Pennsylvania Insurance Commissioner Diane Koken, in her role as statutory liquidator for Reliance Insurance Company, announced today that the department has finalized the negotiation of an $85 million settlement with the former directors and officers of the Reliance Insurance Group.
“The goal of this settlement was to maximize the recovery for Reliance policyholders,” Koken said. “From the day we took over the Reliance Insurance Company, we committed ourselves to taking any and all steps necessary to protect and recover the assets of the company for the benefit of all policyholders and to hold responsible parties accountable for their actions.
“That was the reason we took action against Reliance’s former officers and directors. We have fought long and hard in this case, and we are pleased with this settlement, as we believe it is the largest one ever for the department.”
Of the $85 million settlement, $34 million will benefit the creditors of Reliance parent companies, Reliance Group Holdings Inc. and Reliance Financial Services Corporation. The remaining settlement proceeds of more than $51. This $51 million, when combined with the $45 million previously recovered from Reliance’s parent companies, results in a recovery of nearly $100 million for Reliance’s policyholders from litigation brought by the department.
In addition to a substantial monetary recovery, the settlement provides non-economic benefits, which were negotiated by the department for the benefit of Pennsylvania policyholders and to deter future misconduct by insurance company executives. These include agreements from defendants Saul P. Steinberg and Robert M. Steinberg not to serve as officers or directors, or to hold a controlling interest in any insurance company domiciled, licensed or conducting insurance business in the Commonwealth of Pennsylvania for the next 15 years. Other defendants have also confirmed that they do not have a controlling interest in any insurance company domiciled, licensed or carrying on insurance business in the Commonwealth of Pennsylvania.
“Today, the Pennsylvania Insurance Department has closed a large chapter in the story of the liquidation of the Reliance Insurance Company,” Koken continued. “We could not have done it without the direction and expertise of the President Judge of the Commonwealth Court, Judge James Gardner Colins, who had a critical role in establishing and overseeing the mediation which resulted in the settlement.
A copy of the settlement agreement can be found at the Reliance Documents website, www.reliancedocuments.com. Policyholders with questions in the Reliance liquidation estate should call 215-864-4500.
A Pennsylvania-based insurance company, Reliance Insurance Company was licensed to write insurance business in all 50 states, although it stopped writing most new or renewal business in June 2000. The states with the largest number of policyholders included California, New York, Florida, Pennsylvania, Illinois and Texas. Reliance Insurance Company’s insurance business consisted primarily of workers’ compensation, commercial auto, commercial liability and personal auto coverage.
The Pennsylvania Insurance Department took statutory control of the company on May 29, 2001, under an Order of Rehabilitation, followed by an Order of Liquidation in early October of that same year. The Department filed a civil action, from which this settlement arose, against the former officers and directors of Reliance on June 24, 2002, in the Commonwealth Court of Pennsylvania. Among other things, the complaint alleged claims for breach of fiduciary duties, professional negligence and the recovery of preferential transfers.