In Re: Penn Treaty Network (majority)
Annotate this CasePenn Treaty Network America Insurance Company (“PTNA”) and its subsidiary, American Network Insurance Company (“ANIC”) (collectively, the “Companies”), were Pennsylvania life insurers specializing in long-term care insurance, covering skilled-nursing, nursing home, and assisted living and home health care for individuals with chronic illnesses or disabilities. In January 2009, the Commonwealth Court ordered the rehabilitation of the Companies, upon application of then-Insurance Commissioner Joel Ario, who cited the consent of both entities as the sole grounds for the orders of rehabilitation. Nine months after entry of the rehabilitation order, however, Commissioner Ario filed petitions to covert the Companies’ rehabilitations into liquidations. The Commonwealth Court, per a single-judge proceeding, conducted hearings spanning thirty days of testimony and encompassing the submission of thousands of pages of exhibits and documentary evidence. In May 2012, the Commonwealth Court entered an order denying the petitions to liquidate and directed the Commissioner to develop a plan of rehabilitation within ninety days. The Commonwealth Court concluded the Rehabilitator’s evidence did not show that a rehabilitation was tried and failed. "Rather, it showed that a rehabilitation plan was abandoned in its nascency. In short, the Rehabilitator did not prove that continued rehabilitation substantially increases the risk to policyholders, creditors and the public or is futile." A critical facet of the Commonwealth Court’s opinion concerned the degree of deference owing to a statutory rehabilitator on consideration of a conversion petition. The Commissioner challenged the Commonwealth Court’s decision in such regard, namely, that the court’s no-deference determination was, in fact, inconsistent with the case which it had referenced as being supportive. The Supreme Court affirmed: "In all events, deference does not require the courts to accede to a misuse of the process. In light of the above, and the former Commissioner’s accession at the outset of the rehabilitation proceedings that liquidations would be harmful to policyholders, as well as the Commonwealth Court’s supported finding that there is no present harm in moving forward in rehabilitation, we decline to impede that court’s review of the rehabilitation plan which it directed should be filed, and which has now been submitted. The judicial review, however, should proceed subject to a more deferential overlay relative to the new acting Commissioner."
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