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express purpose is to avoid financial loss to a legitimate claimant as a result
of the insolvency of its insurer to which the claimant paid premiums.
New York
B.D. Cooke & Partners Ltd. v. Nationwide Mut’l. Ins. Co., 791 N.Y.S.2d 103 (App.
Div. 2005). Pursuant to the liquidator’s plan and petition to close liquidation of
the reinsurer, the liquidator assigned to the plaintiff all reinsurance recoverables
owed to the insolvent reinsurer by reinsurance pool members. The reinsurer
was not entitled to setoff amounts due to the plaintiff, a cedent and major
creditor of the reinsurer in liquidation, because the liquidation order specified
that claims against the estate were to be either asserted and adjudicated in the
liquidation proceeding or were thereafter barred.
Corcoran v. American Plan Corp., CV No. 86‐1729 (E.D. N.Y. Feb. 5, 1987) (LEXIS,
Genfed library, Courts file). Pursuant to New York Insurance Law,
Superintendent, as liquidator of insolvent insurer, has standing to initiate any
claim that the insolvent insurer could bring, including causes of action against
former directors.
Corcoran v. American Plan Corp., No. CV‐86‐1729 (E.D. N.Y. filed Nov. 16, 1988)
(LEXIS, Genfed library, Courts file). In a Racketeer Influenced and Corrupt
Organizations Act ("RICO") action, the court, in dicta, asserted that the New
York Superintendent of Insurance may serve in a dual capacity as
representative of the insurance department and liquidator. Although the
Superintendent represents the insolvent insurer, he must still satisfy the
requirements of the particular predicate mail fraud acts alleged in order to
sustain a RICO claim.
Craig v. Bank of New York, 169 F. Supp. 2d 202 (S.D.N.Y. 2001). The federal
district court granted a motion for summary judgment in favor of the former
trustee of the insolvent insurer’s domestic trust account. The liquidator’s class
action against the trustee, who previously had sent a letter to NAIC announcing
his resignation, was barred due to lack of damages to the insurer and the
insurer’s own fraudulent conduct. Also, the trustee’s letter to NAIC announcing
its resignation triggered the running of the limitations period on claims against
the trustee; the trustee was not required to notify all policyholders and
claimants.
Crist v. J. Henry Schroder Bank & Trust Co., 693 F. Supp. 1429 (S.D. N.Y. 1988).
Bank's refusal to honor receiver's sight drafts that were made payable to the
receiver instead of the insolvent insurer which was the beneficiary of the
letters of credit was improper. The court asserted that a party who succeeds
by operation of law to the rights of the beneficiary of a letter of credit may
demand payment. Moreover, receiver may delegate to his subordinates his
authority to request such payments.
Harnett v. National Motorcycle Plan, Inc., 59 A.D.2d 870, 399 N.Y.S.2d 242
(1977). An agent named as a defendant in an action brought by the liquidator
cannot set off a claim for damages for alleged breaches of contract by the
insolvent insurer against the agent's obligations to the insurer. The agent's
claim had not matured at the time of insolvency. The concept of "mutuality"
depends on whether the debts to be offset are due to, and from, the same
persons in the same capacity.
Home Ins. Co. in Liquidation v. Accident & Cas. Ins. Co. of Winterthur
Switzerland, 807 N.Y.S.2d 348 (App. Div. 2006). The plaintiff insurer’s failure to
plead setoffs in its answer to an action seeking to enforce a settlement
agreement, was excusable, where the liquidation order giving rise to the claim
for setoffs was not rendered until after the filing of the note of issue.