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In re New York Title & Mortgage Co., 168 Misc. 60, 5 N.Y.S.2d 471 (1938). A plan
to reorganize a title and mortgage company in liquidation, developed by the
insurance commissioner, whereby a new mortgage company would be formed
and sell its stock to the former company's assenting creditors at a price fixed
by the commissioner, was held not invalid because of the stockholders'
exclusion from participation.
Matter of Lawyers Mortgage Co., 169 Misc. 802, 9. N.Y.S.2d 127 (1938),
affirmed, 256 A.D. 974, 11 N.Y.S.2d 250. The court concluded that preventing
creditors and stockholders from voluntarily forming syndicates to purchase
assets from the insurance commissioner in a liquidation proceeding could be
discriminatory and injurious to the very persons the liquidation law seeks to
safeguard and assist. Thus, creditors and stockholders can work out a plan of
reorganization for their own company, as long as every creditor or stockholder
can participate in the plan or may opt out and share in the proceeds of the
liquidation.
Pennsylvania Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 61 Dauph. 131
(1950). Only the insurance commissioner is authorized to liquidate a company
and a plan which requires the commissioner's consultation with other parties,
including policyholders, was not valid. Such a plan illegally delegated authority.
Date of Vesting of Rights and Liabilities
Fifth Circuit
Alabama
Arkansas
Crist v. Sharp Electric, Inc., 876 F.2d 379 (5th Cir. 1989). Receiver sued insured
for payment of premiums earned by insurer prior to insolvency. Insured
defended on the grounds that the subsequent failure to provide a defense
pursuant to coverage under the policy was a breach of the insurance contract,
thereby relieving the insured of its contractual obligation to pay premiums.
The court held that the "interlocking web of statutes" governing insurance
insolvency prevails over general principles of basic contract law, and rejected
an argument that because the insurer failed to defend after its insolvency, the
premium was not "earned." The court found that no event occurring after
insolvency could control whether premiums were or were not "earned,"
because the rights and liabilities of the insurer and its creditors are fixed as of
the date of the entry of the liquidation order and because a decree of
dissolution cancels outstanding policies as of that date by operation of law. A
contrary holding would permit these insureds as unfair preference over other
claimants of the same class.
Myers v. Protective Life Ins., 342 So.2d 722 (Ala. App. 1977). Agents' rights to
renewal commissions due from insolvent insurer is decided as of the date the
final order fixing the rights and liabilities of the insolvent insurer is filed in the
clerk's office.
Federal Union Surety Co. v. Flemister, 95 Ark, 389, 130 S.W. 574 (1910). The
court held that where there was no adjudication of the insolvency of a foreign
mutual insurance company, and no decree dissolving the company, but there
was an order of a chancery court in Arkansas appointing a receiver to collect
and distribute the company's assets in Arkansas to the creditors, a policyholder
whose policy has not been cancelled may recover for a loss which accrued
after the receiver's appointment.
Massachusetts Bonding & Insurance Co. v. Home Life & Accident Co., 119 Ark.
102, 178 S.W. 314 (1915). Where a fire insurance company violated a statutory
period within which it was required to pay a loss covered by one of its policies,
is not liable for the penalty therein where demand was made after the time
specified and after a receiver of the insurance company was appointed.