784 A.2d 209 (Pa.Cmwlth. 2001), Koken v. Reliance Ins. Co.

Citation:784 A.2d 209
Party Name:M. Diane KOKEN, Insurance Commissioner of the Commonwealth of Pennsylvania, Plaintiff, v. RELIANCE INSURANCE COMPANY, Defendant. In re Petition of Rehabilitator for 180-day Extension of Stay.
Case Date:August 21, 2001
Court:Commonwealth Court of Pennsylvania
 
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Page 209

784 A.2d 209 (Pa.Cmwlth. 2001)

M. Diane KOKEN, Insurance Commissioner of the Commonwealth of Pennsylvania, Plaintiff,

v.

RELIANCE INSURANCE COMPANY, Defendant.

In re Petition of Rehabilitator for 180-day Extension of Stay.

Commonwealth Court of Pennsylvania

August 21, 2001.

Page 210

PER CURIAM.

ORDER

AND NOW, this 21st day of August 2001, the Preliminary Findings in Support of Court's Order of August 2, 2001 in the above-captioned matter shall be reported.

Preliminary Findings in Support of Court's Order of August 2, 2001

COLINS, Judge.

These preliminary findings are entered in support of the Rehabilitator's request for a stay of all proceedings pending in the various courts in the nation. Recognizing that the authority of this Court does not extend to our sister states in the Union, nor to the federal courts, it is requested that in the interest of comity a stay be entered in the cases of litigation listed in "Exhibit A" (attached) involving Reliance insureds.

Overview

On May 29, 2001, the Commonwealth Court of Pennsylvania entered an order placing Reliance Insurance Company (Reliance), 1 an insurer that wrote policies throughout the United States, in rehabilitation pursuant to 40 P.S.§§ 221.1--221.63. In that order, M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, was named Rehabilitator, and directed to take immediate possession of the property, business, and affairs of Reliance. Further, the Rehabilitator was directed to marshal assets and identify interests relevant to the rehabilitation of Reliance, thereby creating a single forum in which to dispose equitably of Reliance's assets.

In pursuit of that directive, the Rehabilitator has learned and informed this Court through affidavits, 2 that there are over 190,000 claims, and 15,000 lawsuits pending against Reliance and its insureds. Additionally, there are over 4,500 outside counsel handling claims throughout the United States, many handling multiple lawsuits. In order to maximize the asset pool and minimize a disparity in payment of claims, the financial exposure of Reliance must be ascertained in the most expeditious yet economical manner possible. Therefore, the Rehabilitator has requested and this Court has entered a 60-day stay order relating to all litigation involving Reliance, thereby, providing the Rehabilitator with a distinct time period in which

Page 211

to analyze pending litigation and outline a strategy to approach and resolve, in an orderly and fair manner, the competing issues and demands pending against Reliance.

Also, as a result of this Court's concern that all persons and/or entities with an interest in Reliance receive notice of the rehabilitation and any and all action(s) taken by the Rehabilitator, on July 30, 2001, an order was entered granting a request for the appointment of a policyholders committee, and Robert H. Levin, Esq., was appointed interim counsel for said committee. In order to facilitate the flow of information to the Policyholders Committee, by order entered July 30, 2001, this Court directed that the Policyholders Committee be served with copies of all filings entered upon the docket of this Court. 3

The Rehabilitator now seeks the entry of a 180-day stay in the actions listed in Exhibit A and requests that the stay include all proceedings, including discovery, and extend to suits and proceedings outside the Commonwealth of Pennsylvania, and to suits and proceedings pending in the federal courts of the United States. In making this request, there is no attempt here to impose the authority of this Court where constitutional principles do not so allow. Instead, jurisdiction has been invoked for the sole purpose of enforcing the statutory requirements of 40 P.S. §§ 221.1--221.63. Considering that the regulation of distressed insurance companies is an important state interest 4 and the fact that Reliance is a Pennsylvania insurance company, this Court requests that under the principle of comity, recognition of this Court's authority to act and fulfill the mandate of 40 P.S. § 221.1--221.63 be permitted via the entry of a 180-day stay by such courts or tribunals of those matters identified in Exhibit "A."

ORDER

AND NOW this 2nd day of August, 2001, upon consideration of petitioner's Emergency Petition to Extend the 60-Day Stay Pursuant to Paragraph 22 of the Commonwealth Court's May 29, 2001 Order, it is hereby ORDERED that the petition is GRANTED insofar as this Court specifically finds that it is in the best interests of the estate of Reliance Insurance Company, as well as the policyholders as a whole, the creditors and other interested parties, that proceedings and actions, including but not limited to discovery, in each of the cases identified in Exhibit "A" hereto should be stayed for a period of 180 days, such period to commence on the date of this order. With respect to suits and other proceedings outside the Commonwealth of Pennsylvania and in the federal courts of the United States, this Order constitutes the request of this Court for comity in the extension of the stay by such courts or tribunals, and that those courts afford this order deference by reason of this Court's responsibility for and supervisory authority over the rehabilitation of Reliance Insurance Company, as vested in this Court by the Pennsylvania Legislature. See 40 P.S. § 221.1-221.63.

Opinion to follow.

EXHIBIT "A"

1. Bank One:

In re Bank One Securities Litigation, United States District Court for the Northern District of Illinois (Eastern Division), No. 00-CV-0767...

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