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ecause all the directors of the dissolved insurer were also directors of the now
insolvent insurer. Furthermore, the court held that the transaction was not in
violation of state law or against public policy. The insolvent insurer was not
alleged to be insolvent at the time of the transaction nor did the transaction
create insolvency. There was also no intent to delay, hinder or defraud
creditors.
Rent v. Hart, 73 Mo. 641 (1881). In an action brought by the receiver of an
insolvent reinsured company, the validity of a transaction between the
reinsuring company and the reinsured company was upheld. An insurer and a
reinsurer entered into an agreement by which the insurer transferred all of its
assets to the reinsurer in exchange for reinsurer's assumption of its liabilities
and reinsurance of outstanding risks. As part of the agreement, the reinsurer
exchanged its own stock for the insurer's with a promise to redeem that stock
at full value within twelve months. The receiver brought suit to recover the
amount paid to a specific shareholder in redemption of that shareholder's stock.
The court held that the money could not be recovered and the contract
between the companies was valid. The assets of the insolvent belonged to the
reinsurer, and therefore, any disposition of such assets was a matter of concern
for the reinsurer's creditors, not the insolvent insurer's creditors.
New York In re Liquidation of Union Indem. Ins. Co., 802 N.Y.S.2d 14 (App. Div. 2005).
In the liquidator’s suit for indemnification under a promissory note, the
obligor on the promissory note failed to establish fraud as a defense to the
liquidator’s recoupment of the payment obligation.
Mills v. Everest Reins. Co., 410 F. Supp. 2d 243 (S.D.N.Y. 2006). The federal
district court dismissed the rehabilitator’s claims against a reinsurer for
mutual mistake and fraud, but let stand the rehabilitator’s claims for
fraudulent conveyance. The rehabilitator alleged that compensation
provided by the insolvent insurer to the reinsurer was excessive and
inappropriate, and that the insurer was insolvent when the reinsurance
contract was entered into or was rendered insolvent as a result of the
contract. For limitations purposes, the court held that each alleged transfer
of assets was a separate conveyance for calculating the date the limitations
accrued.
Muhl v. Trabucchi, 673 N.Y.S.2d.103 (App. Div. 1998). Evidence established a
prima facie case of civil contempt against attorneys for the principals of an
insolvent reinsured, who knew that checks received from a principal’s liability
insurer were property of the reinsurer. Attorneys for the principals therefore
had violated a consent order prohibiting the transfer of assets by sending funds
to Bermuda pursuant to instructions from the insolvent reinsured’s principals.
Pink v. Title Guarantee & Trust Co., 274 N.Y. 167, 8 N.E.2d 321 (1937), reargument
denied, 274 N.Y. 610, 10 N.E.2d 575. The court held that as the rehabilitator of an
insolvent guarantee company, the insurance commissioner had to disaffirm the
fraudulent sale of mortgages to the guarantee company, tendering return of
the mortgages upon the discovery of fraud.
Sklaroff v. Rosenberg, 125 F. Supp.2d 67 (S.D.N.Y. 2000), aff’d, 18 Fed. App. 28
(2d Cir. 2001). The federal district court granted the Receiver’s motion for
summary judgment in the receiver’s action to recover funds due under a written
guarantee of payment from the defendant transferors. The payment guarantee
was not extinguished by delivery of a mortgage satisfaction because the
transferors were insolvent at the time of delivery, therefore delivery of the
mortgage satisfaction was a fraudulent conveyance under New York statute.