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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".
Foster v. Westmoreland Casualty Co., 115 Pa. Commonwealth 393, 540 A.2d 347
(1988). The Insurance Commissioner's petition requesting an insurer be placed
into involuntary dissolution and liquidated was sufficiently specific in that it
alleged insolvency and hazardous financial condition as general grounds for
liquidation, set forth specific results of an investigation conducted by an
independent actuarial firm, and alleged improper actions of key officers of the
insurer. The Commissioner can directly petition the court for a liquidation
order. Appropriate administrative notice and hearing are provided where the
Commissioner requests a judicial declaration of insolvency in conjunction with
a pending liquidation proceeding.
Vermont
In re Ambassador Insurance Co., Inc., 147 Vt. 344, 515 A.2d 1074 (1986). The
Vermont Supreme Court held that the lower court properly exercised its broad
discretion in interpreting the liquidation statute when it required the
liquidation of the insurer upon a finding of statutory insolvency. Furthermore,
the lower court properly used statutory accounting principles instead of, inter
alia, liquidated value accounting principles in evaluating the financial condition
of the insurance company and determining the insurer's potential for
rehabilitation.
Washington Kueckelhan v. Federal Old Line Ins. Co., 69 Wash.2d 392, 418 P.2d 443 (1966).
The court concluded that continuation of the insurer's existing investment
policies rendered its operation hazardous to the policyholders, its creditors and
to the public. Even though the insurer was solvent in the ordinary business
sense, (that it had not defaulted on claims and had annual premium payment
income substantially in excess of death claims), the court on appeal upheld the
lower court's order of rehabilitation. The court found that there was no
requirement that the insurance commissioner wait until disaster strikes or until
an insurance company is insolvent before he/she is empowered to act to
protect the policyholders and the public. The court concluded that where an
insurance company conducts its business and investment policies in such a
manner as to project more than a slight risk of loss to the policyholders, its
creditors and/or the public, this is hazardous as the word is used in the
insurance code and the commissioner is authorized to take appropriate steps
to eliminate that risk of loss.
McConaughy v. Juvenal, 73 Wash. 166, 131 P. 851 (1913). The insurance
commissioner had demanded that in order to continue selling insurance, the
insurer had to give some security, which was given with the personal notes of
some of the officers of the company deposited with the commissioner. The
court found that these notes were made without consideration, they were
never assets of the company, and should have been returned to their makers.
The court found that the notes never resulted in any benefit to the company
nor did they have the effect of being a security for continued business. No
insurance was ever written because of or on the faith of these notes. Because
of this the court held that the insurance commissioner had no authority to
permit a continuation of the business on such security.
Notice and Hearing