Opinion ID: 2373573
Heading Depth: 1
Heading Rank: 3

Heading: REHABILITATION v. LIQUIDATION

Text: Appellant Allstate challenges the Plan on the basis that it more properly represents a liquidation plan and as such, it has been improperly implemented under the Rehabilitation portion of the Insurance Act. It is argued that the instant plan does not contemplate a resuscitation of Mutual Fire's operations which is one of the stated purposes of the rehabilitation statute. Further, opponents of the Plan claim it is in violation of Neblett v. Carpenter, 305 U.S. 297, 59 S.Ct. 170, 83 L.Ed. 182 (1938), in which the United States Supreme Court held that a rehabilitation plan cannot impose harsher consequences than a liquidation. Under Neblett, creditors must fare at least as well under a rehabilitation plan as they would under a liquidation, which Appellants currently argue, would not be the case under this Plan. We disagree and affirm the finding of the Commonwealth Court that this plan properly effectuates the goals of rehabilitation embodied in 40 P.S. § 221.14 et seq. The Commonwealth Court correctly concluded that the ultimate goal of the plan is to have Mutual Fire reemerge as a solvent insurer. The Plan calls for Mutual Fire's possible restructure and orders that it maintain its required capital and surplus minimums required in order to resume operations in the future. The rehabilitation, in order to be legitimate, does not have to restore the company to its exact original condition. So long as the rehabilitation properly conserves and equitably administers the assets of the involved corporation in the interest of investors, the public and others, (with) the main purpose being the public good the plan of rehabilitation is appropriate. 2A Couch on Insurance 2d § 22.10. The Plan as it presently appears before this Court does provide the benefits of rehabilitation such as flexibility and the accelerated disposition of claims which the Commonwealth Court properly recognized as preferable to and distinct from, the ordinary procedures of liquidation. The Commonwealth Court after an extensive and thorough analysis concluded that the plan of rehabilitation best effectuates the legislatively stated purpose (of) `the protection of the interest of insureds, creditors and the public generally. . . .' and the `equitable apportionment of any unavoidable loss' through inter alia, `improved methods for rehabilitating insurers. . . .' Section 501 of the Act, 40 P.S. § 221.1. Grode v. Mutual Fire, Marine and Inland Insurance Company, 132 Pa.Commw.Ct. 196, 207, 572 A.2d 798, 803 (1990) (quoting 40 P.S. § 221.1(c)). Finding no meritorious challenge to the Plan on this issue, and in recognition of the validity of the goals sought and the scheme offered by the rehabilitation, we affirm the Commonwealth Court's holding that this is a legitimate plan of rehabilitation intended for the benefit of the public and not a de facto plan of liquidation. In keeping with our limited and narrow scope of review we will now address seriatim the remaining issues raised before and resolved by the Commonwealth Court.