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Maryland Security Financial Ins. Co. v. Insurance Commissioner, 231 Md. 571, 192 A.2d 571,
102 A.2d 95 (1963). The court found that a lower court had properly exercised
jurisdiction over the property and business of an insurer and appointed a
receiver to liquidate the company. The grounds for liquidation in the law which
the court applied were that the insurer's assets were not sufficient for carrying
a business, it was not in compliance with provisions of the insurance code, and
its business was being fraudulently conducted. The evidence which supported
the court's holding included the fact that the insurer refused to establish
reserves after repeated demands by the insurance commissioner, that it had
used forms not approved by the commissioner, that it had engaged in rate
discrimination, and that it had paid salaries to officers six months in advance
while the company was financially weak.
Massachusetts Bowler v. Arthur Andersen, 20 Mass. L. Rep. 85; 2005 Mass. Super. LEXIS 529
(Mass. Super. Ct. 2005). In determining the financial condition of a company for
purposes of regulatory action, the Commissioner could not reasonably rely on
an allegedly negligent audit opinion after the date the auditors withdrew their
opinion. The Receiver sought damages on the theory of deepening insolvency
for the residual market’s increased claim caused by the delay in bringing the
receivership as a result of the audit opinion, but the Court held that the claims
by the residual market were the result of the insurer’s issuance of auto policies
during the delay, not a result of the issuance of the audit opinion.
Missouri
Angoff v. American Financial Security Life Insurance Company, 891 S.W. 2d
833 (Mo. App. 1994). The receivership court denied the motion of insurer's
directors to terminate the rehabilitation of an insurer and the directors
appealed. The insurer's directors had admitted in opening statement that
they continued to rely on reinsurance reserve credits which the court had
previously found evidenced its hazardous condition, in order to argue that
the insurer was solvent. The trial court directed its verdict based on this
admission. The Court of Appeals affirmed because a directed verdict is
appropriate if the admission demonstrates that plaintiff is not entitled to
recover as a matter of law. The insurer's directors also claimed that AFSLIC
was no longer in hazardous condition because it was not writing new
business and could pay all current and future claims. The Court of Appeals
held that rehabilitation was an appropriate remedy if the insurer was in such
condition that the further transaction of business would be hazardous. It did
not matter whether or not AFSLIC was writing new business.
Angoff v. Casualty Indemnity Exchange, et al., 963 S.W. 2d 258 (Mo. App.
1997). On review of the decision by state Director of Department of
Insurance to seek liquidation of Reciprocal Insurance Exchange, trial court
could overturn Director’s decision and terminate rehabilitation. The trial
court is not merely a "rubber stamp" for the Director. The Court of Appeals
affirmed the trial court's decision finding that the Director's asserted
grounds for liquidation were not proved under the applicable statute.
Leggett v. General Indemnity Exchange, 363 Mo. 273, 250 S.W.2d 710 (1952).
The Missouri insurance commissioner was authorized to seek dissolution of a
reciprocal insurance exchange if the corporation ceased to transact the
business of insurance for one year irrespective of the existence or
nonexistence of claims or creditors.
Relfe v. Commercial Ins. Co., 5 Mo. App. 173 (1878) affirmed, Williams v.
Commercial Insurance, 75 Mo. 388 (1882). In upholding the right of the
Missouri insurance commissioner to proceed for the dissolution of a Missouri