§ 7405 — Order of liquidation; rights and liabilities

New York § 7405

• Jurisdiction: New York
• Law ISC: Insurance
• Art. 74: Rehabilitation, Liquidation, Conservation and Dissolution of Insurers

Text

§ 7405. Order of liquidation; rights and liabilities. (a) An order to\nliquidate the business of a domestic insurer shall direct the\nsuperintendent and his successors in office, as liquidator, forthwith to\ntake possession of the property of such insurer and to liquidate the\nbusiness of the same and deal with such property and business of such\ninsurer in their own names as superintendents or in the insurer's name\nas the court may direct, and to give notice to all creditors to present\ntheir claims.\n (b) The superintendent and his successors shall be vested by operation\nof law with the title to all property, contracts and rights of action of\nsuch insurer as of the date of the entry of the order so directing them\nto liquidate. The filing or recording of such order in any record office\nof the state shall impart the same notice that a deed, bill of sale or\nother evidence of title duly filed or recorded by such insurer would\nhave imparted. The rights and liabilities of any such insurer and of its\ncreditors, policyholders, shareholders, members and all other persons\ninterested in its estate shall, unless otherwise directed by the court,\nbe fixed as of the date the order is entered in the office of the clerk\nof the county where such insurer had its principal office on the date\nthe proceeding commenced, subject, however, to the provisions of section\nseven thousand four hundred thirty-three of this article to the rights\nof claimants holding contingent claims.\n (c) The liquidator of any domestic insurance corporation shall\nreinsure all its policy obligations in any solvent corporation\nauthorized to do business in this state if the unearned premium reserve\nof the insurer is sufficient to effect such reinsurance. If such reserve\nis insufficient for that purpose, the liquidator shall reinsure a\npercentage of each policy obligation of the insurer outstanding to the\nextent that the reserve may be sufficient for that purpose. No contract\nof reinsurance shall be entered into by the liquidator except pursuant\nto an order of the court in which the liquidator was appointed directing\nthe reinsurance and establishing the general form of the reinsurance\ncontract.\n (d) An order to liquidate the business of the United States branch of\nan alien insurer having trusteed assets in this state shall be in the\nsame terms as those hereinbefore prescribed, except that only the assets\nof the business of such United States branch shall be included therein.\n (e) Where the trustee of a mortgage series consisting in whole or in\npart of certificated mortgage investments guaranteed by a domestic\ninsurer has distributed all of the trust estate collateral, or has been\npermitted by court order to abandon all or part of such collateral not\ndistributed, the court, by order, may, upon the consent of the\nliquidator of the insurer, direct the superintendent, upon being\nfurnished with a list of certificate holders certified to by the\ntrustee, to record subsequent transfers of certificates and charge and\ncollect a reasonable fee therefor, and distribute dividends applicable\nthereto upon liquidation of company assets in his hands, to the record\nowners of such certificates, and make and deduct from such dividend\npayments a reasonable charge for such services. The duty of the\nsuperintendent under such order shall terminate upon the termination of\nthe liquidation proceedings.\n (f) (1) No later than one hundred eighty days after a final order of\nliquidation with an adjudication of insolvency of an insurer by a court\nof competent jurisdiction of this state, the liquidator may in his sole\ndiscretion make application to the court for approval of a proposal to\ndisburse assets out of marshalled assets, from time to time as such\nassets become available, to any fund established by article seventy-six\nof this chapter, article six-A of the workers' compensation law and any\nforeign entity performing a similar function, having obligations because\nof such insolvency. If the liquidator determines that there are\ninsufficient assets to disburse, the application authorized by this\nsubsection shall be considered satisfied by a filing by the liquidator\nstating the reasons for this determination.\n (2) Such proposal shall at least include provisions for:\n (A) reserving amounts for the payment of expenses of administration,\nclaims of secured creditors to the extent of the value of the security\nheld, and claims falling within the priorities established in section\nseven thousand four hundred twenty-six of this article;\n (B) disbursement of the assets marshalled to date and subsequent\ndisbursement of assets as they become available;\n (C) disbursements to the funds and entities entitled thereto under\nthis subsection in amounts estimated to be at least equal to all claim\npayments for which such funds or entities could assert claims against\nthe liquidator, and if the assets available for disbursement from time\nto time do not at least equal such claim payments, then disbursements in\nthe amount of available assets;\n (D) equitable allocation of disbursements to each of such funds or\nentities;\n (E) the securing by the liquidator from each of such funds or entities\nof an agreement to return to the liquidator such assets, together with\nincome earned on assets previously disbursed, as may be required to pay\nclaims of secured creditors and claims falling within the priorities\nestablished in section seven thousand four hundred twenty-six of this\narticle in accordance with such priorities. No bond shall be required of\nany such fund or entity; and\n (F) a full report to be made by each such fund or entity to the\nliquidator accounting for all assets so disbursed to the fund or entity,\nall disbursements made therefrom, any income earned by the fund or\nentity on such assets and any other matters as the court may direct.\n (3) Notice of such application shall be given to such funds and\nentities and to the commissioners of insurance of each of the states.\nAny such notice shall be deemed to have been given when deposited in the\nUnited States certified mails, first class postage prepaid, at least\nthirty days prior to submission of such application to the court. Action\non the application may be taken by the court if the required notice has\nbeen given and the liquidator's proposal complies with subparagraphs\n(A), (B) and (D) of paragraph two of this subsection.\n (g) (1) No later than one hundred twenty days after the end of the\ncalendar or fiscal year of a domestic insurance corporation subject to\nrehabilitation or liquidation, upon whichever standard the corporation\nconducts its financial affairs, the rehabilitator or liquidator shall\nsubmit to the department an annual report of the preceding calendar or\nfiscal year's activity of such corporation. Such report, which shall\npertain only to such corporation's activities and those of the\nrehabilitator or liquidator as they relate to such corporation, shall\ninclude a financial review of the assets and liabilities of the\ncorporation, the claims accrued or paid in that period, and a summary of\nall other corporate activity and a narrative of the actions of the\nrehabilitator or liquidator respecting such corporation.\n (2) No later than August first of each year, the rehabilitator or\nliquidator shall submit to the department and the legislature separate\nor combined annual financial statements for the domestic insurance\ncorporations subject to rehabilitation or liquidation. Upon whichever\nstandard each corporation conducts its respective financial affairs,\nshowing their condition at last calendar year end or at the last fiscal\nyear end ending on or prior to last calendar year end, together with an\nopinion or other report of an independent certified public accountant on\nsuch financial statements, provided that such corporations were placed\ninto rehabilitation or liquidation prior to the commencement of the\ncalendar or fiscal years covered by such financial statements.\n (3) No later than August first of each year, the superintendent as\nreceiver shall submit to the department and the legislature an annual\nfinancial statement of the liquidation bureau showing its cash receipts\nand disbursements for the prior calendar year, together with an opinion\nor other report of an independent certified public accountant on such\nfinancial statement.\n (4) The reports and statements required under this subsection shall be\nseparate and apart from other reports and statements issued by the\nliquidation bureau of the department in the normal course of its\nbusiness.\n