PRINTER'S NO. 450
No. 427 Session of 1997
INTRODUCED BY GREENLEAF, MOWERY, AFFLERBACH, HART AND HECKLER,
FEBRUARY 11, 1997
REFERRED TO BANKING AND INSURANCE, FEBRUARY 11, 1997
AN ACT
1 Amending the act of May 17, 1921 (P.L.789, No.285), entitled, as
2 amended, "An act relating to insurance; establishing an
3 insurance department; and amending, revising, and
4 consolidating the law relating to the licensing,
5 qualification, regulation, examination, suspension, and
6 dissolution of insurance companies, Lloyds associations,
7 reciprocal and inter-insurance exchanges, and certain
8 societies and orders, the examination and regulation of fire
9 insurance rating bureaus, and the licensing and regulation of
10 insurance agents and brokers; the service of legal process
11 upon foreign insurance companies, associations or exchanges;
12 providing penalties, and repealing existing laws," further
13 providing for powers and duties of the rehabilitator.
14 The General Assembly of the Commonwealth of Pennsylvania
15 hereby enacts as follows:
16 Section 1. Section 516 of the act of May 17, 1921 (P.L.789,
17 No.285), known as The Insurance Department Act of 1921, added
18 December 14, 1977 (P.L.280, No.92), is amended to read:
19 Section 516. Powers and Duties of the Rehabilitator.--(a)
20 The commissioner as rehabilitator may appoint a special deputy
21 who shall have all the powers of the rehabilitator granted under
22 this section. Provided, however, That any appointment of a
23 special deputy receives the advice and consent of two-thirds of
1 the members elected to the Senate. The commissioner shall make
2 such arrangements for compensation as are necessary to obtain a
3 special deputy of proven ability. The special deputy shall serve
4 at the pleasure of the commissioner.
5 (b) The rehabilitator may take such action as he deems
6 necessary or expedient to correct the condition or conditions
7 which constituted the grounds for the order of the court to
8 rehabilitate the insurer. He shall have all the powers of the
9 directors, officers and managers, whose authority shall be
10 suspended, except as they are redelegated by the rehabilitator.
11 He shall have full power to direct and manage, to hire and
12 discharge employes subject to any contract rights they may have,
13 and to deal with the property and business of the insurer. The
14 rehabilitator must operate the insurer under rehabilitation in a
15 professional manner.
16 (b.1) Any legal services, bond counsel or other financial
17 services which are needed to rehabilitate the insurer and which
18 cannot be effectively performed by attorneys or staff employed
19 by the Insurance Department shall be contracted out to and
20 performed by the party submitting the lowest bid for the
21 performance of these services after due public advertisement, on
22 those terms and conditions, and upon such open competitive
23 bidding as the issuing officials shall direct.
24 (c) If it appears to the rehabilitator that there has been
25 criminal or tortious conduct, or breach of any contractual or
26 fiduciary obligation detrimental to the insurer by any officer,
27 manager, agent, broker, employe, or other person, he may pursue
28 all appropriate legal remedies on behalf of the insurer.
29 (d) The rehabilitator may prepare a plan for the
30 reorganization, consolidation, conversion, reinsurance, merger
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1 or other transformation of the insurer. However, the
2 commissioner is prohibited from appointing the board of
3 directors of an insurer under rehabilitation once it comes out
4 of receivership. Upon application of the rehabilitator for
5 approval of the plan, and after such notice and hearing as the
6 court may prescribe, the court may either approve or disapprove
7 the plan proposed, or may modify it and approve it as modified.
8 If it is approved, the rehabilitator shall carry out the plan.
9 In the case of a life insurer, the plan proposed may include the
10 imposition of liens upon the equities of policyholders of the
11 company, provided that all rights of shareholders are first
12 relinquished. A plan for a life insurer may also propose
13 imposition of a moratorium upon loan and cash surrender rights
14 under policies, for such period and to such an extent as may be
15 necessary.
16 (e) The rehabilitator shall have the power to avoid
17 fraudulent transfers under sections 528 and 529.
18 (f) The commissioner must file a quarterly report on any
19 rehabilitation with the Banking and Insurance Committee of the
20 Senate and the Insurance Committee of the House of
21 Representatives.
22 Section 2. This act shall take effect in 60 days.
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