Consedine v. Penn Treaty Network Am. Ins. Co.
| Court | Commonwealth Court of Pennsylvania |
| Citation | 63 A.3d 368 |
| Parties | Michael F. CONSEDINE, Insurance Commissioner of the Commonwealth of Pennsylvania, Plaintiff v. PENN TREATY NETWORK AMERICA INSURANCE COMPANY, Defendant. Michael F. Consedine, Insurance Commissioner of the Commonwealth of Pennsylvania, Plaintiff v. American Network Insurance Company, Defendant. Re: Petition for Liquidation of Penn Treaty Network America Insurance Company (In Rehabilitation) and American Network Insurance Company (In Rehabilitation). |
| Decision Date | 18 January 2013 |
63 A.3d 368
Michael F. CONSEDINE, Insurance Commissioner of the Commonwealth of Pennsylvania, Plaintiff
v.
PENN TREATY NETWORK AMERICA INSURANCE COMPANY, Defendant.
Michael F. Consedine, Insurance Commissioner of the Commonwealth of Pennsylvania, Plaintiff
v.
American Network Insurance Company, Defendant.
Re: Petition for Liquidation of Penn Treaty Network America Insurance Company (In Rehabilitation) and American Network Insurance Company (In Rehabilitation).
Commonwealth Court of Pennsylvania.
Argued by Trial.
Closing Arguments Feb. 21 and 22, 2012.
Decided May 3, 2012.
Publication Ordered Dec. 28, 2012.
As Amended Jan. 18, 2013.
[63 A.3d 370]
Thomas S. Harty, James R. Potts and Mia Meloni, Philadelphia, for rehabilitator.
Douglas Y. Christian, Damian L. DiNicola and Benjamin Schmidt, Philadelphia, for Penn Treaty American Corporation.
OPINION BY Judge LEAVITT.
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¦TABLE OF CONTENTS AND GLOSSARY¦
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¦ ¦
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¦ ¦Page¦
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¦ ¦ ¦ ¦
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¦I. ¦Introduction ¦374 ¦
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¦ ¦ ¦ ¦
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¦II. ¦Syllabus ¦375 ¦
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¦ ¦ ¦ ¦
+----+-------------------------------------------------------+------¦
¦III.¦Findings of Fact ¦380 ¦
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+--------------------------------------------------+
¦ ¦A.¦Business and History of PTNA and ANIC ¦380 ¦
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¦ ¦ ¦i. ¦The Companies ¦380 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦ii. ¦The Companies' Products ¦380 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦iii. ¦OldCo and NewCo Business ¦385 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦iv. ¦Reserves ¦386 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦v. ¦Reinsurance ¦387 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦vi. ¦Financial Condition of the Companies ¦387 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦vii. ¦Conditions that Led to Rehabilitation ¦388 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦viii.¦The Rehabilitation Orders ¦389 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦ix. ¦April 2009 Preliminary Report and Plan of ¦390 ¦
¦ ¦ ¦ ¦Rehabilitation ¦ ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦x. ¦Rehabilitation Implementation Committee ¦391 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦xi. ¦Milliman August 2009 PowerPoint Projections ¦391 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦xii. ¦Termination of New Premium Rate Increase Filings ¦392 ¦
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¦ ¦B. ¦Companies' Statutory Surplus as of December 31, 2009¦393 ¦
+----+---+----------------------------------------------------+------¦
¦ ¦C. ¦Scope of Expert Evidence ¦394 ¦
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¦ ¦ ¦i. ¦Rehabilitator's Experts ¦394 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦ii. ¦Intervenors' Experts ¦395 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦iii. ¦Actuarial Projections of the Companies' Financial ¦396 ¦
¦ ¦ ¦ ¦Conditions ¦ ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦iv. ¦Actuarial Principles and Concerns ¦397 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦v. ¦Changes in Milliman's Projections ¦399 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦vi. ¦Actuarial Caveats and Limitations ¦401 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦vii. ¦Credibility of Data Used in Projections ¦402 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦viii.¦Actuarial Standard of Practice No. 25 ¦402 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦ix. ¦Actuarial Standard of Practice No. 18 ¦403 ¦
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¦ ¦D.¦Milliman Expert Report and Testimony¦403 ¦
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¦ ¦ ¦i. ¦Milliman Morbidity or Claim Costs Assumption ¦403 ¦
+----+----+----+---------------------------------------------------+-------¦
¦ ¦ ¦ii. ¦Milliman Morbidity Improvement Assumption ¦407 ¦
+----+----+----+---------------------------------------------------+-------¦
¦ ¦ ¦iii.¦Milliman Mortality Assumption ¦409 ¦
+----+----+----+---------------------------------------------------+-------¦
¦ ¦ ¦iv. ¦Milliman Voluntary Lapsation Assumption ¦409 ¦
+----+----+----+---------------------------------------------------+-------¦
¦ ¦ ¦v. ¦Milliman Interest Rate Assumption ¦409 ¦
+----+----+----+---------------------------------------------------+-------¦
¦ ¦ ¦vi. ¦Milliman Claim Adjudication and Wellness Assumption¦410 ¦
+----+----+----+---------------------------------------------------+-------¦
¦ ¦ ¦vii.¦Milliman Premium Rate Increase Assumption ¦411 ¦
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¦ ¦E. ¦United Health Actuarial Services, Inc. Expert Report and ¦412 ¦
¦ ¦ ¦Testimony ¦ ¦
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+----------------------------------------------------------------------------+
¦ ¦ ¦i. ¦United Health Morbidity or Claim Costs Assumption ¦413 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦ii. ¦United Health Morbidity Improvement Assumption ¦414 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦iii. ¦United Health Mortality Assumption ¦414 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦iv. ¦United Health Voluntary Lapsation Assumption ¦414 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦v. ¦United Health Interest Rate Assumption ¦415 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦vi. ¦United Health Claim Adjudication and Wellness ¦415 ¦
¦ ¦ ¦ ¦Assumption ¦ ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦vii. ¦United Health Premium Rate Increase Assumption ¦415 ¦
+----+----+-----+----------------------------------------------------+-------¦
¦ ¦ ¦viii.¦United Health Agents' Commission Assumption ¦419 ¦
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¦ ¦F. ¦Gross Premium Reserve ¦419 ¦
+----+----+----------------------------------------------------------+-------¦
¦ ¦G. ¦Ernst & Young Report ¦420 ¦
+----+----+----------------------------------------------------------+-------¦
¦ ¦H. ¦State Regulation of Long–Term Care Insurance Rate Making ¦421 ¦
+----+----+----------------------------------------------------------+-------¦
¦ ¦I. ¦Impact of Medical Advances on Future Long–Term Care ¦424 ¦
¦ ¦ ¦Insurance Claims ¦ ¦
+----+----+----------------------------------------------------------+-------¦
¦ ¦J. ¦Evaluation of Actuarial Projections and Expert Testimony ¦429 ¦
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¦ ¦ ¦ ¦
+---+------------------------------------------+----¦
¦IV.¦Legal Analysis ¦439 ¦
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¦ ¦A. ¦Statutory Standard for Conversion of a Rehabilitation to a¦439 ¦
¦ ¦ ¦Liquidation ¦ ¦
+----+----+----------------------------------------------------------+-------¦
¦ ¦B. ¦Insolvency ¦441 ¦
+----+----+----------------------------------------------------------+-------¦
¦ ¦C. ¦Substantial Increase in Risk of Loss to Policyholders ¦441 ¦
+----+----+----------------------------------------------------------+-------¦
¦ ¦D. ¦Futility of Continued Rehabilitation ¦446 ¦
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¦ ¦ ¦i. ¦Meaning of “Futility” ¦446 ¦
+---+--+---+------------------------------------+-----¦
¦ ¦ ¦ii.¦Rehabilitator's Case for Futility ¦448 ¦
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¦ ¦ ¦ ¦
+---+------------------------------------------+----¦
¦V. ¦Conclusions of Law ¦458 ¦
+---+------------------------------------------+----¦
¦ ¦ ¦ ¦
+---+------------------------------------------+----¦
¦VI.¦Conclusion ¦458 ¦
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[63 A.3d 372]
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