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Reference Handbook on Insurance Company Runoff and Receiverships Property/Casualty & Life/Health FIFTH EDITION Table of Contents PART I Run‐Off, Administration, Supervision, Rehabilitation and Liquidation A. Introduction B. Statutes 1. Insurers Rehabilitation and Liquidation Model Act 2. Insurance Receivership Model Act 3. Rhode Island Statutes, Chapter 27‐14.5, Voluntary Restructuring of Solvent Insurers C. Case Law Digest 1. Run‐Off 2. Receiverships a. General Provisions Persons Covered Definitions of Insolvency Jurisdiction of the Federal Courts Jurisdiction of the State Receivership Court Venue Filing Fees and Exemptions Injunctions and Other Court Orders Rules of Civil Procedure in Proceedings Retroactive Application Applicability of the McCarran‐Ferguson Act Arbitration in Liquidation Proceedings Uniform Commercial Code in Liquidation Proceedings Dropdown b. Summary Proceedings Powers and Duties of the Commissioner Summary Seizure ‐ Constitutionality c. Formal Proceedings Formal Proceedings ‐ In General
Formal Proceedings ‐ Constitutionality Authority to Initiate Proceedings Exclusive Remedy Right to Intervene Interpleader Court Orders of Rehabilitation or Liquidation ‐ In General Court Orders of Rehabilitation or Liquidation ‐ Burden of Proof Grounds for Rehabilitation or Liquidation Notice of Hearing Powers and Duties of the Rehabilitator or Liquidator ‐ Constitutionality Powers and Duties of the Rehabilitator or Liquidator Powers and Duties of the Receivership Court Plan of Rehabilitation Stay of Proceedings Pre‐Answer Security Requirements Notice to Creditors and Others ‐ In General Notice to Creditors and Others ‐ Constitutionality Duties of Agent Cancellation of Policies Transfer of Obligations to Another Insurer or Reinsurer Liability of the Insurance Commissioner Liability of Company Directors or Officers Mutualization of an Insolvent Insurer Dissolution of Corporate Existence Termination of Receivership or Rehabilitation Proceedings Reopening Liquidation d. Assets of the Insolvent Insurer’s Estate Assets of the Estate ‐ In General Unpaid Stock Subscriptions Fraudulent Conveyances Voidable Preferences and Liens Setoffs and Counterclaims Assessments Assessments ‐ Notice of Hearing Liability of the Insured Liability of the Excess Insurer Reinsurer’s Liability Cut‐Through Agreements Premiums Owned and Unearned Commissions Valuation of Assets Claims Against Regulators 2
Page 1 and 2: REFERENCE HANDBOOK ON INSURANCE COM
Page 3: Contributing Editors Cross‐Border
Page 7 and 8: Priorities ‐ Interstate Claimants
Page 9 and 10: Part III PART IV APPENDIX D. Bermud
Page 172 and 173:
Rhode Island Statutes TITLE 27 Insu
Page 174 and 175:
(17) "Policyholder" means an insure
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(3) All creditors, assumption polic
Page 178 and 179:
(2) If, at any time, the conditions
Page 180 and 181:
Run‐Off New York Seaton Ins. Co.
Page 182 and 183:
as writs of seizure, were necessary
Page 184 and 185:
Igel v. Phillips, 183 A.D. 220, 169
Page 186 and 187:
wind up its affairs, even if the no
Page 188 and 189:
insolvency, including the issue of
Page 190 and 191:
over action would: (i) defeat domic
Page 192 and 193:
the Commissioner of Insurance on be
Page 194 and 195:
Sixth Circuit AmSouth Bank v. Dale,
Page 196 and 197:
action did not automatically preclu
Page 198 and 199:
proceedings. The New York insurance
Page 200 and 201:
independent receivership proceeding
Page 202 and 203:
Connecticut Florida Grasso v. City
Page 204 and 205:
instance, because the regulation of
Page 206 and 207:
company filed a motion for declarat
Page 208 and 209:
Commissioner of Ins. v. Mid‐Ameri
Page 210 and 211:
district court had exclusive jurisd
Page 212 and 213:
SEC v. Republic National Life Ins.
Page 214 and 215:
legislature granted exclusive juris
Page 216 and 217:
Rejecting the liquidator's motion,
Page 218 and 219:
time as an administrative claim had
Page 220 and 221:
mandate application of Florida's in
Page 222 and 223:
This simple declarative sentence pr
Page 224 and 225:
its earlier holding [Bonura v. Unit
Page 226 and 227:
In re Application for an Order Stay
Page 228 and 229:
to prosecution of claims against hi
Page 230 and 231:
were closely intertwined, the entir
Page 232 and 233:
South Carolina Texas New South Life
Page 234 and 235:
the insurance code. The trial court
Page 236 and 237:
within the meaning of the insurance
Page 238 and 239:
was overbroad in delaying indefinit
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financial institutions to transfer
Page 242 and 243:
entities were in fact a "single bus
Page 244 and 245:
the company in that other state to
Page 246 and 247:
easoning that: 1) its earlier findi
Page 248 and 249:
McConnell v. All‐Coverage Insuran
Page 250 and 251:
company. The court also found that
Page 252 and 253:
impermissible because they were not
Page 254 and 255:
contrary appellate court judgment,
Page 256 and 257:
exhaust the pro rata shares of solv
Page 258 and 259:
asserted a priority despite the fac
Page 260 and 261:
The question presented was whether
Page 262 and 263:
Cir. 2000). The Ninth Circuit adopt
Page 264 and 265:
entity with those conferred or with
Page 266 and 267:
Pennsylvania court had exclusive ju
Page 268 and 269:
liquidator argued that Ohio’s sta
Page 270 and 271:
Vermont Costle v. Fremont Indemnity
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(“Munich”) and NAC Reinsurance
Page 274 and 275:
Pine Top Ins. Co. v. Continental Re
Page 276 and 277:
incapable of being performed," foun
Page 278:
completion of the plan of arbitrati
Page 281 and 282:
the policy make specific provision
Page 283 and 284:
the catastrophe policy prevents “
Page 285 and 286:
sought only money damages. 3 Hence,
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Commissioner has reasonable grounds
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policyholders were brought against
Page 291 and 292:
a supervision‐release order for a
Page 293 and 294:
secure a court‐ordered receiversh
Page 295 and 296:
no liability exists for any acts ta
Page 297 and 298:
stay of any proceeding in which an
Page 299 and 300:
Fields v. Fidelity General Ins. Co.
Page 301 and 302:
Illinois insurance code is vested i
Page 303 and 304:
Michigan Daniel v. Citizens' Mutual
Page 305 and 306:
appointment of a receiver to wind u
Page 307 and 308:
independent actuarial firm, and all
Page 309 and 310:
owned by one corporation, proposed
Page 311 and 312:
den'd, 126 N.J. 389 (1991). The cou
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constitutional the statute under wh
Page 315 and 316:
The circuit judge's denial of plain
Page 317 and 318:
duplication provision of the PPCIGA
Page 319 and 320:
New York National Union Fire Ins. C
Page 321 and 322:
insurance companies pursuant to sta
Page 323 and 324:
Matter of Morgan, 277 N.Y. 203, 14
Page 325 and 326:
Alabama Arizona California Moody v.
Page 327 and 328:
Schenek v. Citizens Casualty Co., 6
Page 329 and 330:
disclosed in its annual statement.
Page 331 and 332:
insurance company, the court held t
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Pennsylvania's interest in investig
Page 335 and 336:
Pennsylvania Commonwealth ex rel. C
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non‐mandatory preference for the
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Powers and Duties of the Rehabilita
Page 341 and 342:
the insolvency clause of a reinsura
Page 343 and 344:
Financial Indemnity Company v. Supe
Page 345 and 346:
ecause they had constructive notice
Page 347 and 348:
Illinois law does not provide the D
Page 349 and 350:
claimed. Although the code allows t
Page 351 and 352:
040(3)(a) or 304‐33.190(2). Rathe
Page 353 and 354:
to the state's unemployment compens
Page 355 and 356:
State ex rel. ISC Financial Corp. v
Page 357 and 358:
authorizing the Liquidator to prope
Page 359 and 360:
implement the statutory liquidation
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that trust claimants will recover a
Page 363 and 364:
showing that the rehabilitator’s
Page 365 and 366:
insurer, sued former owner of insur
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Brainard v. Foster, Civil Action No
Page 369 and 370:
Flowers v. Tennessee Trucking Ass
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the insurer under Texas law; and th
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state court against B.C. Rogers, an
Page 375 and 376:
People ex rel. Baylor v. Multi‐St
Page 377 and 378:
equiring the insurer to produce doc
Page 379 and 380:
failed to demonstrate to the contra
Page 381 and 382:
intervention. It is not an abuse of
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eview the actions of the insurance
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not reported losses (IBNR). The Sup
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Commonwealth tort claims against th
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Liquidation Act. On a petition for
Page 391 and 392:
defendant to bring the action to th
Page 393 and 394:
Main Ins. Co. v. Bradford, Williams
Page 395 and 396:
proceedings against an insolvent Ne
Page 397 and 398:
Matter of Title, Etc., Co. of Buffa
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the R.C. 3955.19 stay provision as
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Casualty Insurance Guaranty Associa
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property without a hearing. The Cou
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consent of the liquidators, the bro
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ecording of an order of liquidation
Page 409 and 410:
Florida Imagine Ins. Co. v. State o
Page 411 and 412:
executory contracts, and the insure
Page 413 and 414:
procured new policies in a solvent
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Safeway liable for the entire amoun
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even lower interest rate than that
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North Carolina Texas North Carolina
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an individual and official capacity
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enterprise with United States Gener
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were not ultra vires acts. There we
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authorized by state law to petition
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Stamp v. Touche Ross & Co., 263 Ill
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control, or possession of the insur
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offers to compromise because severa
Page 435 and 436:
insolvent insurer brought an action
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"interested parties" in a proceedin
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Assets of the Insolvent Insurer's E
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Garamendi v. SDI Vendome, No. CV 02
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for personal injury claim brought a
Page 445 and 446:
transacting any insurance business
Page 447 and 448:
Bent v. Hart, 10 Mo. App. 143 (1881
Page 449 and 450:
discretion allowed policyholders to
Page 451 and 452:
In re New State Life Ins. Co., 23 P
Page 453 and 454:
ecover a subscription fund executed
Page 455 and 456:
Pursuant to D.C. Code Ann. § 35‐
Page 457 and 458:
ecause all the directors of the dis
Page 459 and 460:
agree on whether Kentucky statutory
Page 461 and 462:
W. J. Jones & Son v. Independence I
Page 463 and 464:
precluding liquidator's avoidance o
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association's directors for monies
Page 467 and 468:
a Transit insured. Fifteen months l
Page 469 and 470:
court granted the motion. On appeal
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unearned portion of the premium was
Page 473 and 474:
the insolvent Mission Insurance Com
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Drake v. Rollo, 7 Fed. Cas. Pg. 105
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judge to act as presiding judge ove
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$25,000 compromise would be paid to
Page 481 and 482:
express purpose is to avoid financi
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einsurance contract against moneys
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provision and therefore its ruling
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complaint, the defendants would not
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as an offset against the insolvent
Page 491 and 492:
Swiss Re made payments to Protectiv
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directors were not included in that
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purported rescission by the company
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members. The court further held tha
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instituting of the receivership pro
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would prevent a multiplicity of act
Page 503 and 504:
assessments against members of a do
Page 505 and 506:
Richards v. Hale, 14 O.C.D. 468, 1
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Wetmore v. Scalf, 85 S.C. 285, 67 S
Page 509 and 510:
mutual insurance company because Wi
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out liquidation assessment powers i
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their insurer became insolvent. Any
Page 515 and 516:
insolvent carrier, sought to interp
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The Home Insurance Co. v. Hooper, 2
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coverage. The court held that cover
Page 521 and 522:
insurance, and that Mission was not
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contract. Further, as the parties t
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agreement. The Colorado receiver cl
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preliquidation assets that could be
Page 529 and 530:
agreements with Legion Insurance Co
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prediction, and was neither arbitra
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Guaranty Association (“PPCIGA”)
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contrary holding would permit these
Page 537 and 538:
People ex rel. Bolton v. Progressiv
Page 539 and 540:
where the solvency of the company,
Page 541 and 542:
agent of all premiums collected by
Page 543 and 544:
subsequent to institution of delinq
Page 545 and 546:
corporate mismanagement and account
Page 547 and 548:
Mendel v. Garner, 283 Ark. 473, 678
Page 549 and 550:
The lower court denied the claim be
Page 551 and 552:
definition, a “covered claim,”
Page 553 and 554:
Missouri MSEJ, LLC, v. Transit Cas.
Page 555 and 556:
medical malpractice action, which i
Page 557 and 558:
Suit was transferred to the court o
Page 559 and 560:
within policy limits. The insolvent
Page 561 and 562:
alleged negligence of an insured of
Page 563 and 564:
Arkansas Colorado Florida Baldwin
Page 565 and 566:
liquidator was entitled to rely upo
Page 567 and 568:
Ohio Covington v. Ind. Dep’t of N
Page 569 and 570:
River abstention doctrines did not
Page 571 and 572:
directly against manufacturer. The
Page 573 and 574:
insurance commissioner entered into
Page 575 and 576:
un ten months and twenty‐six days
Page 577 and 578:
policies were delivered, the state
Page 579 and 580:
Accordingly, the manufacturer sough
Page 581 and 582:
Sizemore v. United Physicians Ins.
Page 583 and 584:
insolvency. The court found for pla
Page 585 and 586:
equires all claims against the rece
Page 587 and 588:
cancelled by order of the court, th
Page 589 and 590:
Dewey v. Davis, 82 Wis. 500, N.W. 7
Page 591 and 592:
April 18, the filing of the Missour
Page 593 and 594:
Texas Buckner v. Lloyd's Ins. Co. o
Page 595 and 596:
payment by the California Insurance
Page 597 and 598:
the tortfeasors to recover its paym
Page 599 and 600:
Ga. App. 660, 440 S.E.2d 254 (1994)
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Act. The Court also noted that whet
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opportunity to settle.” The court
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jurisdictions that did find associa
Page 607 and 608:
Ohio Lake Hospital System, Inc. v.
Page 609 and 610:
award. It became insolvent, however
Page 611 and 612:
Rhulen advanced claim payments to T
Page 613 and 614:
entitled to coverage from the Illin
Page 615 and 616:
the negligence claim, brought by th
Page 617 and 618:
insurer did not thereby release fro
Page 619 and 620:
when contingent claims must necessa
Page 621 and 622:
In Matter of Liquidation Of Integri
Page 623 and 624:
from the time damages are certain o
Page 625 and 626:
In re N.Y. Surety Co., 723 N.Y.S.2d
Page 627 and 628:
Governmental/Superpriority Claims S
Page 629 and 630:
Reliance Ins. Co. v. Shriver, Inc.,
Page 631 and 632:
Georgia Boyd v. Wright, 148 Ga. 216
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policyholders, judgment creditors o
Page 635 and 636:
when it appears that such funds or
Page 637 and 638:
within the insurance statutes. Cred
Page 639 and 640:
Priorities ‐ Federal U.S. Supreme
Page 641 and 642:
statute was preempted by the federa
Page 643 and 644:
instituting or taking further actio
Page 645 and 646:
Florida Dilme v. SBP Serv., Inc. an
Page 647 and 648:
Massachusetts Commissioner of Insur
Page 649 and 650:
New York Finkelstein v. Van Schaick
Page 651 and 652:
Texas Op. Att'y. Gen. WW‐795 (Tex
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Illinois People ex rel. Potts v. Co
Page 655 and 656:
Arizona Colorado State ex rel. Low
Page 657 and 658:
equirements had not been complied w
Page 659 and 660:
Michigan Commissioner of Insurance
Page 661 and 662:
commissioner certain securities for
Page 663 and 664:
State ex rel. Cincinnati Life Assn'
Page 665 and 666:
and without assets in trust in Flor
Page 667 and 668:
State ex rel. Burgess v. Crabbe, 11
Page 669 and 670:
jurisdiction over the attorneys in
Page 671 and 672:
Pennsylvania Lewycka v. Springfield
Page 673 and 674:
meaning, held that the Indiana clai
Page 675 and 676:
Rose v. Fid. Mut'l Life Ins. Co., 2
Page 677 and 678:
uniform law or that it was necessar
Page 679 and 680:
of incorporation of a mutual insure
Page 681 and 682:
jurisdiction over that litigation f
Page 683 and 684:
ehabilitation in Indiana and had ob
Page 685 and 686:
Krueger v. Tabor, 546 So.2d 1317 (L
Page 687 and 688:
and, because of the guarantees, for
Page 689 and 690:
Rhode Island injunction by arguing
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In prior proceedings in this case,
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state law issues and was contingent
Page 695 and 696:
Bryant v. Shields, Britton & Fraser
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against the Wisconsin Insurance Sec
Page 699 and 700:
PART II Cross‐Border Run‐Offs a
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CASE(S) Highland Insurance Company
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CASE(S) Hatteras Reinsurance Ltd NR
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• The Court in which the Chapter
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As previously noted, of the sevente
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WFUM Pool Solvent Schemes ~ In re G
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arrangement, including solvent run
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5. Chapter 15 ~ Official Text 1501.
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(d) §1502. Definitions. (2) an ind
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(c) (d) A request for comity or coo
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(a) (b) If the decision or certific
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§1521. Relief that may be granted
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(4) approval or implementation of a
Page 725 and 726:
B. United Kingdom ‐‐ The Positi
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1. majority votes in favour of the
Page 729 and 730:
eported claims, was not of great im
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and Jersey. The English schemes wou
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Life Assurance Limited (FPLLA) both
Page 735 and 736:
MB Group Plc, Re (1989) 5 B.C.C. 68
Page 737 and 738:
issued a third circular which state
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court had jurisdiction to sanction
Page 741 and 742:
The Judge (Roger Kaye Q.C.) allowed
Page 743 and 744:
the agreement would not be avoided
Page 745 and 746:
submitted that cover had been provi
Page 747 and 748:
liquidators and in the English bank
Page 749 and 750:
court did not strike out the petiti
Page 751 and 752:
Stein so that he could pursue it. B
Page 753 and 754:
Part III of the Winding‐up and Re
Page 755 and 756:
v. Proceedings in Canada to Assist
Page 757 and 758:
D. Bermuda ‐‐ The Bermuda Persp
Page 759:
Hong Kong Court to restructure the
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Excluded Lines - Ocean Marine Louis
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Covered Claim - Unearned Premium co
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Oregon Corvallis Aero Service, Inc.
Page 797 and 798:
purposes of joint and several liabi
Page 799 and 800:
Affiliated FM Ins. Co. v. State, 33
Page 801 and 802:
Heninger v. Riley, 317 Pa. Super. 5
Page 803 and 804:
assumed the obligations of Dr. Lucc
Page 805 and 806:
Florida Hawaii Fernandez v. Florida
Page 859 and 860:
Case Law Digest Supplement LIFE & H
Page 861 and 862:
Texas Messagephone, Inc., et al v.
Page 863 and 864:
were invested in four group annuity
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Alaska Arizona Illinois Unisys Corp
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Minnesota Honeywell, Inc. v. Minnes
Page 869 and 870:
plan participants rather than the G
Page 871 and 872:
esponsible for attorneys’ fees an
Page 873 and 874:
Alaska Arizona Indiana Unisys Corp.
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Federal Jurisdiction - Preemption c
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Supreme Court California New York U
Page 879 and 880:
Assessments Assessments - In Genera
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the sales transaction is not uncons
Page 883 and 884:
State Department of Insurance Insur
Page 885 and 886:
Kentucky State Department of Insura
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New Jersey New Mexico State Departm
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Virginia Washington State Departmen
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© 2009 National Association of Ins
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CO Marcy Morrison Commissioner (Wes
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KS Sandy Praeger Commissioner NAIC
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NH Roger A. Sevigny Commissioner NA
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TN Leslie A. Newman Commissioner (V
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NAIC OFFICES NAIC Central Office: 2
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GUARANTY FUND DIRECTORY Updated 02/
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nolhga.com :: state ga contact info
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