by John Darer CLU ChFC MSSC CeFT RSP CLTC
Peter Bickford''s 2004 white paper "Who Protects Us From The Receiver?" contains sharp criticism of the New York Insurance Liquidation Bureau and spoke of a system that had been the subject of at least two significant studies in the years leading up to 2004 that concluded that the system:
- lacks essential due process protections
- lacks transparency, lacks accountability
- lacks supervision or controls
- lacks incentives for success
- includes incentives to prolong the inefficient management of estataes to the detriment of creditors
In the above cited paper Bickford lamented that once an insurer is placed into liquidation or rehabilitation in New York, the Superintendent has not been compelled to file the same financial statements or actuarial certifications as are required by solvent companies subject to his regulatory jurisdiction The reports filed under this section are minimal summaries that bear little if any resemblance to statutory statements, and do not include any actuarial certifications.
Bickford observed that where in some instances the Liquidation Bureau had filed statements prepared on statutory forms, these statements are not deemed mandatory by the Bureau, are often incomplete or do not follow statutory accounting principles, and lack any regulatory scrutiny or actuarial support.
In Consolidated Edison Company of New York, Inc. v. The Insurance Department of the State of New York, 532 NY Supp.2d, 140 Misc.2d 969 (Sup.Ct., NY County, 1988) the New York Supreme Court held that the New York Liquidation Bureau was not a state agency and therefore not subject to the Freedom of Information Act. Comforting, huh?
Executive Life of New York (ELNY) was taken over in April 1991.
When the New York State Comptroller subsequently sought to audit the activities of the New York Liquidation Bureau and issue subpoenas to New York Liquidation Bureau personnel, the lower court quashed the subpoenas citing Con Ed . Fortunately the New York Appellate Division, First Department, overturned this decision and reinstated the subpoenas concluding in a 3 to 2 decision that the Superintendent of Insurance is a State Officer, and the Liquidation Bureau is therefore carrying out the functions of a State Officer. Hence it is a State Agency subject to audit by the Comptroller. Serio v. Hevesi, 2007 NY Slip Op 01820 (App. Div., 1st Dept., March 6, 2007).
Bickford's "The Insurance Receivership Process in New York" published in 2008-2009 is a highly informative compilation of articles on the subject that at least for its historical perspective, is a must read for those in any way affected by the Executive LIfe of New York situation.
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