N.Y. Insurance Law § 7405: Order of liquidation; rights and liabilities

§ 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.

(b) The superintendent and his successors shall be vested by operation

of law with the title to all property, contracts and rights of action of

such insurer as of the date of the entry of the order so directing them

to liquidate. The filing or recording of such order in any record office

of the state shall impart the same notice that a deed, bill of sale or

other evidence of title duly filed or recorded by such insurer would

have imparted. The rights and liabilities of any such insurer and of its

creditors, policyholders, shareholders, members and all other persons

interested in its estate shall, unless otherwise directed by the court,

be fixed as of the date the order is entered in the office of the clerk

of the county where such insurer had its principal office on the date

the proceeding commenced, subject, however, to the provisions of section

seven thousand four hundred thirty-three of this article to the rights

of claimants holding contingent claims.

(c) The liquidator of any domestic insurance corporation shall

reinsure all its policy obligations in any solvent corporation

authorized to do business in this state if the unearned premium reserve

of the insurer is sufficient to effect such reinsurance. If such reserve

is insufficient for that purpose, the liquidator shall reinsure a

percentage of each policy obligation of the insurer outstanding to the

extent that the reserve may be sufficient for that purpose. No contract

of reinsurance shall be entered into by the liquidator except pursuant

to an order of the court in which the liquidator was appointed directing

the reinsurance and establishing the general form of the reinsurance

contract.

(d) An order to liquidate the business of the United States branch of

an alien insurer having trusteed assets in this state shall be in the

same terms as those hereinbefore prescribed, except that only the assets

of the business of such United States branch shall be included therein.

(e) Where the trustee of a mortgage series consisting in whole or in

part of certificated mortgage investments guaranteed by a domestic

insurer has distributed all of the trust estate collateral, or has been

permitted by court order to abandon all or part of such collateral not

distributed, the court, by order, may, upon the consent of the

liquidator of the insurer, direct the superintendent, upon being

furnished with a list of certificate holders certified to by the

trustee, to record subsequent transfers of certificates and charge and

collect a reasonable fee therefor, and distribute dividends applicable

thereto upon liquidation of company assets in his hands, to the record

owners of such certificates, and make and deduct from such dividend

payments a reasonable charge for such services. The duty of the

superintendent under such order shall terminate upon the termination of

the liquidation proceedings.

(f) (1) No later than one hundred eighty days after a final order of

liquidation with an adjudication of insolvency of an insurer by a court

of competent jurisdiction of this state, the liquidator may in his sole

discretion make application to the court for approval of a proposal to

disburse assets out of marshalled assets, from time to time as such

assets become available, to any fund established by article seventy-six

of this chapter, article six-A of the workers' compensation law and any

foreign entity performing a similar function, having obligations because

of such insolvency. If the liquidator determines that there are

insufficient assets to disburse, the application authorized by this

subsection shall be considered satisfied by a filing by the liquidator

stating the reasons for this determination.

(2) Such proposal shall at least include provisions for:

(A) reserving amounts for the payment of expenses of administration,

claims of secured creditors to the extent of the value of the security

held, and claims falling within the priorities established in section

seven thousand four hundred twenty-six of this article;

(B) disbursement of the assets marshalled to date and subsequent

disbursement of assets as they become available;

(C) disbursements to the funds and entities entitled thereto under

this subsection in amounts estimated to be at least equal to all claim

payments for which such funds or entities could assert claims against

the liquidator, and if the assets available for disbursement from time

to time do not at least equal such claim payments, then disbursements in

the amount of available assets;

(D) equitable allocation of disbursements to each of such funds or

entities;

(E) the securing by the liquidator from each of such funds or entities

of an agreement to return to the liquidator such assets, together with

income earned on assets previously disbursed, as may be required to pay

claims of secured creditors and claims falling within the priorities

established in section seven thousand four hundred twenty-six of this

article in accordance with such priorities. No bond shall be required of

any such fund or entity; and

(F) a full report to be made by each such fund or entity to the

liquidator accounting for all assets so disbursed to the fund or entity,

all disbursements made therefrom, any income earned by the fund or

entity on such assets and any other matters as the court may direct.

(3) Notice of such application shall be given to such funds and

entities and to the commissioners of insurance of each of the states.

Any such notice shall be deemed to have been given when deposited in the

United States certified mails, first class postage prepaid, at least

thirty days prior to submission of such application to the court. Action

on the application may be taken by the court if the required notice has

been given and the liquidator's proposal complies with subparagraphs

(A), (B) and (D) of paragraph two of this subsection.

(g) (1) No later than one hundred twenty days after the end of the

calendar or fiscal year of a domestic insurance corporation subject to

rehabilitation or liquidation, upon whichever standard the corporation

conducts its financial affairs, the rehabilitator or liquidator shall

submit to the department an annual report of the preceding calendar or

fiscal year's activity of such corporation. Such report, which shall

pertain only to such corporation's activities and those of the

rehabilitator or liquidator as they relate to such corporation, shall

include a financial review of the assets and liabilities of the

corporation, the claims accrued or paid in that period, and a summary of

all other corporate activity and a narrative of the actions of the

rehabilitator or liquidator respecting such corporation.

(2) No later than August first of each year, the rehabilitator or

liquidator shall submit to the department and the legislature separate

or combined annual financial statements for the domestic insurance

corporations subject to rehabilitation or liquidation. Upon whichever

standard each corporation conducts its respective financial affairs,

showing their condition at last calendar year end or at the last fiscal

year end ending on or prior to last calendar year end, together with an

opinion or other report of an independent certified public accountant on

such financial statements, provided that such corporations were placed

into rehabilitation or liquidation prior to the commencement of the

calendar or fiscal years covered by such financial statements.

(3) No later than August first of each year, the superintendent as

receiver shall submit to the department and the legislature an annual

financial statement of the liquidation bureau showing its cash receipts

and disbursements for the prior calendar year, together with an opinion

or other report of an independent certified public accountant on such

financial statement.

(4) The reports and statements required under this subsection shall be

separate and apart from other reports and statements issued by the

liquidation bureau of the department in the normal course of its

business.