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WILLIAM J. SHEPPARD v. OLD HERITAGE MUTUAL INSURANCE COMPANY (05/22/80)

decided: May 22, 1980.

WILLIAM J. SHEPPARD, INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA, PETITIONER
v.
OLD HERITAGE MUTUAL INSURANCE COMPANY, RESPONDENT



Original jurisdiction in case of William J. Sheppard, Insurance Commissioner of the Commonwealth of Pennsylvania v. Old Heritage Mutual Insurance Company.

COUNSEL

Joseph Kenneth Hegedus, Deputy Attorney General, with him, Norman J. Watkins, Deputy Attorney General, Chief, Civil Litigation and Gerald Gornish, Attorney General, for petitioner.

Malcolm H. Waldron, Jr., for respondent.

President Judge Crumlish. Memorandum Opinion by President Judge Crumlish.

Author: Crumlish

[ 51 Pa. Commw. Page 492]

This original jurisdiction action, brought by the Pennsylvania Department of Insurance in its capacity as liquidator of the Old Heritage Mutual Insurance Company (Old Heritage), seeks the surrender of certain books and records, property, stock certificates and assets of Old Heritage, Gibraltar Life Insurance Company (Gibraltar) and Pennsylvania Health Insurance Agency (Pennsylvania Health).

The present matter is an encore presentation by the parties stemming from our recent decision in Sheppard v. Old Heritage Mutual Insurance Co., 45 Pa. Commonwealth Ct. 428, 405 A.2d 1325 (1979). The September 5, 1979 Order of this Court by the late President Judge Bowman*fn1 denied without prejudice the application for dissolution of the corporate entity, fixed the date of insolvency as of December 31, 1976, and granted the Department's application to liquidate the business of Old Heritage by taking possession of the assets in accordance with Section 520 of the Insurance Department Act of 1921.*fn2

The Insurance Department brings this action in the form of a contempt request to secure possession of the following items belonging to Old Heritage not delivered by April 2, 1980: (1) Company Charter and Seal; (2) certain claim files, approximately 125 to 135 in number, either withheld or missing from Old

[ 51 Pa. Commw. Page 493]

Heritage records, and (3) the capital stock of Gibraltar and Pennsylvania Health allegedly pledged to secure a $125,000 note from Pennsylvania Health.

Corporate Charter and Seal

Taking the Insurance Department claims categorically, we will deny its request for possession of the Charter and Seal. The final order in Sheppard v. Old Heritage Mutual Insurance Co., supra, at 452, 405 A.2d at 1337-38, specifically denies the Department's application for dissolution of the corporate entity without prejudice for reapplication, and only permits liquidation of the business. Of course, Old Heritage's actual physical possession of these items does not prevent the Department from any required use or inspection.

Claim Files

The Department is clearly entitled to those claim files which have been withheld or missing from Old Heritage records. By agreement of counsel and the parties, these claim files will be turned over to the Department, and all reasonable efforts will be made to do so under penalty of law.

Capital Stock

A microscopic, non-myopic review of the history of this litigious galaxy is needed to properly evaluate this issue.

Old Heritage is an assessable domestic mutual casualty insurance company, organized and existing under the laws of this Commonwealth, and licensed by the Insurance Commissioner to engage in the business of health and accident insurance. On August 4, 1977, the Commissioner suspended its operations. Pennsylvania Health is one of several general agents selling insurance for Old Heritage, while Gibraltar is registered as a non-assessable stock life insurance company.

[ 51 Pa. Commw. Page 494]

The principal stockholders, directors, and officers of all three entities, at one time or another, were and are Herbert L. and Lawrence D. Neff, who were joined in this action.

On March 1, 1976, Old Heritage made a $90,000 collateral loan to Pennsylvania Health secured by commissions due or becoming due to Pennsylvania Health. Old Heritage was suspended by the Department on June 7, 1976, when its 1975 examination reported a deficit in policyholders' surplus. The suspension was terminated ...


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