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$25,000 compromise would be paid to the other insurer. But if the first insurer
were successful, the two insurers would split the $25,000 compromise. The
second insurer's receiver lost the suit, and the court, in considering the $25,000
compromise, held that the $12,500 due from one insurer to the other could not
be used as a set off against the sums due the one receiver from the other
receiver in settlement of their relationship.
Bockover v. Missouri Superintendent of Insurance, 91 Mo. 177, 3 S.W. 833
(1887). The Missouri liquidator offset a distribution to creditors with a prior
amount received by a Virginia policyholder from the Virginia deposit. The
Missouri court upheld the reduction based on the prior distribution to the
Virginia policyholder on the basis of a statutory provision in Missouri, and
furthermore, upheld the statute against the constitution of challenge.
Nevada
New Hampshire
New Jersey
Frontier Ins. Serv., Inc. v. State, 849 P.2d 328 (Nev. 1993). The Supreme
Court of Nevada upheld the lower court's decision to release premiums
collected by appellant, as agent for an insolvent insurer, to the Nevada
Insurance Commissioner as ancillary receiver of the insurer. The court
rejected the appellant's argument that it was entitled to the premiums by
virtue of a setoff against commissions owed it by the insurer. The court held
that the applicable law was the Indiana Uniform Insurers Liquidation Act,
which was the liquidation statute of the domiciliary state. Under the Act, set
off is prohibited where "the obligation of the person is to pay premiums,
whether earned or unearned, to the insurer." The court determined that the
"obligation to pay premiums" includes premiums paid for surety bonds. The
court also found mutuality to be lacking because the premiums collected by
the appellant were held in trust for the insurer while any money the insurer
may have owed the appellant was a mere debt.
In re: The Liquidation of The Home Ins. Co., 953 A.2d 433 (N.H. 2008). An insurer
assumed all of its affiliates’ reinsurance recoverables from a reinsurer prior to
the insolvency of the reinsurer. The insurer sought to apply the affiliates’ losses
against the reinsurer’s claims against the insurer. The Court held that the
assignment by the affiliates to the insured was an absolute, not conditional,
assignment. As a result, the debts between the insurer and the reinsurer were
mutual for purposes of offset. The Court also found that the reinsurance
recoverables were not acquired with a view to being used as offset because the
transfer occurred years before the insolvency. Finally, the Court held that the
offset statute, which states that mutual debts and credits “shall” be offset, is
mandatory, not discretionary.
Bohlinger v. Ward & Co., 20 N.J. 331, 120 A.2d 1 (1956). In an action by the
liquidator of an insolvent insurance company against an agent of the company
for an accounting of premiums, the evidence did not establish that,
subsequent to the agency agreement, a course of business modified the
agreement to allow the agent to offset net return premiums on cancelled
policies against collected premiums. Nor did the evidence establish that such a
course of business substituted a creditor‐debtor relationship for the
principal‐agent relationship created by the agreement. Although the insurance
company permitted the agent to deduct unearned premium credits on policies
cancelled in the ordinary course of business at the request of policyholders or
the company, such treatment of unearned premiums would not apply to
policies conditionally surrendered by policyholders at the agent's request
where the solvency of the company, not cancellation, was the issue. To permit
otherwise would give a preference to such policyholders. The liquidator was
entitled to the full amount of collected premiums.
Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504, 800 A.2d 54 ( 2002). At
issue was the amount of credit the New Jersey Property‐Liability Insurance