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proceedings against an insolvent New Jersey insurer, which was concurrently
the subject of liquidation proceedings in New Jersey. Under the Uniform
Insurers Liquidation Act ("UILA"), the New Jersey liquidation court had issued
an order permanently enjoining any claimant from bringing, maintaining, or
further prosecuting any actions. The court further noted that under the UILA
(which Nevada had adopted), all claims have to be proved in the domiciliary
state's liquidation proceedings ‐‐ unless a state has instituted an ancillary
liquidation proceeding. Because Nevada had not instituted such a proceeding,
the court concluded that the Nevada state court should stay its proceedings.
The court explained that a stay was necessary to avoid frustrating the UILA's
purpose "to make uniform the laws of those states which enact it."
New York
AIG Claims Serv., Inc. ex rel. N.H. Ins. Co. v. Bobak, 835 N.Y.S.2d 925 (App.
Div. 2007). The court granted a stay of arbitration to resolve a
supplementary uninsured motorist coverage dispute pending determination
of the issue of insurance coverage in Pennsylvania, in particular whether
liquidation of the insolvent insurer’s assets would benefit the injured
plaintiff.
A.J. Pegno Constr. Corp./Tully Constr. Co. v. Highlands Ins. Co., 834 N.Y.S.2d
109 (App. Div. 2007). A declaratory judgment action for coverage
determination under a contractor’s umbrella liability insurance policy would
not lie against an insurer in receivership in another state while conservation
and rehabilitation were pending. The court cited a Texas state court order
requiring claims to be submitted exclusively to the Texas receiver and
permanently enjoining all litigation against the insurer which was filed in
New York pursuant to the Uniform Enforcement of Foreign Judgments Act.
Corcoran v. Weicholz Management Corp., 144 Misc. 2d 254, 544 N.Y.S.2d 268
(Supreme Court, New York County 1989). The Liquidator of Union Indemnity
Insurance Company brought an action against Union Indemnity's former
broker and its reinsurer, seeking the return of premiums paid after the order of
insolvency had been issued. The Court held that both parties were liable to the
Liquidator for the return of the premiums. Once the liquidation order was
entered, the rights and obligations of the parties are frozen, thereby
terminating the agency relationship between the liquidated insurer and its
broker. Consequently, the funds sent to the broker were to be considered
held in trust for the Liquidator.
Dambrot v. REJ Long Beach, LLC, 836 N.Y.S. 2d 194 (App. Div. 2007). A stay
issued by a court in another state enjoining and restraining claims against the
insureds of an insolvent insurer is entitled to full faith and credit and suspends all
proceedings as of the effective date of the stay. Nevertheless, before issuing a
ruling on the plaintiff’s motion for discovery sanctions, the court should have
permitted the defendant to file an opposition to the plaintiff’s motion because
the deadline for filing the opposition had not expired before the filing of the
stay order.
Harnett v. National Motorcycle Plan, Inc., 59 A.D.2d 870, 399 N.Y.S. 242 (1977).
Where a prior order prohibited all persons from bringing legal proceedings
against an insolvent insurance company or its liquidator, counterclaims could
not be asserted in a suit brought by the liquidator for damages for breach of
contract and fraud.
In re Ancillary Receivership of Reliance Ins. Co., 837 N.Y.S.2d 640 (App. Div.
2007). The liquidator in its governmental capacity was not subject to estoppel.