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agreement. The Colorado receiver claimed the payment, as did the California
guarantee fund, which had paid the insolvent insurer's obligation to one of its
insureds. The court held that the insolvent insurer's Colorado receiver was
entitled to the reinsurance contract payment, but that California guaranty
fund's claim could be presented to the Colorado receiver.
Connecticut
Florida
H. and L. Chevrolet, Inc. v. Berkley Ins. Co., 110 Conn. App. 428 (2008). The
insured automobile dealer and its insurer failed to establish probable cause to
sue a reinsurer for breach of contract or fraud following insolvency of the
reinsured warranty insurer. The warranty insurer chose not to exercise its
option to purchase run‐off coverage for unexpired warranties after the period
of reinsurance had ended. Absent run‐off coverage or a separate reinsurance
agreement, the insolvent insurer had no claim for losses, and the dealer and its
insurer had no third‐party beneficiary claims.
Clark & Co., Inc. v. Department of Ins., 436 So.2d 1013 (Fla. App. 1983). A Texas
managing general agent asserted priority to reinsurance proceeds due to an
insolvent insurer. The agent had written policies on behalf of the insurer under
an agreement in which the insurer was to reinsure 90% of the risk on all policies
written by the agent. The agent asserted a priority to the reinsurance
proceeds due on a third party beneficiary theory, for reasons that the insolvent
insurer had procured the reinsurance only on the policies produced by the
agent on the agent's behalf. The court held that the agent was not entitled to
any priority because under the terms of the reinsurance contracts, the agent
was not the insured.
Consumer Super Market Inc. v. Underwriters at Lloyds, 189 So.2d 648 (Fla.
App. 1966), cert. dismissed, 198 So.2d 323 (1967). A claimant against an insurer
in the process of liquidation sought to recover the unpaid portion of its claim
directly from the reinsurer of the insurer being liquidated, based on third party
beneficiary theory. The court held that independent action may not be brought
against reinsurer of company being liquidated. Such action would frustrate
purpose of Florida Uniform Insurers Liquidation Act to secure equal treatment
for all creditors and to avoid multiplicity of suits.
McDonough Construction Corp. v. Pan American Surety Co., 190 So.2d 617 (Fla.
App. 1966). The insolvent insurer had been a surety on construction and
performance bonds. The obligees of the bonds filed a claim in the receivership
proceeding asserting a right of priority to reinsurance proceeds due on the
bonds. The court held that where the contract of reinsurance showed no
intent on the part of the reinsurer to assume any direct liability to the insureds,
the reinsurance proceeds would be paid to the receiver as part of the assets of
the insolvent insurer.
Mitchell v. State ex rel. Williams, 223 So.2d 792 (Fla. App. 1969). Insureds of an
insolvent Florida domestic insurer petitioned the receivership court for priority
to reinsurance proceeds due the insolvent insurer. The reinsurer had bound
itself to all terms and conditions of the original contract. The court found that
under these circumstances the reinsurance contract amounted to an
assumption of the liability of the insolvent insurer to the original insured, and
this would constitute an exception to the general rule that reinsurance
proceeds become assets of the insolvent insurer. As a result, it was held that
original insureds had right to petition for priority to reinsurance proceeds.
Illinois
Baylor v. Highway Ins. Co., 57 Ill. 2d 590 (1974). Policyholders of insolvent
insurance company were prevented from recovering from reinsurer where the
reinsurance agreement created no privity between the reinsurer and the
policyholder and provided that if the reinsured became insolvent, reinsurance
was to be paid to the liquidator or the receiver.