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CONSTANCE B. FOSTER v. WESTMORELAND CASUALTY COMPANY (04/18/88)

decided: April 18, 1988.

CONSTANCE B. FOSTER, INSURANCE COMMISSIONER OF THE COMMONWEALTH OF PENNSYLVANIA, PLAINTIFF
v.
WESTMORELAND CASUALTY COMPANY, DEFENDANT



Original Jurisdiction in the case of Constance B. Foster, Insurance Commissioner of the Commonwealth of Pennsylvania v. Westmoreland Casualty Company.

COUNSEL

Jean M. Callihan, Assistant Counsel, with her, Terrance J. Fitzpatrick, Chief of Litigation, Linda J. Wells, Chief Counsel, for plaintiff.

Wayne M. Pecht, Keefer, Wood, Allen & Rahal, for defendant.

President Judge Crumlish, Jr., and Judges McGinley and Smith, sitting as a panel of three. Opinion by President Judge Crumlish, Jr. Judge Smith concurs in the result only.

Author: Crumlish

[ 115 Pa. Commw. Page 394]

The Insurance Commissioner has filed a petition for liquidation in our original jurisdiction*fn1 seeking an involuntary dissolution of Westmoreland Casualty Company and a formal liquidation order pursuant to Article V of the Insurance Department Act of 1921 (Act).*fn2 Westmoreland has filed preliminary objections which are now before us.

An independent actuarial firm analyzed Westmoreland's financial condition and found significant reserve deficiencies and operating losses which threatened its financial integrity. Thereafter, a formal agreement was reached between the Insurance Department and Westmoreland under which Westmoreland would be permitted to continue operations provided certain written commitments for funds were obtained. Westmoreland agreed to waive its right to contest a liquidation petition if it did not obtain these funds. Despite these events, two top Westmoreland officers were issued bonuses in excess of $30,000 and guaranteed $100,000 salaries.

[ 115 Pa. Commw. Page 395]

When the deadline for obtaining the funds expired, the Commissioner ordered Westmoreland to suspend business. These facts, as averred in the Commissioner's petition, constitute the basis for the requested dissolution and liquidation of Westmoreland.

Westmoreland's initial preliminary objection alleges that the instant petition lacks specificity because it fails to identify what acts constitute grounds for liquidation. This contention is clearly without merit.

Section 520(a) of the Act, 40 P.S. ยง 221.20(a), provides:

(a) The commissioner may apply by petition to the Commonwealth Court for an order directing him to liquidate a domestic insurer, domiciled in this Commonwealth, alleging that the insurer has committed one or more acts which may constitute grounds for liquidation as set forth in sections 514 and 519 of this article.

The petition in question not only avers insolvency and hazardous financial condition as general grounds for liquidation*fn3 but it also refers specifically to the results of the investigation conducted by the independent actuarial firm as well as the allegedly improper actions of key company ...


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