Download PDF - Goodmans

Therefore the liquidator was not estopped from denying a claim resulting from
a settlement on grounds that the settlement violated a stay of proceedings.
In re Application for an Order Staying Arbitration, No. 24632, slip op. (N.Y. App.
Div., 1st Dept. December 3, 1985). When an insurance company is in liquidation
and a court order prohibits any action or proceeding from being brought
against it, a preliminary trial to determine whether coverage by the liquidated
company existed should be assigned to the court supervising the liquidation.
An insurer, from whom uninsured motorist coverage was sought, applied for a
preliminary trial to determine whether the company in liquidation had in fact
covered any of the parties to the accident. The trial, however, should not be
assigned to the Trial Term court because the insurance law provides for the
exclusive operation and procedure of companies in liquidation.
In re Liquidation of Midland Ins. Co., No. 41294/1986, 2008 WL 151786 (N.Y. Sup.
Ct. Jan. 14, 2008). The injunction barring suits against an insolvent insurer
protects policyholders and creditors, and preserves assets. A reinsurer did not
meet its burden of demonstrating that the injunction should be lifted so the
reinsurer could sue the insolvent insurer or the liquidator.
In re National Surety Co., 283 N.Y. 68, 27 N.E.2d 505 (1940), motion denied, 284
N.Y. 593, 29 N.E.2d 668, cert. denied, 311 U.S. 707. When the general
corporation law provided for the continued existence of a dissolved
corporation for the purpose of winding up its affairs, and the insurance code
directly conflicted with this, the court held that the insurance code was
controlling. The corporate existence of a surety company ceases on the date
the insurance commissioner obtains an order directing the immediate
cessation of its corporate existence. The dissolution of the insurer abates all
litigation to which the corporation was either plaintiff or defendant, so that
judgments entered thereafter were void.
In re National Surety Co., 176 Misc. 53, 26 N.Y.S.2d 370 (1941). Upon the entry of
the order of liquidation, the corporate existence of an insurance company
ends. Pending actions against the company and those later instigated are
abated.
In re Rehab. of Frontier Ins. Co., 813 N.Y.S. 2d 50 (App. Div. 2006), leave to appeal
denied, 824 N.Y.S. 2d 605 (N.Y. 2006). The court reversed a decision denying full
faith and credit to a federal appeals court ruling that a performance bond
obligor had a valid and liquidated claim against the surety in rehabilitation. New
York courts must give full faith and credit to federal court judgments, and there
is no automatic stay of litigation in rehabilitation as there is in insurer insolvency
and bankruptcy proceedings.
Interboro Ins. Co. v. Coronel, 863 N.Y.S.2d 448 (App. Div. 2008). The court
granted a petition to permanently stay arbitration of uninsured motorist claims
after a rehabilitation stay order had been lifted, holding that the petition was
timely filed. Also, permanent stay was proper because there was no evidence
of physical contact involving the allegedly uninsured vehicle.
Matter of Second Russian Ins. Co., 219 A.D. 46, 219 N.Y.S. 366 (1926), appeal
dismissed, 244 N.Y. 606, 155 N.E. 916. The court held it was error, to modify a
liquidation order which stayed certain actions brought by creditors against a
corporation in order to allow prosecution of the actions stayed. The stay
provided a thorough procedure for the protection and equal treatment of all
interested parties.