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determination of insolvency is made by reference to the statutory
accounting principles, which mandated that conservative methods be
employed in valuing the assets of an insurance company. The court affirmed
the trial court’s holding that the Commissioner’s actions were reasonable in
determining that the real estate assets did not meet the requirements of the
mortgage industry based on the fact that the company’s mortgage
operations were hazardous, there were excessive concentrations of
investments, insufficient return for mortgaged property, failure to consider
mortgages in default, and an insufficiency of appraisals of mortgaged
property.
Michigan Adams v. Michigan Surety Co., 364 Mich, 299, 110 N.W.2d 677 (1961). In
reversing a lower court decree finding that a surety company was solvent, the
court disagreed with several of the lower court's findings concerning the
valuation of the insurance company's assets, holding that (1) for purposes of
determining solvency, the value of company property acquired in
contravention of laws limiting the types of assets and investments of insurance
companies should not have been included in valuing its assets, (2) dealings by a
company with its directors or other corporations with interlocking directors
should be carefully scrutinized, and (3) so much of the book value of realty as
was attributable to the sale of salvage items could not be considered as an
asset of the company in determining its financial condition, where such realty
was acquired by a direct purchase, contrary to a statute restricting acquisition
of realty by insurance companies.
Gauss v. American Life Ins. Co., 290 Mich. 33, 287 N.W. 368 (1939). The court
upheld an order appointing the commissioner of insurance as temporary
receiver of the American Life Insurance Company as there was competent
evidence to sustain the trial court's finding that the defendant insurance
company was insolvent, since a stock insurance company is insolvent when it is
actuarially insolvent, i.e., when its capital has become impaired.
New Jersey
Ainsworth v. State Farm Mut’l Ins. Co., 284 N.J. Super. 117 (App. Div.), certif.
denied, 143 N.J. 328 (1996). Although not technically insolvent under the
provisions of the New Jersey Liquidation Act, N.J.S.A. 17:30C‐3, the Appellate
Division held that the Automobile Full Insurance Underwriting Association
("JUA") was insolvent for purposes of permitting an insured to seek uninsured
motorist coverage. This decision was due to the fact that the JUA had an
operating deficit in excess of $3 billion, an inability to pay debts as they became
due, was subject to liquidation required by legislation ongoing for five years and
had no legal or contractual requirement to pay its debts in full. The Appellate
Court further recognized that the JUA is not an insurer in the traditional sense of
the term and, therefore, could not meet the definition of an insolvent insurer
under the New Jersey Property‐Liability Insurance Guaranty Association Act,
N.J.S.A. 17:30A‐1 et seq. Nonetheless, for purposes of New Jersey's Uninsured
Motorist Coverage Law, N.J.S.A. 17:28‐1.1 et seq., the JUA was deemed an
insurer to the extent that its financial constraints caused it to deny coverage to
the tortfeasor and, further, because the JUA's operation fit the definition of an
insurer in all other respects.
Fortunato v. New Jersey Life Ins., 254 N.J. Super. 420 (App. Div. 1991). The
Appellate Division held that the Chancery Division should not have denied the
Commissioner's request for an order directing him to rehabilitate New Jersey
Life Insurance Company. The Chancery judge had refused to grant the request
for rehabilitation because there were issues of fact concerning the existence of