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Plaintiffs constitute approximately 2,600 licensed agents who had received the
demand letter. Under Pennsylvania law, agents are personally liable for such
unlicensed insurance sales which are considered "unlawful" regardless of
whether they are received inadvertently. The court dismissed the action and
allowed the issuance of the letter because it entitled agents to due process prior
to license revocation and retrieval by the Commissioner.
Foster v. Berwind Corp. Civil Action No. 90‐0857, 1991 U.S. Dist LEXIS 1988 (E.D.
Pa. 2/13/91). Pennsylvania District Court applied Pennsylvania choice of law rules
and Pennsylvania law to govern an action brought by the Pennsylvania
Commissioner of Insurance to pierce the corporate veil of a defunct Bermuda
subsidiary (Norad) and hold the defendant liable for reinsurance loss claims of
the insolvent Mutual Fire, Marine & Inland Island Co. The court held that
Pennsylvania's interest in investigating the claims of its domiciliaries against its
own corporations outweighed Bermuda's interest in regulating its reinsurance
industry where the subsidiary is "exempt" because it "does not do business".
In re Grouphealth Partnership, Inc., 137 B.R. 593 (E.D. Pa. 1992), appeal granted,
1992 U.S. Dist. LEXIS 5277 (E.D. Pa. Apr. 14, 1992). Creditor filed motion to
dismiss debtor health maintenance organization's voluntary Chapter ll
bankruptcy petition. The bankruptcy court, on the recommendation of the
Pennsylvania Insurance Department, denied the motion and accepted
jurisdiction. The department reasoned that because the debtor's parent, an
entity not under the department's regulatory jurisdiction, had also filed a
voluntary Chapter ll petition with the bankruptcy court and because the debtor
had no subscribers at the time the bankruptcy proceeding was initiated, the
bankruptcy court should retain jurisdiction over the matter.
In re Reliance Group Holdings, Inc., 273 B.R. 374 (Bankr. E.D. Pa. 2002). The
Pennsylvania Insurance Commissioner (“Commissioner”) served as the
liquidator for an insurer. The Commissioner brought an action in state court for
a declaration that the insurance company’s assets included certain insurance
policies and sought to enjoin the debtor from consummating any settlements of
class actions that involved those policies. The proceedings were removed to
federal court based on Debtor’s Chapter 11 filing. In deciding a motion to
remand or to transfer venue, the court held the actions did not come within the
exception to the bankruptcy removal statute because the actions were not
enforcing “police or regulatory power” by a “governmental unit.” It used the
Halper test to determine that the mandatory abstention rule did not apply to
the “core proceedings” which arose under Title 11. Further, the court
determined that because most of the mandatory abstention factors were met it
was appropriate for the court to consider 28 U.S.C. §1334(c)(1)’s discretionary
abstention for the trust action. Since the issues in the trust action involved an
undeveloped area of Pennsylvania law that greatly impacted the State’s
insurance regulation the court determined the trust action should be remanded
for the state court to decide. It also determined it would hear the declaratory
action and the proceedings that were removed would be transferred to the
judicial district in which the debtor’s bankruptcy case was pending.
Koken v. Cologne Reinsurance (Bardados), Ltd., 34 F. Supp.2d 240 (M.D. Pa.
1999). The Pennsylvania Insurance Commissioner, as statutory liquidator of an
insolvent insurer, commenced an action in the Commonwealth Court against an
alien reinsurer, seeking damages and declaratory relief arising from a coinsurance
agreement. The reinsurer removed the case, based on federal
question and diversity jurisdiction, and the liquidator filed a motion to remand.
The reinsurer thereafter filed a motion to stay the action and compel arbitration.