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einsurance contract against moneys Midland owed Kemper under a separate
contract. Rejecting the Liquidator's contention, New York's highest court
concluded that the contractual obligations between Kemper Re and Midland
constitute mutual debts for purposes of offset under section 7427 of New
York's Insurance Law despite the fact that the debts arose out of two separate
and distinct transactions. Further, the Court concluded that mutuality is not
destroyed by the existence of an insolvency clause in the carrier's contract
with the reinsurer. An insolvency clause requires the reinsurer to make full
payment to the liquidator in the event of insolvency, regardless of the amount
paid to the insured by the insolvent insurer, but the insolvency clause does not
affect the reinsurer's right of offset.
New York Title Co. v. Friedman, 153 Misc. 697, 276 N.Y.S. 72 (1934). The
receiver of a mortgage guaranty insurer brought an action to recover
payments mistakenly paid to the defendant, but intended for a person with
the same name. The defendant held a mortgage certificate guaranteed by the
insurer, and the court held the defendant could not retain the payments by
way of set‐off where the basis of set‐off was a contingent liability which had
not ripened into an absolute debt on the date of the commencement of
rehabilitation proceedings.
New York Title & Mortgage Co. by Van Shaick v. Irving Trust Co., 268 N.Y. 547,
198 N.E. 379 (1935), reargument denied, 268 N.Y. 709, 198 N.E. 569. The court
exceeded its jurisdiction when it enjoined a bank's right of offset of
guaranteed mortgages in an action by a title company for deposits.
New York Title & Mortgage Co., by Van Shaick v. Irving Trust Co., 268 N.Y. 547,
198 N.E. 397 (1935) reargument denied, 268 N.Y. 709, 198 N.E. 569. Where a
title and mortgage company in rehabilitation sued to recover balances on
deposit with a bank, a counterclaim was permitted for principal and interest
due on mortgages which the plaintiff guaranteed in writing as the right to
set‐off or counterclaim. The court found the insurance code, which created
the right of set‐off or counterclaim, applied to rehabilitations as well as
liquidations.
Pink v. American Surety Co. of New York, 283 N.Y. 290, 28 N.E.2d 842 (1940).
The reinsured was a trustee for the reinsurer as to the reinsurer's share of
salvage received by the reinsured. The reinsured became a surety on a bond
given by the reinsurer. The reinsured had not been required to make
payments on its bond until after the reinsurer's insolvency. The reinsured's
claim based on bond payments could not be offset against its liability as a
trustee for the reinsurer's share of the salvage. The debts were not mutual.
Pink v. Isle Theatrical Corporation, 246 A.D. 24, 284, N.Y.S. 447 (1935).
Although a lump sum award was not entered until after the insurer's
liquidation, claims against the insurer under workers' compensation policies for
payments made by the insured from the date of the insurer's liquidation until
the trial were a "debt" which the insured could offset against the insurer's
claim for premiums due.
Pink v. Title Guarantee & Trust Co., 274 N.Y. 167, 8 N.E.2d 321, reargument
denied, 274 N.Y. 610, 10 N.E.2d 575 (1937). A guarantee company and a trust
company shared a common directorate. The guarantee company purchased
mortgages from the trust company at an excessive price through fraud
perpetrated by the directorate. The guarantee company subsequently
became insolvent. The trust company owed no duty to return the purchase
price of the mortgages, and there was no debt that was subject to offset until
the guarantee company or the appointed rehabilitator discovered the fraud
and disavowed the purchase. Accordingly, the trust company was not entitled