THE COURTS
Title 210—APPELLATE PROCEDURE
PART I. RULES OF APPELLATE PROCEDURE
[ 210 PA. CODE CH. 37 ]
Proposed Rules Regarding Insurance Company Rehabilitation and Liquidation Proceedings in the Commonwealth Court
[42 Pa.B. 659]
[Saturday, February 4, 2012]Following are proposed rules that address obtaining judicial review of proceedings under Article V of the Insurance Department Act of 1921 regarding rehabilitation and liquidation of insurance companies in financial distress. Review under Article V falls within the exclusive jurisdiction of the Commonwealth Court.
The judges of the Commonwealth Court, following extensive discussion and review, approved the rules for publication and comment.
Comments should be submitted within sixty (60) days of publication and should be directed to Jean Warrick, Esquire, Commonwealth Court, 610 Sentry Park East—Suite 210, Blue Bell, PA 19422.
Annex A
TITLE 210. APPELLATE PROCEDURE
PART I. RULES OF APPELLATE PROCEDURE
ARTICLE III. MISCELLANEOUS PROVISIONS
CHAPTER 37. BUSINESS OF THE COMMONWEALTH COURT
SUMMARY AND FORMAL PROCEEDINGS AGAINST INSURERS Rule 3771. Scope of Rules.
Rules 3771—3784 apply to all actions in the Commonwealth Court arising under Article V of The Insurance Department Act of 1921, Act of May 17, 1921, P. L. 789, added by the Act of December 14, 1977, P. L. 280, as amended, 40 P. S. §§ 221.1—221.63 (concerning summary and formal proceedings against insurers) (Article V). The rules are intended to govern practice and procedures in Article V proceedings. In the event of any inconsistency, the provisions of Article V control.
Rule 3772. Definitions.
(a) Unless otherwise stated, words and phrases used in these rules shall have the meanings given to them under Article V.
(b) ''administrative case docket'' shall refer to the docket created upon the initiation of a formal proceeding by the filing of a petition to rehabilitate or liquidate an insurance company.
(c) ''adversarial proceeding'' shall refer to any action initiated by the rehabilitator or liquidator against persons other than the insurer, any action asserting a right or interest afforded by Article V and for which neither Article V nor prior orders of the Court provide an avenue for redress, and any other dispute that arises under Rules 3775 or 3776 that the Court determines shall be governed by Rule 3783.
(d) ''ancillary case docket'' shall refer to a docket created when an adversarial proceeding is initiated or when a creditor files an objection to the liquidator's claim determination under Rule 3781(c).
(e) ''Court'' shall mean the Commonwealth Court of Pennsylvania.
(f) ''formal proceeding'' shall refer to an action to rehabilitate or liquidate an insurer pursuant to Sections 515 or 520 of Article V, 40 P. S. §§ 221.15—221.20.
(g) ''master service list'' shall refer to the list maintained by the receiver, as directed in Rule 3779, that consists of the contact information of the parties and/or their attorneys in a matter on the administrative case docket.
Official Note: Administrative Case Docket—The following illustrates the types of filings that may appear on an administrative case docket: any response to the petition to rehabilitate or liquidate; applications to intervene; responses in opposition to a receiver's applications for approval of reports, partial distributions, administrative expenses, etc.; applications seeking to compel the issuance of a notice of determination on a proof of claim or any other filings by the receiver related to the administration of the liquidation or rehabilitation. Other than the filing that initiated an ancillary case docket, the administrative case docket will not usually include filings related to matters assigned to an ancillary case docket.
Rule 3773. Filings; Number of Copies.
(a) General Rule. Each filing with the Court shall consist of the original document, two (2) copies, and a labeled CD-ROM or USB flash drive containing a copy of the filing in portable document format (PDF).
(b) Exception. Unless otherwise ordered by the Court, proof of service or report of the performance of a ministerial task does not need to be copied in electronic format.
(c) No Courtesy Copies. Courtesy copies of filings shall not be provided to the judge's chambers.
Rule 3774. Manner of Initiating Article V Proceedings.
(a) Judicial Review of Summary Orders (Section 510 of Article V, 40 P. S. § 221.10). A request for judicial review of a summary order by the Commissioner shall be presented by petition for review and shall conform to the provisions of Chapter 15 of the Pennsylvania Rules of Appellate Procedure.
(b) Court Seizure Order (Section 512 of Article V, 40 P. S. § 221.12). Petitions by the Commissioner for a seizure order shall state the material facts that constitute the grounds for relief. The petition may be decided with or without an answer or a hearing. An application by the insurer for a hearing and review of an ex parte seizure order may be filed at any time and shall set forth the factual and legal basis on which the applicant believes that the Court should vacate or modify the seizure order. The Court may set a time for the Commissioner to file an answer, but in any event the Court shall decide the application in accordance with Section 512(d), 40 P. S. § 221.12(d).
(c) Formal Proceedings (Sections 515 and 520 of Article V, 40 P. S. §§ 221.15 and 221.20).
(1) Petitions by the Commissioner for an order of rehabilitation or liquidation shall state the material facts that constitute the grounds for relief.
(2) Within thirty (30) days of the filing of a petition for rehabilitation or a petition for liquidation, the insurer shall file either an answer to the petition or consent to the entry of an order granting the relief the Commissioner seeks in the petition. No other responsive filings by the insurer are permitted. The time period for responding to the petition may be extended by the Court for good cause shown.
(3) An answer shall state the material facts that constitute a defense to the petition.
(4) Following the entry of an order to rehabilitate or liquidate the business of an insurer, the Court may enter a case management order to supplement these Rules.
Rule 3775. Intervention in Formal Proceedings.
(a) Intervention. A person not named as a respondent in a formal proceeding who has a direct and substantial interest in the administration of the insurer's business or the estate may request leave of court to intervene.
(b) Application to Intervene. A request for leave to intervene, generally or for a limited purpose, shall be by application and answer, if any, in accordance with Pa. R.A.P. 123. The application shall contain a concise statement of the interest of the applicant and the purposes for which the applicant seeks to intervene. A copy of the document to be filed if the Court allows intervention shall be attached to the application.
(c) Action on Application. Intervention in a formal proceeding shall be allowed if the proven or admitted allegations of the petition establish a sufficient interest in the proceedings, unless the interest of the applicant is already adequately represented or intervention will unduly delay or prejudice the adjudication of the rights of the parties.
(1) General Intervention. Where the applicant demonstrates an ongoing interest in the administration of the insurer's business or estate, the Court may grant the applicant general intervention. The general intervenor shall remain on the master service list until the formal proceeding is completed.
(2) Limited Intervention. Where the applicant's interest involves a discrete controversy relating to the administration of the insurer's business or estate, the Court may grant the applicant limited intervention to participate as a party in the discrete controversy. The limited intervenor shall not be placed upon the master service list unless otherwise directed by the Court.
(d) Upon grant of an application to intervene, the attached application under Rule 3776 or complaint under Rule 3783 shall be deemed filed, and the Court shall direct the time for filing a response.
Official Note: General or limited intervention—Inter-vention, whether general or limited in scope, may be granted for purposes such as, but not limited to, the following:
(1) Oppose a petition by the Commissioner for an order of liquidation or rehabilitation;
(2) Oppose a request by the receiver for a court order relating to the administration of the insurer's business or of the estate;
(3) Object to a report to the Court by the receiver;
(4) Seek relief from any order of the Court;
(5) Assert any rights or interest afforded to the person by Article V and for which neither Article V nor prior orders of the Court provide an avenue for redress; or
(6) Compel the liquidator to issue a notice of determination if the liquidator has failed to do so in conformity with Rule 3780.
Relief from stay—An application to intervene is the appropriate filing in which to request relief from the stay of actions against the insurer that is imposed under Section 526, 40 P. S. § 221.26.
Rule 3776. Applications for Relief or Court Approval.
An application for relief shall comply with Pa. R.A.P. 123, except that an answer shall be filed within thirty (30) days of service of the application for relief. Uponapplication, the Court may extend the time for response. The application may be supported by a memorandum of law; any answer may likewise be accompanied by a memorandum of law.
Official Note: Extension of time for response—Requests based on an agreement of the parties are more likely to receive favorable consideration.
Rule 3777. Docketing.
(a) Administrative Case Docket. Upon the filing of a petition to rehabilitate or liquidate an insurance company under Article V, the chief clerk shall assign the petition a number on the administrative case docket. All filings directly related to the Court's consideration of the petition for rehabilitation or liquidation shall be filed at that number, and this docket will contain all filings concerning the administration of the insurer's estate should the petition be granted.
(b) Case Caption—Administrative Case Docket. The caption of the proceeding assigned to an administrative case docket shall be in the following form:
_________________
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
IN RE: XYZ Insurance Company : In Liquidation [Rehabilitation] : No. 1 XYZ 20xx : [Title of Document] _________________
(c) Ancillary Case Docket. When actions are initiated against the receiver or an objection is filed in response to a notice of determination, the chief clerk will note such filing on the administrative case docket and then establish an ancillary case docket for each such matter.
(d) Case Caption—Ancillary Dockets. Matters that receive ancillary case docket numbers shall be captioned in accordance with the following examples:
(1) An adversarial proceeding under Rule 3783 shall be captioned:
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
_________________ , : Plaintiff/Petitioner/
: Applicant
: : v. : : No.______ _________________ , : Defendant/Respondent
: : (Ancillary to IN RE: : XYZ Insurance Company : In Liquidation : No. 1 XYZ 20xx) : [Title of Document] _________________
(2) An objection to the liquidator's determination on a proof of claim should be captioned:
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
John Doe Company, : Objector : Objection to Notice of : Determination : : Re: Proof of Claim : No. _____ : v. : : : XYZ Insurance Co., in : Liquidation : : No. ______ (Ancillary to IN RE: : XYZ Insurance Company : In Liquidation : No. 1 XYZ 20xx) :
Objection to Liquidator's Notice(s) of Determination Official Note: Listing proof of claim number(s)—All claim numbers should be listed in the caption to the right of the dotted line and on the cover sheet. If the objection relates to proofs of claims numbers too numerous to conveniently be listed in the caption, the first claim number followed by ''et al'' must be shown in the caption and additional proof of claim numbers shall be listed in a footnote on page one.
Rule 3778. Master Service List.
(a) General Rule. As soon as practicable after commencing an action to rehabilitate or liquidate an insurer, the Commissioner shall create and maintain a master service list. If the Court grants the petition to liquidate or rehabilitate, the receiver will assume the duty to maintain the master service list. The master service list shall include (a) the name, address, telephone number, facsimile (fax) number and electronic mail (e-mail) address of counsel for each party in the proceeding, and (b) the name, address, telephone number, fax number and e-mail address of each pro se party in the proceeding at the administrative case docket number.
The receiver is not required to list a party or counsel for a party participating only as a limited intervenor on the master service list.
Changes in contact information, including transfer of responsibilities to another attorney in the firm and requests to be removed from the master service list may be accomplished by notifying the receiver by e-mail, fax or mail in accordance with the receiver's instructions.
(b) Request of Non-Party for Inclusion on Master Service List. Any interested person may be included on the master service list by sending a written request to the Commissioner or the receiver, as the case may be, including name, address, telephone number, facsimile (fax) number and electronic mail (e-mail) address.
(c) Availability of Master Service List. The Commissioner, or receiver, shall post and maintain the master service list on the website established under these rules. If no website has been established, the receiver shall make the master service list available by e-mail upon request. The receiver may make a paper copy of the master service list available at the standard fee.
Official Note: Court Maintains Its Own Service List—The master service list maintained by the Commissioner or receiver is not the Court's service list. The two lists are separately managed. Amendment or deletion of information on one list does not affect the other list. Notice of any change must be given to both the Commissioner or receiver and the Court.
Rule 3779. Website.
Unless otherwise ordered by the Court, upon commencing an action to rehabilitate or liquidate an insurer, the Commissioner shall establish and maintain a website for the purpose of either posting or listing filings with and orders of the Court in accordance with these rules. If the Court grants the petition to liquidate or rehabilitate, the receiver will assume the duty to maintain the website. On the website, the receiver shall post in PDF format all documents filed at the administrative case docket number.
After the chief clerk assigns an ancillary case docket number to a disputed matter, the receiver shall note on the website the initiation of the ancillary case, stating briefly the nature of the dispute and the docket number assigned thereto. The receiver is not required to post a copy of filings at an ancillary case docket number.
When a copy of a filing is not required to be posted on the website, the receiver may list the filing without posting a copy.
Rule 3780. Service.
(a) Administrative Case Docket.
(1) Service on all parties. Service of all documents filed by any party (receiver, insurance company, general intervenors) at the administrative case docket number shall be served on all other parties in accordance with Pa. R.A.P. 121. Proof of service shall comply with Pa. R.A.P. 122.
(2) Notice to non-parties listed on the master service list. The receiver shall promptly notify all non-parties named on the master service list of any filing at the administrative case docket number by transmitting via facsimile (fax) or electronic mail (e-mail) a notice to each such person that the filing has been posted on the website. The notice shall include:
(i) The title or description of the filing;
(ii) The date of the filing;
(iii) A statement that the filing is available for viewing, downloading, or printing at the website;
(iv) Directions on how interested persons may view, download, or print a copy of the filing from the website;
(v) A name, address, telephone number, fax number, and e-mail address as a contact for those unable to view, download, or print the filing from the website.
Notification is deemed complete upon transmission of the notice of filing by e-mail or when the fax transmission is complete. If the notice of filing is transmitted by fax, the receiver shall also comply with the requirements of Pa. R.C.P. No. 440(d)(2), relating to a fax cover sheet.
(b) Ancillary Case Docket. Service of all documents filed by a party at an ancillary case docket number shall be served on all other parties in accordance with Pa. R.A.P. 121. Proof of service shall comply with Pa. R.A.P. 122.
(c) Filings Not Posted on Website. Any person on the master service list desiring a copy of a filing listed, but not posted, on the website may obtain a copy from the receiver.
(d) Alternative Service. If a person listed on the master service list is unable to receive electronic notice of filings, written notice of this inability shall be sent to the receiver who shall then provide notice of a filing by ordinary mail.
(e) Notice of the Entry of Court Orders. The chief clerk shall give written notice of the entry of a Court order to counsel of record or any party if not represented in disputes at either the administrative case docket number or at an ancillary case docket number, as the case may be. Such notice shall be given in accordance with Pa. R.C.P. No. 236.
The Commissioner or receiver, as the case may be, shall post on the website all orders issued by the Court and shall provide notice of the filing of the order to non-parties listed on the master service list in conformity with subsection (a)(2) of this rule unless otherwise ordered by the Court.
Rule 3781. Claim Procedure in Liquidation Proceedings.
(a) Filing a Proof of Claim.
(1) In the notice to potential creditors of the insurer's estate, the liquidator shall provide a proof of claim form that complies with Article V.
(2) A creditor asserting a monetary claim against the estate of the insurer shall file a proof of claim with the liquidator in accordance with Article V.
(3) The completed proof of claim form and documentation supporting the claim shall be filed with the liquidator. Filing may be accomplished by mail, facsimile (fax), or electronic mail (e-mail) to the addresses and numbers indicated on the proof of claim form. Filing is effective upon the date on which the proof of claim form is mailed, as established by a United Postal Service Form 3817 Certificate of Mailing or by any similar form from which the date of deposit in the mail can be verified. If faxed or e-mailed to the liquidator, filing is effective upon the date faxed or e-mailed, as documented by sender's fax or computer. If service is accomplished by fax, the claimant shall also comply with the requirements of Pa. R.C.P. No. 440(d)(2), relating to a fax cover sheet.
(b) Notice of Determination.
(1) Unless otherwise ordered, the liquidator shall issue a written notice of determination within one hundred and eighty (180) days of the filing of the proof of claim, unless the liquidator seeks additional information on a claim pursuant to Section 538(b), 40 P. S. § 221.38(b). If additional information is required, the liquidator shall issue a notice of determination within ninety (90) days of the date on which the requested supplementary information is mailed, faxed or e-mailed to the liquidator.
(2) The notice of determination shall include:
(i) the amount of the claim allowed;
(ii) the priority class assigned to the claim;
(iii) if the claim is disallowed, in whole or in part, a brief statement of the reason(s) for the liquidator's determination;
(iv) a statement advising the claimant of the requirements set forth in Rule 3781(c)(1) below; and
(v) notice that if a claimant fails to file an objection with the Commonwealth Court within sixty (60) days from the mailing date on the notice of determination, the claimant cannot later object to the liquidator's determination.
(3) If the liquidator determines that the claim has been submitted to a state guaranty association, the liquidator may defer further review of the proof of claim until the guaranty association has made its final determination and has returned the closed claim file to the liquidator. In such a case, the liquidator shall notify the claimant of the decision to defer review.
(c) Objections.
(1) If a claimant disputes the amount or priority class assigned to the claim, the claimant shall file an objection in the Court within sixty (60) days from the mailing date shown on the notice of determination. The objection must present the factual and legal basis for the objection and include relevant supporting documentation and a copy of the notice of determination.
(2) The claimant shall serve a copy of the objection on the liquidator in accordance with Pa. R.A.P. 121.
(3) Upon receipt of an objection, the liquidator shall promptly acknowledge receipt, contact the claimant and attempt to resolve the objection. If the objection is not resolved within sixty (60) days, the liquidator shall file with the Court and serve on the claimant a written response. The claimant and the liquidator may agree in writing to extend these deadlines. Any such agreement must be filed with the Court.
(4) If the claimant is an entity other than a natural person, an attorney admitted to practice in Pennsylvania or admitted to practice pro hac vice in accordance with Pa. R.C.P. No. 1012.1, Pa. B.A.R. 301, and 204 Pa. Code § 81.505, must enter an appearance for the claimant within sixty (60) days of the filing of the objection, or the Court may dismiss the objection.
(d) Resolution of Objections.
(1) Upon receipt of the liquidator's response to the objection, the Court shall establish a time for a hearing.
(2) Objections may be assigned to a single judge for disposition.
(3) Upon the parties' request or on its own initiative, the Court may appoint a referee to hear the objection and submit to the Court a recommended decision, which shall include findings of fact, conclusions of law and a proposed order.
(e) Referee Procedure.
(1) Compensation. Referees serve at the pleasure of the Court and shall be compensated from the insurer's estate at an hourly rate to be set by the Court at the beginning of each calendar year. The rate shall be clearly set forth in the appointment order, subject to any annual adjustment, which shall be posted on the website created under Rule 3776 and on the Court's website.
(2) Parties' costs. Each party shall bear its own costs associated with proceedings before the referee. The parties shall share equally any costs incurred by the referee in creating a record and any transcription costs.
(3) Conflict of interest. No referee may appear as counsel in connection with any matter connected to the liquidation proceeding.
(4) Authority of the referee. The referee shall have authority to:
(i) set hearing dates;
(ii) establish procedures to expedite the presentation of evidence;
(iii) establish discovery schedules where discovery is necessary; and
(iv) establish briefing schedules.
(5) Rules of evidence. The Pennsylvania Rules of Evidence shall apply to all evidentiary hearings conducted by a referee.
(6) Additional evidence. The referee shall review the objection and any response and may request and review additional documents or information.
(7) Efficient and cost effective. The referee shall resolve the objection in a cost-effective and efficient manner, using stipulations and depositions and conducting hearings by teleconference or videoconference where appropriate. The referee may bifurcate a proceeding to address issues seriatim.
(8) Maintain a record. The referee shall maintain a record consisting of everything submitted for consideration. The referee shall also maintain a list of the contents of the record, numbered and maintained in the order in which the items were submitted. In the case of materials submitted as evidence, the referee shall mark each exhibit offered into evidence as admitted or excluded. While an objection is pending before a referee, no documents or other material related to that objection shall be filed with the Court.
(9) Filing recommended decision. The referee shall file with the Court and serve on the parties the recommended decision, a proposed order and a certified list of all documents submitted by the parties and compiled in accordance with Rule 3781(e)(8).
(10) Failure to cooperate with referee. If a claimant or the liquidator fails to cooperate with the referee or to participate in good faith in proceedings before the referee, the referee may include such findings in his recommended decision and recommend appropriate sanctions, which may include a recommendation that the objection be sustained or dismissed.
(f) Exceptions to the Referee's Recommended Decision.
(1) Either the liquidator or the claimant may file with the Court exceptions to the referee's recommended decision no later than thirty (30) days after service of the recommended decision. The exceptions shall be served on the other party and the referee.
(2) In separately numbered paragraphs, the exceptions shall specify the errors in the referee's recommended decision. There shall be attached as exhibits to the exceptions: the liquidator's notice of determination; the objection; the liquidator's response; and, the referee's recommended decision. Exceptions shall be accompanied by a memorandum of law.
(3) Any response to the exceptions shall be filed and served on the other party and the referee within fourteen (14) days of service of the exceptions. A response shall be accompanied by a memorandum of law. The time for response may be extended by agreement of the parties with the approval of the Court.
(4) Within fourteen (14) days of service of the exceptions, the referee shall forward to the Court the record of the proceedings.
(5) When exceptions are filed, the Court may, on its own motion or upon request, direct an evidentiary hearing or oral argument. The Court may adopt the referee's proposed factual findings, modify those findings or recommit the matter to the referee with instructions.
(6) Upon completion of its review of the exceptions, the Court will enter a final order sustaining or overruling the exceptions, in part or in whole. The Court may adopt the referee's recommended decision or may issue its own opinion and order. An order of Court dismissing an objection as a sanction pursuant to Rule 3781(e)(10) is the final disposition of the claim.
(7) When no exceptions to a referee's recommended decision are filed, the referee, within fourteen (14) days of the last day for filing exceptions, shall file with the Court the record of the proceedings. Thereafter, either the claimant or the liquidator may apply to the Court for, or the Court on its own initiative may issue, an order either adopting the recommended decision or stating that in the absence of exceptions, the referee's proposed order is entered as the order of the Court.
(8) When no exceptions are filed, findings of fact or conclusions of law in a referee's report and the recommended decision are not considered controlling in any subsequent proceeding, unless the Court adopts the entire report or specific findings of fact or conclusions of law.
(9) Unless otherwise ordered by the Court, failure to file timely exceptions to a referee's recommended decision shall be deemed a waiver of further appeal if the Court approves the recommended decision without modification.
Rule 3782. Claim Procedure in Rehabilitation Proceedings.
When an approved plan of rehabilitation includes the filing of claims by creditors, the rehabilitation plan shall follow the claim procedures set forth in Rule 3781, unless modified by the Court.
Rule 3783. Adversarial Proceedings.
(a) Manner of Initiating Adversarial Proceedings. Adversarial proceedings, whether filed by the receiver or filed by an intervenor, shall be initiated by the filing of a complaint.
(b) Rules Governing Adversarial Proceedings. Unless otherwise directed by the Court, the Pennsylvania Rules of Civil Procedure shall apply.
(c) Appointment of Referee. The Court may appoint a referee to hear the complaint and make recommended findings of fact and conclusions of law and propose an order for review by the Court in the same manner and pursuant to the same procedure prescribed for the disposition of objections to a notice of determination. The Court shall determine if the referee's fee shall be paid by the estate, the claimant or apportioned between the parties.
Rule 3784. Reporting.
(a) At least annually, the liquidator shall prepare and submit to the Court a report of the claims against the insurer's estate that have been resolved, with his recommendations (''Claims Report''). The Claims Report shall include the following: each claimant's name, address, priority class, allowed amount, and whether the claim determination was finalized because no objection was filed, upon acceptance of the referee's recommendation or upon settlement of the parties. The Claims Report will be served on those on the master service list in accordance with these rules. No claim shall be paid, in part or in whole, until the report is approved by the Court.
(b) The receiver shall submit a comprehensive report on the status of the insurer's business or the administration of the insurer's estate as frequently as ordered by the Court.
[Pa.B. Doc. No. 12-180. Filed for public inspection February 3, 2012, 9:00 a.m.]
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