Could state regulators be ganging up on Penn Treaty?

The head of Penn Treaty Network America Insurance Company and a sister company wants to know who the companies’ rehabilitator has been talking to.

Eugene Woznicki, the companies’ chairman, is suggesting in a court document that the rehabilitator, Pennsylvania Insurance Commissioner Michael Consedine, may be discouraging insurance regulators in other states from granting the companies permission to increase long-term care insurance (LTCI) rates.

Consedine has been asking for state court permission to liquidate Penn Treat and the other company, American Network Insurance Company. Consedine has estimated that Penn Treaty and American Network would have to increase their LTCI rates about 300 percent, or arrange for some equivalent combination of rate increases and benefits cuts, to overcome their current deficit.

Consedine discussed his views on the companies’ finances in a draft rehabilitation plan filed in April.

Woznicki and the insurance companies’ holding company, Penn Treaty American Corp. — who are identified as intervenors — have filed a document blasting Consedine’s role in the affairs of Penn Treaty and American Network and calling for the court to give Woznicki and Penn Treaty access to information about Consedine’s communications with state insurance regulators outside Pennsylvania and the National Association of Insurance Commissioners (NAIC).

The intervenors want to know what the rehabilitation team has been telling others about the intervenors’ efforts to appeal a move by Consedine to liquidate Penn Treaty and American Network.

“The rehabilitator should not be permitted to hide behind the veil of privilege when he will not even acknowledge and identify what documents and communications regarding the appeal and the November 30, 2012 ‘update on Penn Treaty’ that he or members of the rehabilitation team have exchanged with the NAIC and/or state insurance regulators in this matter,” Woznicki and Penn Treaty American Corp. said in a document filed with the Commonwealth Court of Pennsylvania June 11.

“The rehabilitator has not yet provided the intervenors or the court with a privilege log describing the identities of the persons and entities that sent or received the withheld communications and documents, preventing the intervenors from addressing the documents in particularized fashion,” Woznicki and Penn Treaty American Corp. said. 

“A privilege log will show the extent to which the rehabilitator, deputy rehabilitator, other rehabilitation team members, their representatives and attorneys, and specific individuals at third-party NAIC and unidentified state insurance regulators and their representatives and attorneys were involved in the communications,” Woznicki and Penn Treaty American Corp. said.

Guaranty funds “do not belong in the driver’s seat of an insolvency proceeding,” and a privilege log also could indicate whether they were involved in communications with the rehabilitation team, Woznicki and Penn Treaty American Corp. said.