Opinion ID: 1515959
Heading Depth: 1
Heading Rank: 1

Heading: Liquidator's Authority

Text: First, we address the ACE Companies' and BMC's argument that the superior court erred in holding that the liquidator has the authority under RSA chapter 402-C to enter into the proposed agreement. In particular, they argue that: (1) the liquidator's actions were inconsistent with RSA chapter 402-C because they violated the mandatory priority distribution in RSA 402-C:44; (2) nothing in the statute indicates that the legislature intended to grant the liquidator unfettered discretion; (3) courts in other states have refused to depart from statutory mandates, even where to do so would increase estate assets; and (4) allowing a deviation from the clear requirements of RSA 402-C:44 would open the door to similar agreements with other creditors or attempts by creditors to enhance their priority. In response, the liquidator asserts that: (1) RSA chapter 402-C grants the liquidator broad authority to collect assets and gives actual and necessary collection costs Class I priority so that payment of those costs is consistent with the provisions of RSA 402-C:44; (2) RSA 402-C:44 contains no bar on payment of administration costs to lower priority creditors; and (3) the drafting notes to the most recent version of the Insurer Receivership Model Act specifically state that a liquidator has the right to pay Class I administration costs to persons in any priority class where those . . . payments assist or result in the collection or recovery of property of the insurer for the benefit of creditors of the estate. We begin our analysis by examining the language of the relevant provisions of RSA chapter 402-C. The interpretation of a statute is a question of law, which we review de novo. We are the final arbiters of the legislature's intent as expressed in the words of the statute considered as a whole. We first examine the language of the statute, and, where possible, ascribe the plain and ordinary meanings to the words used. When a statute's language is plain and unambiguous, we need not look beyond it for further indication of legislative intent, and we will not consider what the legislature might have said or add language that the legislature did not see fit to include. Woodview Dev. Corp. v. Town of Pelham, 152 N.H. 114, 116, 871 A.2d 58 (2005) (citations omitted). RSA 402-C:1, IV (2006) states the general purpose of chapter 402-C and provides, in pertinent part: The purpose of this chapter is the protection of the interests of insureds, creditors, and the public generally. . . . This is achieved through, among other things: (a) Early detection of potentially dangerous conditions in an insurer, and prompt application of appropriate corrective measures . . . (b) Improved methods for rehabilitating insurers . . . and (c) Enhanced efficiency and economy of liquidation. . . . RSA 402-C:1, IV(a)-(c). RSA 402-C:25 sets forth an extensive, nonexclusive list enumerating the powers of the liquidator, and provides that subject to the court's control, a liquidator may [c]ollect all debts and moneys due and claims belonging to the insurer, and do such other acts as are necessary or expedient to collect, conserve or protect its assets or property. . . . RSA 402-C:25, VI. The statute also authorizes the liquidator to [d]efray all expenses of taking possession of, [and] conserving . . . property of the insurer. RSA 402-C:25, IV. The statute further provides the liquidator with the authority to do such other acts not herein specifically enumerated or otherwise provided for as are necessary or expedient for the accomplishment of or in aid of the purpose of liquidation. RSA 402-C:25, XXII. Thus, on its face, RSA 402-C:25 grants the liquidator broad authority to take all necessary and appropriate action in collecting the assets of an insolvent insurer. Consistent with this authority, the statute provides that the necessary costs of collecting assets are a principal expense, giving Class I priority to administration costs, which are defined as [t]he costs and expenses of administration, including but not limited to the following: the actual and necessary costs of preserving or recovering the assets of the insurer. . . . RSA 402-C:44, I. The ACE Companies and BMC contend that the priority provisions of RSA 402-C:44 facially prohibit administrative cost payments to an entity which is also a lower priority creditor. However, the plain language of RSA chapter 402-C contains no bar on payment of administration costs to lower priority creditors in order to collect an asset. The ACE Companies assert that courts in other states have refused to depart from statutory mandates, even when to do so would increase the assets of an insolvent insurer's estate, citing Kemper Reinsurance Co. v. Corcoran (In the Matter of Liquidation of Midland Ins. Co.), 79 N.Y.2d 253, 582 N.Y.S.2d 58, 590 N.E.2d 1186 (1992), and Prudential Reinsurance Co. v. Superior Court, 3 Cal.4th 1118, 14 Cal.Rptr.2d 749, 842 P.2d 48 (1992), for support. While it is accurate that in both cases the courts reference the general rule of adhering to the priority of claims in the statutory scheme, both cases address a different issue not relevant to our discussion; namely, whether reinsurance debts and credits generated between a reinsurer and the original insurer under the terms of their reciprocal contracts may be set off when the original insurer becomes insolvent. See Midland Ins. Co., 582 N.Y.S.2d 58, 590 N.E.2d at 1187-88, 1191; Prudential Reinsurance Co., 14 Cal.Rptr.2d 749, 842 P.2d at 50, 61-62. The liquidator directs our attention to the most recent revision of the Insurer Receivership Model Act (IRMA), adopted by the National Association of Insurance Commissioners (NAIC), which explicitly recognizes that administrative cost payments to creditors to assist in the collection of assets for the benefit of a broad body of creditors are consistent with the priorities of distribution. He argues that we may properly consider IRMA in this context, because not only is RSA chapter 402-C consistent with IRMA, but we have previously relied upon NAIC comments to the Post-Assessment Property and Liability Insurance Guaranty Association Model Act, see Benson v. N.H. Ins. Guaranty Assoc., 151 N.H. 590, 599, 864 A.2d 359 (2004). The New Hampshire legislature has not adopted IRMA. However, RSA chapter 402-C is nearly identical to the 1967 Wisconsin Insurers Rehabilitation and Liquidation Act (Wisconsin Act), which the NAIC adopted as the Model Act. Compare WIS. STAT. §§ 645.01-645.90 (1967) with RSA 402-C:1-:61 (2006). See 1 Nat'l Ass'n of Ins. Comm'rs, Proceedings of the National Association of Insurance Commissioners 241 (1969). IRMA is a recent revision of the Model Act. See 3 Nat'l Ass'n of Ins. Comm'rs, Model Laws Regulations and Guidelines 555-1 to 555-96 (2006). Section 801 of IRMA is entitled Priority of Distribution, and is analogous to RSA 402-C:44. Section 801A(1) provides that the costs and expenses of administration are given Class I priority status. See id. at 555-83. Further, as in RSA 402-C:44, administrative costs and expenses include [t]he actual and necessary costs of preserving or recovering the property of the insurer. . . . Id. In the drafting note to this subsection of section 801, the NAIC noted that: Implicit in the powers conferred on the liquidator under this Act . . . is the right, subject to approval by the receivership court, to pay Class 1 administrative costs to persons in any priority class where those Class 1 administrative cost payments assist or result in the collection or recovery of property of the insurer for the benefit of creditors of the estate. Payments of administrative costs in these circumstances do not constitute distributions so as to circumvent priority classes or establish subclasses within a class. Id. at 555-84. This note clarifies that in order to maximize the collection of estate assets, a liquidator is authorized to enter into agreements in order to encourage creditors to prosecute their claims, so long as the agreement results in a net benefit to creditors of the estate. Given the similarities between IRMA and RSA chapter 402-C, we conclude that the broad language of RSA 402-C:25 confers this same authority upon the liquidator. The ACE Companies argue that affirming the superior court's orders would set a precedent for wholesale violations of RSA 402-C:44. They contend that affirming the order would permit creditors to freely negotiate individual percentage distributions depending on the value of their claim to the liquidation. We disagree. Although RSA chapter 402-C grants the liquidator broad authority to administer liquidation proceedings, the court oversees the entire process. Therefore, any agreement negotiated by the liquidator requires court approval. See RSA 402-C:25 (the liquidator must report to the court regularly on the progress of the litigation, and any actions the liquidator takes are [s]ubject to the court's control); RSA 402-C:45, I (the liquidator should [a]s often as practicable . . . present to the court reports of claims against the insurer with his recommendations); RSA 402-C:46, I (the liquidator shall distribute assets [u]nder the direction of the court). Since the liquidator's actions are closely supervised by the court, there is little risk that the priority provisions of RSA 402-C:44 will be violated. We thus conclude that the superior court did not err in ruling that the liquidator has the authority under RSA chapter 402-C to enter into the proposed agreement.