Altman v. Kyler, 1 HPI 2018

• Decision Date: 17 October 2019
• Docket Number: No. 1 HPI 2018,1 HPI 2018
• Parties: Jessica K. ALTMAN, Insurance Commissioner of the Commonwealth of Pennsylvania, In her official capacity as Liquidator of Healthcare Providers Insurance Exchange, In Liquidation, Applicant v. Daniel KYLER, as Administrator Ad Prosequendum of the Estate of Patricia Ann Averona (Deceased), Respondent (Ancillary matter to: In Re: Healthcare Providers Insurance Exchange in Liquidation, No. 1 HPI 2017)
• Court: Pennsylvania Commonwealth Court

221 A.3d 687

Jessica K. ALTMAN, Insurance Commissioner of the Commonwealth of Pennsylvania, In her official capacity as Liquidator of Healthcare Providers Insurance Exchange, In Liquidation, Applicant
v.
Daniel KYLER, as Administrator Ad Prosequendum of the Estate of Patricia Ann Averona (Deceased), Respondent

(Ancillary matter to: In Re: Healthcare Providers Insurance Exchange in Liquidation, No. 1 HPI 2017)

No. 1 HPI 2018

Commonwealth Court of Pennsylvania.

Heard: September 20, 2018
Filed: October 17, 2019

Paul G. Gagne, Philadelphia, for Applicant Jessica K. Altman.

Stephen W. Bruccoleri, Philadelphia, for Respondent Daniel Kyler.

BEFORE: HONORABLE P. KEVIN BROBSON, Judge

OPINION BY JUDGE BROBSON

In the present litigation, the Court must determine whether the Statutory Liquidator (Liquidator) of Healthcare Providers Insurance Exchange (HPIX) had authority to intercept a $1 million settlement check in the possession of UPS for intended delivery to the plaintiffs in a civil action brought against insureds of HPIX. After a hearing and consideration of post-hearing briefs, the Court concludes that the Liquidator acted within the bounds of her authority. Consequently, the Court will grant the Liquidator's Application for Relief (Application).¹

221 A.3d 691

I. INTRODUCTION

On December 18, 2017, Jessica K. Altman, then-Acting Insurance Commissioner of the Commonwealth of Pennsylvania (Commissioner Altman),² filed in this Court a Petition for Review in the Nature of a Complaint for Order of Liquidation (Petition for Order of Liquidation), docketed with this Court at Altman v. Health Care Providers Insurance Exchange , 1 HPI 2017 (Liquidation Proceeding). By order dated January 12, 2018, this Court ordered HPIX into liquidation (Order of Liquidation) under Article V of The Insurance Department Act of 1921 (Act),³ and appointed Commissioner Altman as the Liquidator of HPIX. Relevant to the instant dispute, the Court's Order of Liquidation vested title to all of HPIX's property, assets, and rights of action (assets) in the Liquidator and declared that such assets are in custodia legis of the Court. (Order of Liquidation ¶ 4.) The Court further declared that it had exclusive jurisdiction over all disputes regarding title to assets purportedly owned by HPIX. (Id. ¶ 4(b).) Finally, in conjunction with the Order of Liquidation, the Court stayed all litigation against HPIX. (Stay Order, dated January 12, 2018). See Section 526 of the Act, 40 P.S. § 221.26(a) (imposing an automatic stay of litigation against insolvent insurer).

By order of July 27, 2018, and despite the stay of litigation imposed by this Court and by Pennsylvania statute, the Superior Court of New Jersey (New Jersey trial court or trial court), in the civil action of Averona v. Schuitema, D.O. (N.J. Sup. Ct., Camden Cty.-Law Div., No. L-1529-15), granted plaintiff Dominique Averona's (Averona) motion to enforce a pre-liquidation settlement agreement between Averona and Medical Mutual Insurance Company of North Carolina (Medical Mutual), HPIX, and HPIX's insureds, Larry Feinerman, M.D., and Rancocas Anesthesiology, P.A.⁴ Notably, the trial court ordered HPIX (In Liquidation)⁵ or the Liquidator to transmit a settlement check in the amount of $1 million payable to Averona and her attorney within 30 days of the date of the trial court's order. The Liquidator filed the present Application on August 23, 2018, seeking an order declaring that she is not required to comply with the July 27, 2018 order of the New Jersey trial court.

In her Application, the Liquidator asserts that the Uniform Insurers Liquidation

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Act (UILA)⁶ requires the New Jersey trial court to honor this Court's Orders of Liquidation and Stay, that full faith and credit and comity require the trial court to honor this Court's orders, that the trial court's order conflicts with this Court's exclusive in rem jurisdiction over HPIX's assets, and that this Court has exclusive authority to determine the validity of claims against HPIX. The Liquidator maintains that Averona must pursue any claims arising under an insurance policy issued by HPIX in the proof of claim process as delineated in the Court's Order of Liquidation and Article V of the Act.

In her response to the Application, Averona avers that she settled her claims against Medical Mutual, HPIX, and HPIX's insureds, Feinerman and Rancocas Anesthesiology, in November 2017 for the sum of $1 million (settlement funds). Averona further avers that HPIX allocated and released the settlement funds to HPIX Insurance Services, LLC, before December 18, 2017, the date that Commissioner Altman filed her petition seeking an order of liquidation of HPIX. (Averona Response ¶ 3.)⁷ According to Averona, HPIX Insurance Services issued a settlement check to her (Check #1) on December 21, 2017, and then issued a replacement check to her (Check #2 or second check) on January 11, 2018.⁸ Averona also avers that on January 16, 2018 (four days after this Court ordered HPIX into liquidation), the second check was "seized ... from UPS at/or immediately before delivery ... at the direction of the Liquidator." (Id. ¶ 4(5).)

Thereafter, Averona sought to enforce the settlement agreement before the New Jersey trial court. The trial court initially denied relief due to a related stay of litigation imposed in that jurisdiction. The stay imposed/recognized in New Jersey purportedly expired on June 2, 2018, and Averona re-filed her motion to enforce the settlement agreement thereafter. The trial court granted the re-filed motion and entered the July 27, 2018 order that is the subject of the Liquidator's Application presently before the Court.

This Court held a hearing in this matter on September 20, 2018.⁹ At the hearing, the Liquidator introduced the testimony of Laura Slaymaker, the Pennsylvania Insurance Department's Deputy Insurance Commissioner for the Office of Liquidations, Rehabilitations and Special Funds

221 A.3d 693

(Slaymaker), and Richard Fee (Fee), who was employed by HPIX Insurance Services during the relevant events.¹⁰ The Court also admitted into the record documentary evidence from both parties. At the close of the hearing, the Court advised the parties that it discerned two issues relevant to the instant dispute: (1) whether the settlement funds were assets of the HPIX (In Liquidation) estate when the Liquidator prevented delivery of the settlement check; and (2) whether a transfer of HPIX (In Liquidation) property occurred pursuant to Section 529(b)(1) of the Act, 40 P.S. § 221.29(b)(1).¹¹

Following the hearing, the Court set a briefing schedule. Briefing is complete and the matter is ready for resolution.

II. FINDINGS OF FACT

A. Background

1. HPIX is an unincorporated association organized under the laws of the Commonwealth of Pennsylvania with a principal place of business in Camp Hill, Pennsylvania. (Petition for Order of Liquidation ¶ 3.)¹²

2. HPIX, which is authorized as a reciprocal and inter-insurance exchange under Sections 1001 through 1011 of Article X of the Act, 40 P.S. §§ 961 - 971, wrote medical professional liability insurance for physicians and surgeons located in Pennsylvania, Delaware, New Jersey, and Maryland. (Id. ¶¶ 4, 9.)

3. HPIX wholly owns American Healthcare Providers Insurance Services Company, LLC (AHPIS). (Id. ¶ 6.) AHPIS "acts as [the] attorney-in-fact to all HPIX policyholders by managing HPIX." (Id. ¶ 5.)

4. Medical Mutual is an insurance company licensed to do business in Pennsylvania; Medical Mutual has offices in North Carolina (Hr'g, Notes of Testimony (N.T.) at 31 (Slaymaker dir. ex.)), and Camp Hill, Pennsylvania (Id. at 118 (dir. ex.)).

5. On December 23, 2015, then-Pennsylvania Insurance Commissioner Teresa D. Miller approved an Assumption and Reinsurance Agreement between HPIX and Medical Mutual, authorizing HPIX to reinsure its entire schedule of policies with Medical Mutual and precluding HPIX from further selling or assuming any insurance policies without prior written approval of the Pennsylvania Insurance Department. (Petition for Order of Liquidation ¶¶ 10, 11, and Exhibit 1 thereto (Ins. Comm'r's Order of December 23, 2015).) Consequently, Medical Mutual "assumed all in-force insurance policies of HPIX and prospective obligations of such in-force policies." (Id. ¶ 12.)

6. On January 1, 2016, HPIX, AHPIS, and HPIX Insurance Services executed a Claims Service Agreement (CSA) authorizing HPIX Insurance Services to provide management and claims administration services for claims arising under certain specified medical professional liability policies issued by HPIX. (Hr'g, Liq. Ex. 4 (CSA).) Pursuant to the CSA, HPIX Insurance Services performed these services as an independent contractor. (Id. ¶ 7.) AHPIS paid HPIX Insurance Services a monthly fee for the services. (Id. ¶ 2.)

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7. Under the CSA, HPIX Insurance Services' duties included: creation of a file for each HPIX claim; investigation of each claim; setting and reporting loss reserves; adjusting, denying, and/or settling claims; providing all necessary reports to HPIX;...