Commitments and Contingencies

12 Months Ended

Dec. 31, 2021

Commitments and Contingencies [Abstract]

Commitments and Contingencies

17. Commitments and Contingencies:

The Reinsurers and the Hallmark Insurers have agreed to submit to binding arbitration a dispute that has arisen regarding the rights and obligations of the parties under the LPT Contract.   (See Note 7.)  Pending resolution of the dispute, the Hallmark Insurers have agreed to fund the payment of claims under the LPT Contract without prejudice to their right to seek reimbursement and other relief in the arbitration proceedings.  The arbitration panel has not yet been constituted and no pleadings have been submitted.  However, based on prior negotiations, the Company expects the Reinsurers to seek rescission of the LPT Contract on the basis of alleged breach and fraudulent inducement by the Hallmark Insurers.  The Company believes any such claims are without factual basis or legal merit and intends to vigorously contest the matter.  The Company also intends to pursue an arbitration award enforcing the terms of the LPT Contract and reimbursing the Hallmark Insurers for all claim amounts funded by them during the pendency of the arbitration, as well as all other damages sustained by the Hallmark Insurers. Because the dispute is at an initial stage, we are unable at this time to provide an evaluation of the likelihood of an adverse outcome.

As of December 31, 2021 we were engaged in various legal proceedings in the ordinary course of business, none of which, either individually or in the aggregate, are believed likely to have a material adverse effect on our consolidated financial position or results of operations, in the opinion of management. The various legal proceedings to which we were a party are routine in nature and incidental to our business.

From time to time, assessments are levied on us by the guaranty association of the states where we offer our insurance products. Such assessments are made primarily to cover the losses of policyholders of insolvent or rehabilitated insurers. Since these assessments can generally be recovered through a reduction in future premium taxes paid, we capitalize the

assessments that can be recovered as they are paid and amortize the capitalized balance against our premium tax expense. We did not pay an assessment during 2021 and 2020.