$85 MILLION RELIANCE SETTLEMENT:

Pennsylvania Insurance Commissioner Diane Koken, in her role as statutory liquidator for Reliance Insurance Company, finalized the negotiation of an $85 million settlement with the former directors and officers of the Reliance Insurance Group, the largest settlement ever by the department.

Out of the $85 million settlement, $34 million will benefit the creditors of Reliance parent companies, Reliance Group Holdings Inc. and Reliance Financial Services Corporation. The remaining settlement proceeds of more than $51 million, when combined with the $45 million previously recovered from Reliance’s parent companies, results in a recovery of nearly $100 million for Reliance policyholders from litigation brought by the department.

A Pennsylvania-based insurance company, Reliance Insurance Company was licensed in all 50 states, although it stopped writing most business in June 2000. The states with the largest number of policyholders included California, New York, Florida, Pennsylvania, Illinois and Texas. Reliance’s business consisted primarily of workers’ compensation, commercial auto, commercial liability and personal auto coverage.

The Pennsylvania department took statutory control of the company on May 29, 2001, and liquidation was ordered in October of that same year. The department filed a civil action, from which this settlement arose, against the former officers and directors of Reliance on June 24, 2002. Among other things, the complaint alleged breach of fiduciary duties, professional negligence and the recovery of certain preferential transfers.