Download PDF - Goodmans

discretion allowed policyholders to speak on their own behalf, regarding the
reinsurer’s obligations. In this case, the reinsurer, rather than the insolvent
insurer’s estate, would bear the cost of providing notice to policyholders and
reinsurers and expenses associated with enforcing its interposition rights; costs
are chargeable to the insolvent estate only if benefit would accrue to the estate,
subject to court approval.
In re Liquidation of Union Indem. Ins. Co., 802 N.Y.S.2d 14 (App. Div. 2005). The
court affirmed judgment in favor of the liquidator in the liquidator’s action for
recovery on an investor bond, and rejected the defendant’s fraud defense. The
insolvent insurer guaranteed payment of a promissory note made by the
defendant obligor to purchase a certain investment and the obligor agreed to
indemnify the insolvent insurer for amounts paid by the insurer on the
guarantee and expressly waived defenses against the insurer. The obligor failed
to raise sufficient factual issues to show fraud.
In re Liquidation of the Union Indem. Ins. Co. of N.Y. 132 Misc. 2d 102, 502 N.Y.S.
2d 907 (N.Y. Sup. Ct. 1986). The New York Supreme Court held that funds
segregated by an insurer, although presently in the possession of its agent, for
payment of workers' compensation claims constituted "general assets" for the
security of all the policyholders of the insolvent insurer, and thus the liquidator
was entitled to recover such funds.
In the Matter of Liquidation of Union Indemnity Insurance Company of New
York, the Royal Bank & Trust Company. v. The Superintendent of Insurance
of the State of New York, ___A.D. 2d___, 687 N.Y.S. 2d 132 (1 st Dept. 1999).
The Court applied the 1998 New York Court of Appeals ruling in this case
(see case note immediately preceding) to the issue of the rate of postliquidation
interest to be paid to a claimant on a bond issued by Union
Indemnity. New York Insurance Law § 7405(b) fixes claims against an
insolvent insurer as of the date of the Order of Liquidation. The court noted
that the purpose of Insurance Law Article 74 (Rehabilitation, Liquidation,
Conservation and Dissolution of Insurers) is to preserve the limited funds of
the insured to satisfy all creditors equally. By contrast, Article 76
(Property/Casualty Security Funds) which is applicable to post‐liquidation
interest claims under the 1998 Court of Appeals holding, is to provide dollar
for dollar recovery from the Security Fund. The court observed that if the
claim is deemed to be fixed as of the date of the Order of Liquidation, as
argued by the New York Insurance Superintendent, then no post‐liquidation
would be permitted, contrary to the 1998 Court of Appeals decision. The
Court found that the contract rate of interest rather than the statutory rate
applicable to post‐judgment interest should apply subsequent to the date of
the Order of Liquidation and remanded the case for recalculation of the
interest.
In re Liquidation of U.S. Capital Ins. Co., 724 N.Y.S.2d 311 (App. Div. 2001). The
court rejected the defendant’s claim to a disputed security deposit, holding that
the deposit was the property of the insolvent insurer, and therefore was now
property of the liquidator, pursuant to entry of the liquidation order. The court
also declined to address defendant’s counterclaims seeking declaratory
judgment that it was entitled to recover a security deposit because those claims
for relief were barred by injunctions in the liquidation order and were timebarred
having not been filed within four months from the date of entry of the
liquidation order.
Kelly v. Overseas Investors, Inc., 45 Misc.2d 292, 256 N.Y.S.2d 702, (1965)
reversed on other grounds, 24 A.D.2d 157, 264 N.Y.S.2d 586. A cause of action in
tort was an "asset" of the domiciliary receiver of an insurer domiciled in a
reciprocal state with New York, where that receiver could sue in New York to