Final Liquidation For Legion and Villanova

NU Online News Service, July 30, 2:05 p.m.EDT?Pennsylvania insurance commissioner Diane Kokenannounced that the Commonwealth Court of Pennsylvania has grantedfinal orders of liquidation for Legion Insurance Company and itssubsidiary, Villanova Insurance Company.

The orders were effective July 28, 2003, at 12:01 a.m., shesaid.

"In August 2002, we determined that Legion did not havesufficient liquid assets available to pay its obligations as theycame due," Commissioner Koken said in a statement. "At that time,we petitioned the Commonwealth Court for an order ofliquidation."

"We are relieved to finally have the ability to move forwardwith liquidation," Ms. Koken continued. "Many policyholders andother claimants were being impacted because they did not haveaccess to state guaranty association coverage."

The court's liquidation orders, she said, will now begin totrigger the state guaranty associations to pay policyholder claims"to the maximum levels provided by law."

"In addition, by law, all Legion and Villanova policies willterminate within 30 days of this action," she added.

The Commissioner is appealing to the Pennsylvania Supreme Courta portion of the Commonwealth Court ruling that allowed four largepolicyholders to collect claims directly from Legion'sreinsurers.

These four policyholders successfully contended that, sinceLegion acted as a fronting company, they were the intendedbeneficiaries of the reinsurance, and that they should have apreference over other policyholders because their claims greatlyexceed the maximums available from the guaranty funds.

The Commissioner on the other hand claims that all of theavailable reinsurance proceeds should benefit all Legionpolicyholders equally and that these four large policyholdersshould not be favored.

Legion and Villanova were both based in Philadelphia and ownedby Mutual Risk Management Ltd., a publicly held Bermuda-basedcompany. The companies specialized in commercial insuranceproducts, including workers' compensation, medical malpractice,general liability and property coverages, and wrote business in all50 states, the insurance department said.