Article 74, §§ 7401 - 7436
Rehabilitation, Liquidation, Conservation, and Dissolution of Insurers
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§7401 - Application of article; definitions.
(a)This article shall apply to all corporations, associations, societies, orders, firms, and individuals to which this chapter is applicable, or which are subject to examination or supervision by the superintendent under this chapter or under any other law of this state, or which are doing or attempting to do or representing that they are doing the business of insurance in this state, or which are in process of organization for the purpose of or intending to do such business therein, anything in this chapter or any other law of this state to the contrary notwithstanding.
§7402 - Grounds for rehabilitation of domestic insurer.
The superintendent may apply under this article for an order directing him to rehabilitate a domestic insurer which:
§7403 - Order of rehabilitation; advances from property/casualty insurance security fund; termination.
(a) An order to rehabilitate a domestic insurer shall direct the superintendent and his successors in office, as rehabilitator, forthwith to take possession of the property of such insurer and to conduct the business thereof, and to take such steps toward the removal of the causes and conditions which have made such proceeding necessary as the court shall direct.
§7404 - Grounds for liquidation.
The superintendent may apply under this article for an order directing the superintendent to liquidate the business of a domestic insurer, or of the United States branch of an alien insurer having trusteed assets in this state, upon any of the grounds specified in subsections (a) through (o) of section seven thousand four hundred two of this article, whether or not there has been a prior order directing the superintendent to rehabilitate such insurer.
§7405 - Order of liquidation; rights and liabilities.
(a)An order to liquidate the business of a domestic insurer shall direct the superintendent and his successors in office, as liquidator, forthwith to take possession of the property of such insurer and to liquidate the business of the same and deal with such property and business of such insurer in their own names as superintendents or in the insurer's name as the court may direct, and to give notice to all creditors to present their claims.
§7406 - Grounds for conservation of assets of foreign or alien insurer.
(a) The superintendent may apply under this article for an order directing the superintendent to conserve the assets within the state of a foreign insurer upon:
§7407 - Order of conservation or ancillary liquidation of a foreign or alien insurer.
(a) An order to conserve the assets of a foreign or alien insurer shall direct the superintendent and his successors in office, as conservator, forthwith to take possession of, and conserve, the insurer's property within this state, subject to the court's further direction.
§7408 - Uniform insurers liquidation act; title; definitions.
(a) This section and sections seven thousand four hundred nine through seven thousand four hundred fifteen of this article may be cited as the uniform insurers liquidation act.
§7409 - Conduct of delinquency proceedings against insurers domiciled in this state.
(a) Whenever under the laws of this state a receiver is to be appointed in delinquency proceedings for an insurer domiciled in this state, the court shall appoint the superintendent as such receiver and direct the superintendent forthwith to take possession of the assets of the insurer and to administer the same under the orders of the court.
§7410 - Conduct of delinquency proceedings against insurers not domiciled in this state.
(a) Whenever under the laws of this state an ancillary receiver is to be appointed in delinquency proceedings for an insurer not domiciled in this state, the court shall appoint the superintendent as ancillary receiver. The superintendent shall file a petition requesting the appointment if he finds that there are sufficient assets of such insurer located in this state to justify the appointment of an ancillary receiver, or if ten or more persons resident in this state having claims against such insurer file a petition with the superintendent requesting the appointment of such ancillary receiver
§7411 - Filing and proving of claims of non-residents against delinquent insurers domiciled in this state.
(a)In a delinquency proceeding begun in this state against an insurer domiciled in this state, claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceedings.
§7412 - Filing and proving of claims of residents against delinquent insurers domiciled in reciprocal states.
(a) In a delinquency proceeding in a reciprocal state against an insurer domiciled in that state, claimants residing in this state may file claims either with the ancillary receiver, if any, appointed in this state, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary proceeding.
§7413 - Priority of preferred claims, special deposit claims and secured claims.
(a) In a delinquency proceeding against an insurer domiciled in this state, claims owing to residents of ancillary states shall be preferred claims if like claims are preferred under the laws of this state. All such claims whether owing to residents or non-residents shall be given equal priority of payment from general assets regardless of where such assets are located.
§7414 - Attachment and garnishment of assets.
During the pendency of delinquency proceedings in this or any reciprocal state no action or proceeding in the nature of an attachment, garnishment, or execution shall be commenced or maintained in the courts of this state against the delinquent insurer or its assets. Any lien obtained by any such action or proceeding within four months prior to the commencement of any such delinquency proceeding or at any time thereafter shall be void as against any rights arising in such delinquency proceeding.
§7415 - Uniformity of interpretation.
The uniform insurers liquidation act shall be interpreted and construed to effectuate its general purpose to make uniform the law of those states that enact it. To the extent that its provisions, when applicable, conflict with other provisions of this chapter, the provisions of this act shall control.
§7416 - Grounds for dissolution of domestic insurer.
The superintendent may apply under this article for an order dissolving the corporate existence of a domestic insurer: (i) upon his application for an order of liquidation of its business, or at any time after such order has been granted; or (ii) upon the grounds specified in subsection (m) of section seven thousand four hundred two of this article, regardless of whether an order of liquidation is sought or has been obtained.
§7417 - Commencement of a proceeding.
The superintendent represented by the attorney general shall commence any proceeding under this article by an application to the supreme court, in the judicial district in which the principal office of the insurer is located, for an order directing such insurer to show cause why the superintendent should not have the requested relief. On the return of such order, and after a full hearing, which shall be held without delay, such court shall either deny the application or grant it together with such other relief as the nature of the case and the interests of policyholders, creditors, shareholders, members, or the public may require.
§7418 - Service of order to show cause.
(a) The order to show cause and the papers upon which it is granted shall be served upon the insurer named therein by delivering true copies to, and leaving them with:
§7419 - Injunctions.
(a) Upon application by the superintendent for an order to show cause under this article or at any time thereafter, the court in which such order is made, or any justice thereof may without notice issue an injunction restraining the insurer, its officers, directors, shareholders, members, trustees, agents, servants, employees, policyholders, attorneys, managers, and all other persons from the transaction of its business or the waste or disposition of its property until further order of the court.
§7420 - Annual report.
The superintendent shall transmit to the legislature in his annual report the names of all insurers proceeded against under this article together with such facts as shall acquaint the policyholders, creditors, shareholders, and the public with all proceedings. To that end the special deputy superintendent in charge of any such insurer shall file annually with the superintendent a report of the affairs of such insurer.
§7421 - Removal of proceedings.
Any time after commencement of a proceeding under this article, the superintendent may apply ex parte to the court or any justice thereof for an order changing the venue of and removing the proceeding to Albany county, or, in the discretion of the superintendent, to any other county of this state in which he deems that such proceeding may be most economically and efficiently conducted. Upon the filing of any such application, the court or any justice thereof shall direct the clerk of the county wherein such proceeding is pending to transmit all papers filed therein with such clerk to the clerk of the county to which such proceeding is removed. The proceeding shall thereafter be conducted in such other county as though it had been commenced in such county.
§7422 - Appointment of deputies; employment of assistants.
(a)For the purposes of this article the superintendent shall have power to appoint special deputy, and assistant special deputy, superintendents as his agents, and to employ such counsel, clerks and assistants as may by him be deemed necessary and to give them such powers to assist him as he considers wise.
§7423 - Exemption from filing fees.
The superintendent shall not be required to pay any fee to any county clerk, register or other public officer in this state for filing, recording, issuing a transcript or certificate, or authenticating any paper or instrument pertaining to the exercise by the superintendent of any of the powers or duties conferred upon him by any of the provisions of this article, whether or not such paper or instrument be executed by the superintendent or his deputies or attorneys of record and whether or not it is connected with the commencement of an action or judicial proceeding by or against the superintendent, or with the subsequent conduct of such an action or proceeding.
§7424 - Deposit of monies collected; preference.
Monies collected by the superintendent in a proceeding under this article shall be deposited in one or more state or national banks, savings banks, or trust companies. In the case of insolvency or voluntary or involuntary liquidation of any such depositary organized and supervised under the laws of this state, such deposits shall be entitled to priority of payment on an equality with any other priority given by the banking law of this state. The superintendent may in his discretion deposit such monies or any part thereof in a national bank or trust company as a trust fund.
§7425 - Voidable transfers.
(a) Any transfer of, or lien created upon, the property of an insurer within twelve months prior to the granting of an order to show cause under this article with the intent of giving to any creditor or enabling him to obtain a greater percentage of his debt than any other creditor of the same class and which is accepted by such creditor having reasonable cause to believe that such a preference will occur, shall be voidable.
§7426 - Priority of claims for wages. (Repealed eff. 06-29-1999)
§7427 - Offsets.
(a) In all cases of mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this article, such credits and debts shall be set off and the balance only shall be allowed or paid, except as provided in subsection (b) hereof.
§7428 - Disposition of assets and compromise of claims.
(a) The superintendent may, subject to the approval of the court:
§7429 - Borrowing on the pledge of assets.
To facilitate the rehabilitation, liquidation, conservation or dissolution of an insurer pursuant to this article the superintendent may, subject to the approval of the court, borrow money and issue evidences of indebtedness therefor and secure repayment by a security interest in any or all property, real, personal or mixed of such insurer. Subject to court approval, the superintendent may take all other action necessary and proper to consummate such loans and provide for their repayment. The superintendent shall be under no obligation personally or in his capacity as superintendent to repay any loan made pursuant to this section.
§7430 - Levy of assessments; determination of liability of members.
(a)Within three years from the date of an order of rehabilitation or liquidation of a domestic mutual insurer filed in the office of the clerk of the county in which the insurer had its principal office, the superintendent may make a report to the court setting forth:
§7431 - Determination of liability of members for other indebtedness.
(a)If it shall appear that a member of a domestic mutual insurer is indebted to such insurer, apart from his liability to assessment, the court may, upon the application of the superintendent, in any order under section seven thousand four hundred thirty of this article directing such member to show cause why he should not be held liable to pay an assessment, likewise direct him to show cause why he should not be held liable to pay such indebtedness.
§7432 - Adjudication of insolvency of insurer; time to file claims.
(a)If upon the granting of an order of liquidation pursuant to section seven thousand four hundred four of this article or at any time thereafter during such liquidation proceeding, such insurer shall not be clearly solvent, the court shall, after such notice and hearing as it deems proper, make an order declaring such insurer to be insolvent.
§7433 - Proof and allowance of claims.
§7433-A - Loan to workers' compensation security fund.
(a)Upon certification by the superintendent that further sums, not exceeding seventy million dollars in the aggregate, are required by the workers' compensation security fund to meet its obligations and accomplish the purposes of article six-A of the workers' compensation law, the superintendent is hereby authorized to make one or more loans to such fund from the assets of one or more liquidation estates in such amounts as shall be specified by the superintendent. For purposes of this section, “liquidation estate” shall mean the assets of an insurer against which an order of liquidation has been commenced pursuant to this article. Such sums, not exceeding seventy million dollars in the aggregate, shall be a liability of the workers' compensation security fund.
§7434 - Distribution of assets.
§7435 - Distribution for life insurers.
(a) The priority of distribution of claims from the estate of a life insurance company in any proceeding subject to this article shall be in accordance with the order in which each class of claims is herein set forth. Every claim in each class shall, subject to such limitations as may be prescribed by law and do not directly conflict with the express provisions of this section, be paid in full or adequate funds retained for such payment before the members of the next class receive any payment. No subclasses shall be established within any class. The order of distribution of claims shall be:
§7436 - Claims-made policies; special requirements.
(a) Where a policy has been issued on a claims-made basis by an insurer against which an order of liquidation, rehabilitation or conservation has been entered pursuant to this article, the superintendent shall provide, at an appropriate additional premium by the insured and consistent with the terms of such policy, for the issuance of coverage for claims based on occurrences prior to the termination of the policy which are reported after the termination of the policy, in the event that the insured seeks to purchase such coverage in accordance with the terms of such policy.
Article 76, §§ 7601 - 7614
Property/Casualty Security Funds
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§7601 - Property/casualty insurance security fund; public motor vehicle liability security fund.
(a) The property and liability insurance security fund is continued and shall hereafter be known as "the property/casualty insurance security fund".
§7602 - Definitions.
In this article, unless the context or subject matter otherwise requires:
§7603 - Property/casualty insurance security fund.
§7604 - Public motor vehicle liability security fund.
(a) The purpose of the public motor vehicle liability security fund is to secure the benefits contemplated by section three hundred seventy of the vehicle and traffic law in those cases where a policy of insurance or corporate surety bond, therein described, of a solvent and responsible insurer is accepted by the commissioner of motor vehicles as a compliance with such section. The fund shall be used to pay allowed claims of injured parties and policyholders under insurance policies or surety bonds, remaining unpaid, in whole or in part, by reason of the insurer's insolvency or its inability to meet its insurance obligations (including any obligation for the return of unearned premiums) provided the insurer has made payments to the fund as required by subsection (b) hereof.
§7605 - Quarterly returns.
With respect to each fund subject to this article, every insurer on or before the fifteenth days of February, May, August and November of each year, shall file, with the commissioner and the superintendent identical returns, subscribed and affirmed by the insurer to be true under the penalties of perjury, on a form prescribed by the superintendent, stating the amount of net direct written premiums charged by such insurer during the quarter year ending on the last day of the second month preceding that in which the report is required to be filed.
§7606 - Determination of net value of funds; limits.
(a) The superintendent shall annually, on or before March first, ascertain and determine the net value of each fund as of the next preceding December thirty-first by deducting from the value of the assets of each fund, ascertained pursuant to this article, the aggregate actual and estimated liabilities of each fund as determined by the superintendent. When the net value of a fund, as thus determined, reaches an amount equal to fifteen percent of the outstanding claim reserves of all authorized insurers, incurred under policies or bonds providing benefits as specified in subsection (a) of section seven thousand six hundred three or subsection (a) of section seven thousand six hundred four of this article, as the case may be, no further contributions to such fund shall be required to be made.
§7607 - Management and investment of funds.
(a) Each of the two funds governed by this article shall be separate and apart. Each fund shall also be separate and apart from any other fund and from all other state moneys, and the faith and credit of the state of New York is pledged for their safekeeping. The commissioner shall be the custodian of the funds. All disbursements shall be made by the commissioner upon vouchers signed by the superintendent, or his deputy.
The moneys of the funds may be invested by the commissioner in obligations of the United States or of this state and in interest bearing certificates of deposit of a bank or trust company located and authorized to do business in this state, or of a national bank located in this state, secured by a pledge of direct obligations of the United States or of the state of New York in an amount equal to the amount of such certificates of deposit, or in accordance with the provisions of section ninety-eight-a of the state finance law.
§7608 - Payments from funds; subrogation; limit on payments.
(a) Payments from the funds shall be made by the commissioner to the superintendent acting as liquidator, rehabilitator or conservator pursuant to article seventy-four of this chapter upon the authority of appropriate certificates filed with him by the superintendent acting in such capacity.
§7609 - Rights of funds against insolvent insurers.
(a) The commissioner as custodian of each of the funds shall be entitled to a valid claim against an insurer which becomes insolvent or unable to meet its insurance obligations, or its liquidator, rehabilitator, conservator, receiver, or trustee in bankruptcy, in an amount equal to the liabilities, including loss adjustment expenses relating to such liabilities, of the insurer paid from the fund less the net payments paid into the fund by such insurer.
§7610 - Defense of claims.
(a) The superintendent may, in his discretion, designate or appoint a duly authorized representative to appear before any court or other body or official having jurisdiction and defend any action or proceeding against principals or assureds on insurance policies or bonds issued to them where the insurer has become insolvent or unable to meet its insurance obligations. The superintendent shall have, as of the date of such insolvency or inability to meet its insurance obligations, only the rights which the insurer would have had if not insolvent or unable to meet its insurance obligations.
§7611 - Expense of administering funds.
(a) The expense of administering each fund shall be paid out of such fund. Prior to the first days of January, April, July and October, there shall be submitted to the director of the budget for approval an estimated budget of expenditures for the succeeding three months.
§7612 - Foreign and alien insurers.
Every foreign or alien insurer subject to this article is deemed to have consented to the adjudication of all claims secured by this article in a proceeding under article seventy-four of this chapter.
§7613 - Rules and regulations.
The superintendent may adopt, amend and enforce all reasonable rules and regulations necessary for the proper administration of the funds.
§7614 - Penalties.
(a) If any insurer fails to file any return or make any payment required by this article, or if the superintendent has cause to believe that any return or other statement filed is false or inaccurate in any particular, or that any payment made is incorrect, he may examine all the books and records of the insurer to ascertain the facts and determine the correct amount to be paid and may proceed in any court of competent jurisdiction to recover for the benefit of the fund any sums shown to be due upon such examination and determination.