[CLC-Discussion] question re: surety in liquidation

Sun May 20 07:36:02 PDT 2012

Here is a blurb from a recent motion to stay that I had to file because of a notice of rehabilitation that I received from a former surety client.  Hopefully this will help a little:

Chapter 631, Florida Statutes, known as the “Insurer Rehabilitation Act” (the “Act”) governs insurer insolvency in Florida.  Fla. Stat. § 631.001.  Deemed integral by Florida’s Legislature to the regulation of the insurance business, the purpose of the Act is, among other things, to “[a]dminister insurer receiverships more efficiently on an interstate and international basis by facilitating cooperation between states[.]”  Fla. Stat. § 631.001(3)(g).  A surety is an insurer for purposes of the Act.  Fla. Stat. §§ 631.011(15), 624.03.

New York, for example, is a “Reciprocal state,” in which in substance and effect the provisions of the Act are in force, including the provisions requiring that the commissioner of insurance or equivalent insurance supervisory official be the receiver of a delinquent insurer.  Fla. Stat. § 631.011(20); Frontier Ins. Co. v. American Title Services, 838 So. 2d 1178 (Fla. 5th DCA 2003).

In Frontier Ins. Co., the insurer there sought certiorari review of a circuit court order granting its insured’s motion to lift stay entered by the Supreme Court of the State of New York.  Id. at 1178.  After the plaintiffs in Frontier Ins. Co. initiated their action, the Supreme Court of the State of New York entered an order in a delinquency finding the insurer to be insolvent.  Id.  The order in Frontier Ins. Co. provided, in pertinent “[a]ll persons are enjoined and restrained from commencing or prosecuting any action, lawsuits or proceedings against [the insurer.]” Id. at 1179.

There, the insurer filed a notice of stay and suggestion of stay in the Florida circuit court.  Id.  The insureds filed a motion to lift the stay, which was granted.  Id.  On certiorari review, the Fifth District Court of Appeal granted the insurer’s petition and quashed the order of the circuit court, recognizing that “[i]t is the public policy of Florida to cooperate with reciprocal states in delinquency proceedings involving an insurer.”  Id. In recognizing that New York has adopted a version of the Act, under principles of comity, “the Florida court should have honored the stay entered by the New York court.”  Id.

Ty G. Thompson
Board Certified Construction Attorney | Mills Paskert Divers
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From: clc-discussion-bounces at lists.flabarrpptl.org [mailto:clc-discussion-bounces at lists.flabarrpptl.org] On Behalf Of Michelle Kane
Sent: Friday, May 18, 2012 2:05 PM
To: Roberts, Hardy L.; Andrea Fair; clc-discussion at lists.flabarrpptl.org
Subject: Re: [CLC-Discussion] question re: surety in liquidation

I am sure you can file a claim but it would be subject to the priroties of claims as laid out in that state's statute, similar to Florida Statute 631.271
________________________________
From: clc-discussion-bounces at lists.flabarrpptl.org on behalf of Roberts, Hardy L.
Sent: Fri 5/18/2012 1:08 PM
To: Andrea Fair; clc-discussion at lists.flabarrpptl.org
Subject: Re: [CLC-Discussion] question re: surety in liquidation
When I encountered this issue in the past I filed a claim with the state bureau that was liquidating the surety.  They typically have a claims bar date much like a bankruptcy proceeding.  It took more than five years, but the claim ultimately was allowed and there was a substantial payout.

From: clc-discussion-bounces at lists.flabarrpptl.org [mailto:clc-discussion-bounces at lists.flabarrpptl.org] On Behalf Of Andrea Fair
Sent: Friday, May 18, 2012 12:42 PM
To: clc-discussion at lists.flabarrpptl.org
Subject: [CLC-Discussion] question re: surety in liquidation

I have a client with potential bond claims against First Sealord Surety, Inc., which is in liquidation.  My client does work in many states and their TX attorney told them that they could not file suit against this surety due to the liquidation process (like the automatic stay in bankruptcy) and they have just let some bond claims go by the wayside because of this advice.  I question whether that was good advice.  The deadline is coming up next week on a potential bond claim and I thought I would just file suit and not serve the surety until I get an answer on this issue.  If any of you know the answer and can let me know ASAP, I would greatly appreciate it.  Bottom line: Can I file suit against First Sealord?  If no, what should I do instead to pursue the bond claim?  Of course, I still intend to pursue the GC but I don’t know how the liquidation affects my client’s bond claims.  Thank you in advance for all of the feedback!  I think the way this group discusses issues and shares information is truly amazing and so helpful.

Thx-Andrea

Andrea M. Fair-Purcell
Board Certified Construction Attorney
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