Court Opinion

ID: 9714933
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:49:42.239579+00
Date Added: 2024-06-11T18:23:29.854354
License: Public Domain

DeBRULER, Justice,
dissenting.
A Reinsurance Treaty between Foremost and Keystone was struck and Keystone agreed to reinsure the risks which Foremost had insured, growing out of certain life and health and accident insurance. The parties and indeed the courts which have discussed this treaty have given it the appellation of reinsurance agreement. When Keystone became insolvent, Foremost commenced to pay claims and perform the other servicing functions which Keystone had assumed under the agreement as well. Keystone held and continues to hold through its liquidator premiums paid by the policyholders of Foremost for insurance policies upon which such claims are based. The issue presented to the trial court and to this Court is whether Foremost as a claimant against Keystone in liquidation is entitled to the preference of a policyholder, beneficiary, or insured as specified in Ind.Code § 27-1-4-15, adopted in 1977, since amended, which provides in pertinent part:
“Priority of claims against insolvent company. -Claims against a company declared to be insolvent under the provisions of this chapter shall be satisfied in the following order of priority:
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(3) Claims by policyholders, beneficiaries, and insured arising from and within the coverage of and not in excess of the applicable limits of insurance policies and contracts issued by the company, and liability claims against insureds which claims are within the coverage of and not in excess of the applicable limits of insurance policies and insurance contracts issued by the company and claims of the Indiana insurance guaranty association established under IC 27-6 -8 [27-6-8-1— 27- 6 -8 19] and any similar organization in another state.
(4) All other claims.”
In reading this provision it is at first evident that the class sought to be given preference is not limited to policyholders, but is extended to include beneficiaries and insureds as well. It is not limited to relationships growing out of insurance policies, but extends as well to those stemming from insurance contracts. The purpose of establishing this class of claimants is to subject the assets of insurance companies in liquidation to the fulfillment of their obligations to policyholders, beneficiaries and insureds arising from insurance policies and contracts, before subjecting them to the payment of other types of obligations. In so *1099doing, insurance type expectations are given preference over others and are therefore more likely to be fulfilled.
The definitions section of the statute states that insurance “means ... an agreement by which one party ... in consideration of a price paid, adequate to the risk, becomes security to the other against loss by certain specified risks . . . .” Ind.Code § 27-1-2-3. The reinsurance contract between Keystone and Foremost satisfies this definition and is therefore “insurance” within the meaning of that term as used in the statute. According to its provisions, in consideration of a price specified and paid, adequate to the risk, Keystone secured Foremost against the risks specified in the treaty. Furthermore, outside the four corners of the statute, reinsurance is generally considered to be a type of insurance. Black’s Law Dictionary defines reinsurance in the following manner:
“A contract by which an insurer procures a third person to insure him against loss or liability by reason of original insurance. A contract that one insurer makes with another to protect the latter from a risk already assumed. It binds the reinsurer to pay to the reinsured the whole loss sustained in respect to the subject of the insurance to the extent to which he is reinsured.” Black’s Law Dictionary 1157 (5th ed. 1979)
Reinsurance is simply a risk spreading device utilized by insurance companies; it is a type of business insurance for insurance companies.
According to the same definition section an insurer “means a company making any kind or kinds of insurance.” Keystone is an “insurer” within the meaning of that term as used in this statute. This follows necessarily since it makes a kind of insurance, namely, reinsurance.
There is no definition of the term “insured” as used in Ind.Code § 27-1-4-15. However, for a statute to include reinsurance contracts within the meaning of “insurance” and to include companies engaging in making reinsurance within the meaning of “insurer” and then exclude reinsured companies from the meaning of the term “insureds” would be unlikely and even unnatural. Certainly, there is to be found no language which expressly excludes rein-sured insurance companies from the category of “policyholders, beneficiaries, and insureds”.
The conclusion flows naturally upon consideration of these definitions and the text that the treaty between Keystone and Foremost was “insurance” and that Keystone was an “insurer” and that Foremost, the claimant against the liquidator, was an “insured”. I would, therefore, conclude that Foremost’s claim is a Class 3 claim as falling with the class of “claims by . insureds arising from and within the coverage of and not in excess of the applicable limits of insurance . . contracts . issued by the company. . . ” To do otherwise is to ignore the meaning of the words used in the statute.
There arises in consideration of this case the implication that there exists an insurance language and that in this language the terms “policyholders, beneficiaries, and insureds” do not refer to reinsured insurance companies. The indications are that the term “insured” does not have a precise and narrowly conceived meaning. In Great American Ins. Co. v. Fireman's Fund Ins. Co., (2d Cir. 1973) 481 F.2d 948, a reinsurance company issued a cancellation of binder to a company it had reinsured. The document used the word “insured” and not the term “reinsured.” The court reasoned that common sense and the practical usage of the term “insured” warranted the conclusion that “reinsured” had been meant.
The judgment of the trial court should be reversed and the claim of Foremost Life Insurance granted priority as a Class 3 claim.