Download PDF - Goodmans

to offset its claims against the guarantee company in an action by the
rehabilitator for the purchase price. Although the form of action brought by
the rehabilitator was founded in contract, the debt was not truly contractual.
The allowance of offset would be a preference prejudicial to other creditors.
Moreover, the parties did not claim mutual debts based on the same right.
Schenck v. Coordinated Coverage Corporation, 50 A.D.2d 50, 376 N.Y.S.2d 131
(1975) and Schenk v. Citizens Casualty Company, 60 Misc. 811, 322 N.Y.S.2d 483
(1971). The court held that where a party with a claim against an insurance
company is sued by the liquidator of the insurance company pursuant to a
liquidation order which contains an injunction barring counterclaims against
the liquidator's actions, such party has the option of either filing its claim in the
liquidation proceeding or raising its claim as a set‐off.
Serio v. Black, Davis & Shue Agency Inc., No. 05 CIV. 15 (MHD), 2005 WL 2560390
(S.D.N.Y. Oct. 11, 2005). The federal district court granted the liquidator’s
motion for stay of adjudication of the defendant agency’s counterclaims
seeking setoff in favor of the state liquidation and rehabilitation proceeding, but
stated that any obligation by the insolvent insurer to pay withheld commissions
to the agency would constitute a proper setoff in the litigation.
Van Schaick v. Astor, 154 Misc. 543, 277 N.Y.S. 394 (1935). In an action to
recover unearned premiums, the insured was entitled to offset the insurer's
periodic payments under a compensation award for the death of the insured's
employee, and the insurer's debt against the insured's liability over a seven
year period before conservation. However, the insured was not entitled to
offset based upon the insurer's failure to defend personal liability actions
brought against the insured prior to the conservation order.
Van Schaick v. Bank of Yorktown, 154 Misc. 400, 277 N.Y.S. 311 (1934). The
defendant who loaned money on promissory notes secured by bonds of the
surety company was entitled to offset the amount of the unpaid notes against
the time deposits of the surety company when receiver attempted to recover
such deposits.
Van Schaick v. Lincoln Dye Works, Inc., 146 Misc. 342, 263 N.Y.S. 114 (1933).
When the liquidator brought an action to recover premiums, the defendant
counterclaimed that the insurer was obligated under its policies to defend
actions pled prior to order of the liquidation and to pay the resulting claims.
The court held the counterclaims could not be maintained where the order of
liquidation enjoined any actions against the insurer or the liquidator. In
liquidation proceedings the amounts due for premiums are absolute debts and
could not be offset against any loss or individual claim due from the insurer in
liquidation.
Van Schaick v. Pennsylvania Exch. Bank, 236 A.D. 453, 260 N.Y.S. 37 (1932). The
insurance commissioner as liquidator could recover a deposit in the
defendant's bank, but the defendant was entitled to offset a claim against the
insurer, as guarantor of a note, where the note was duly presented and
payment refused prior to the date of the liquidation order.
Ohio
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