§ 7309 — Conversion of domestic reciprocal insurers into mutual property/casualty insurance companies

§ 7309. Conversion of domestic reciprocal insurers into mutual\nproperty/casualty insurance companies. Any domestic reciprocal insurer\ndoing business under the provisions of this article which has in force\ncontracts of insurance, of the kinds which domestic mutual\nproperty/casualty insurance companies may be authorized to make,\ncovering not less than three hundred separate risks and on which the\npremiums in force aggregate not less than one hundred fifty thousand\ndollars, may be converted into and licensed as a domestic mutual\nproperty/casualty insurance company, in the manner prescribed in this\nsection and subject to any other requirements of law. The successive\nsteps shall be as follows:\n (a) Not less than a majority of the advisory committee of any such\nreciprocal insurer proposing so to convert shall adopt a resolution\napproving the proposed conversion and appointing a committee of not less\nthan three from its membership to prepare a draft of a proposed\ndeclaration, charter and by-laws.\n (b) Such committee shall prepare a proposed declaration, charter and\nby-laws, which shall be submitted with an appropriate resolution to the\nadvisory committee for approval.\n (c) Not less than a majority of the advisory committee, at any regular\nor special meeting thereof, shall approve by resolution a proposed\ndeclaration, charter and by-laws, which shall conform to the\nrequirements of this chapter relative to the contents of charters and\nby-laws of domestic mutual property/casualty insurance companies\nhereafter organized to do the kinds of business transacted by such\nreciprocal insurer, with such additions thereto as the superintendent\nshall approve, in order to make provision on account of insurance\ncontracts then in force. Such resolution shall also instruct the\nattorney-in-fact of such reciprocal insurer to give notice of the\nmeeting at which the proposed conversion is to be voted upon and of a\nhearing of the subscribers before the superintendent. A copy of such\nresolution, together with copies of those required in subsections (a)\nand (b) of this section, a copy of the proposed declaration, charter and\nby-laws and a suitable proxy form approved by the superintendent, shall\naccompany such notice, which notice shall be mailed, with postage\nprepaid, to all subscribers at their post office addresses shown on the\nrecords of the reciprocal insurer, at least thirty days prior to the\ndate of the meeting. At the hearing, the superintendent shall pass upon\nthe fairness of the terms and conditions of the proposed conversion and\nof the issuance of certificates of interest in the surplus of the\ncorporation and he shall approve or disapprove the proposed conversion.\n (d) At least two-thirds of the votes of subscribers at any reciprocal\ninsurer, voting at such meeting, either in person or by proxy on the\nform furnished the subscriber, if the subscriber's agreement at such\nreciprocal insurer provides for a vote by proxy, shall be cast in favor\nof the proposed conversion and of the adoption of the proposed\ndeclaration, charter and by-laws. A resolution shall be similarly\nadopted authorizing thirteen persons, who shall be either members of an\nadvisory committee of a reciprocal insurer proposing to convert, the\nattorney-in-fact, if an individual, officers of the attorney-in-fact if\na corporation, or subscribers at a reciprocal insurer proposing to\nconvert, to execute the declaration and authorizing the\nattorney-in-fact, if an individual, or the president or a vice-president\nand one other officer of the attorney-in-fact, if a corporation, to\nexecute or certify and file all necessary papers and instruments\nincident to the proposed conversion.\n (e) The proposed declaration executed as aforesaid and proposed\ncharter with proof of mailing of notice of the subscribers' meeting and\ncopies of all other papers and instruments referred to in this section,\ntogether with a certificate of their adoption, subscribed and affirmed\nas true under the penalties of perjury, as provided for in subsection\n(d) of this section, shall be submitted to the superintendent.\n (f) If, after examination, the superintendent finds that the\nproceedings for the change to a mutual insurance corporation have been\nregularly taken in conformity with law and the declaration and charter\nconform to all requirements of paragraph five of subsection (a) of\nsection one thousand two hundred one of this chapter, he shall file the\ndeclaration and charter in his office and issue a certified copy thereof\nto the proposed incorporators. If requested by such proposed\nincorporators, the superintendent shall also issue to them a certificate\nof incorporation executed by him in the name of the people of the state.\nUpon the issuance of such certified copy, such incorporators shall\nbecome a body corporate, and shall then have power to receive payment of\nsubscriptions to its surplus as set forth in subsection (g) of this\nsection, but such corporation shall not be authorized to do the business\nof insurance until it shall have obtained a license therefor.\n (g) Those subscribers who have voted in person or by proxy for the\nconversion and any other subscribers who thereafter agree to subscribe\nto the surplus of the corporation shall be deemed to have subscribed to\nthe surplus of the corporation to an amount equal to their operating\nreserve accumulations at the reciprocal insurer, and such subscriptions\nshall be paid by a transfer of their operating reserve accumulations to\nthe corporation. Certificates of interest in said surplus shall be\nissued to such subscribers in amounts equal to their respective\noperating reserve accumulations at the time when the proposal to convert\nis adopted by the subscribers. Such certificates of interest shall be\nissued upon the agreement set forth in section one thousand three\nhundred seven of this chapter.\n (h) If, after examination, the superintendent finds that the new\ncorporation meets the requirements of this chapter, including the\nrequirements as to initial surplus and reserves applicable under section\nfour thousand one hundred seven of this chapter, he may issue a license\nto the insurer to do business under the provisions of this chapter.\nThereupon, the remaining assets of the reciprocal insurer shall be\ntransferred to the corporation and the reciprocal insurer shall cease to\nhave authority to do business as such and shall be deemed extinguished.\nEvery such corporation resulting from conversion shall assume and\nsucceed to all of the obligations and liabilities of the reciprocal\ninsurer and shall be held liable to pay and discharge all such debts and\nliabilities in the same manner as if they had been incurred or\ncontracted by the corporation, but the subscribers of the reciprocal\ninsurer shall continue subject to all the liabilities, claims and\ndemands which shall then exist, or which may thereafter accrue against\nthem, or any of them, by reason of any obligations incurred by them or\non their behalf as such subscribers before the date of conversion and\nsuch subscribers who become subscribers to the surplus shall be entitled\nto recoup from the corporation any payment made by reason of such\nliabilities, claims or demands.\n (i) No action or proceeding, pending at the time of the conversion to\nwhich the reciprocal insurer may be a party, shall be abated or\ndiscontinued by reason of such conversion, but the same may be\nprosecuted to final judgment in the same manner as if the conversion had\nnot taken place, or the corporation may be substituted in place of such\nreciprocal insurer by order of the court in which the action or\nproceeding may be pending.\n (j) Upon such conversion the accumulated operating reserves of\nsubscribers who shall not have subscribed to the surplus of the\ncorporation, held on deposit with the reciprocal insurer as of the date\nof the conversion shall be held by the corporation for the benefit of\nsuch subscribers until all the obligations incurred on their behalf have\nbeen extinguished. When all of such obligations have been discharged or\nterminated, and the superintendent shall have so certified, the said\nsubscribers' deposits or the balances thereof remaining to their credit\nshall be released and returned, whereupon the powers of the\nattorney-in-fact relating thereto shall cease and terminate.\n