Pa. Commissioner Sues Pair of Predecessors

August 7, 2002

In an unusual move, Pennsylvania Insurance Commissioner M. Diane Koken has sued two of her predecessors for private-sector work they reportedly did after leaving office for two insurance companies that later failed, according to the Philadelphia Inquirer.

But Koken’s attempts to collect damages from a third failed insurer have reportedly been questioned by two other ex-insurance commissioners, now in the position of expert defense witnesses.

So far this year, Koken has filed a civil suit naming ex-commissioner Linda Kaiser among those responsible for the demise of her former employer, Reliance Insurance Co., and another naming ex-commissioner Constance Foster, accusing her of having a part in failing to keep Phico Insurance Co. solvent when she was a director there. Both Kaiser and Foster have denied any wrongdoing.

Meanwhile, ex-insurance commissioners in Connecticut and Pennsylvania have been enlisted in defense of the manager-owners of the failed Physicians Insurance Co. (PIC), targets of a third Koken suit.

According to Koken’s allegations, PIC’s owners unloaded the company services at inflated prices and made other payments to themselves, ultimately resulting in the malpractice insurer going out of business.

In a move that contrasts Koken’s allegations, Cynthia Maleski, Pennsylvania insurance commissioner from 1992 to 1995 – between Foster’s term and Kaiser’s – has submitted an expert-witness report stating that, at the time the deals were signed, PIC, its board and state regulators had every reason to believe PIC could afford those payments.

Similarly, Peter Gillies, Connecticut’s insurance commissioner in the 1980’s who later was a managing partner of insurance litigator LeBoeuf, Lamb, Greene & MacRae, has submitted a statement claiming that PIC’s directors could have reasonably believed the company was solvent when they approved service contracts and dividends that Koken later blamed for PIC’s collapse.

The PIC case is slated to go to trial in the fall.

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