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Accordingly, the manufacturer sought coverage of Integrity’s portion of the
settlement by the Fund. The New York Superintendent of Insurance decided
that the valves had left the possession and control of the manufacturer in
Rhode Island and for that reason, rejected coverage of the claim by the
Fund.
The Court overruled the Superintendent, finding that the key issue was
whether control of the valves was relinquished in Rhode Island when they
were delivered to a carrier. There was no dispute that the valves were
located in New York when the defects became evident. The Court found
that because the claim arose from the product’s physical presence in New
York, coverage of the claim by the Fund should not depend on manner of
delivery of the product. In ruling that the claim was covered by the Fund,
the Court overturned the New York Superintendent’s analysis of the New
York Insurance Law that the location where the insured relinquished
possession and control of the product was the determinative factor. The
Court took the opportunity to reiterate the standards to be followed by a
court in overruling the Superintendent. The Superintendent has broad
authority to interpret the Insurance Law and has statutory power under
Insurance Law § 7613 to enforce reasonable rules and regulations for the
proper administration of the Fund. Once it is determined that an agency’s
conclusion has a sound basis in reason, the review process is at an end and
the court may not substitute its judgment for that of the agency. If a court
determines, however, that an agency has made an irrational determination,
that determination requires no deference and may properly be annulled. In
this case, the Court rejected the Superintendent’s conclusion that the
manner of delivery of a product, rather than its eventual physical location, is
the determinative factor in deciding whether a claim is covered by the Fund.
Reese v. Smith, 95 N.Y. 645 (1884). The receiver of an insolvent New York life
insurance company entered into a contract with a Connecticut company,
whereby the latter agreed to undertake the former's outstanding policy
liabilities. Certain policyholders in the New York company surrendered their
policies to the Connecticut company, receiving its policies in exchange. The
court held that the Connecticut company did not thereby become a
policyholder in the New York company and was not entitled to share in the
distribution as such.
Serio v. U.S. Fire Ins. Co., 837 N.Y.S. 2d 294 (App. Div. 2007). Where the
insolvent insurer failed to reserve rights in disclaiming coverage for an additional
insured in a personal injury action, and the insured was prejudiced by the
receiver’s coverage disclaimer after liability had been established, the receiver
was estopped from denying coverage.
Ohio
Bailey v. Reithmiller, 46 Ohio App.3d 27 (1989). The court observed that the
purpose of Ohio Revised Chapter 3955 is to afford an insured protection
against an insolvent insurer and not to provide protection against claims
beyond the limits of a tortfeasor's policy. Consequently, an insurer is only
prohibited from attempting to recover against an insured to the extent of the
insured's rights against his insolvent insurer. To hold otherwise would put a
tortfeasor in a better position if his insurer became insolvent.
Downwyn Farms v. Ohio Ins. Guar. Ass'n, No. 89CA004593, 1990 Ohio App.
LEXIS 363 (Ohio Ct. App. Jan. 31, 1990). The court held that attorneys' fees
incurred prior to the declaration of insolvency by an insurer are not "covered
claims" within the meaning of Ohio Revised Code Section 3955.01(B) where (1)
the attorneys' fees arose from a contract between the insurer and the
attorney and (2) the attorney performed services for the insurer prior to the
insurer's insolvency. The court suggests that attorneys' fees incurred by the