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First Nat. Bank of Kansas City v. Higgins, 357 S.W.2d 139 (Mo. 1962). A claimant
against an insured of the insolvent insurer made a claim on its reinsurance
contract. Rejecting the trial court's ruling that only the Missouri insurance
commissioner as the receiver of the insolvent insurer was entitled to judgment
against the reinsurer, the court found that the reinsurance contract, which is
generally paid only to the reinsured company or its receiver in the event of
insolvency, had been worded in such a way that insureds of the insolvent
insurer were third‐party beneficiaries of the reinsurance contract.
General Reinsurance Corporation v. Missouri General Ins. Corp., 458 F. Supp. 1
(W.D. Mo. 1977). An interpleader action was brought to determine whether
the Missouri receiver of an insolvent insurer or the Mississippi guaranty fund
which had paid the insolvent insurer's claims in Mississippi, was entitled to the
proceeds of the reinsurance contract issued to the insolvent insurer. The court
held the proceeds should be paid to the domiciliary liquidator based on the
insolvency clause of the reinsurance agreement and rejected the guaranty
fund's statutory language that the association's "stood in the shoes" of the
insolvent insurer and the argument that "public policy" held that the
reinsurance proceeds should be paid to the guaranty fund.
Green v. American Life and Accident Ins. Co., 112 S.W.2d 924 (Mo. App. 1938). A
reinsurer denied a death claim filed by the beneficiary of policies issued by an
insolvent primary company whose policies were assumed by the reinsurer.
The insolvent insurer's policies were cancelled upon the insolvency and
appointment of the receiver, and although such policies were reinsured, the
assumption of liability was set forth in the reinsurance contract. As a result,
since the original policies had lapsed due to nonpayment of premiums, there
was no reserve available to be applied toward the purchase of coverage under
the reinsurance contract, and the denial was proper.
Homan v. Employer's Reinsurance Corp., 345 Mo. 650, 136 S.W.2d 289 (1939).
Based on the language of the reinsurance contract, the court found that the
claimant of the insolvent insurer could maintain a direct action against the
reinsurer.
O'Hare v. Pursell, 329 S.W.2d 614 (Mo. 1959). In upholding a claimant's action
against the reinsurer of the insolvent insurance company, the court noted that
the reinsurance treaty in question provided for 100% cession of all of the
insolvent insurers liability, that the reinsurer would takeover loss reserves and
service, adjust, and settle claims directly with insureds, that reinsurance should
be payable without diminution to the insolvent insurer's insureds in the event
of insolvency, and the liability of the reinsurer followed the terms and
conditions of the policy. The court ignored the further retrocession and quota
share agreement whereby 50% of the risk was retroceded back to the insolvent
insurer.
New Jersey
Fortunato v. New Jersey Life Ins., 254 N.J. Super. 420 (App. Div. 1991). The
Appellate Division held that the Chancery Division should not have denied the
Commissioner's request for an order directing him to rehabilitate New Jersey
Life Insurance Company. The Chancery judge had refused to grant the request
for rehabilitation because there were issues of fact concerning the existence of
insolvency, including the issue of whether a reinsurance agreement had been
repudiated. The reinsurance issue was scheduled for arbitration at a later date.
While the Uniform Insurers Liquidation Act [N.J.S.A. 17B:32‐2, before
amendment by P.L.1992, c. 65] gives the Superior Court original jurisdiction
over the Commissioner's petition, it does not require a full hearing before the
court issues orders. The Commissioner's determination that further business
by the insurer would be hazardous was a finding of fact, an informed