Case Name: In the Matter of the Liquidation of Union Indemnity Insurance Company of New York; Royal Bank & Trust Company, Respondent, v. Superintendent of Insurance of the State of New York, as Administrator of the New York Property/Casualty Insurance Security Fund, and as Liquidator of Union Indemnity Insurance Company of New York, Appellant
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1998-06-11
Citations: 92 N.Y.2d 107
Docket Number: 
Parties: In the Matter of the Liquidation of Union Indemnity Insurance Company of New York. Royal Bank & Trust Company, Respondent, v Superintendent of Insurance of the State of New York, as Administrator of the New York Property/Casualty Insurance Security Fund, and as Liquidator of Union Indemnity Insurance Company of New York, Appellant.
Judges: 
Reporter: New York Reports
Volume: 92
Pages: 107–140

Head Matter:
[699 NE2d 852, 677 NYS2d 228]
In the Matter of the Liquidation of Union Indemnity Insurance Company of New York. Royal Bank & Trust Company, Respondent, v Superintendent of Insurance of the State of New York, as Administrator of the New York Property/Casualty Insurance Security Fund, and as Liquidator of Union Indemnity Insurance Company of New York, Appellant.
Argued May 5, 1998;
decided June 11, 1998
POINTS OF COUNSEL
Herzfeld & Rubin, P. C., New York City (David B. Hamm and Herbert Rubin of counsel), and Joseph Termini for appellant.
Gibson, Dunn & Crutcher, L. L. P., New York City (Jerry J. Strochlic and Preeta D. Bansal of counsel), for respondent.

Opinion:
OPINION OF THE COURT
Bellacosa, J.
Defendant Superintendent of Insurance, as Administrator of the New York Property/Casualty Insurance Security Fund (Security Fund) and as Liquidator of Union Indemnity Insurance Company of New York (Union), appeals from a Supreme Court judgment, pursuant to leave granted by this Court. The judgment directed payment to plaintiff Royal Bank and Trust Company (Royal) of $10,937,753.25. The source of the satisfaction of the judgment is the State Security Fund. The appeal brings up for review a prior nonfinal Appellate Division order which affirmed Supreme Court's direction that the Security Fund pay Royal's claims with postliquidation interest and attorney's fees.
We must decide whether (1) Insurance Law § 7434 (b) excuses the Security Fund from responsibility for postliquidation interest on Royal's claims, and (2) Insurance Law § 7608 (c) prohibits the Security Fund from adding interest and at torney's fees to the claims payment because these obligations would tip Royal's recovery over the limit of liability of the insuring instruments. Since neither statutory construction supports appellant's desired outcome for the case, we affirm.
L
In 1983, Union issued bonds to Royal securing the payment of promissory notes signed by 55 investors in Harlan Coal Processors, Ltd., a limited partnership which had borrowed $3,400,000 from Royal. When Harlan and most of the individual investors failed to make timely repayments, Royal demanded payment from Union under the bonds. In 1985, after making partial payment, Union was placed into liquidation by Supreme Court, based in part upon the finding that it was insolvent. The Superintendent was named as its Liquidator (hereinafter referred to under either title or as appellant).
In 1986, Royal filed 55 separate proofs of claim in Union's liquidation proceeding. It demanded indemnification and payment from the Security Fund pursuant to article 76 of the Insurance Law, for any and all amounts which may be due Royal under the individual investor bonds and proofs of claim. Each claim had three components: principal ($42,500 each), pre- and postliquidation interest, and attorney's fees. After the Superintendent denied indemnification because the bonds were not based upon risks located in New York, Supreme Court annulled the determination and remitted for plenary reconsideration (Matter of Royal Bank & Trust Co. v Superintendent of Ins., 148 Misc 2d 863, affd for reasons stated below sub nom. Matter of Union Indent. Ins. Co., 179 AD2d 374, also affd for reasons stated at Sup Ct, except insofar as discussion of superseding legislation and the reasons for its enactment 80 NY2d 983).
Justice Gammerman, who has presided over all phases of this matter for more than a decade, then granted Royal's motion for partial summary judgment and directed payment of interest and attorney's fees on the claims. Supreme Court rejected the Liquidator's arguments that Insurance Law § 7434 (b) and § 7608 (c) barred the payment of postliquidation interest and attorney's fees. The court held that although Insurance Law § 7434 (b) limits the payment of interest on dividends from the estate of the bankrupt-insurer, this was not a request for payment from Union's estate but, rather, a claim against the statutory Security Fund, a distinct source. The court also rejected the argument that the term "limit of liability" in Insurance Law § 7608 (c) meant the maximum amount permitted to be paid by the Security Fund regardless of additional obligations imposed by a securing instrument, and that this amount was determined by the face amount of the policy or bond. Noting that the express legislative purpose of the recodification of the Insurance Law in 1984 was "to recodify, without substantive change, the insurance law in effect immediately prior to the effective date of this chapter" (Insurance Law § 102), the court concluded that the Security Fund "should contain no strictures respecting the limits of liability" because the earlier version of the statute did not contain any such substantive restrictions. The court emphasized the absence of any language in the bonds themselves pertaining to limits of liability, and stated that interest was an integral component of the risk covered by the bonds. The court awarded attorney's fees because the bonds expressly authorized them. This 1994 ruling was affirmed in 1996 (225 AD2d 379).
After an interim nonjury trial in October 1995, Supreme Court determined that the Superintendent failed to establish the defenses of lack of standing and fraud, and held that the Security Fund should be the source of payment on the bonds. In March 1997, Supreme Court added the recoverable rate of interest from the Security Fund (12% until the date of the order of Union's liquidation, and 9% thereafter). Notably, Supreme Court's award of 9% interest from the date of the order of Union's liquidation does not correspond to the interest rate specified in the bonds. Royal's appeal of Supreme Court's March 1997 ruling on the rate of interest, filed in November 1997, is currently pending at the Appellate Division. The parties then stipulated to the amount of attorney's fees and the principal amounts and interest due under the bonds pursuant to the earlier legal determinations of Supreme Court and the Appellate Division. They reserved their rights to appeal those determinations and this Court granted the Superintendent's motion for leave to appeal.
The Superintendent presses precise statutory construction arguments that (1) Insurance Law § 7434 (b) prohibits payment of postliquidation interest out of the Security Fund, and (2) Insurance Law § 7608 (c) prohibits the Security Fund from paying interest and attorney's fees because inclusion of these amounts would result in a total payment over the limit of liability of the underlying bonds.
These restrictions do not appear in the statutes themselves and we are not persuaded that interpretive contentions justify such substantive transformations of the governing principles. Moreover, the express language of the underlying bonds provides for payment of interest and attorney's fees and those contractual undertakings more specifically apply and cogently prevail in these circumstances. Thus, we are satisfied that the courts below ruled correctly in each respect.
IL
It is useful to frame the analysis within the context of the underlying purpose of the Security Fund and the particular type of bond at issue in this long-standing source-of-payment dispute. Then we must specify the nature and scope of the judicial review power necessary and appropriate to solve the multifaceted puzzle of this set of claims.
The Security Fund was initially enacted as a special benefit to protect New York insureds from the insolvency of companies underwriting automobile liability insurance (see, Matter of Union Indent. Ins. Co., 140 Misc 2d 702, 704, later proceeding Matter of Snyder Tank Corp. v Superintendent of Ins., 150 AD2d 992, lv denied 75 NY2d 704, affd 151 AD2d 301 [vacating 150 AD2d 992]). The protection was then extended to other forms of casualty property insurance. In his statement in support of legislation creating the Security Fund, the then-Superintendent of Insurance stated that payment from the Security Fund would be 100 cents on the dollar and would be made by the Fund itself (1969 Report to Governor by Insurance Dept, "The Public Interest Now in Property and Liability Insurance Regulation," at 61). It has been described as "an extraordinary benefit" (Matter of Royal Bank & Trust Co. v Superintendent of Ins., 148 Misc 2d 863, 866, supra). The payments made from the Fund are restricted to those circumstances and claims specifically authorized by statute.
The type of insuring instrument at issue in this case is a financial guaranty surety bond. It was covered by the Security Fund at the time of the insolvency and claims at issue; that is not in question. In 1989, however, Insurance Law article 69 was enacted to supplant the regulation of this particular type of insurance. This amendment removed financial guaranty insurance from the protection of the Security Fund (1989 McKinney's Session Laws of NY, at 2057, 2389).
In support of this substitutive legislation, then-Governor Cuomo described financial guaranty bonds as "a relatively new insurance product which, in essence, insures the timely payment of principal and interest of numerous kinds of publicly traded debt" (id., at 2389 [emphasis added]). The State Execu tive Department also supported the 1989 changes with the assertion that financial guaranty insurance had experienced "phenomenal" growth in the prior 10 years, and that although it was "subject to rules applicable to property/casualty insurance generally," it was "a unique kind of coverage requiring specialized treatment" (id., at 2053). The narrative continued that financial guaranty insurance was "issued to minimize risk of loss to insured obligees or indemnitees for: the payment of principal and interest on public and private debt, fluctuations in interest rates, fluctuations in currency rates, fluctuations in financial or commodity indices, and changes in value of assets and price levels in general" (id., at 2054 [emphasis added]). In addition to providing useful historical insights and context concerning the sweep of coverage and reimbursements payable out of the Security Fund, these observations and understandings also suggest that, by denying coverage of Royal's claims for postliquidation interest, the Superintendent is seeking to garner a retroactive functional effect from the 1989 amendment, even though the statute was intended to provide only a prospective change (compare, Majewski v Broadalbin-Perth Cent. School Dist, 91 NY2d 577).
Appellant contends that the lower courts erred in awarding Royal postliquidation interest and attorney's fees. In furtherance of this assertion, he advances two statutory arguments, and further contends that the lower courts should have deferred to his restrictive interpretation, as neither irrational nor unreasonable.
The Superintendent of Insurance, as administrator of the Security Fund (a role distinct from that as Liquidator in this particular circumstance [see, Insurance Law § 7601 (e)]), has authority to "prescribe [,] withdraw or amend regulations interpreting the provisions of [the Insurance Law] and governing the procedures to be followed in the practice of the department" (Insurance Law § 301 [c], [d]; see, Matter of Consolidated Mut. Ins. Co. [Arcade Cleaning Contrs. — Superintendent of Ins.], 60 NY2d 1, 8). To be sure, when the Superintendent's "interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom, the courts regularly defer" to that interpretation unless it is irrational or unreasonable (Kurcsics v Merchants Mut. Ins.. Co., 49 NY2d 451, 459; see, Paramount Communications v Gibraltar Cas. Co., 90 NY2d 507, 513-514, rearg denied 90 NY2d 1008; Matter of Consoli dated Mut. Ins. Co. [Arcade Cleaning Contrs. — Superintendent of Ins.], supra, 60 NY2d, at 8).
Where, however, as here, "the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent, there is little basis to rely on any special competence or expertise of the administrative agency" (Kurcsics v Merchants Mut. Ins. Co., supra, 49 NY2d, at 459). The questions in this case relate to what the Legislature allowed or prohibited under the Security Fund scheme— matters substantive and preserved for independent judicial assessment. Judicially engrafted public policy, as urged by appellant, cannot trump or amend a legislatively enacted formula for reimbursements, reasonably plain on careful and appropriate analysis.
III.
A.
We turn then to the appellant's statutory interpretation claim that Insurance Law § 7434 (b) prohibits the Security Fund from paying postliquidation interest on Royal's claims. That section states:
"No creditor shall be entitled to interest on any dividend by reason of delay in payment of such dividend" (Insurance Law § 7434 [b]).
The lower courts held that this prohibition applied to claims against the estate of a bankrupt-insurer, not to reimbursements sought discretely from the Security Fund.
The Security Fund is governed by article 76 of the Insurance Law and the Liquidator acknowledges that section 7434 (b) does not, by its own terms, apply to the Security Fund but, rather, applies to liquidation estates. Instead, he constructs a tenuous thesis around the facial inapplicability of section 7434 (b) to the Security Fund, arguing that section 7434 (b) applies to the Security Fund by linkage through Insurance Law § 7603 (a) (1). That provision states:
"The property/casualty insurance security fund shall be used in the payment of allowed claims remaining unpaid, in whole or in part, by reason of the inability due to insolvency of an authorized insurer to meet its insurance obligations under policies" (Insurance Law § 7603 [a] [1] [emphasis added]).
The Superintendent hooks up the theory by the assertion that the Security Fund is permitted to make payment only upon an "allowed claim," which section 7602 (g) defines as:
"a claim which has been allowed by the court in a proceeding finder article seventy-four of this chapter" (Insurance Law § 7602 [former (g)]).
The final locution is that since section 7434 (b) prohibits the payment of postliquidation interest, a claim for postliquidation interest is not an "allowed claim" which is payable even by the article 76 Security Fund.
The plain answer to this circumnavigation and interlineation of the statutory language is that the inclusion of the term "dividends" and the absence of the term "payments" in section 7434 (b) unravels the too-finely spun argument. Those specifications essentially demonstrate that the limitation in section 7434 (b) does not and should not apply to claims against the Security Fund but, rather, should be confined to claims only against insolvent estates.
Indeed, Royal cogently litanizes that distributions to claimants from the Security Fund are consistently referred to as payments (see, e.g., Insurance Law § 7603 [a] [1] ["The property /casualty insurance security fund shall be used in the payment of allowed claims remaining unpaid, in whole or in part, by reason of the inability due to insolvency of an authorized insurer to meet its insurance obligations under policies"] [emphasis added]; Insurance Law § 7603 [a] [2] ["No payment from the property / casualty insurance security fund shall be made to any person who owns or controls ten percent or more of the voting securities of the insolvent insurer and no payment on any one claim shall exceed one million dollars, provided that the amount of payment on a claim and the aggregate for all claims shall be further limited by the provisions of paragraph two of subsection (g) of section seven thousand six hundred two of this article"] [emphasis added]; Insurance Law § 7603 [c] [1] ["Whenever the superintendent determines that the net value of the property / casualty insurance security fund is at least one hundred fifty million dollars, no further contributions shall be made after the fund year in which the determination is first made, but if thereafter the superintendent determines that payments made from the fund by the commissioner to the superintendent have reduced the net value to an amount less than such amount, the superintendent shall cause contributions to be resumed"] [emphasis add ed]; Insurance Law § 7608 [a] ["Payments from the funds shall be made by the commissioner to the superintendent"] [emphasis added]; Insurance Law § 7608 [b] [1] ["Payments from the funds upon allowed claims give no right of recovery by the commissioner against principals or assureds under policies of insurance or surety bonds"] [emphasis added]; Insurance Law § 7608 [c] ["No payment from the funds shall exceed the limit of liability provided for in the insurance policy or surety bond"] [emphasis added]).
On the other hand, distributions from insolvent estates are treated and referred to as dividends (see, e.g., Insurance Law § 7434 [b] ["No creditor shall be entitled to interest on any dividend by reason of delay in payment of such dividend"] [emphasis added]; Insurance Law § 7434 [c] ["Any claimant of another state or foreign country who is entitled to, or receives, a dividend upon his claim shall not be entitled to any further dividend until all other claimants of the same class irrespective of residence shall have received an equal dividend upon their claims"] [emphasis added]).
Royal emphasizes that section 7434 (a) refers to both types of distributions — payments and dividends — and presses that this recognition of the different categories and the reference to only dividends (distributions from insolvent estates) in section 7434 (b) manifests the legislative intention to include only distributions from an insolvent estate.
We are satisfied that the weight of analysis, authority and sustainable interpretation of these complex, regulatory and security-type statutes support the lower courts' determinations that the prohibition of section 7434 (b) against the payment of interest applies to claims against liquidation estates only. It has no relevant or dispositive impact, in the circumstances presented here, to the Security Fund, as to pre- or postliquidation interest.
We are mindful of the correct observation by the Superintendent concerning an historical common-law aspect. That rule showed that, in the distribution of the assets of an insolvent company, a liquidator was prohibited from paying interest on claims against funds unless an estate proved sufficient to discharge the principal claims in full, with surplus sufficient to pay interest (see, Matter of People [Norske Lloyd Ins. Co.], 249 NY 139, 146-147; People v American Loan & Trust Co., 172 NY 371, 379, remittitur amended 177 NY 467). The observation, however, fails to connect a compelling reason for this common- law limitation, which governs liquidation estates, to carry over and apply to this statutory Security Fund, unless the Legislature says so.
In fact, on one other occasion, this Court rejected the argument that the common-law prohibition against postliquidation interest should apply to a statutory fund. In Matter of People (Norske Lloyd Ins. Co.) (249 NY 139, supra), the insolvent insurance company, a Norwegian corporation, had been required by the Insurance Law to deposit securities with the State Insurance Department as a prerequisite to doing business in the State. When the corporation became insolvent, liquidators were appointed. Claimants who dealt with the company in the United States were entitled to the protection of the statute and to share in the distributions made under the statute. Other creditors, who dealt with foreign branches of the company, were entitled to share only in the distribution of assets by the liquidators. After the statutory fund paid the claims of eligible creditors, a large surplus remained.
The question presented for this Court's resolution was whether those creditors, who had received payment from the fund, were also entitled to interest upon their claims which accrued during the liquidation period. Although claimants eligible for coverage from the statutory fund had their principal claims paid in full, even after transmission of the fund surplus to the liquidators, those claimants who were not eligible for fund coverage would receive dividends amounting to barely 40% of their claims. The Appellate Division held that, under these circumstances, the fund could not pay interest (id., at 145-146).
This Court reversed and noted the general rule that " 'after property of an insolvent passes into the hands of a receiver or of an assignee in insolvency, interest is not allowed on the claims against the funds' " (id., at 146, quoting Thomas v Western Car Co., 149 US 95, 116-117). Noting that the assets in the fund, which was administered by the Superintendent of Insurance, were more than sufficient to pay the claims, with interest, of all creditors eligible for fund coverage (id., at 147), the Court stated nevertheless that it could not "escape the conclusion that the Legislature in providing carefully for the deposit here of capital by the foreign company for the security and protection of those who transact business with the company here intended to provide protection as complete as can be given to them through the liquidation of the assets or capital so deposited for their benefit" (id., at 149 [emphasis added]). Thus, the Court determined that the creditors were entitled to postliquidation interest from the fund. In sum, Norske Lloyd buttresses our conclusion that, in the absence of a sustainable manifestation that the Legislature, when it created the statutory Security Fund, adopted comparable common-law limitations of the kind proposed in this case by appellant, that limitation does not apply.
The purpose of the common-law rule was to satisfy all creditors equally and to preserve the limited funds of the estate of an insolvent insurer. The Security Fund, however, serves a fundamentally different purpose, though its assets are also entitled to their own statutory protections. In accordance with the intended goal of article 76 security funds, "liability may extend beyond the assets of the defunct insurance company, as such claims may eventually be allowed against the insurance security fund established pursuant to article 76" (compare, Matter of Transit Cas. Co. [Digirol — Superintendent of Ins.], 79 NY2d 13, 23-24 [Kaye, J., dissenting], cert denied 506 US 869).
The appellant Superintendent's "allowed claim" argument is also unavailing. Postliquidation interest may appropriately constitute an allowed claim. "The rule that interest is not allowed after the property of an insolvent has passed into the hands of an official liquidator applies only in the distribution of the proceeds of the property by the liquidator where the proceeds are insufficient to pay all creditors in full" (Matter of People [Norske Lloyd Ins. Co.], 249 NY 139,147, supra). Indeed, in this case, although insolvent Union's estate assets are evidently insufficient to pay all estate claims in full, no comparable plight is advanced with respect to the Security Fund's inability to pay claims in accordance with its statutory mission, with interest.
Notably, the Superintendent suggests that payment of interest in this case might create the possibility that additional premiums will be required to replenish the Fund earlier than contemplated by the extant statutory schedule. This speculation does not warrant a judicial engraftment of ineligibility for payments under section 7434 (b), which, on its face, is inapplicable to article 76 and the Security Fund. That kind of judicial soldering might functionally cut off part of an otherwise legitimate statutory repayment.
In addition, the Superintendent's argument that Matter of Professional Ins. Co. (Jason — Superintendent of Ins.) (67 AD2d 850, affd for reasons stated at App Div 49 NY2d 716) supports this "allowed claim" argument is overstated and his reliance is unpersuasive. In Jason, the claimant submitted an untimely proof of claim in a liquidation proceeding. Pursuant to then-section 543 of the Insurance Law, the claim was marked "deferred," which could be paid only if all timely filed claims were paid in full. The lower court qualified the claim as timely, and admitted it to participation in the Security Fund, stating that no prejudice would arise by granting that relief (id., at 850). The Appellate Division reversed, stating that the Security Fund was available for only allowed claims, and that "others, such as petitioner's 'deferred' claim, must look only to the surplus, if any, of the insurer's assets remaining after payment in full of all 'allowed claims' " (id., at 850-851). This fact-specific . holding relating to the allowance of "deferred" claims in no way justifies the categorical preclusion now urged by the Superintendent in this case — that postliquidation interest never constitutes an allowed claim payable out of the Security Fund.
Pertinently, the legislative history for the predecessor of Insurance Law § 7434 (b) (former section 545 [1-a] had substantially the same language as the current section) supports the narrower application of section 7434 (b) found by the lower courts. The predecessor to section 7434 (b) was enacted specifically to overrule Matter of Consolidated Indem. & Ins. Co. (281 NY 680, affg 256 App Div 604, rearg denied 281 NY 830). It had allowed a sympathetic creditor to recover interest on a claim where the Superintendent had unsuccessfully litigated the claim. In support of the overruler legislation, the Insurance Department noted that its purpose was "to eliminate the liability of an estate in liquidation for interest on dividends" (Mem of NY St Ins Dept, Bill Jacket, L 1940, ch 621 [emphasis added]).
The plain language of section 7434 (b) indicates that the prohibition of the payment of interest applies in the limited circumstance of the payment of a delayed or deferred claim in an insolvent estate, rather than to payment from the Security Fund. As noted, the legislative history of the predecessor to section 7434 (b) strongly comports with this assessment. The determination of every level of judicial review .that Insurance Law § 7434 (b) is inapplicable to the Security Fund is finally underscored by the fact that its predecessor was enacted prior to the creation of the Security Fund.
Notably, because we agree with Royal that section 7434 (b) does not prohibit the payment of postliquidation interest, we need not address or settle Royal's argument or the Liquidator's countercontention as to the precedential sweep of Matter of Union Indent. Ins. Co. (Soleo Plumbing Supply) (199 AD2d 209, 212, lv denied in part 83 NY2d 944 [Appellate Division modified Supreme Court's order disallowing a claim for postliquidation interest, and allowed the claim, stating that because the evidence did not indicate that the funds were insufficient to pay all claims in full with interest or that the awarding of interest would impose liability greater than the amount of Union's bonds, the general rule that interest is not allowed after the property of an insolvent has passed into the hands of an official liquidator was not applicable]).
B.
We must also consider another strand of the Superintendent's second statutory construction argument — that Insurance Law § 7608 (c) prohibits the payment of interest and attorney's fees in this case because awarding these items aggregates the total payment over the limit of liability on the surety bonds. Section 7608 (c) states:
"No payment from the funds shall exceed the limit of liability provided for in the insurance policy or surety bond" (emphasis added).
The Superintendent argues that section 7608 (c) prohibits the Fund from paying interest and attorney's fees where these payments would exceed the face limit of the insuring instrument, and that the term "limit of liability" refers to the amount set forth on the face of the insuring instrument, exclusive of any additional or supplementary payments which may be required under the terms of the instrument. In this case, the Superintendent posits that the limit of liability is equal to the principal amount of each bond, i.e., $42,500, or $3,087,875.08 as the aggregate principal under the bonds.
Royal emphasizes an analytical weakness of the Superintendent's argument that the limit of liability of the bonds in this case should be limited to the principal amount of each bond. After all, the Superintendent evidently acquiesces (albeit not formally conceding the point) in the Security Fund's responsibility in this case and circumstance to pay preliquidation interest on these bonds, and opposes only postliquidation interest payments. Royal argues that submission to preliquidation interest responsibility belies the Superintendent's contention that the limit of liability provision caps the principal recovery amount of each bond. Royal argues that the Superintendent's stance on this issue creates an unsupportable distinction between pre- and postliquidation interest which does not exist in the statute, nor does logic or practical appreciation or application support this bifurcated treatment.
In addition, the Superintendent's postargument acknowledgment that the cost of defense may qualify for Security Fund coverage further undercuts the logic and cogency of his argument that the limit of liability is strictly limited to the principal amount of the bonds. The Superintendent must adopt policies in a coherent and consistent manner with appropriate regard for those previously taken or must explain the reasons for variations among policies (see, Matter of Field Delivery Serv. [Roberts], 66 NY2d 516, 520). The Superintendent fails to proffer a sustainable distinction between allowing the Security Fund to pay preliquidation interest and defense costs, while prohibiting payment of postliquidation interest. In sum, we are satisfied that Royal has the better of these arguments and reject the Superintendent's strained interpretation of section 7608 (c) in this respect, as did the lower courts.
Although noting that "a literal reading of the statute favors the Liquidator's interpretation," the trial court also determined that the Superintendent's interpretation of the term "limit of liability" would defeat the core purpose of the 1984 recodification of the Insurance Law — "to recodify, without substantive change, the insurance law in effect immediately prior to the effective date of this chapter" (Insurance Law § 102). Section 330 (2) and section 333 (2) of the former Insurance Law pertained to motor vehicle insurance policies which, by their terms, have an established limitation of liability represented by the coverage. In contrast, the property and liability insurance provision of former Insurance Law § 334 (2) contained no limit of liability provision. Because no substantive change was intended by the 1984 recodification, no justification exists to transfer the limit of liability clause and analysis, as appellant proposes to do with respect to the bonds at issue in this case.
Moreover, the financial guaranty bonds at issue expressly provide for the payment of interest and attorney's fees ("Surety further agrees with the Bank, to pay to the Bank upon receipt by the Surety of the Bank's demand therefor, all costs and expenses [including but not limited to court costs, attorneys' fees and other legal expenses] incurred as expended by the Bank in connection with the enforcement of this Bond, together with interest on amounts recoverable under this Bond from the time such amounts become due until payment at the rate of 12% per annum" [emphasis added]). Thus, even if the term "limit of liability" was applicable here, a potent and potential contradiction would arise that would favor a rejection of a particular limit on payment from the Security Fund against the express terms and agreement under the surety bond instruments themselves. On their face, they expressly provide for interest on amounts recoverable under the bonds from the time the amounts become due until payment, and for the payment of court costs, attorney's fees and other legal expenses incurred as expended by Royal in enforcement of the bonds.
Indeed, the statements made by then-Governor Cuomo and the State Executive Department in support of the 1989 legislation, removing financial guaranty insurance from the ambit of Security Fund coverage, fortify the historical rooting and cogency of the determination by the lower courts in this case that full interest was an integral component of the obligation and risk which the financial guaranty bonds were designed to protect and for which the Security Fund is responsible in this instance.
IV.
At this point in the opinion, it is necessary to respond discretely to some of the dissent's disagreements with our holding. The initial and main point of departure for the dissent involves the degree of deference which should be afforded to the Superintendent's handling of the statutory provisions governing "this dispute. The dissent posits that "until today, whenever this Court has been called upon to interpret the statutory provisions governing the Security Fund, we have never annulled a reasonable statutory construction by the Superintendent" (dissenting opn, at 130). As an initial matter, we do not share the dissent's view that the Superintendent's strained circumnavigation of articles 74 and 76 of the Insurance Law, to justify his result, is reasonable.
Moreover, it is useful to remember at this juncture that in this very proceeding, this Court has already affirmed the lower courts' rejection of the Superintendent's construction of statutory provisions governing the Security Fund at an earlier stage of this saga (see, Matter of Royal Bank & Trust Co. v Superintendent of Ins., 148 Misc 2d 863, 866, affd for reasons stated below sub nom. Matter of Union Indent. Ins. Co., 179 AD2d 374, also affd for reasons stated at Sup Ct, except insofar as discussion of superseding legislation and the reasons for its enactment 80 NY2d 983, supra [Superintendent as administra tor denied indemnification finding that the bonds did not satisfy the criteria set forth in Insurance Law § 7602 (g) and § 7603 (a) (1) (B)]). This case history serves as a virtual template against heightened or special deference to the Superintendent's interpretations in this unique, complicated set of circumstances including its entire, peculiar litigation history. Contrary to the dissent's attribution we neither express nor imply any technical precedential or law-of-the-case attributes to the earlier adjudications in this very case; they do, however, possess contextual value, relevance and cogency (dissenting opn, at 130-131).
Although we do not disagree with the dissent's statement that the resolution of the postliquidation interest issue "requires us to grapple with the intricate interplay between the Security Fund and an insolvent's liquidated estate" (id., at 131), the fact remains that this case presents questions of "pure statutory reading and analysis" (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459, supra). The questions presented here — whether Insurance Law § 7434 (b) and § 7608 (c) prohibit the Security Fund from adding postliquidation interest and attorney's fees to Royal's claims — require an examination of various statutory provisions contained in articles 74 and 76 of the Insurance Law, the legislative history of these provisions, and case precedent. This exercise does not involve "knowledge and understanding of underlying operational practices," nor does it entail "an evaluation of factual data and inferences to be drawn therefrom" (id., at 459). Thus, because the questions presented are ones of "pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent," no justification for judicial deference to the Superintendent's interpretations is warranted (id., at 459).
Finally in this regard, it is notable that most of the cases cited by the dissent as support for the position that this Court should defer to the Superintendent's construction are distinguishable in that they involve the agency's interpretation of a regulation which the agency promulgated, rather than a statute (see, Matter of John Paterno, Inc. v Curiale, 88 NY2d 328 [Appellate Division properly deferred to Superintendent's interpretation of a regulation as barring broker from placing claims-made liquor liability policies in New York through an excess line broker]; Matter of American Tr. Ins. Co. v Abdelghany, 80 NY2d 162 [Insurance Law § 5103 (e) and the implementing regulation requiring New York automobile insurance policies to provide the minimum uninsured motorist coverage mandated by the law of another State when the insured automobile is involved in an accident in that State are valid]; Matter of New York Pub. Interest Research Group v New York State Dept. of Ins., 66 NY2d 444 [Superintendent's regulations using aggregate industry data rather than individual carriers' line-by-line results to determine excess profit to be refunded on motor vehicle insurance policies not inconsistent with Insurance Law § 2329]; Ostrer v Schenck, 41 NY2d 782 [regulation adopted by the Superintendent to control the masking of a group insurance arrangement is not in conflict with the Insurance Law and is a reasonable exercise of the Superintendent's broad power to protect beneficiaries of union-management welfare funds from abuses]; Breen v Cunard Lines S. S. Co., 33 NY2d 508 [regulation permitting insurance policy to limit coverage of liability for bodily injury or property damage sustained in the process of loading or unloading to a lessee or borrower of the vehicle, or an employee of the named insured is valid and not in conflict with statutory provisions]).
Because the dissent's overarching disagreement with the majority's rationale is so dependent on its conclusion that this Court should defer to the Superintendent's implementation of the statutory provisions at issue, we need not address further features of the dissent's prongs except in these additional respects.
We are not persuaded by the dissent's acceptance of Royal's thesis that the payment/dividend distinction is unimportant because "neither the word payment nor dividend in section 7434, or for that matter, any part of article 74, was intended to refer expressly to the Security Fund — rendering any payment/ dividend distinction in article 74 meaningless for our purposes" (dissenting opn, at 133). First, although the dissent correctly notes that the predecessor statute to section 7434 (b) was enacted prior to the creation of the Security Fund, the distinction between payments and dividends predates even the 1932 statute which, according to the dissent, is the source of the word "payments" in section 7434 (a) (id., at 133). In Matter of People (Norske Lloyd Ins. Co.) (249 NY 139, supra), this Court considered whether certain creditors were entitled to interest from a statutory fund. The Court consistently referred to distributions from the fund as payments ("remaining after the payment of those creditors who are entitled to payment [from the fund]" [id., at 146] [emphasis added]) ("there will be a large surplus of assets iii his charge after the payment of the claims of creditors entitled to share in the distribution of assets here [from the fund]" [id., at 146] [emphasis added]). In contrast, the Court referred to distributions made by the liquidator from the insolvent estate as dividends ("the American and foreign creditors, who dealt with the foreign branches of the company and who may share only in the distribution by the foreign liquidator, will not receive dividends amounting to as much as forty per cent of their claims" [id., at 146] [emphasis added]; see also, People v American Loan & Trust Co., 172 NY 371, 376, remittitur amended 177 NY 467, supra [used word "dividends" when discussing payments from insolvent estate]).
The dissent also proposes that our interpretation of "allowed claim" is "flatly contradicted" by our holding in Matter of Professional Ins. Co. (Jason — Superintendent of Ins.) (67 AD2d 850, affd for reasons stated at App Div 49 NY2d 716, supra) (dissenting opn, at 134). We do not accord the same sweeping effect to Jason as does the dissent that "claims must be actually, as opposed to hypothetically, allowed by the Liquidator to be carried over against the Security Fund" (dissenting opn, at 134). In any event, even under the dissent's view of Jason, the Superintendent's argument fails. In Jason, the entire claim was marked "deferred" because claimant had failed to submit a timely proof of claim. Royal's application for postliquidation interest is not a separate claim but, rather, is an integral component of the claim which has already been determined to be an allowed claim. We reject flatly the implicit premise contained in the dissent's overreliance on Jason that two different claims are at issue here: the claim for the principal amount and the claim for interest. Instead we view Royal as having an integrated claim which Supreme Court has determined, and this Court has affirmed, to be entitled to Security Fund coverage (see, Matter of Royal Bank & Trust Co. v Superintendent of Ins., 148 Misc 2d 863, 866, affd for reasons stated below sub nom. Matter of Union Indem. Ins. Co., 179 AD2d 374, also affd for reasons stated at Sup Ct, except insofar as discussion of superseding legislation and the reasons for its enactment 80 NY2d 983, supra).
The dissent further endorses the Superintendent's argument that the payment of postliquidation interest from the Security Fund would frustrate the purpose of section 7434 (b) because the Security Fund would then have a subrogation claim, pursuant to section 7609 (a), in the liquidation proceeding for the amount paid from the Fund, including interest. The dissent's concern that the subrogation rights afforded to the Security Fund by section 7609 (a) will result in the Security Fund, if it pays postliquidation interest to Royal, having a greater claim against the liquidation estate than Royal itself would have had, thereby increasing the estate's over-all debt to the detriment of all other creditors sharing in the liquidated assets of the estate and frustrating the purpose of section 7434 (b) (dissenting opn, at 135) is theoretically and practically flawed.
As noted above, the Security Fund was created in order to provide payment which would be "100 cents on the dollar" and which "would be made expeditiously, in the first instance, by the Fund itself." (1969 Report to Governor by Insurance Dept, "The Public Interest Now in Property and Liability Insurance Regulation," at 61.) It was also intended that the Security Fund — not the policyholder — would then abide the results of the liquidation proceeding. (Id.) The dissent's argument implicitly indicates an underlying objection to Royal receiving a greater amount from the Security Fund than it would have received from the liquidation estate. However, the very purpose of the Security Fund is to provide those eligible for its coverage with greater protection than they would otherwise receive from the liquidation estate. Were the Security Fund limited to paying the amount recoverable from Union's estate, Royal presumably would not have gone to such litigation lengths — successfully — to have its claims declared eligible for Security Fund coverage. The Security Fund would hardly be "an extraordinary benefit" if the scope of its coverage were as limited as the dissent posits (Matter of Royal Bank & Trust Co. v Superintendent of Ins., 148 Misc 2d 863, 866, supra). In sum, once the court determined that Royal's claims were eligible for Security Fund coverage, it necessarily followed that Royal would receive a greater payment from the Fund than it would receive as a dividend from the estate and, thus, by logical conclusion, the Security Fund would have a greater subrogation claim against the estate pursuant to section 7609 (a) than Royal would have had in the first instance.
The language of section 7609 (a) also fortifies the conclusion that the subrogation rights afforded to the Security Fund by that section do not undercut the majority holding that postliquidation interest should be available in this case. Section 7609 (a) states that "[t]he commissioner shall be entitled to a valid claim against an insurer which becomes insolvent or unable to meet its insurance obligations, or its liquidator, rehabilitator, conservator, receiver, or trustee in bankruptcy, in an amount equal to the liabilities of the insurer paid from the fund less the net payments paid into the fund by such insurer" (emphasis added). This section 7609 (a) offset manifestly indicates, therefore, that the Security Fund would not garner a dollar-for-dollar subrogation benefit against the liquidation estate. Thus, the dissent's concern that the Security Fund might secure a greater claim against the liquidation estate than Royal itself would have had is unfounded and exaggerated for purposes of making an argument that is not essentially dispositive of the fundamental issue in this case and appeal.
In any event, even accepting arguendo the dissent's position that the subrogation rights afforded to the Security Fund by section 7609 (a) present arguable policy implications, our reading of sections 7434 (b) and 7608 (c) as well as the pertinent legislative history does not require that we nullify the endgame of this perpetual motion machine litigation. We are satisfied that the statutes and their history lead to the conclusion that postliquidation interest is payable on these claims. To the extent that this result may theoretically have an unintended subrogation impact on the relationship between sections 7434 (b) and 7609 (a), that facet would be up to the Legislature to deal with and rectify.
The dissent even urges that because section 7608 (c) specifically refers to "funds," and article 76 covers only two funds— the Public Motor Vehicle Liability Security Fund and the Property/Casualty Insurance Security Fund — the statute necessarily extends to payments from the Security Fund. Because we hold, however, that the face of the bonds expressly provides for interest and attorney's fees and, thus, adding these components to the principal claim does not cause payment to exceed the "limit of liability," we need not consider Royal's argument that the legislative history of section 7608 (c) shows that the reference to "funds" in the plural was an error made during recodification. We see no reason to expand this opinion any further to respond to the dissent's remaining disagreements with the majority holding since we believe those views are sufficiently unpersuasive on their own face and expression.
V.
In sum, we hold that this controversy should finally be concluded with payment from the Security Fund on Royal's claims, including appropriate postliquidation interest and attorney's fees. Appellant Liquidator's arguments, adopted by the dissent, that Insurance Law § 7434 (b) and § 7608 (c) should be construed to prohibit satisfaction of these amounts from the Security Fund's obligation to pay fail to persuade us that the lower courts erred.
Accordingly, the judgment of Supreme Court and the order of the Appellate Division brought up for review should be affirmed, with costs.