Judge James Gardner Colins has given the Pennsylvania Insurance Department (PDI) until December 4th to come up with a plan to either rehabilitate Reliance Insurance Co., or to shut down the insolvent insurer.
The PDI is still trying to marshall Reliance assets, and is strongly contesting the bankruptcy proceedings of its parent, Reliance Holdings in New York. At issue is the fundamental question of how much money should go to pay the claims of policyholders, and how much should go to creditors.(See IJ Website, Aug. 20).
Reliance has been in rehabilitation since last June, and the PDI stated when it took over administration of the company that it would take at least six months for independent auditors to be able to reasonably assess the company’s assets. The December 4th deadline increases the chances that Reliance will be shut down, as it would be unable to continue to pay claims.
If that happens, it could result in surcharges on insurers across the country to pay them.
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