In Re: Penn Treaty Network America Ins. Co. (In Liquidation)
1 PEN 2009 & 1 ANI 2009
| Pa. Commw. Ct. | Dec 22, 2021Background
- PTNA and ANIC (long‑term care insurers) were placed in rehabilitation and then liquidation; their policies were transferred to state life/health guaranty associations to continue coverage up to statutory limits.
- The Statutory Liquidator created a captive (Penn Treaty Plus) via a partial assumption reinsurance agreement within the 30‑day post‑liquidation window to provide excess coverage ("Non‑GA Policy Benefits").
- The Liquidator sought court approval to allocate significant estate assets to the Captive (proposed ~38.8% of PTNA and ~32.7% of ANIC assets) so the Captive could pay a portion (~10%) of Non‑GA claims.
- Health insurers (Anthem, UnitedHealthcare) intervened, arguing the Liquidator lacked statutory authority and that estate assets supporting excess coverage belong to guaranty associations; they would face large assessment exposure if assets were diverted.
- A three‑judge panel denied the Liquidator’s application; the Liquidator filed exceptions en banc. The Court overruled the exceptions and reaffirmed the panel ruling.
Issues
| Issue | Liquidator's Argument | Health Insurers / Panel Argument | Held |
|---|---|---|---|
| Authority to use estate assets to fund a captive for Non‑GA Policy Benefits | Statutory liquidator may allocate estate assets to create a facility to pay excess benefits and minimize harm to policyholders | Article V and PLHIGA do not authorize using estate assets to fund coverage that pays claims accruing after policy termination | Denied — no authority to allocate estate assets to Captive for post‑termination Non‑GA claims |
| Classification of Non‑GA claims (class (b) or breach of contract) | Non‑GA claims are "claims under policies for losses" (class (b)); alternatively, termination gives rise to breach claims the Liquidator can value/pay | Policies terminate by operation of law; claims accruing after 30 days are barred; breach damages are general creditor claims, not class (b) policy loss claims | Held barred as post‑termination policy claims; breach claims are not class (b) and would have zero valuation under Warrantech |
| Splitting policies between guaranty associations and an excess insurer | Liquidator may apportion a single policy — guaranty associations cover part and Captive assume the remainder | Section 523(8) does not authorize dividing a single policy between two insurers; transfers assume entire policy | Held not permitted — cannot split policy obligations between guaranty association and Captive |
| Guaranty associations’ entitlement to estate assets beyond subrogation | Associations’ recoveries should be limited to assets they obtain as assignees of policyholder claims (subrogation interest) | PLHIGA and Article V give guaranty associations an independent statutory right to estate assets to fund statutory obligations, distinct from assigned subrogation claims | Held — guaranty associations have an independent statutory claim to estate assets (not limited to mere subrogation assignment) |
| Health Insurers’ limited intervention | Intervention was premature/remote because harm is speculative and mitigable by tax offsets | Health Insurers have a direct and substantial pecuniary interest in estate administration (large assessment exposure) and interests differ from guaranty associations | Held — limited intervention properly granted; they have a direct, substantial interest |
Key Cases Cited
- In Re: Penn Treaty Network America Insurance Company (In Liquidation), 259 A.3d 1028 (Pa. Cmwlth. 2021) (panel opinion denying Liquidator’s plan to fund captive and allocating assets)
- Warrantech Consumer Products Servs., Inc. v. Reliance Ins. Co. in Liquidation, 96 A.3d 346 (Pa. 2014) (interprets Article V to bar allowance of claims that accrue after the 30‑day policy continuation period)
- In Re Penn Treaty Network America Ins. Co. in Rehabilitation, 119 A.3d 313 (Pa. 2015) (background appellate decision addressing PTNA’s receivership issues)
- Consedine v. Penn Treaty Network America Ins. Co., 63 A.3d 368 (Pa. Cmwlth. 2012) (procedural and factual history of PTNA’s rehabilitation)