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Penn Treaty parties spar over policyholder panel proposal

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Penn Treaty Network America Insurance Company and a sister company are still operating in rehabilitation, and the chairman of the companies’ boards is still skirmishing in court with the rehabilitator.

The latest battle is over whether the rehabilitator — Pennsylvania Insurance Commissioner Michael Consedine — should get to create a policyholder comittee.

Penn Treaty has posted links to court documents related to the rehabilitation on its website.

Penn Treaty helped create the modern long-term care insurance (LTCI) market. Regulators took it over after deciding that LTCI sales at Penn Treaty and the sister company, American Network Insurance Company, were outstripping growth in assets.

Consedine is asking a Pennsylvania state judge, Mary Leavitt, for permission to create the policyholder committee, to represent the policyholders in court proceedings related to the consideration of rehabilitation plans for Penn Treaty and American Network.

Consedine would appoint Ronald Schiller to be the interim counsel for the committee, with Schiller’s fees to be paid from the companies’ assets.

Eugene Woznicki, the chairman of Penn Treaty, American Network, and the insurance companies’ holding company, Penn Treaty American Corp., and William Hunt, the companies’ former chief executive officer, have intervened in the rehabilitation proceedings and have kept Pennsylvania regulators from putting Penn Treaty and American Network in liquidation.

Consedine has been consulting with Woznicki and Hunt — the “intervenors”  – about developing a rehabilitation plan, but not the policyholders, even though the policyholders rank higher in terms of priority than Woznicki and Hunt, Consedine told the court in an application for permission to start a policyholder committee.

 ”The presence of intervenors, board members and consultants at the negotiating table, without the policyholders also being formally represented, results in an approach to the development of a plan that the public could view as unbalanced and effectively excluding the direct input of policyholders,” Consedine said.

Woznicki said Leavitt should deny the policyholder committee application.

“There is no question that the policyholders…should have an opportunity to be heard with regard to any rehabilitation pan,” Woznicki said in a response to Consedine’s application. 

In the past, the rehabilitator has argued against the idea of appointing a policyholder committee, and the rehabilitator has not explained the decision to support creating a policyholder committee, other than to say the Penn Treaty case is a “unique case,” Woznicki said.

“It is the job of the rehabilitator to protect the interests of policyholders, and the burgeoning rehabilitation team is charging the companies a great sum of money to do just that,” Woznicki said. “It is not necessary for the rehabilitator to now punt that obligation by way of the creation of a new and expensive committee that, given the obvious conflicts among its members, will be unworkable.”

Some LTCI policyholders would probably benefit from the companies going into rehabilitation, while others would suffer, Woznicki said.

Forming a single committee to the policyholders’ conflicting interests would not be appropriate, Woznicki said.

Lawyers representing Consedine and Woznicki were not immediately available for comment.

Michael Kelley, a lawyer for National Health Administrators, an insurance broker, said his understanding is that Penn Treaty and American Network are still paying claims and still paying any trailing commissions and other compensation due in connection with the policies that are still in force.

“We think it will continue on,” Kelley said. “There are enough funds for it to pay claims for the foreseeable future.” 

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