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commissioner certain securities for the benefit of its policyholders.
Subsequently, the insurance company exchanged securities. The exchange
was done without the knowledge of the policyholders and without the
approval of the State Treasurer. Once the insurance company was declared
insolvent, the receiver demanded delivery of the initial securities and was given
the other less valuable securities which were deposited with the insurance
commissioner. The trust company refused to return the initial securities to the
receiver, and the court held that the transfer and surrender of the initial
securities was void because the policyholders were the equitable owners and
they never consented to the exchange. Therefore, the receiver was merely
trying to recover what was and had been the policyholder's property, and the
trust company had no right to insist that it be made whole at the expense of
the trust fund belonging to the policyholders.
Missouri
Holloway v. Federal Reserve Life Ins. Co., 21 F. Supp. 516 (W.D. Mo. 1937). A
Missouri life insurance company was reinsured by an insolvent Kansas
company, which was the subject of an order appointing a receiver in Kansas.
The Kansas receiver demanded that the Missouri insurance commissioner turn
over a statutory deposit to the receiver. The court held that Missouri law did
not provide for the liquidation or disposition of the deposit that belonged to a
foreign insurer, and the Missouri commissioner was ordered to return the
deposit to the Kansas receiver.
New York G. C. Murphy Co. v. Reserve Ins. Co., 101 Misc.2d 729, 421 N.Y.S.2d 1006 (1970).
An insured incorporated in Delaware and whose principal place of business
was Pennsylvania, but which was authorized to do business in New York, was
entitled to protection under the New York law requiring its insurance company
to put up a bond even though the insurer was in liquidation in Illinois and not
licensed to do business in New York. The court found that the Uniform
Insurers Liquidation Act could not be used to deprive the insured of the
statutory security protection even though ordinarily an action would be
required to be commenced in a liquidation proceeding to recover against an
insurer's general assets.
In re Southern Surety Co. of New York, 282 N.Y. 54, 24 N.E.2d 845, reargument
denied, 282 N.Y. 678, 26 N.E.2d 809 (1939). When a New York insurance
company deposited securities in Ohio with the insurance commissioner in trust
for the benefit of its policyholders, the court held that an Ohio policyholder
was a secured creditor and was therefore entitled to prove its claim for the
difference between the original debt and the amount realized from the Ohio
fund.
In the Matter of the Attorney General v. The North America Life Ins. Co., 92
N.Y. 654 (1883). A special term of the New York Supreme Court issued an
order directing the insurance commissioner as to the distribution of a fund
deposited as security for the policyholders of the insolvent insurer. More than
two years later, a motion was made for an order changing the distribution of
the fund. The court held that the Supreme Court had jurisdiction over the fund
and refused to disturb the original order.
Levin v. Nat’l Colonial Ins. Co., 806 N.E.2d 473 (N.Y. 2004). The lower New York
state court was required to give full faith and credit to the Kansas state court’s
liquidation order approving classification and disposition of a trust as a “special
deposit” under the Uniform Insurers Liquidation Act. The state court in New
York improperly exercised jurisdiction over the special deposit and was directed
to transfer the trust assets to the insolvent insurer’s liquidator in Kansas.
North Carolina
Continental Bank and Trust Co. v. Gold, 140 F. Supp 252 (E.D. N.C. 1956). The
court held that a statutory deposit of foreign insurer, under North Carolina law,