Claimants against insolvent insurer Legion will be able to recover directly from captive reinsurers for which Legion served as a fronting company. Koken v. Legion Ins. Co. et al, NO. 218 MAP 2003 (July 19, 2005)
The decision came over a dissent by Madame Justice Newman, in which the Justice said: "Because Section 534 of the Insurance Department Act explicitly prohibits an insured from obtaining direct access to reinsurance funds absent express language in the provisions of the reinsurance contract, I believe that we must reverse the Orders of the Commonwealth Court to the extent that they permit such erroneous direct access.
See also the decision below: Koken v. Legion Ins. Co., 831 A.2d 1196 (Pa. Commw. 2003)
(Commissioner’s decision to liquidate insolvent insurers and trigger guaranty funds contested by principal shareholder. Insolvents acted either as “fronting companies” on numerous corporate insurance programs reinsured by captives or wrote large deductible policies on corporate risks and were reimbursed by affiliate that wrote a Deductible Reimbursement Policy. Corporate insureds that had such contracts with Legion were granted direct access to the reinsurance proceeds, and did not have to accept a delayed and reduced dividend from the insolvent estate of Legion.)