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alternative to being liquidated, where it did not establish that a subsequent
change in condition had resurrected it. The company bears the burden of
showing that rehabilitation is feasible.
Grounds for Rehabilitation or Liquidation
California Caminetti v. State Mutual Life Ins. Co., 52 Cal. App.2d 321, 126 P.2d 165 (1942).
The court held that the lower court had jurisdiction to make an ex parte order
vesting title to the assets of a mutual life insurance company in the insurance
commissioner, where payment of a monthly salary to company's officer out of
the company's funds was hazardous to the company and its policyholders, and
the commissioner was not estopped from taking over an insolvent company
because the previous commissioner knew of the company's practices but
failed to take over the company.
Florida
Illinois
Florida Dep’t of Ins. v. Cypress Ins. Co., 660 So. 2d 1177 (Fla. Dist. Ct. App.
1995). An Oklahoma insurer and a Florida reinsurer, which reinsured a
substantial portion of the Oklahoma insurer’s business, were rendered
insolvent by Hurricane Andrew. The Oklahoma direct insurer was placed into
liquidation in Oklahoma. The Florida Department of Insurance (the “Florida
Department”) petitioned the Florida court for an order placing the Florida
reinsurer in liquidation. The Florida Department alleged that losses owed to
the Oklahoma direct writer rendered insolvent the Florida reinsurer. Before
the petition for liquidation was heard, and while an injunction was pending
which prohibited any person from disposing of the Florida reinsurer’s assets,
the Florida reinsurer unilaterally settled with the Oklahoma reinsurer for a
reduced cash payment and surplus notes. The trial court denied the petition
for liquidation holding that the Florida reinsurer was no longer insolvent.
The appellate court agreed, holding that the insurer’s unilateral settlement
of the Oklahoma receiver’s claims did not violate the Florida injunction and
did not violate Florida statutes delegating exclusive authority upon the
Department of Insurance to rehabilitate an insurer. The appellate court also
held that because the surplus rates were not given in exchange for
borrowed money, the reinsurer did not need the Florida Department’s
approval before issuing the surplus notes.
People v. Acme Plate Glass Mutual Ins. Co., 292 Ill. App. 275, 10 N.E.2d 988 (Ill.
App. 1935). While the court agreed that the insurer had obtained sufficient
releases of claims to render it solvent, the company was not permitted to
resume business because of misrepresentation and mismanagement.
People v. Progressive General Ins. Co., 85 Ill. App.2d 427, 229 N.E.2d 350 (Ill.
App. 1967). Although the insurer alleged that rehabilitation is only appropriate
where there is financial irregularity, the court held that the insurance code
provides grounds warranting rehabilitation where the company's further
transaction of business would be hazardous to policyholders, creditors, or
public, that the company has violated its charter or any law of the state, or that
the company is found to be in such condition that it could not meet the
requirements for organization and authorization as required by law.
Reiter v. Illinois National Casualty Co., 328 Ill. App. 234, 65 N.E.2d 830, rev'd 397
Ill. 141, 73 N.E.2d 412, cert. denied, 332 U.S. 791, (1946). The insurance
department's examination of a company found that although the company
settled its claims promptly and equitably, it had paid the adjuster $17,465.50 in
excess of the amount due and the company failed to produce certain securities