Upon the foregoing papers, it is ordered that this motion (denominated an application) by Brent D. Cassity, Rhonda L. Cassity, and D. Tyler Cassity for an order terminating the rehabilitation is denied; and it is further

ORDERED that the Rehabilitator's cross motion for attorneys' fees and costs and for an order requiring the Cassitys to seek court approval to make future motions is denied.

By order dated April 28, 2010, this Court placed Professional Liability Insurance Company of America (PLICA) into rehabilitation, appointing the Superintendent of Insurance as Rehabilitator. Many grounds were offered in support of an order placing PLICA into rehabilitation, including that the Illinois Circuit Court of Cook County, Chancery Division, placed PLICA into conservatorship in Illinois by order dated March 15, 2010 and appointed the Director of Insurance of the State of Ilinois as Conservator. See Insurance Law § 7402 (k).

Insurance Law § 7403 (d) states, in pertinent part, "any interested person upon due notice to the superintendent, at any time, may apply for an order terminating any rehabilitation proceeding and permitting such insurer to resume possession of its property and the conduct of its business, but no such order shall be granted except when, after a full hearing, the court shall determine that the purposes of the proceeding have been fully accomplished." Here, Brent D. Cassity, Rhonda L. Cassity, and D. Tyler Cassity (the Cassitys) move for an order terminating the rehabilitation. The Cassitys are the sole beneficiaries of the PLICA Equity Trust, which owns 78% of the shares of PLICA. The PLICA Equity Trust is a division of RBT Trust II, a trust organized under the laws of Missouri. See Higgins Affirm., Ex A [Exhibits C, D and E to the Affidavit of Eugene Bienskie]. The Rehabilitator does not question that the Cassitys are interested persons who may apply for an order terminating the liquidation.

The Cassitys assert that the purposes of the rehabilitation have been fully accomplished because the Rehabilitator entered into a consent decree with the Illinois Director of Insurance consenting to a two year suspension of PLICA's Illinois insurance license. Higgins Affirm. ¶ 16. They also assert that PLICA is highly solvent, based on a copy of PLICA's balance sheet and statement of income for the period ending March 31, 2010, and a copy of a report and an actuarial opinion from Milliman. Higgins Affirm., Exs F, G.

However, it appears that the Illinois conservatorship is still pending. Kelly Affirm. ¶¶ 3-4. More importantly, during the pendency of this rehabilitation, the Cassitys apparently executed a modification agreement which, among other things, purportedly removed Howard Wittner as trustee of the PLICA Equity Trust. Wittner has filed a petition in the Probate Division of the Circuit Court of St. Louis County, Missouri, for a declaration disapproving the modification agreement. Kelly Opp. Affirm., Ex 10.

The uncertainty surrounding the dispute as to who is the trustee of the PLICA Equity Trust warrants continuing the rehabilitation at this time. Were the rehabilitation to terminate, [*3]PLICA would have to form a new board of directors and officers to assume management of the company. In this Court's view, PLICA would not be in a position to form the board of directors and choose officers that would ensure stability in the company's operations. A further change in the trustee of the PLICA Equity Trust, which undisputedly holds a vast majority of PLICA shares, would likely result in a wholesale change of the board of directors and officers appointed by the previous trustee and of 8 the company's operations.

To terminate PLICA's rehabilitation in the midst of what the Rehabilitator characterizes as a "corporate governance dispute" would put PLICA in jeopardy, in "such a condition that its further transaction of business will be hazardous to its policyholders, creditors, or the public." Insurance Law § 7402 (e). The management risk presents financial dangers to PLICA. Matter of Bohlinger (International Workers Order, Inc.), 305 NY 258 (1953) (interpreting predecessor to Insurance Law § 7402 [e]).

Therefore, the Cassitys' motion for an order terminating the rehabilitation is denied. Because the Cassitys present no proof disputing that Wittner was replaced as trustee, and that he is challenging his removal as trustee, the motion can be determined without a hearing. Matter of Montepagani v New York City Dept. of Health, ___ AD3d ___, 2011 WL 2225545, 1 (1st Dept 2011), citing Battaglia v Schuler, 60 AD2d 759 (4th Dept 1977).

In light of the Court's determination, the Court does not address the Rehabilitator's remaining arguments in opposition to the Cassitys' motion.

The Rehabilitator's cross motion is denied. The Rehabilitator has not articulated the statutory authority under which it is seeking attorneys' fees and costs. Although the Court has the power to issue, at any time during a proceeding under Article 74 of the Insurance law, an injunction "necessary to prevent interference with the superintendent or the proceeding, or waste of the assets of the insurer," the Court is not persuaded that such an injunction against the Cassitys is warranted at this time.

Dated:6/29/11/s/, J.S.C.

New York, New York