Sec. 38a-930. (Formerly Sec. 38-448). Voidable preferences and liens.
Sec. 38a-930. (Formerly Sec. 38-448). 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 sections 38a-903
to 38a-961, inclusive, 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) Any preference may be avoided by the liquidator if: (A) The insurer was insolvent at the time of the transfer; (B) the transfer was made within four months before the
filing of the petition; (C) the creditor receiving it or to be benefited thereby or his agent
acting with reference thereto had, at the time when the transfer was made, reasonable
cause to believe that the insurer was insolvent or was about to become insolvent; or (D)
the creditor receiving it 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 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 shall have a lien upon the property to the extent of the consideration actually
given by him. 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 require the agreement or concurrence of
any third party or which require 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 twenty-one 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 (2) of subsection (a) 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 sections 38a-903
to 38a-961, inclusive, 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 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 any 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 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 a 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 from him.
(j) If an insurer shall, directly or indirectly, within four months before the filing of
a successful petition for liquidation under sections 38a-903 to 38a-961, inclusive, or at
any time in contemplation of a proceeding to liquidate it, pay money or transfer property
to an attorney-at-law for services rendered or to be rendered, the transaction 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 benefit
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-at-law for services rendered or to be rendered shall be governed by the provisions of subdivision (2) of subsection (a) 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 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 reasonable
cause to so believe if the transfer was made within four months before the date of filing
of the successful petition for liquidation.
(2) Every person receiving any property from the insurer or the benefit thereof as
a preference voidable under subsection (a) 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.
(P.A. 79-382, S. 28; P.A. 85-613, S. 105, 154.)
History: P.A. 85-613 made technical change in Subsec. (k); Sec. 38-448 transferred to Sec. 38a-930 in 1991.