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showing that the rehabilitator’s actions were arbitrary, capricious or an abuse of
discretion.
National Bondholders Corporation v. Joyce, 276 N.Y. 92, 11 N.E.2d 552 (1938).
The insurance commissioner as the liquidator of an insolvent insurance
company is vested with all causes of action, including any causes of action
against former directors, which were previously vested in the insurance
company.
Pierre Associates Inc. v. Citizens Casualty Company of New York, 32 A.D.2d 495,
304 N.Y.S.2d 158 (1969). A landlord's cancellation of an insurance company's
lease on the grounds of its insolvency would not be binding on the insurance
commissioner in a proceeding to take possession of the property and
rehabilitate the company, because the commissioner was not a party to the
landlord's action seeking the lease's termination.
Pink v. Title Guarantee & Trust Co., 274 N.Y. 167, 8 N.E.2d 321 (1937),
reargument denied, 274 N.Y. 610. 10 N.E.2d 575. The court held that as the
rehabilitator of an insolvent guarantee company, the insurance commissioner
had to disaffirm the fraudulent sale of mortgages to the guarantee company,
tendering return of the mortgages upon the discovery of fraud.
Pink v. Title Guarantee & Trust Co., 164 Misc. 128, 298 N.Y.S. 544 (N.Y. Sup. Ct.
1937). The court held that the insurance commissioner as statutory receiver
did not have the power to waive or ratify ultra vires and illegal transfers to the
mortgage guarantee company of subordinate interests in first mortgages
owned by the corporation, which would preclude the commissioner from
obtaining a recession of the transfers.
Royal Bank and Trust Co. v. Superintendent of Insurance, 148 Misc. 2d 863, 562
N.Y.S.2d 347 (Supreme Court, New York County 1990), aff'd, 1992 N.Y. Slip Op.
5029 (N.Y. 1992). In a dispute involving the Liquidator of Union Indemnity
Insurance Company, the Court ruled that although the interpretation by the
Superintendent of the provisions of the Security Fund will be upheld unless
irrational or unreasonable, the Superintendent must be consistent in his interpretation
and application of the provisions of the Fund, or his position will be
deemed to be arbitrary and capricious and will be set aside. Finding that the
Superintendent's construction of a "covered risk" under the terms of the Fund
to be inconsistent with the Superintendent's earlier interpretations, the Court
set aside a determination of the Liquidator denying Security Fund coverage
with respect to investor bonds.
Serio v. Ardra Ins. Co., 761 N.Y.S.2d 1 (App. Div. 2003). The liquidator was not
equitably estopped from seeking to pierce the corporate veil in order to hold a
reinsurer and its principals liable for a reinsurance debt; a governmental agency
is not estopped from changing its position in the exercise of a governmental
function.
Serio v. Black, Davis & Shue Agency, Inc., No. 05 CIV. 15 (MHD), 2005 WL
2560390 (S.D.N.Y. Oct. 11, 2005). The Insurance Superintendent as rehabilitator
is “charged with marshaling assets, paying or compromising claims, and
otherwise overseeing the affairs of [the insolvent insurer] in an effort to either
put it back on its financial feet or determine that rehabilitation is not feasible
and that the company must be liquidated.” The court granted the
rehabilitator’s motion to stay the defendant’s counterclaims against the