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The Vermont Statutes Online



Title

08

:
Banking and Insurance






Chapter

145

:
SUPERVISION, REHABILITATION, AND LIQUIDATION OF INSURERS






Subchapter

003
:
FORMAL PROCEEDINGS










 

§

7067. Voidable preferences and liens

(a)(1) A

preference is a transfer of any of the property of an insurer to or for the

benefit of a creditor, for or on account of an antecedent debt, made or

suffered by the insurer within one year before the filing of a successful

petition for liquidation under this chapter, the effect of which transfer may

be to enable the creditor to obtain a greater percentage of this debt than

another creditor of the same class would receive. If a liquidation order is

entered while the insurer is already subject to a rehabilitation order, then

such transfers shall be deemed preferences if made or suffered within one year

before the filing of the successful petition for rehabilitation, or within two

years before the filing of the successful petition for liquidation, whichever

time is shorter.

(2) A preference

may be avoided by the liquidator if:

(A) the insurer

was insolvent at the time of the transfer of property;

(B) the transfer

of property was made within four months before the filing of the petition;

(C) the creditor

receiving it or to be benefited thereby or his or her agent acting with

reference thereto had, at the time when the transfer of property was made,

reasonable cause to believe that the insurer was insolvent or was about to

become insolvent; or

(D) the creditor

receiving transferred property was an officer, or any employee or attorney or

other person who was in fact in a position of comparable influence in the

insurer to an officer whether or not he or she held such position, or any

shareholder holding directly or indirectly more than five per centum of any

class of any equity security issued by the insurer, or any other person, firm,

corporation, association, or aggregation of persons with whom the insurer did

not deal at arm's length.

(3) Where the

preference is voidable, the liquidator may recover the property or, if it has

been converted, its value from any person who has received or converted the

property; except where a bona fide purchaser or lienor has given less than fair

equivalent value, he or she shall have a lien upon the property to the extent

of the consideration actually given by him or her. Where a preference by way of

lien or security title is voidable, the Court may on due notice order the lien

or title to be preserved for the benefit of the estate, in which event the lien

or title shall pass to the liquidator.

(b)(1) A

transfer of property other than real property shall be deemed to be made or

suffered when it becomes so far perfected that no subsequent lien obtainable by

legal or equitable proceedings on a simple contract could become superior to

the rights of the transferee.

(2) A transfer

of real property shall be deemed to be made or suffered when it becomes so far

perfected that no subsequent bona fide purchaser from the insurer could obtain

rights superior to the rights of the transferee.

(3) A transfer

which creates an equitable lien shall not be deemed to be perfected if there

are available means by which a legal lien could be created.

(4) A transfer

not perfected prior to the filing of a petition for liquidation shall be deemed

to be made immediately before the filing of the successful petition.

(5) The

provisions of this subsection apply whether or not there are or were creditors

who might have obtained liens or persons who might have become bona fide

purchasers.

(c)(1) A lien

obtainable by legal or equitable proceedings upon a simple contract is one

arising in the ordinary course of such proceedings upon the entry or docketing

of a judgment or decree, or upon attachment, garnishment, execution, or like

process, whether before, upon, or after judgment or decree and whether before

or upon levy. It does not include liens which under applicable law are given a

special priority over other liens which are prior in time.

(2) A lien

obtainable by legal or equitable proceedings could become superior to the

rights of a transferee, or a purchaser could obtain rights superior to the

rights of a transferee within the meaning of subsection (b) of this section, if

such consequences would follow only from the lien or purchase itself, or from

the lien or purchase followed by any step wholly within the control of the

respective lienholder or purchaser, with or without the aid of ministerial

action by public officials. Such a lien could not, however, become superior and

such a purchase could not create superior rights for the purpose of subsection

(b) of this section through any acts subsequent to the obtaining of such a lien

or subsequent to such a purchase which requires the agreement or concurrence of

any third party or which requires any further judicial action or ruling.

(d) A transfer

of property for or on account of a new and contemporaneous consideration which

is deemed under subsection (b) of this section to be made or suffered after the

transfer because of delay in perfecting it does not thereby become a transfer

for or on account of an antecedent debt if any acts required by the applicable

law to be performed in order to perfect the transfer as against liens or bona

fide purchasers' rights are performed within 21 days or any period expressly

allowed by the law, whichever is less. A transfer to secure a future loan, if

such a loan is actually made, or a transfer which becomes security for a future

loan, shall have the same effect as a transfer for or on account of a new and

contemporaneous consideration.

(e) If any lien

deemed voidable under subdivision (a)(2) of this section has been dissolved by

the furnishing of a bond or other obligation, the surety on which has been

indemnified directly or indirectly by the transfer of or the creation of a lien

upon any property of an insurer before the filing of a petition under this

chapter which results in a liquidation order, the indemnifying transfer or lien

shall also be deemed voidable.

(f) The property

affected by any lien deemed voidable under subsections (a) and (e) of this

section shall be discharged from such lien, and that property and any of the

indemnifying property transferred to or for the benefit of a surety shall pass

to the liquidator, except that the Court may on due notice order any such lien

to be preserved for the benefit of the estate and the Court may direct that

such conveyance be executed as may be proper or adequate to evidence the title

of the liquidator.

(g) The Superior

Court of Washington County shall have summary jurisdiction of any proceeding by

the liquidator to hear and determine the rights of any parties under this

section. Reasonable notice of hearing in the proceeding shall be given to all parties

in interest, including the obligee of a releasing bond or other like

obligation. Where an order is entered for the recovery of indemnifying property

in kind or for the avoidance of an indemnifying lien, the Court, upon

application of any party in interest, shall in the same proceeding ascertain

the value of the property or lien, and if the value is less than the amount for

which the property is indemnity or less than the amount of the lien, the

transferee or lienholder may elect to retain the property or lien upon payment

of its value, as ascertained by the court, to the liquidator, within such

reasonable times as the Court shall fix.

(h) The

liability of the surety under a releasing bond or other like obligation shall

be discharged to the extent of the value of the indemnifying property recovered

or the indemnifying lien nullified and avoided by the liquidator, or where the

property is retained under subsection (g) of this section to the extent of the

amount paid to the liquidator.

(i) If a

creditor has been preferred, and afterward in good faith gives the insurer

further credit without security of any kind, for property which becomes a part

of the insurer's estate, the amount of the new credit remaining unpaid at the

time of the petition may be set off against the preference which would

otherwise be recoverable.

(j) If an

insurer shall, directly or indirectly, within four months before the filing of

a successful petition for liquidation under this chapter, or at any time in

contemplation of a proceeding to liquidate it, pay money or transfer property

to an attorney for services rendered or to be rendered, the transactions may be

examined by the Court on its own motion or shall be examined by the Court on

petition of the liquidator and shall be held valid only to the extent of a

reasonable amount to be determined by the Court, and the excess may be

recovered by the liquidator for the benefits of the estate provided that where

the attorney is in a position of influence in the insurer or an affiliate thereof

payment of any money or the transfer of any property to the attorney for

services rendered or to be rendered shall be governed by the provision of

subdivision (a)(2)(D) of this section.

(k)(1) Every

officer, manager, employee, shareholder, member, subscriber, attorney, or any

other person acting on behalf of the insurer who knowingly participates in

giving any preference when he or she has reasonable cause to believe the

insurer is or is about to become insolvent at the time of the preference shall

be personally liable to the liquidator for the amount  of the preference. It is permissible to infer

that there is a reasonable cause to so believe if the transfer was made within

four months before the date of filing of this successful petition for

liquidation.

(2) Every person

receiving any property from the insurer or the benefit thereof as a preference

voidable under subsection (a) of this section shall be personally liable

therefor and shall be bound to account to the liquidator.

(3) Nothing in

this subsection shall prejudice any other claim by the liquidator against any

person. (Added 1991, No. 45, § 2, eff. May 29, 1991.)