In re Int'l Reinsurance Corp.

• Decision Date: 08 July 1936
• Citation: 271 N.Y. 381,3 N.E.2d 518
• Parties: In re INTERNATIONAL REINSURANCE CORPORATION et al.
• Court: New York Court of Appeals Court of Appeals

271 N.Y. 381

3 N.E.2d 518

In re INTERNATIONAL REINSURANCE CORPORATION et al.

Court of Appeals of New York.

July 8, 1936.

Proceeding in the matter of the application of the People, by George S. Van Schaick, as State Superintendent of Insurance, for an order to take possession of the property and to conserve the assets of the International Reinsurance Corporation of Dover, Del., the Independence Indemnity Company, the Public Indemnity Company. From a final order of the Appellate Division (246 App.Div. 791, 285 N.Y.S. 536) affirming an order of the Supreme Court, which confirmed the report of the referee, the primary receivers of the International Reinsurance Corporation, of Dover, Del., appeal.

Affirmed. Appeal from Supreme Court, Appellate Division, First Department.

Francis R. Stoddard, of New York City, for appellants.

Irvin Waldman and Alfred C. Bennett, both of New York City, for respondent.

Robert J. Sykes and William C. Morris, both of New York City, for Metropolitan Casualty Co., amicus curiae.

Jeremiah F. Connor and Everett F. Warrington, both of New York City, for Columbia Casualty Co., amicus curiae.

CROUCH, Judge.

Determination of the controversy here hangs primarily upon a construction of section 54, subdivision 7, of the Workmen's Compensation Law (Consol.Laws, c. 67), and of a bond and deposit of securities made pursuant thereto. So far as material, the text of the statute is as follows:

‘ 7. Limitation of the Issuance of Policies by a Foreign Insurance Company. No policy or contract of insurance issued by a foreign stock corporation or mutual association authorized to transact the business of workmen's compensation insurance in this state * * * shall be accepted * * * unless such foreign stock corporation or mutual association shall have filed with the superintendent of insurance a bond or undertaking with good and sufficient sureties to the people of the state of New York, and conditioned upon the payment in full of any and all compensation and benefits as provided in this chapter to any and all persons entitled thereto under any such policy or contract of insurance. * * * The amount of such bond shall be such sum as may reasonably represent twenty-five per centum of the outstanding reserves for compensation losses on policies issued by such foreign stock corporation or mutual association upon risks located in the state of New York. * * * Such bond shall be renewed annually. * * * In lieu of the bond * * * any such foreign stock corporation or mutual association may deposit with the superintendent of insurance securities of the kind prescribed in section thirteen of the insurance law in an amount equal to twenty-five percentum of the outstanding reserves for compensation losses on policies issued * * * upon risks located in the state of New York. * * * Such securities shall be held by the superintendent of insurance as a special deposit and as express security for the payment of such compensation or benefits.'

Subdivision 7 was added to section 54 by chapter 305 of the Laws of 1929. Its legislative background (Legislative Document No. 87, 1928; Legislative Document No. 75, 1929) discloses a purpose to protect, in the event of the insolvency of a foreign insurance carrier, all workmen and their dependents then or thereafter to be entitled to any compensation and benefits under policies issued by it. Prior to its enactment, no such protection was afforded. For lack of it unfortunate losses had been sustained.

International Reinsurance Company, prior to January 5, 1933, had absorbed Independence Indemnity Company and Public Indemnity Company, corporations which had for some years engaged in the business of issuing workmen's compensation policies in the state of New York. Following the enactment of subdivision 7, those companies had complied annually with its provisions by filing bonds underwritten by various surety companies in varying amounts as determined according to the provisions of the statute. Having taken over the business of the other two companies, it became necessary for the International to furnish the statutory security. Accordingly, as of January 5, 1933, International filed a bond for $112,000 upon which General Indemnity Corporation of America was surety. Upon the statutory basis the security required amounted to $260,000. The bond was therefore supplemented by a deposit of certain securities and first mortgages having a par or face value of $385,000.

In April, 1933, International was declared insolvent, and three receivers were appointed in chancery proceedings in Delaware. Immediately thereafter, upon the application of the superintendent of insurance of this state, an order was made pursuant to article 9 of the Insurance Law, § 260 et seq. (Consol.Laws, c. 28), directing him to take possession of, and to conserve the property of, International within this state. In due course of administration, the superintendent of insurance, as conservator, filed a report, audit, and petition which proposed alternative plans relating to the manner in which the rights of the New York...