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insolvency and the court's power to use the assets of the insolvent insurer to
obtain reinsurance for the policyholders without subjecting the assets to
judicial sale.
Kansas
Ace Prop. & Cas. Ins. Co. v. Superior Boiler Works, Inc., 504 F. Supp. 2d 1154 (D.
Kan. 2007). On motion for summary judgment, an insurer sought to pay only its
pro rata share of the defense and indemnity costs of a manufacturer named as a
defendant in multiple asbestos cases. Periods of time existed where the
manufacturer was either uninsured, or insured by a now insolvent insurer. The
court held that an unresolved question of whether a single continuous
occurrence resulted in an unallocable loss covering successive policy periods
existed and precluded summary judgment
State v. Bank Savings Life Ins. Co., 147 Kan. 170, 75 P.2d 297 (1938). Where the
receiver of an insolvent insurer enters into a reinsurance contract with another
company, the receiver cannot, by agreement with the reinsurer, modify the
insolvent insurer's policyholders' rights under the receiver's contract with
policyholder.
Kentucky Kentucky Home Mutual Life Ins. Co. v. Leitner, 302 Ky. 789, 196 S.W.2d 421
(1946). Where the insurance commissioner has authorized a reinsurance
agreement to protect all policyholders of an insolvent insurer, a policyholder
who accepts the agreement is bound by it and all amendments thereto, even
without the policyholder's consent, since the interests of policyholders are
protected by the insurance commissioner.
Massachusetts Commissioner of Insurance v. Massachusetts Accident Co., 318 Mass. 238, 61
N.E.2d 137 (1945). Under the state's liquidation law, the rights of all interested
parties are fixed as of the date of the order of liquidation and policyholders are
entitled to prove their claims against the company's assets. If the court
presiding over the liquidation proceeding has approved a reinsurance
agreement, policyholders may elect to accept the reinsurance; however, if they
reject the benefits of the reinsurance agreement or if no such agreement is
negotiated or approved, the rights of policyholders in the liquidation
proceeding are determined without regard to any reinsurance. The terms of
the reinsurance agreement may not be used to measure the rights of the
policyholders who did not accept the reinsurance.
Mississippi
Bank of Miss. v. Miss. Life & Health Ins. Guar. Ass’n, 850 So. 2d 127 (Miss. Ct.
App. 2003). An annuity purchased by a pension plan was assigned to a
liquidating trust for the benefit of the beneficiaries of the pension plan upon
the insolvency of the insurance company that sold the annuity. The trustee
of the liquidating trust participated in the rehabilitation plan of the insolvent
insurer and accepted a lower interest rate from a second insurance company
that assumed the annuity. The trustee filed a claim with the Mississippi Life
and Health Insurance Guaranty Association (“MLHIGA”) for reimbursement
of the losses resulting from the insolvent insurer’s default. MLHIGA denied
the claim because the pension plan had been protected by the Pension
Benefit Guaranty Corporation. The trustee challenged the denial and,
ultimately, the Supreme Court of Mississippi agreed with the trustee that the
losses were covered by MLHIGA. On remand, two disputes again arose
between the parties. First, the trustee argued that MLHIGA was required to
pay to the trust interest accruing after the original annuity contract’s
maturity date at the rate contracted for in the original annuity (issued by the
insolvent insurance company), or alternatively, the slightly lower legal
statutory interest rate. MLHIGA argued that the interest rate should be an