Download PDF - Goodmans

O'Hern v. De Long, 298 Ill App. 375, 19 N.E.2d 214 (1939). The agents of an
insolvent insurer were denied a setoff by way of counterclaim in mortgage
foreclosure proceeding for future renewal commissions due defendants under
agency contracts with insolvent insurer. The court noted that the continued
solvency of the company and its ability to collect and receive future premiums
was one of the conditions contemplated by the agents in entering into the
agency contracts.
Pine Top Ins. Co. v. Republic Western Ins. Co., No. 88‐2032, (N.D. Ill. July 26,
1988). The court ruled that if the reinsured was found liable to the reinsurer's
liquidator for amounts transferred to it from a voidable transfer, it would not
be entitled to an offset of amounts due to it by the reinsurer pursuant to the
reinsurance agreement, as these claims are not considered "mutual" for
purposes of a setoff.
Traer v. Consolidated Coal Co. of St. Louis, 221 Ill. App. 576 (1921). A
policyholder was not allowed to set off against the losses on policies issued by
the insolvent company the amount of the assessment the policyholder owed
the company since such assessments had been voluntarily agreed to by the
policyholder (prior to liquidation) in order to raise money to pay losses.
Further, the claim loss had been allowed in the estate on a pro rata share.
Kentucky
Louisiana
Stephens v. Fed. Ins. Co., 1995 U.S. Dist. LEXIS 17680 (S.D.N.Y. 1995) (applying
Kentucky law), aff’d, Rich v. Fed. Ins. Co., 113 F.3d 1230 (2d Cir. 1997), summary
order opinion at 1997 U.S. App. LEXIS 12284. The federal district court granted
defendant’s motion for summary judgment and found that defendant had a setoff
defense to the liquidated reinsurer’s claim for balances due under
reinsurance treaties. While the liquidation order barred counterclaims against
the liquidated reinsurer, the defense of set‐off was not a counterclaim. The
defendant did not waive its set‐off defense when it indicated that it did not have
a set‐off claim on the proof of claim form because it had no knowledge at the
time of any claims by the plaintiff against which it could exercise set‐off. Finally,
the requirement that the debts be mutual was satisfied because both plaintiff
and defendant were parties to the relevant pool contracts.
Brown v. Adolph, 961257 (La. App. 1 Cir. 3/27/97), 691 So.2d 1321. In the
liquidation of a single business enterprise, advances made to owners of an
insurer that were “written off” as “cash expenses” on the company’s books
prior to liquidation does not constitute a “remission” of the debt under LSA
C.C. art. 1888, such as to relieve the owner of repaying the advance to the
estate. In this case, prior to liquidation various advances had been made to
A.J. Adolph, the former owner of Automotive Financial Services (“AFS”), an
affiliate of Automotive Casualty Insurance Company (“ACIC”) which had
been placed into Liquidation pursuant to a declaration that the entities along
with another affiliate (“APS”) constituted a “single business enterprise” and
as such were to be liquidated under the Louisiana Insurance Code.
Furthermore, the Court determined that Mr. Adolph’s affidavit filed
subsequent to the entry of the summary judgment which recharacterized
the advances as “bonuses” could not be considered as “newly discovered
evidence,” because the affiant was aware of the information before the
hearing and failed to disclose it.
Brown v. Risk Exchange, Inc., 95 2199 (La. App. 1 Cir. 5/10/96), 674 So.2d
484). In response to an action by the Liquidator to recover payments made
to various debenture holders of defunct insurer, the defendants argued that
the court was improperly formed and contended that they were due a setoff
of sums received. Pursuant to Article V., section 5(A) of the Louisiana
Constitution, the Louisiana Supreme Court has the authority to assign a