Insurance Commissioner of Pennsylvania v. Beyer, 21 N.Y.2d 194 (1967)

A liquidator of an insurance company stands in the shoes of the company and is subject to the same contractual limitations as the company itself; therefore, a policy provision limiting the time for assessment is enforceable against the liquidator.

Summary

The Insurance Commissioner of Pennsylvania, as liquidator of a failed mutual insurance company, sued a New York policyholder to collect an assessment on two policies. The first policy had expired more than one year before the company’s dissolution, while the second had not. The policy contained a provision limiting assessments to within one year of policy expiration. The New York Court of Appeals held that the one-year limitation barred assessment on the first policy because the liquidator’s rights were no greater than the company’s, and the company could not have assessed the policyholder after one year. The court dismissed the appeal regarding the second policy as non-final because the lower court had ordered a trial on factual issues.

Facts

In 1949, Beyer, a New York resident, obtained a liability and collision policy from General Mutual, a Pennsylvania mutual insurance company not licensed in New York. The policy, effective from September 19, 1949, to September 19, 1950, contained a provision limiting liability for premium calls to one time the premium, levied within one year of expiration or cancellation. Upon expiration, Beyer obtained another policy with similar terms, effective from September 19, 1950, to September 19, 1951. On November 2, 1951, a Pennsylvania court ordered General Mutual’s dissolution and appointed the Insurance Commissioner as liquidator.

Procedural History

In 1958, the Commissioner sought and obtained court approval in Pennsylvania to assess policyholders who had policies in force between 1947 and 1951. Beyer was assessed $695.41 for the 1950 policy and $579.30 for the 1951 policy. The Commissioner sued Beyer in New York in 1963 to collect the assessments. Special Term granted summary judgment for the Commissioner. The Appellate Division reversed, granting summary judgment to Beyer on the 1950 policy and ordering a trial on the 1951 policy. The Commissioner appealed to the New York Court of Appeals.

Issue(s)

1. Whether the full faith and credit clause requires New York to enforce the Pennsylvania assessment decree against Beyer, despite the policy’s one-year limitation provision.
2. Whether the one-year limitation clause in the policy contravenes Pennsylvania law.
3. Whether the one-year limitation is binding upon the Commissioner as liquidator.

Holding

1. No, because while the Pennsylvania decree is conclusive on the necessity and amount of the assessment, Beyer is entitled to raise personal defenses based on the policy provisions.
2. No, because Pennsylvania law does not prohibit such a limitation.
3. Yes, because the Commissioner succeeds to the company’s rights and is subject to the same limitations.

Court’s Reasoning

The court reasoned that while the Pennsylvania assessment decree is entitled to full faith and credit regarding the necessity and amount of the assessment, it does not preclude Beyer from raising personal defenses based on his contract. Citing Stone v. Penn Yan, Keuka Park & Branchport Ry., 197 N.Y. 279, 283-284, the court stated that Beyer could assert any defense establishing the cessation of his liability or its non-enforceability, such as the policy’s one-year limitation. The court distinguished the case from Pink v. A. A. A. Highway Express, Inc., 314 U.S. 201, where the Supreme Court held that the full faith and credit clause did not require Georgia courts to enforce a New York insurance law obligation not included in the policy contract.

The court found no conflict between the policy’s one-year limitation and Pennsylvania law. Pennsylvania law allows for additional premium assessments but does not prohibit reasonable time limitations on that liability as expressed in the policy. The court rejected the Commissioner’s argument that the limitation was “void and ineffective” against her, stating that the Commissioner, as liquidator, only succeeds to the company’s existing rights and is not entitled to any enlarged rights. The court emphasized that no Pennsylvania decision supported the argument that the Commissioner could levy an assessment when the company could not. Citing Van Schaick v. Stiering, 141 Misc. 461, the court reiterated that if no liability existed when the Superintendent of Insurance took possession, the liquidation process could not create one.