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assessments against members of a domestic mutual insurer ordered into
liquidation or rehabilitation come into play when the insurer's assets are not
sufficient to satisfy claims, and this is a remedy that should only be applied as a
last resort.
In re Auto Mutual Indemnity Co., 14 N.Y.S.2d 601 (1939). The laws of the state
of the corporation's domicile determine the validity of an assessment made in
the liquidation of an insolvent insurance corporation, and the assessment
creates an obligation in res. and binds both resident and non‐resident
policyholders. Even though the policyholders were not notified of the
assessment within one year after the expiration or cancellation of their
policies, and they were not members of the company at the time it was
ordered into liquidation, they were not relieved of their liability for the
assessment. Also the policyholders were not relieved from liability for
assessments by the fact that the insolvent insurer breached its contract with
them when it was placed in liquidation. The company's breach did give rise to
a provable claim against the company fund held by the insurance
commissioner.
Kelly v. Bremmerman, 23 A.D.2d 346, 260 N.Y.S.2d 971 (1965), affirmed in part,
appeal dismissed in part, 21 N.Y.2d 195, 287 N.Y.S.2d 41, 234 N.E.2d 217. A
provision of a mutual policy stated that additional premiums would be levied
within one year of expiration and that in the event that the policy was
cancelled, the liquidator was barred from levying an assessment against a
policy which expired more than one year before the order of dissolution. The
court held that the liquidator had an obligation to conduct the liquidation with
reasonable diligence, and that the insured was entitled to have the period of
limitation of liability for assessment calculated from the date at which the
liquidator could reasonably have obtained a court order of assessment.
Furthermore, the court found that even though a member of a mutual insurer
is not a party to the proceedings, such member is still liable for the assessment.
New York Auto. Ins. Plan v. American Transit Ins. Co., 673 N.Y.S.2d 895 (Sup. Ct.
1998). The Superintendent of Insurance had primary jurisdiction in an action to
determine whether an insolvent insurer was liable for assessments for the Auto
Insurance Plan during liquidation proceedings.
North Carolina Blackwell v. Mutual Reserve Fund Life Association, 141 N.C. 117, 53 S.E. 833
(1906). The plaintiff sued a foreign insurer and asked the court to appoint a
receiver in order to take control of the insurer's North Carolina assets, which
plaintiff alleged the insurer was removing from state in order to defraud North
Carolina policyholders. The court held that where only "property" of the
insurer in the state was assessments due from members, no receiver would be
appointed as the assessments were an unattachable debt.
Commonwealth Mutual Fire Ins. Co. v. Edwards, 124 N.C. 116, 32 S.E. 404 (1899).
Where foreign insurer had complied with statutory deposit and other
requirements of North Carolina law, and thereafter became insolvent in its
domiciliary state, North Carolina residents were subject to assessments validly
rendered in the domiciliary state.
Ohio
A. Wilhelm & Son v. Parker, 9 O.C.D. 724, 17 Cir. Ct. R. 234 (1898). Where a
receiver is appointed to wind up the affairs of an insolvent mutual insurance
company, and such receiver is authorized to make assessments upon its
policyholders to pay its debts, it cannot be said that former policyholders,
whose policies had been cancelled and surrendered before such company
became insolvent, although they are liable for such indebtedness that was
incurred during their membership, occupied any other relation to the company