16
Dec
2008

What’s Wrong With The New York Insurance Liquidation Bureau?

Mealy's Litigation Report

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PUBLISHED ON: December 16, 2008

New York’s Liquidation Bureau is an arm of the Insurance Department and acts under the authority of the Superintendent of Insurance of the State of New York. That is a mouthful — but of great importance to the insurance-buying public. The Liquidation Bureau manages all insolvent or impaired New York insurance companies in both Rehabilitation and Liquidation proceedings pursuant to Article 74 of New York’s Insurance Laws. (Another mouthful.)

In this day of financial distress to the entire financial sector, including insurance, how our government officials handle distressed carriers becomes all the more important.

The pre-eminent purpose of Article 74 is to “insure equitable treatment for [all] creditors and to avoid preferences . . .” Knickerbocker Agency, Inc. v. Holz, 4 A.D.2d 71, 73 (1st Dep’t 1957). If the goal is followed, the insurance-buying public can “trust” the management of insurance company rehabilitations and liquidations because they know they will be treated equally with other similarly-situated policyholders. Equal treatment among creditors is the guiding principle of insurance insolvencies throughout the country (see, e.g., Cal. Ins. Code § 1010 et seq.; Article XIII of the Illinois Insurance Code) and in Federal Bankruptcy Court. See 11 U.S.C. § 1121.

The New York Liquidation Bureau follows these principles and manages those estates with the primary motivation of protecting the interests of policyholders — right?