NY Court of Appeals Rules that Choice of Law Analysis Is Necessary To Reject Or Approve Insurance Claims Made To Liquidator
Normally, I would think that "interesting" and "choice of law" was an oxymoron. But, a decision issued yesterday by the NY Court of Appeals, Matter of Liquidation of Midland Insurance Co., is actually interesting – it deals with what substantive law applies to claims submitted against an insurer that has been placed into liquidation in New York. The law applicable to liquidated insurers is probably relevant to any entity with pollution and/or toxic tort issues because many insurers facing these claims have been judged insolvent and placed into liquidation. The decision particularly analyzes the language of Article 74 of the Insurance Law of New York, but is a good summary of New York law regarding insurance choice of law.
Not surprisingly, the liquidator (the Superintendent of the NYS Insurance Department) argued that New York substantive law should apply to all decisions to disallow claims of policyholders. The claimants argued that claim determinations required a choice of law analysis to determine the substantive state law applicable to each policy. The court decides that the “grouping of contacts” analysis must be made to determine what state’s law controls whether a claim in the liquidation may be allowed or denied.
This seems like good news for insurance claimants in states that have laws that generally favor policy holders, and bad news for those in more restrictive states (after all, there is only one pot of money here), and a lot of work for the insurance liquidator.
From my perspective, this would be easy to argue on both sides.
