A state court has given Pennsylvania Insurance Commissioner Joel Ario permission to put Penn Treaty Network America Insurance Company in rehabilitation, Ario says.

The Pennsylvania Commonwealth Court, an intermediate appellate court, also has given Ario permission to put American Network Insurance Company, a Penn Treaty Network subsidiary, in rehabilitation.

Penn Treaty American Corp., Allentown, Pa., the parent of Penn Treaty Network and America Network, announced in October that Penn Treaty Network, its primary insurance subsidiary, would become insolvent unless the subsidiary found new financing to replace reinsurance agreements that were terminated by Imagine International Reinsurance Ltd., Hamilton, Bermuda.

Penn Treaty American helped create the modern U.S. LTC insurance industry. Its subsidiaries have done business in all 50 states and the District of Columbia, and they provide LTC insurance for more than 126,000 people.

The Commonwealth Court rehabilitation order gives Ario “direct authority” to preserve Penn Treaty Network assets and to oversee the company’s finances and operations, according to officials at the Pennsylvania Department of Insurance.

“It is the Insurance Department’s responsibility to take action when a company is in financially hazardous condition,” Ario says in a statement about the takeover. “Placing Penn Treaty into rehabilitation will make certain that long term care policyholder claims are paid, helping to ensure continuity of care for a community in need.”

The Pennsylvania department gave Penn Treaty Network time to find a buyer and secure new capital, but the company has not yet been able to raise enough financing, Ario says.

Ario says he believes he has to act to protect Penn Treaty Network’s assets and protect policyholders.

“The Insurance Department will perform an independent, comprehensive evaluation of the company’s finances,” Ario says. “Based upon this review and analysis, the department then will determine the viability of a rehabilitation plan. Any plan will give payment priority to policyholder claims.”

The Penn Treaty Network receivership is the first that the Pennsylvania department has announced in more than 4 years, Ario says.