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ended at insolvency. By participating in the rehabilitation plan, the trust sought
to mitigate its losses. To award the interest rate in the original contract, or at
the statutory rate, would give the trust greater damages than if it were to
recover from the insolvent insurer directly. In the same appeal, the court
rejected the trust’s request that it be awarded attorney fees and expenses
because such an award would be punitive in nature in this context.
Missouri
Wenzel v. Holland‐America Ins. Co. Trust, 13 S.W.3d 643 (2000). The receiver of
two Mission insurance companies asked the trial court to approve, and the trial
court approved, a plan for distributing assets of the trust, including assessing
statutory interest on claims allowed against the trust calculated for the period
beginning on the date of insolvency through the date of payment of each claim.
In affirming the trial court, the Supreme Court of Missouri held that because the
liquidation statute authorizes the receiver to request the payment of
prejudgment interest as part of the “compounding,” “compromising,” and
“negotiating” settlement of claims against an insolvent insurer, the trial court
was authorized to approve the receiver's proposed settlement.
New Mexico Aztec Well Servicing Co. v. Property & Cas. Ins. Guar. Assoc. of the State, 115
N.M. 475, 853 P.2d 726 (1993). The term “unpaid claim” in statute limiting
“covered claims” against property and casualty insurance guaranty
association to $100,000 refers to the amount that claimant seeks to recover
from insolvent insurer and subsequently against the association. It does not
preclude prejudgment interest.
New York
In the Matter of the Application of the People of New York for an Order re
Norske Lloyd Ins. Co., Ltd., 249 N.Y. 140, 163 N.E. 129 (1928). The rule that
interest is not allowed after the property of an insolvent has passed into the
hands of an official liquidator applies only to the distribution of the proceeds of
the property by the liquidator where the proceeds are insufficient to pay all
creditors in full. Interest continues to run against the debtor during liquidation
and if the fund proves sufficient to pay all claims in full with interest, then
interest accruing during liquidation is allowed.
In the Matter of the Application of the People of New York for an Order re the
Second Russian Ins. Co., 231 A.D. 303, 247 N.Y.S. 160 (1931), reversed on other
grounds, 256 N.Y. 177, 176 N.E. 133 reargument denied, 256 N.Y. 600, 177 N.E.
191, cert denied, 284 U.S. 678. The court held that the alien custodian was
entitled to payments due to the insurer and subsequent commissions. The
New York insurance commissioner, as liquidator, was required to pay only such
interest as had been received.
In the Matter of the Liquidation of the U.S. Branch of the Sumitomo Marine
and Fire Ins. Co., Ltd., 133 N.Y.S.2d 342 (1954). The court held that where
sufficient funds existed to pay all claims with interest, the allowance of interest
on claims was proper. The court also ruled that such interest should run from
the time at which demand for payment was made by the claimant to the
liquidator.
In re Liquidation of Union Indem. Ins. Co., 687 N.Y.S.2d 132 (App. Div. 1999). In a
liquidation proceeding, the holder of bonds issued by the insolvent insurer
argued it was entitled to the contract rate of interest post‐liquidation. The court
agreed, and ruled that the contract rate of interest should have been applied
both pre‐liquidation and post‐liquidation; the plaintiff’s claim to the contract
rate of interest was not governed by the rule that all claims be fixed as of the
date of the liquidation order. The court held that post‐liquidation interest may
appropriately constitute an allowed claim by the Security Fund.