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preempted by the statutory scheme outlining a claims procedure for
rehabilitation of an insolvent insurer.
Reed v. Squire Co., Inc., 217 A.D. 494, 217 N.Y.S. 92 (1926). In the event that it is
impossible to proceed in voluntary liquidation proceedings without the
appointment of a receiver, then the only remedy is an application under the
insurance code for the insurance commissioner to take possession of the
assets and to proceed with liquidation.
Wisconsin
In the Matter of the Ancillary Liquidation of Integrity Ins. Co., A.O. Smith
Corp. v. Wis. Ins. Sec. Fund, 217 Wis. 2d 252, 580 N.W.2d 348 (Wis. Ct. App.
1998). Integrity insured A.O. Smith, and was declared insolvent in New
Jersey, where a court issued an order for its liquidation. Years after the bar
date for all claims and the effective date of Wisconsin's "Net Worth" statute
(which limited payments from the fund for those insureds with a "net
worth" greater than $10 million to the extent that the aggregate of the
insured’s claims excess 10% of the insured’s net worth ‐‐ thus effectively
creating a deductible for companies with a net worth greater than $10
million), A.O. Smith filed claims with the Wisconsin Insurance Security Fund
("WISF"), identifying four third party actions that had been filed against A.O.
Smith after the bar dates and effective dates. The fund denied A.O. Smith's
claims, and A.O. Smith claimed the fund retroactively applied the "net
worth" statute, thereby depriving A.O. Smith of vested statutory rights. The
court held that the any claims by the insured, A.O. Smith, against Integrity,
and thus the WISF, did not arise until a suit has been initiated against A.O.
Smith. The court also held that the WISF is only obligated to assume those
contractual duties which the statute directs it to assume. The court
alternatively noted that retroactive application of a statute is permissible if
the application is remedial and does not disturb contracts or vested rights.
Because the purpose of the Wisconsin Insurance Security Fund and the net
worth law is remedial, the insured did not acquire any vested statutory rights
that are beyond the power of the legislature to alter.
Faber v. Musser, 207 Wis. 2d 132, 557 N.W.2d 808 (Wis. 1997). In a case where
a physician's insurer became insolvent and liquidated, the court held that the
physician's sole recourse for loss of liability insurance was through the
Wisconsin Insurance Security Fund ("WISF"). The court held that the
legislature distinguished between market failure causing deficits in health
care provider liability coverage, and insurer insolvency and liquidation
causing deficits in liability coverage. The legislature created the WISF to deal
with the latter situation. The physician was not entitled to retroactive
replacement coverage under the Wisconsin Health Care Liability Insurance
Plan, which the legislature created to deal with the situation where the
insurance market fails to offer the liability coverage a physician is required by
statute to carry, even though the physician would be responsible for a
$100,000 gap in coverage resulting from the application of the WISF.
Right to Intervene
Seventh Circuit
Cullom v. Traders Ins. Co., 163 F. 45 (7th Cir. 1908). Plaintiff and other general
agents of insolvent insurance company (resulting from the San Francisco
earthquake of 1906), challenged the appointment of a receiver with a view to
secure a right to the insolvent company's unearned premium reserve on the
theory that the agents, in paying unearned premium claims on behalf of the
company, were entitled to a priority claim to this "trust fund". The court held