Pennsylvania Insurance Commissioner Announces $40 Million Settlement With Deloitte and Touche LLP
Litigation Recoveries at $145 million
HARRISBURG, Pa., Nov. 24 /PRNewswire-USNewswire/ -- Pennsylvania Insurance Commissioner Joel Ario, in his capacity as statutory liquidator for Reliance Insurance Company, announced today that the Insurance Department has finalized a $40 million settlement with Deloitte & Touche LLP in connection with the firm's auditing services for Reliance.
"We have fought long and hard in this case, and we are pleased with this settlement," Commissioner Ario said, adding that the goal in this, and prior actions, has been to maximize recovery for Reliance policyholders from its parent companies, management and outside professionals.
"This $40 million settlement will directly benefit Reliance's policyholders. When combined with the $45 million previously recovered from the Reliance parent companies, as well as the approximately $60 million recovered from the settlement of actions against the company's former officers and directors, the grand total of recoveries in the Reliance estate total nearly $145 million from litigation brought by the department," Ario said.
In addition to this substantial recovery, insurance regulation now provides additional protections to minimize the risks associated with the auditing of insurance companies.
The department has been working through the National Association of Insurance Commissioners on new requirements related to auditor independence, corporate governance and internal control over financial reporting designed to promote the accuracy and reliability of financial statements filed by insurance companies.
Other key developments in financial regulation include strengthening risk-based capital requirements and adopting more stringent standards for actuarial opinions on the adequacy of insurance company reserves.
The department will continue working to develop and implement new tools for state regulation of insurance company financial solvency and to minimize the number and impact of insurance company insolvencies.
A copy of the settlement agreement can be found at the Reliance Documents Web site: www.reliancedocuments.com. Policyholders with questions in the Reliance liquidation estate should call (215) 864-4500.
The Insurance Department took statutory control of Reliance on May 29, 2001, under an Order of Rehabilitation, followed by an Order of Liquidation that October. On Oct. 15, 2002, the department, as the liquidator, filed a complaint in Commonwealth Court of Pennsylvania against Reliance's outside auditor, Deloitte & Touche LLP, and its appointed actuary, Lommele. This complaint was originally captioned as "Koken v. Deloitte & Touche LLP et al" (Docket No. 734-MD2002) and is now captioned as "Ario v. Deloitte et al." Among other things, the complaint alleged claims for breach of fiduciary duties, professional negligence and the recovery of preferential transfers.
A Pennsylvania-based insurance company, Reliance was licensed to write insurance in all 50 states. The states with the largest number of policyholders included California, New York, Florida, Pennsylvania, Illinois and Texas. Reliance Insurance Company's insurance business consisted primarily of workers' compensation, commercial auto, commercial liability and personal auto coverage.
CONTACT: Rosanne Placey or Melissa Fox
SOURCE Pennsylvania Department of Insurance
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