N.Y. Insurance Law § 7309: Conversion of domestic reciprocal insurers into mutual property/casualty insurance companies

§ 7309. Conversion of domestic reciprocal insurers into mutual

property/casualty insurance companies. Any domestic reciprocal insurer

doing business under the provisions of this article which has in force

contracts of insurance, of the kinds which domestic mutual

property/casualty insurance companies may be authorized to make,

covering not less than three hundred separate risks and on which the

premiums in force aggregate not less than one hundred fifty thousand

dollars, may be converted into and licensed as a domestic mutual

property/casualty insurance company, in the manner prescribed in this

section and subject to any other requirements of law. The successive

steps shall be as follows:

(a) Not less than a majority of the advisory committee of any such

reciprocal insurer proposing so to convert shall adopt a resolution

approving the proposed conversion and appointing a committee of not less

than three from its membership to prepare a draft of a proposed

declaration, charter and by-laws.

(b) Such committee shall prepare a proposed declaration, charter and

by-laws, which shall be submitted with an appropriate resolution to the

advisory committee for approval.

(c) Not less than a majority of the advisory committee, at any regular

or special meeting thereof, shall approve by resolution a proposed

declaration, charter and by-laws, which shall conform to the

requirements of this chapter relative to the contents of charters and

by-laws of domestic mutual property/casualty insurance companies

hereafter organized to do the kinds of business transacted by such

reciprocal insurer, with such additions thereto as the superintendent

shall approve, in order to make provision on account of insurance

contracts then in force. Such resolution shall also instruct the

attorney-in-fact of such reciprocal insurer to give notice of the

meeting at which the proposed conversion is to be voted upon and of a

hearing of the subscribers before the superintendent. A copy of such

resolution, together with copies of those required in subsections (a)

and (b) of this section, a copy of the proposed declaration, charter and

by-laws and a suitable proxy form approved by the superintendent, shall

accompany such notice, which notice shall be mailed, with postage

prepaid, to all subscribers at their post office addresses shown on the

records of the reciprocal insurer, at least thirty days prior to the

date of the meeting. At the hearing, the superintendent shall pass upon

the fairness of the terms and conditions of the proposed conversion and

of the issuance of certificates of interest in the surplus of the

corporation and he shall approve or disapprove the proposed conversion.

(d) At least two-thirds of the votes of subscribers at any reciprocal

insurer, voting at such meeting, either in person or by proxy on the

form furnished the subscriber, if the subscriber's agreement at such

reciprocal insurer provides for a vote by proxy, shall be cast in favor

of the proposed conversion and of the adoption of the proposed

declaration, charter and by-laws. A resolution shall be similarly

adopted authorizing thirteen persons, who shall be either members of an

advisory committee of a reciprocal insurer proposing to convert, the

attorney-in-fact, if an individual, officers of the attorney-in-fact if

a corporation, or subscribers at a reciprocal insurer proposing to

convert, to execute the declaration and authorizing the

attorney-in-fact, if an individual, or the president or a vice-president

and one other officer of the attorney-in-fact, if a corporation, to

execute or certify and file all necessary papers and instruments

incident to the proposed conversion.

(e) The proposed declaration executed as aforesaid and proposed

charter with proof of mailing of notice of the subscribers' meeting and

copies of all other papers and instruments referred to in this section,

together with a certificate of their adoption, subscribed and affirmed

as true under the penalties of perjury, as provided for in subsection

(d) of this section, shall be submitted to the superintendent.

(f) If, after examination, the superintendent finds that the

proceedings for the change to a mutual insurance corporation have been

regularly taken in conformity with law and the declaration and charter

conform to all requirements of paragraph five of subsection (a) of

section one thousand two hundred one of this chapter, he shall file the

declaration and charter in his office and issue a certified copy thereof

to the proposed incorporators. If requested by such proposed

incorporators, the superintendent shall also issue to them a certificate

of incorporation executed by him in the name of the people of the state.

Upon the issuance of such certified copy, such incorporators shall

become a body corporate, and shall then have power to receive payment of

subscriptions to its surplus as set forth in subsection (g) of this

section, but such corporation shall not be authorized to do the business

of insurance until it shall have obtained a license therefor.

(g) Those subscribers who have voted in person or by proxy for the

conversion and any other subscribers who thereafter agree to subscribe

to the surplus of the corporation shall be deemed to have subscribed to

the surplus of the corporation to an amount equal to their operating

reserve accumulations at the reciprocal insurer, and such subscriptions

shall be paid by a transfer of their operating reserve accumulations to

the corporation. Certificates of interest in said surplus shall be

issued to such subscribers in amounts equal to their respective

operating reserve accumulations at the time when the proposal to convert

is adopted by the subscribers. Such certificates of interest shall be

issued upon the agreement set forth in section one thousand three

hundred seven of this chapter.

(h) If, after examination, the superintendent finds that the new

corporation meets the requirements of this chapter, including the

requirements as to initial surplus and reserves applicable under section

four thousand one hundred seven of this chapter, he may issue a license

to the insurer to do business under the provisions of this chapter.

Thereupon, the remaining assets of the reciprocal insurer shall be

transferred to the corporation and the reciprocal insurer shall cease to

have authority to do business as such and shall be deemed extinguished.

Every such corporation resulting from conversion shall assume and

succeed to all of the obligations and liabilities of the reciprocal

insurer and shall be held liable to pay and discharge all such debts and

liabilities in the same manner as if they had been incurred or

contracted by the corporation, but the subscribers of the reciprocal

insurer shall continue subject to all the liabilities, claims and

demands which shall then exist, or which may thereafter accrue against

them, or any of them, by reason of any obligations incurred by them or

on their behalf as such subscribers before the date of conversion and

such subscribers who become subscribers to the surplus shall be entitled

to recoup from the corporation any payment made by reason of such

liabilities, claims or demands.

(i) No action or proceeding, pending at the time of the conversion to

which the reciprocal insurer may be a party, shall be abated or

discontinued by reason of such conversion, but the same may be

prosecuted to final judgment in the same manner as if the conversion had

not taken place, or the corporation may be substituted in place of such

reciprocal insurer by order of the court in which the action or

proceeding may be pending.

(j) Upon such conversion the accumulated operating reserves of

subscribers who shall not have subscribed to the surplus of the

corporation, held on deposit with the reciprocal insurer as of the date

of the conversion shall be held by the corporation for the benefit of

such subscribers until all the obligations incurred on their behalf have

been extinguished. When all of such obligations have been discharged or

terminated, and the superintendent shall have so certified, the said

subscribers' deposits or the balances thereof remaining to their credit

shall be released and returned, whereupon the powers of the

attorney-in-fact relating thereto shall cease and terminate.