On Feb. 23, Pennsylvania became the second state to recognize an “ordinary course of business” exception to preference actions brought under a state insolvency statute where the defense is not expressly set forth in the statute. In Joel S. Ario, Insurance Commissioner of the Commonwealth of Pennsylvania, in his Official Capacity as Liquidator of Reliance Insurance Company v. Ingram Micro Inc. , the Pennsylvania Supreme Court was faced with the issue of whether an insurer’s pre-liquidation payment for a covered loss to an insured can be clawed back as a preference under the Pennsylvania Insurance Department Act of 1921 (the 1921 Act).
In an opinion authored by Justice Debra Todd, the court concluded that a payment made by an insurer to an insured in the ordinary course of business does not constitute antecedent debt and, therefore, is not a preference under the applicable provisions of the 1921 Act.
Factual And Procedural Background
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