Kennesaw Life & Acc. Ins. Co. v. Old Nat. Ins. Co.

• Decision Date: 20 December 1973
• Citation: 287 So.2d 869,291 Ala. 752
• Parties: KENNESAW LIFE & ACCIDENT INSURANCE CO., a corporation, v. OLD NATIONAL INSURANCE COMPANY and John G. Bookout, as Receiver of Old National Insurance Company, in Receivership. SC 279.
• Court: Alabama Supreme Court

Page 869

287 So.2d 869

291 Ala. 752

KENNESAW LIFE & ACCIDENT INSURANCE CO., a corporation, v. OLD NATIONAL INSURANCE COMPANY and John G. Bookout, as Receiver of Old National Insurance Company, in Receivership.

SC 279.

Supreme Court of Alabama.

Dec. 20, 1973.

Rehearing Denied Jan. 24, 1974.

E. A. Screws, Jr., Montgomery, John A. Taber, Greenville, for appellant.

James W. Webb, Edwin K. Livingston, Montgomery, for appellees.

BLOODWORTH, Justice.

Appellant, Kennesaw Life & Accident Insurance Company, appeals from a denial of its petition for intervention in the cause entitled State of Alabama, ex rel. John G. Bookout, Superintendent of Insurance v. Old National Insurance Company, a receivership proceeding commenced in the Jefferson County Circuit Court, Bessemer Division, In Equity.

Old National Insurance Company is an Alabama corporation that primarily handles paid-up life insurance policies which are 'ceded' to it by other companies along with a transfer of assets sufficient to cover the statutory reserve requirements on the ceded policies. In 1967, Kennesaw ceded paid-up policies to Old National and transferred $1.5 million in assets to it to cover the statutory reserve requirements on those policies. Apparently, on account of mismanagement, Old National's assets were substantially depleted and the company placed in receivership 'for rehabilitation' on March 28, 1970. Separate suits by its creditors were enjoined.

Kennesaw was advised by its counsel that it continued to remain legally liable to its policyholders, notwithstanding Old National's assumption of liability on the policies. Thus, in August, 1970, at the request of the receiver, Kennesaw reassumed primary liability on the policies (which it had ceded to Old National) without any accompanying retransfer of assets by Old National. In the reinsurance agreement, Kennesaw specifically reserved any and all causes of action it might have against Old National.

On February 3, 1971, the court ordered notice to be given to all prospective creditors of Old National to file their claims. Kennesaw received such notice. However, Kennesaw did not file. Instead, on June 15, 1971, Kennesaw filed a declaratory judgment action in the Jefferson County Circuit Court, Bessemer Division. It asked, inter alia, that it be declared a creditor of Old National based upon the breach of the 1967 reinsurance agreement between Kennesaw and Old National or based upon its alleged status as subrogee of the policyholders whose policies had been first ceded by Kennesaw to Old National and then reinsured by Kennesaw. This cause has never come on for trial.

In September, 1971, Kennesaw filed a second suit in the same court to enjoin the receiver of Old National from any transfer, sale or release of any and all assets, rights, claims or choses in action until after a final determination of Kennesaw's status as creditor of Old National. The record is unclear as to the final disposition, if any, of this suit.

Briefs point out that one of the 'assets' of Old National is a possible cause of action for fraud against several officers and directors of Coastal States Life Insurance Company, based upon their responsibility for the insolvency of Old National. The statute of limitations on this cause of action was, by agreement, extended through October 1, 1972.

In September, 1972, the receiver presented to the court for approval a proposed settlement agreement, whereby Old National would release all claims against Coastal States in exchange for the latter's agreement to reinsure policies having a reserve liability of.$1.4 million. It was then that Kennesaw petitioned to intervene in this cause. The petition was denied, the court giving no reason for its decision. Subsequently, the proposed settlement was approved.

This appeal from the denial of Kennesaw's petition to intervene then followed. Kennesaw contends that it is a general creditor by virtue of the breach of the reinsurance contract of 1967; that policyholders are nothing more than general creditors; that the proposed settlement agreement will prefer the policyholders of Old National to the detriment of general creditors such as Kennesaw; and that therefore the denial of the petition for intervention is reversible error.

The first issue presented to us on this appeal is a motion by appellee, Old National Insurance Company, to dismiss the appeal, or, in the alternative to strike appellant's response and reply brief, or to grant appellees leave to file a response to appellant's reply brief. In support of these motions, appellee contends (1) that appellant Kennesaw has conceded in its reply brief that the Coastal States agreement does not work a preference, and (2) that appellant Kennesaw's reply brief attempts to raise new issues for the first time.

We do not understand appellant Kennesaw's reply brief to concede that the Coastal States agreement does not work a preference. And, while new issues cannot be raised for the first time in a reply brief, raising of such issues is not a ground for dismissal of the appeal or striking of the entire brief in which such issues appear. This Court will simply treat such issues as not before the Court. Lunney v. Southern Railway Company, 272 Ala. 611, 133 So.2d 247 (1961). The motion is denied.

On the merits, one issue appears to be dispositive of this appeal--Kennesaw's failure to file a claim with the receiver. We therefore pretermit consideration of the other issues argued by the parties.

Kennesaw contends it is a creditor of Old National either as the party injured by Old National's breach of the 1967 reinsurance agreement, or as subrogee of the policyholders whose policies had been ceded to Old National in 1967 and then reassumed by Kennesaw.

The receiver of Old National contends, on the other hand, that whatever claim Kennesaw may have had in the past is barred by its failure to file a claim with the receiver. We agree with this latter contention and accordingly affirm.

Kennesaw says that because the receiver did not raise the failure to file a claim as an affirmative defense this Court is precluded from considering...