Frequently Asked Questions
Companies in Liquidation
Liquidation is similar to bankruptcy. When a company is liquidated, the Insurance Department’s Office of Liquidations, Rehabilitations and Special Funds gathers the company’s assets and determines what liabilities, such as bills and claim payments, it has. The Statutory Liquidator then develops a plan to distribute the company’s assets according to law and submits the plan to the Court for approval. The liquidation process is very complex and is expected to take several years.
No. Although your insurance company has been placed into liquidation, the guaranty association in the state where you reside or where the property is situated may be obligated to provide coverage under insurance policies issued by your insurance company subject to certain defenses and limitations. Coverage of your claim under a guaranty association law is determined by the guaranty association in accordance with its guaranty association act, not by the Liquidator. Any claim or portion of it that is not covered by a guaranty association becomes a claim against your insurance company estate. The amount deemed to be an allowed claim will be paid to the extent funds are available, on an equal basis with all other claims in the same category. These claims may be paid in full, in part, or not at all, depending on the available assets. These claims may not be paid for several years.
All payments are subject to certain statutory limits contained in the various state laws creating the guaranty associations. In no case will payments exceed the applicable policy limits.
You can address your questions about your property and casualty guaranty association’s responsibilities to the guaranty association in the state in which you reside. The website of the National Organization of Life & Health Insurance Guaranty Associations (NOLHGA) contains a list of life and health guaranty associations by state and the National Conference of Insurance Guaranty Funds (NCIGF) contains a list of property and casualty guaranty association by state.
If you believe you have a claim against your insurance company you must file a proof of claim with the Statutory Liquidator using the enclosed proof of claim form. Even if you have a claim already pending with your insurance company you must file a proof of claim. If your claim is a new claim, you should attach documentation to the proof of claim to document your claim. If your claim has already been submitted to your insurance company, you must complete the proof of claim form, but it is not necessary for you to attach additional documentation. If additional information is needed at a later date, you will be contacted. If you have more than one claim against your insurance company, you may duplicate the proof of claim form to submit each claim separately.
Companies in Rehabilitation
Rehabilitation is a court supervised process intended to remedy the company’s financial deterioration for the benefit of policyholders and creditors. The Rehabilitator is charged with the protection of the company’s policyholders, creditors and the public. The rehabilitators actions are dictated by the laws and regulations of Pennsylvania and are subject to review by the Commonwealth Court.
Generally, the Rehabilitation Order, in keeping with Pennsylvania law appoints the Commissioner as Rehabilitator and authorizes and directs the Commissioner as Rehabilitator to take possession of the company’s business and take such actions as are necessary to correct the condition that prompted the rehabilitation.
Initially the company will continue operating largely as it has been though under the control of the Rehabilitator. Cost saving measures will be implemented immediately as efforts to conserve the company’s assets and control its debts. If a Rehabilitation Plan is approved by the Court, changes will be made in the company’s business under the plan.
The Commissioner of the Insurance Department will propose to the Court a plan for the rehabilitation of the company (the Rehabilitation Plan) which may include modifications of premiums and benefits of insurance policies. Notice and details of the Rehabilitation Plan will be provided to all policyholders and interested parties and they will have an opportunity to comment upon, or object to, the proposed Rehabilitation Plan.
Glossary
Commonly Used Terms in Liquidations and Rehabilitations
Tangible or intangible item with exchange or commercial value owned by the insurance company as listed on its balance sheet.
A request made by the insured for insurer payment due to a loss incurred and covered under the policy agreement.
The first or third party that asserts a right of recovery.
An association established to pay claims of insolvent insurance companies. These funds are maintained by assessments collected from all insurers licensed in the state.
When an individual or organization can no longer meet its financial obligations with its policyholders or creditors as debts become due.
The person or organization covered by an insurance policy.
The insurance company.
Taking over of an insurance company’s assets by the State Insurance Commissioner when examination of the annual report reveals that the company is in substantial financial difficulty. The State Insurance Commissioner will then operate the company in what is deemed to be the best interest of the policyholders, insureds, and creditors. If the State Insurance Commissioner believes it is possible to save the company, rehabilitation may be ordered; if salvage is deemed impossible, liquidation may be necessary.
A written and documented claim against an insurance company that has been liquidated.