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made no attempt to prove the claim in the New York liquidation proceeding.
The statutory deposit provisions of the insurance code provide an alternative
mode of recovery for Virginia residents. The insured's failure to forward notice
of the suit to the insurer, in compliance with the terms of the policy, was
excused where the actions of the receiver showed that such compliance would
have been useless.
Shepherd v. Virginia State Ins. Co., 120 Va. 383, 91 S.E. 140 (1917). A domestic
Virginia company had reinsured fire policies of a foreign insurer. The foreign
insurer became insolvent. The Virginia reinsurer asserted claims against
statutory deposit bonds held by the Virginia State Treasurer on behalf of the
foreign insolvent insurer. It was held that a reinsurer is not a policyholder
within the meaning of Section 17 of the Virginia Insurance Act of 1906, and
therefore is not entitled to share in the proceeds of the bonds.
Universal Life Ins. Co. v. Cogbill, 71 Va. (30 Gratt.) 72 (1878). A foreign life
insurance company became insolvent. The plaintiff had purchased policy for
benefit of his wife. The court held that the plaintiff could sue in his own name
to recover premiums paid, and that claims could be paid out of bonds of the
insurer held by the state treasurer.
Wisconsin
Hughs v. Hunner, 91 Wis. 116, 64 N.W. 887 (1895). Prior to dissolution, an
insurer reinsured all of its risks. Upon completion of the reinsurance
agreement, the insurer deposited a surety bond to protect the reinsurance.
The Wisconsin Court held that the bond was deposited to protect the
policyholders of Wisconsin only, and because it was in the custody of the
Wisconsin treasurer, it was within the jurisdiction of the Wisconsin courts.
In re Fidelity Assurance Assn., 247 Wis. 619, 20, N.W.2d 638 (1945). It was
found that the state banking commission or had no beneficial interest in
securities that were deposited with it by an insolvent foreign insurance
association. The state banking commissioner merely held the securities for the
protection of the policyholders of the insolvent association. Thus, an effort to
review an order awarding 6% interest from the date of insolvency to Wisconsin
contract holders and the denial of the claim of the domiciliary receiver (West
Virginia) for the remaining funds held in Wisconsin after payment of all
Wisconsin policyholders was dismissed for the lack of standing.
Liquidation of Alien Insurers
Ninth Circuit
In re Hughes (Fremont Ins. Co. (UK) Ltd.), BAP No. CC‐97‐1924‐OPJ (9th Cir.
B.A.P. Oct. 5, 1998), reported in Mealey's Litig. Rep.‐Ins. Insolvency, Vol. 10,
No. 10 at C1 (Oct. 21, 1998). U.S. Bankruptcy Appellate Panel affirmed an
order of the bankruptcy court directing turnover under section 304(b) of the
Bankruptcy Code of a trust fund established by an alien insurer pursuant to
New York’s Regulation 41 for the benefit of U.S. policyholders and cedents.
The court found that the trust agreement had expired by its terms on
August 7, 1988 and upon such expiration, the insurer had an absolute legal
right to the trust assets. The court further found that a claimant that did not
present a claim prior to the August 7, 1988 termination date could not
enforce its claim against the assets of the trust. As no claims had been
properly perfected, the court determined that the trust assets should be
turned over for distribution with the other assets of the alien insurer’s
estate.
Florida Provident Capital Indem., Ltd. v. State (ex rel. Dep’t of Ins.), 654 So. 2d 232
(Fla. Dist. Ct. App. 1995). Alien insurer domiciled in and formed under the
laws of Dominica, not authorized to transact business in the United States,