Section 991.2456 - Injunction, liquidation and receivership of domestic society(a) Notice of deficiencies and sanctions.--When the commissioner upon investigation finds that a domestic society:(1) has exceeded its powers;(2) has failed to comply with any provision of this article;(3) is not fulfilling its contracts in good faith;(4) has a membership of less than 400 after an existence of one year or more;(5) is conducting business fraudulently or in a manner hazardous to its members, creditors, the public or the business; (7) has failed to comply with an order of the commissioner under section 2428; or(8) has failed to remedy the hazardous condition as determined by the commissioner within the time frames established by the commissioner in accordance with section 2428; the commissioner shall notify the society of the deficiency or deficiencies and state in writing the reasons for his dissatisfaction. The commissioner shall at once issue a written notice to the society requiring that the deficiency or deficiencies which exist are corrected. After this notice the society shall have a 30-day period in which to comply with the commissioner's request for correction, and, if the society fails to comply, the commissioner shall notify the society of the findings of noncompliance and require the society to show cause on a date named why it should not be enjoined from carrying on any business until the violation complained of shall have been corrected or why an action in quo warranto should not be commenced against the society.
(b) Action by Attorney General.--If on that date the society does not present good and sufficient reasons why it should not be so enjoined or why such action should not be commenced, the commissioner may present the facts relating thereto to the Attorney General, who shall, if he deems the circumstances warrant, commence an action to enjoin the society from transacting business or in quo warranto.(c) Hearing and order.--The court shall thereupon notify the officers of the society of a hearing. If after a full hearing it appears that the society should be so enjoined or liquidated or a receiver appointed, the court shall enter the necessary order. No society so enjoined shall have the authority to do business until all of the following occur:(1) The commissioner finds that the violation complained of has been corrected.(2) The costs of such action shall have been paid by the society if the court finds that the society was in default as charged.(3) The court has dissolved its injunction.(4) The commissioner has reinstated the certificate of authority.(d) Liquidation.--If the court orders the society liquidated, it shall be enjoined from carrying on any further business, whereupon the receiver of the society shall proceed at once to take possession of the books, papers, money and other assets of the society and, under the direction of the court, proceed forthwith to close the affairs of the society and to distribute its funds to those entitled thereto.(e) Validity of action and appointment of receiver.--No action under this section shall be recognized in any court of this Commonwealth unless brought by the Attorney General upon request of the commissioner. Whenever a receiver is to be appointed for a domestic society, the court shall appoint the commissioner as the receiver.(f) Applicability to voluntary dissolution.--The provisions of this section relating to hearing by the commissioner, action by the Attorney General at the request of the commissioner, hearing by the court, injunction and receivership shall be applicable to a society which shall voluntarily determine to discontinue business.(g) Liquidation proceedings.--Liquidation proceedings for a domestic society shall be conducted consistent with the purposes of section 501 of the act of May 17, 1921 ( P.L. 789, No.285), known as The Insurance Department Act of 1921, in a manner designed to conserve assets, limit liquidation expenses and avoid an assessment. The following apply: (1) The liquidator may attempt to transfer policies or certificates of the liquidating fraternal benefit society by way of assignment, assumption or other means to another qualified fraternal benefit society, whether domestic or foreign, or, if no qualified fraternal benefit society will accept the transfer, to another insurer. The following apply: (i) In determining whether a fraternal benefit society is qualified, the liquidator shall consider, among other things, the solvency of the society.(ii) A fraternal benefit society shall not be obligated in any circumstance to accept the transfer.(iii) Upon the effective date of a transfer to an insurer that is not a fraternal benefit society and in consideration for that transfer, each member of the society and owner of a policy or certificate shall be deemed to agree that any terms of an insurance policy or certificate providing for the maintenance of the society's solvency or subjecting the policy or certificate to the bylaws of the society shall be null and void. Other changes determined by the liquidator to be necessary to effectuate the transfer shall be made, and the assuming insurer shall endorse the policy or certificate accordingly.(2) Notwithstanding section 2434(d), an assessment may not be imposed against a certificate by a domestic society after a petition for liquidation is filed, except as determined by the commissioner to be necessary to satisfy claims as described in section 544(a) and (b) of The Insurance Department Act of 1921.Amended by P.L. TBD 2019 No. 98, § 3, eff. 1/26/2020.1921, May 17, P.L. 682, No. 284, art. XXIV, § 2456, added 2002, July 10, P.L. 749, No. 110, § 9, effective in 60 days.