Remaining claims of failed Colonial Assurance will be paid, and its former owner will get back $2.3 million.
Inquirer Staff Writer
After 20 years, the Pennsylvania Insurance Department is ready to end its control of a failed insurer, paying all remaining claims and giving $2.3 million back to the company's former owner.
In a petition
filed Wednesday in
Mazzella pleaded no contest in 1987 to federal fraud charges for diverting Colonial funds into bank accounts he controlled, in what he said was a desperate attempt to save his business amid a dispute with another insurer. Since then, he has waged a so-far-unsuccessful legal fight to regain control of the company, which he contends was never really insolvent.
the Insurance Department released a report by a
The state also failed to produce information about several million dollars Colonial was owed, but failed to collect, under state management, according to the auditor.
In its petition, the Insurance Department said the missing records were not important, and it praised state liquidators for returning Colonial to solvency.
In 1984, the state said, Colonial faced a $16.5 million deficit between its assets and its potential liabilities. But after taking control, state liquidators closed that gap.
First, they dismissed $7.2 million in claims against Colonial as illegitimate. Then, delays in settling the case enabled the state "to earn millions of dollars in investment income," according to department spokeswoman Melissa Fox. By 2001, Colonial was showing a cumulative surplus of more than $4 million.
Today, Colonial has $16.5 million in assets and owes $11.9 million in claims to former clients, including businesses and individuals, which would be fully paid pending the court's approval.
The difference, $4.6 million, would normally go to the company's former owner, Mazzella.
However, Koken wants special permission from the court to use some of that money to pay interest to Colonial claimants. That would leave $2.3 million for Mazzella, according to the petition. He has the right to challenge Koken's plan.
He also disputed the Insurance Department's right to pay interest on the claims.
If Mazzella is paid, he has at least one creditor of his own waiting for a piece.
takeover was acrimonious, with the owner and state employees trading personal
accusations in civil court. Former
Colonial is the smallest of more than 20 failed insurance companies currently run by the Pennsylvania Insurance Department.