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Liquidation Act’s goal of helping struggling insurers by encouraging vendors and
trade creditors to continue to conduct business with them.
Covington v. Univ. Hosp. of Cleveland, 778 N.E. 2d 54 (Ohio Ct. App. 2002). This
case resolved the tension between two sections of Ohio’s Liquidation Act—one
dealing with the right of setoff, and another dealing with preferences.
Following the lead of federal bankruptcy law, the Ohio appellate court found
that the setoff provision in Ohio Revised Code § 3903.30, although it purports to
deal with “any action or proceeding,” does not permit set off against a
preference otherwise avoidable by the liquidator. The court noted that the
preference section in Ohio Revised Code § 3903.28(I) contains its own setoff
provision and therefore its ruling did not render the language in Ohio Revised
Code § 3903.30 meaningless.
Oklahoma Joplin Corp. v. State ex rel. Grimes, 570 P.2d 1161 (Okla. 1977). Where
delinquency proceedings against an insurer under the Uniform Insurers
Liquidation Act were commenced by the insurance commissioner on April 4,
where a creditor took judgment against the insurer in Missouri on April 14,
where an order enjoining all persons from seeking or obtaining preferences or
attachments or other liens against the insurer was entered in Oklahoma on
April 16, and where the creditor's Missouri judgment was filed in Oklahoma on
April 18, the filing of the Missouri judgment did not create a lien in favor of the
creditor so as to make it a secured creditor for purposes of the Act.
Pennsylvania
Ario v. Ingram Micro, Inc. 2009 WL 428450 (Pa. 2009). The court interpreted
Pennsylvania preference law regarding insurer insolvencies and considered
whether an insurers pre‐liquidation payment for a covered loss to an insured
constituted a preference which the liquidator of the insurer could recover.
They concluded that a payment made by an insurer to an insured in the
ordinary course of business is not a preference because it does not include
an antecedent debt. The court stated its interpretation protects the
economic interest of insureds while prohibiting unusual transfers. Further,
the court believes its decision regarding legislative intent was consistent
with federal bankruptcy law and the contrary interpretation of the
interpretation of the Pennsylvania preference law would be harmful to the
states insurance industry as well as the insureds.
Arroyo v. Chesapeake Ins. Co., 209 Pa. Super. 174, 224 A.2d 101 (1966). The
liquidator of an insolvent local insurance company could not be subject in local
courts to liens acquired by subsequent attaching creditors.
Stopper v. Chesapeake Ins. Co., 209 Pa. Super. 474, 228 A.2d 35 (1967). Under
Pennsylvania's Suspension of Business Voluntary Dissolution Act (repealed),
attachment of a domestic insurer's assets is prevented by the suspension of
the company from the further transaction of business, with notice to all
creditors, which is generally followed by the appointment of a statutory
liquidator.
South Carolina
Tennessee
Wise v. Carolina Hail Ins. Co., 108 S.C. 504, 94 S.E. 535 (1918). The court held
that assignment of premium notes in return for cash loans made while
company was solvent was not voidable as a preference.
United Physicians Ins. Risk Retention Group v. United Am. Bank of Memphis,
1996 Tenn. App. LEXIS 69 (Tenn. Ct. App. 1996). The commissioner filed a
petition, on behalf of and as liquidator for an insolvent captive insurance
company, against the bank, seeking to avoid a transfer made by the insurance
company to pay off an outstanding loan to the bank. The bank filed a motion to
dismiss the commissioner’s petition because the challenged transfer occurred
outside of the avoidance period in Tennessee Code § 56‐9‐317(a)(2)(B). The trial