How does an insurance company get placed into Liquidation?
When a company is found to be financially insolvent, pleadings are filed by the Department of Financial Services petitioning the Court to place the company into receivership. Receivership hearings are held in the Leon County Circuit Court in Tallahassee, Florida. If the court approves the petition, it will name the Department of Financial Services as Receiver of the company for purposes of liquidation.
Summary of Liquidation under Chapter 631, Part I, Florida Statutes
The liquidation portion of Chapter 631, Part I, Florida Statutes provides specific provisions on all aspects of the liquidation process.
The Department of Financial Services is responsible for taking possession of the assets and administering them under order of the Leon County Circuit Court. A delinquency proceeding can only be filed by the Department and can only be filed in Leon County.
Liabilities become fixed as of the date of filing the petition.
Generally, coverage is continued for the lesser of 30 days from the liquidation date, the normal expiration date, or until the business is transferred.
Some Powers of the Receiver as Liquidator:
Employ, hire agents and counsel, and fix compensation of those employed.
Conduct investigations into the causes of the insolvency.
Commence litigation to recover any funds diverted from the insurer by any officers, directors or employees.
Litigation may be commenced to recover damages for the good of the insurer's policyholders and other creditors.
Collect all debts and money due.
Conduct public and private sales.
Use assets to transfer policy obligations.
Acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon or otherwise dispose of assets.
Notify the insurer's agents so they can advise insureds of the policy cancellation, replace coverage and collect any premium and unearned commissions that may be due the insurer.
Contract and affirm or disavow existing contracts.
Prosecute causes of action.
Take possession of records.
Deposit and invest assets.
Assert defenses available to insurer.
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