Bad Faith Claim against Island Insurance Co.

Bobby N. Harmon, CPCU, ARM

October 3, 2006

VIA fax: 808-275-8222 & clmrpt@islandinsurance.com

Valerie U Katz, CPCU, ARM

Vice President Claims

Island Insurance Company

1022 Bethel Street

Honolulu, Hawaii 96806

Re: Notice of Bad Faith Claim Against Island Insurance Company, et al

Date of Notice: September 1, 2006

Dear Ms. Katz:

This responds to your letter dated September 13, 2006, in which you state:

“This is in response to your letter of September 1, 2006. Previously, we informed you of our disclaimers of coverage and denials of your tender of defenses relating to the Demand for Arbitration filed by Trustee Mary Lou Woo. We have reviewed our files and maintain our position as previously communicated to you.

“Respectfully, we believe your allegations are without legal merit. We hope that after your due consideration you will allow this matter to be laid to rest.”

With all due respect, this is NOT an acceptable response to my bad faith claim notice. In fact, I wish to cite your letter as yet another act of bad faith by Island Insurance Company, for reasons which I will explain briefly, as follows.

First, you are NOT AUTHORIZED by your Professional Liability Insurance carrier to adjust claims of bad faith against your own company. As a claims professional, you are certainly aware of this fact. Your denial letter, therefore, provides clear evidence that Island Insurance Company has, from the beginning to the present time, acted in extreme bad faith in the handling of my claims.

According to a press release by your marketing firm, Bright Light Marketing Group, Inc., and as reported in the August 11, 2006, edition of the Honolulu Star-Bulletin, you were just recently appointed as Vice President, Claims, for Island Insurance Company. According to the release: “Katz has over 30 years of experience in the property and casualty insurance industry. Prior to joining Island Insurance, Katz was Vice President of Claims Audit for ACE USA Insurance Group where she was responsible for technical and operational quality assurance for the U.S. and Canada. Katz has also held various positions with American International Adjustment Company, UAC (Continental Insurance Company), NRG America Management Corporation and Royal Insurance Company. ... Katz’s professional designations include: Chartered Property Casualty Underwriter, Associate in Risk Management, Certified Business Continuity Planner, Associate in Insurance Services and Associate in Insurance Management ...”

The second major reason that you, personally, should not be denying my bad faith claim is that you have conflicts of interest in this particular case with your former employers ACE, AIG and Royal, as you can see from the following web sites:

www.the-catbird-seat.net/ACE.htm

www.the-catbird-seat.net/AIG.htm

www.the-catbird-seat.net/Royal-SunAlliance.htm

Therefore, Ms. Katz, I expect Island Insurance Company to honor my previous tenders of defense and take full responsibility for the ultimate settlement of CV05-00030, including the filing of any appeals in that case, AND/OR, to have your professional liability insurance carrier respond directly to me regarding these bad faith claims against your company.

Your immediate response is respectfully requested.

Very truly yours,

Bobby N. Harmon, CPCU, ARM

cc: Colbert Matsumoto, Esq., CEO, Island Insurance Co. (via fax: 808-564-8456)

Michael Tanoue, Esq., Atty. for Island Insurance Co. (mtanoue@paclawgroup.com)

Roy Hughes, Esq. (hthughes@hawaii.rr.com)

John Goemans, Esq. (wip@kamuela.com)

Arnold Phillips, Esq., (via fax @ 808-528-3911)

John D. Marshall, Esq., Nagle & Marshall, LLP (lawyer@hawaiilaw.com)

Curtis Ching, Gayle Lau and James Nicholson, Office of the U.S. Trustee

c/o Steven Guttman, Esq., Kessner Duca, et al. (sguttman@kdubm.com)

Dr. Randall Roth, www.brokentrustbook.com (rroth@hawaii.edu)