N.J. Stat. tit. 17B, ch. 32

N.J. Stat. tit. 17B, ch. 32
in effect

N.J. Stat. § 17B:32-31 Short title, purpose of act

1. a. This act shall be known and may be cited as the "Life and Health Insurers Rehabilitation and Liquidation Act." b. The purpose of this act is the protection of the interests of insureds, claimants, creditors and the public generally through: (1) Early detection of any potentially dangerous condition in an insurer, and prompt application of appropriate corrective measures; (2) Improved methods for rehabilitating insurers, involving the cooperation and management expertise of the life and health insurance industry; (3) Enhanced efficiency and economy of liquidation, through clarification of the law, to minimize legal uncertainty and litigation; (4) Equitable apportionment of any unavoidable loss; (5) Lessening the problems of interstate rehabilitation and liquidation by facilitating cooperation between states in the liquidation process, and by extending the scope of personal jurisdiction over debtors of the insurer outside this State; (6) Regulation of the insurance industry by the impact of the law relating to delinquency procedures and substantive rules on the entire life and health insurance industry; and (7) Providing for a comprehensive scheme for the rehabilitation and liquidation of life and health insurers and others subject to this act as part of the regulation of the business of insurance, insurance industry and insurers in this State. Proceedings in cases of insurer insolvency and delinquency are deemed an integral aspect of the business of insurance and are of vital public interest and concern. L.1992,c.65,s.1.

N.J. Stat. § 17B:32-32 Application of authorized proceedings

2. The proceedings authorized by this act shall be applied to: a. All insurers who are doing, or have done, insurance business in this State, and against whom claims arising from that business may exist now or in the future. b. All insurers who purport to do insurance business in this State. c. All insurers who have insureds residing in this State. d. All other persons organized or in the process of organizing with the intent to do life or health insurance or annuity business in this State. L.1992,c.65,s.2.

N.J. Stat. § 17B:32-33 Definitions

3. For the purposes of this act: "Advance" shall have the same meaning as that term is defined at 12 C.F.R. s.1266.1. "Ancillary state" means any state other than a domiciliary state. "Commissioner" means the Commissioner of Insurance of this State. "Creditor" is a person having any claim against the insurer, whether matured or unmatured, liquidated or unliquidated, secured or unsecured, absolute, fixed or contingent. "Delinquency proceeding" means any proceeding instituted against an insurer for the purpose of liquidating, rehabilitating, reorganizing or conserving that insurer, and any summary proceeding under section 9 of this act. "Formal delinquency proceeding" means any liquidation or rehabilitation proceeding. "Department" means the Department of Insurance. "Doing business" includes any of the following acts, whether effected by mail or otherwise: (1) The issuance or delivery of contracts of life or health insurance or annuity to persons residing in this State; (2) The solicitation of applications for those contracts, or other negotiations preliminary to the execution of those contracts; (3) The collection of premiums, membership fees, assessments or other consideration for those contracts; (4) The transaction of matters subsequent to execution of those contracts and arising out of them; or (5) Operating under a license or certificate of authority, as an insurer, issued by the department. "Domiciliary state" means the state in which an insurer is incorporated or organized; or, in the case of an alien insurer, its state of entry. "Fair consideration" is given for property or obligation: (1) When in exchange for that property or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or services are rendered or an obligation is incurred or an antecedent debt is satisfied; or (2) When that property or obligation is received in good faith to secure a present advance or antecedent debt in an amount not disproportionately small as compared to the value of the property or obligation obtained. "Federal home loan bank" means a bank as defined in 12 U.S.C. s.1422(1)(A). "Foreign country" means any other jurisdiction not in any state. "General assets" means all property, real, personal or otherwise, not specifically mortgaged, pledged, deposited or otherwise encumbered for the security or benefit of specified persons or classes of persons. As to specifically encumbered property, "general assets" includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and on deposit for the security or benefit of all policyholders or all policyholders and creditors, in more than a single state, shall be treated as general assets. "Guaranty association" means the New Jersey Life and Health Insurance Guaranty Association created in subsection a. of section 5 of P.L.1991, c.208 (C.17B:32A-5) and any other similar entity now or hereafter created by any other law of this State for the payment of claims of insolvent insurers. "Foreign guaranty association" means any similar entities now in existence in, or hereafter created by, any law of any other state. "Insolvency" or "insolvent" means: (1) That an insurer: (a) is unable to pay its obligations when they are due, or (b) its admitted assets do not exceed its liabilities plus the greater of: (i) Any capital and surplus required by law for its organization; or (ii) The total par or stated value of its authorized and issued capital stock. (2) As to any insurer licensed to do business in this State, as of the effective date of this act, which does not meet the standard established under paragraph (1) of this definition, the term "insolvency" or "insolvent" shall mean, for a period not to exceed three years from the effective date of this act, that it is unable to pay its obligations when they are due or that its admitted assets do not exceed its liabilities plus any required capital contribution ordered by the commissioner under provisions of the insurance law. (3) For purposes of the definition of "insolvency" or "insolvent," "liabilities" shall include, but not be limited to, reserves required by law or by regulations of the department or specific requirements imposed by the commissioner upon an insurer at the time of admission or subsequent thereto. "Insurer" includes every person engaged as indemnitor or contractor in the business of life insurance, health insurance or of annuities and every such person subject to the supervisory authority of, or to liquidation, rehabilitation, reorganization or conservation by, the commissioner or the equivalent insurance regulator of another state; every person purporting to be engaged as indemnitor or contractor in the business of life insurance, health insurance or of annuities in this State; every person in the process of organization to become engaged as indemnitor or contractor in the business of life insurance, health insurance or of annuities; and every fraternal benefit society established pursuant to P.L.1959, c.167 (C.17:44A-1 et seq.); every mutual benefit association established pursuant to R.S.17:45-1 et seq.; every hospital service corporation established pursuant to P.L.1938, c.366 (C.17:48-1 et seq.); every health service corporation established pursuant to P.L.1985, c.236 (C.17:48E-1 et seq.); every medical service corporation established pursuant to P.L.1940, c.74 (C.17:48A-1 et seq.); every dental service corporation established pursuant to P.L.1968, c.305 (C.17:48C-1 et seq.); every dental plan organization established pursuant to P.L.1979, c.478 (C.17:48D-1 et seq.); and every health maintenance organization established pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.). "Insurer-member" means an insurer that is a member of a federal home loan bank. "Preferred claim" means any claim which is accorded priority of payment from the general assets of the insurer pursuant to the provisions of this act. "Receiver" means receiver, liquidator, rehabilitator or conservator as the context requires. "Reciprocal state" means any state, other than this State, in which in substance and effect, subsection a. of section 17 and sections 51, 52 and 54 through 56 of this act are in force, and in which provisions are in force requiring the commissioner or equivalent official to be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers. "Secured claim" means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow, or otherwise; but not including special deposit claims or claims against general assets. The term also includes claims which have become liens upon specific assets by reason of judicial process. "Special deposit claim" means any claim secured by a deposit made pursuant to law for the security or benefit of a limited class or classes of persons, but not including any claim secured by general assets. "State" means any state, district, or territory of the United States and the Panama Canal Zone. "Transfer" shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with, property or with an interest therein, or with the possession thereof, or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily, by or without judicial proceedings. The retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by the debtor. L.1992, c.65, s.3; amended 2023, c.172, s.5.

N.J. Stat. § 17B:32-34 Jurisdiction over delinquency proceedings

4. a. No delinquency proceeding shall be commenced under this act by anyone other than the commissioner and no court shall have jurisdiction to entertain, hear or determine any proceeding commenced by any other person. b. No court of this State shall have jurisdiction to entertain, hear or determine any complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation or receivership of any insurer; or praying for an injunction or restraining order or other relief preliminary to, incidental to or relating to such proceedings other than in accordance with this act. c. In addition to other grounds for jurisdiction provided by the law of this State, a court of this State having jurisdiction of the subject matter has jurisdiction over a person served pursuant to the Rules Governing the Courts of the State of New Jersey or other applicable provisions of law in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this State: (1) If the person served is an agent, broker or other person who has at any time written policies of insurance for, or has acted in any manner whatsoever on behalf of, an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer; (2) If the person served is a reinsurer who has at any time entered into a contract of reinsurance with an insurer against which a delinquency proceeding has been instituted, or is an agent or broker of or for the reinsurer, in any action on or incident to the reinsurance contract; (3) If the person served is or has been an officer, director, manager, trustee, organizer, promoter or other person in a position of comparable authority or influence over an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer; (4) If the person served is or was at the time of the institution of the delinquency proceeding against the insurer holding assets in which the receiver claims an interest on behalf of the insurer, in any action concerning the assets; or (5) If the person served is obligated to the insurer in any way whatsoever, in any action on or incident to the obligation. d. If the court on motion of any party finds that any action should as a matter of substantial justice be tried in a forum outside this State, the court may enter an appropriate order to stay further proceedings on the action in this State. e. All actions authorized pursuant to this section shall be brought in the Superior Court. L.1992,c.65,s.4.

N.J. Stat. § 17B:32-35 Restraining orders, injunctions

5. a. Any receiver appointed in a proceeding under this act may at any time apply for, and the Superior Court may grant, such restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to prevent: (1) The transaction of further business; (2) The transfer of property; (3) Interference with the receiver or with a proceeding under this act; (4) Waste of the insurer's assets; (5) Dissipation and transfer of bank accounts; (6) The institution or further prosecution of any actions or proceedings; (7) The obtaining of preferences, judgments, attachments, garnishments or liens against the insurer, its assets or its policyholders; (8) The levying of execution against the insurer, its assets or its policyholders; (9) The making of any sale or deed for nonpayment of taxes or assessments that would lessen the value of the assets of the insurer; (10) The withholding from the receiver of books, accounts, documents or other records relating to the business of the insurer; or (11) Any other threatened or contemplated action that might lessen the value of the insurer's assets or prejudice the rights of policyholders, creditors or shareholders, or the administration of any proceeding under this act. b. The receiver may apply to any court outside of this State for the relief described in subsection a. of this section. c. Notwithstanding any provision of law to the contrary, the commencement of a delinquency proceeding with respect to an insurer-member shall not operate as a stay, injunction, or prohibition of exercise by a federal home loan bank of its rights regarding collateral pledged by that insurer-member. L.1992, c.65, s.5; amended 2023, c.172, s.6.

N.J. Stat. § 17B:32-36 Cooperation with commissioner in proceedings

6. a. Any officer, manager, director, trustee, owner, employee or agent of any insurer, or any other person with authority over or in charge of any segment of the insurer's affairs, including any person who exercises control directly or indirectly over activities of the insurer through any holding company or other affiliate of the insurer, shall cooperate with the commissioner in any proceeding under this act or any investigation preliminary to the proceeding. The term "cooperate" shall include, but shall not be limited to, the following: (1) Replying promptly in writing to any inquiry from the commissioner requesting such a reply; and (2) Making available to the commissioner any books, accounts, documents, or other records or information or property of or pertaining to the insurer and in his possession, custody or control. b. No person shall obstruct or interfere with the commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto. c. This section shall not be construed to abridge any other existing legal rights, including the right to resist a petition for liquidation or other delinquency proceedings, or other orders. d. Any person who fails to cooperate with the commissioner pursuant to subsection a. of this section, or who obstructs or interferes with the commissioner pursuant to subsection b. of this section, or who violates any order the commissioner issued validly under this act shall: (1) Be subject to a civil penalty of not more than $10,000 or to imprisonment for not more than one year, or both; or (2) After a hearing, be subject to an administrative penalty imposed by the commissioner of not more than $10,000 and to the revocation or suspension of any insurance licenses issued by the commissioner. L.1992,c.65,s.6.

N.J. Stat. § 17B:32-37 Proceedings previously commenced deemed commenced under this act; exceptions, distribution of claims

7. a. Every proceeding heretofore commenced under the laws in effect before the enactment of this act shall be deemed to have been commenced under this act henceforth for all purposes and shall be governed by the provisions of this act, including, but not limited to, section 41 of this act, except that, in the discretion of the commissioner, the proceeding may be continued, in whole or in part, as it would have been continued had this act not been enacted. b. Notwithstanding the provisions of subsection a. of this section and section 41 of this act to the contrary, one-half of the direct, non-contingent obligations incurred on or after August 9, 1991, which prior to May 4, 1992, the insurer in rehabilitation under the supervision of the commissioner as rehabilitator had stipulated were due, and which stipulation has been ordered by the court supervising pending delinquency proceedings, shall have a priority of distribution pursuant to section 41 of this act which is after Class 3 claims under paragraph (3) of subsection a. of section 41 of this act and before Class 4 claims under paragraph (4) of subsection a. of section 41 of this act. L.1992,c.65,s.7.

N.J. Stat. § 17B:32-38 Prohibitions relative to insurer subject to delinquency proceeding

8. No insurer that is subject to any delinquency proceedings, whether administrative or judicial, shall: a. Be released from that proceeding, unless that proceeding is converted into a judicial rehabilitation or liquidation proceeding; b. Be permitted to solicit or accept new business or request or accept the restoration of any suspended or revoked license or certificate of authority; c. Be returned to the control of its shareholders or private management; or d. Have any of its assets returned to the control of its shareholders or private management until all payments of or on account of the insurer's contractual obligations by all guaranty associations, along with all expenses thereof and interest on all such payments and expenses, shall have been repaid to the guaranty associations or a plan of repayment by the insurer shall have been approved by the guaranty associations. L.1992,c.65,s.8.

N.J. Stat. § 17B:32-39 Filing of petition; court orders

9. a. The commissioner may file in the Superior Court of this State a petition alleging that, with respect to a domestic insurer: (1) There exist any grounds that would justify a court order for a formal delinquency proceeding against an insurer under this act; (2) The interests of policyholders, creditors or the public will be endangered by delay; and (3) The contents of an order deemed necessary by the commissioner. b. Upon a filing under subsection a. of this section, the court may issue forthwith, ex parte and without a hearing, the requested order which shall direct the commissioner to take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer, and of the premises occupied by it for transaction of its business; and until further order of the court enjoin the insurer and its officers, managers, agents, and employees from disposition of its property and from the transaction of its business except with the written consent of the commissioner. c. The court shall specify in the order what its duration shall be, which shall be the time the court deems necessary for the commissioner to ascertain the condition of the insurer. On motion of either party or on its own motion, the court may from time to time hold hearings it deems necessary after giving notice it deems appropriate, and may extend, shorten, or modify the terms of the seizure order. The court shall vacate the seizure order if the commissioner fails to commence a formal proceeding under this act after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this act shall ipso facto vacate the seizure order. d. Entry of a seizure order under this section shall not constitute an anticipatory breach of any contract of the insurer. e. An insurer subject to an ex parte order under this section may petition the court at any time after the issuance of the order for a hearing and review of the order. The court shall hold a hearing and review not more than 15 days after the request. A hearing under this subsection may be held privately in chambers and it shall be held privately in chambers if requested by the insurer proceeded against. f. If, at any time after the issuance of such an order, it appears to the court that any person whose interest is or will be substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given. An order that notice be given shall not stay the effect of any order previously issued by the court. L.1992,c.65,s.9.

N.J. Stat. § 17B:32-40 Confidentiality of documents, files, records, papers

10. In all proceedings and judicial reviews thereof under section 9 of this act, all records of the insurer, other documents, and all department files and court records and papers, so far as they pertain to or are a part of the record of the proceedings, shall be and remain confidential except as is necessary to obtain compliance therewith, unless and until the Superior Court, after hearing arguments from the parties in chambers, shall order otherwise; or unless the insurer requests that the matter be made public. Until such court order, all papers filed with the clerk of the Superior Court shall be held by him in a confidential file. L.1992,c.65,s.10.

N.J. Stat. § 17B:32-41 Petition for authority to rehabilitate insurer

11. The commissioner may petition the Superior Court for an order authorizing him to rehabilitate a domestic insurer or an alien insurer domiciled in this State on any one or more of the following grounds: a. The insurer is in such condition that the further transaction of business would be hazardous financially to its policyholders, creditors or the public. b. There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration or diversion of the insurer's assets, forgery or fraud affecting the insurer, or other illegal conduct in, by, or with respect to, the insurer that if established would endanger assets in an amount threatening the solvency of the insurer. c. The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee or other person, if the person has been found after notice and hearing by the commissioner to be dishonest or untrustworthy in a way affecting the insurer's business. d. Control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in a person or persons found after notice and hearing to be untrustworthy. e. Any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director or trustee, employee or other person, has refused to be examined under oath by the commissioner concerning its affairs, whether in this State or elsewhere; and after reasonable notice of that fact, the insurer has failed promptly and effectively to terminate the employment and status of the person and all his influence on management. f. After demand by the commissioner under chapter 21 of Title 17B of the New Jersey Statutes or any other law governing the examination of insurers, or under this act, the insurer has failed to promptly make available for examination any of its own property, books, accounts, documents or other records, or those of any subsidiary or related company within the control of the insurer, or those of any person having executive authority in the insurer so far as they pertain to the insurer. g. Without first obtaining the written consent of the commissioner, the insurer has transferred, or attempted to transfer, in a manner contrary to section 2 of P.L.1970, c.22 (C.17:27A-2) or N.J.S.17B:18-64, substantially its entire property or business, or has entered into any transaction the effect of which is to merge, consolidate or reinsure substantially its entire property or business in or with the property or business of any other person. h. The insurer or its property has been or is the subject of an application for the appointment of a receiver, trustee, custodian, conservator or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under the insurance laws of this State, and such appointment has been made or is imminent, and such appointment might oust the courts of this State of jurisdiction or might prejudice orderly delinquency proceedings under this act. i. Within the previous five years the insurer has willfully violated its charter or articles of incorporation, its bylaws, any insurance law of this State, or any valid order of the commissioner. j. The insurer has failed to pay, within 60 days after the due date, any obligation to any state or any subdivision thereof or any judgment entered in any state, if the court in which such judgment was entered had jurisdiction over such subject matter, except that such nonpayment shall not be a ground until 60 days after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before the commissioner or in the courts, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligations in full. k. The insurer has failed to file its annual report or other financial report required by law within the time allowed by law and, after written demand by the commissioner, has failed to give an adequate explanation immediately. l. The board of directors or the holders of a majority of the shares entitled to vote, or a majority of those individuals entitled to the control of a mutual insurer as defined in N.J.S.17B:18-3, request or consent to rehabilitation under this act. For purposes of this subsection, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the insurer, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10% or more of the voting securities of an insurer. L.1992,c.65,s.11.

N.J. Stat. § 17B:32-42 Appointment of rehabilitator

12. a. An order to rehabilitate the business of a domestic insurer, or an alien insurer domiciled in this State, shall appoint the commissioner and his successors in office the rehabilitator, and shall direct the rehabilitator forthwith to take possession of the assets of the insurer, and to administer them under the general supervision of the court. The filing or recording of the order with the clerk of the Superior Court or recorder of deeds of the county in which the principal business of the company is conducted, or the county in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with that recorder of deeds would have imparted. The order to rehabilitate the insurer shall by operation of law vest title to all assets of the insurer in the rehabilitator. b. Any order issued under this section shall require accountings to the court by the rehabilitator. Accountings shall be at such intervals as the court specifies in its order, but no less frequently than semi-annually. Each accounting shall include a report concerning the rehabilitator's opinion as to the likelihood that a plan under subsection e. of section 13 of this act will be prepared by the rehabilitator and the timetable for doing so. c. Entry of an order of rehabilitation shall not constitute an anticipatory breach of any contracts of the insurer nor shall it be grounds for retroactive revocation or retroactive cancellation of any contracts of the insurer, unless such revocation or cancellation is done by the rehabilitator pursuant to section 13 of this act. L.1992,c.65,s.12.

N.J. Stat. § 17B:32-43 Powers of rehabilitator

13. a. The commissioner as rehabilitator may appoint one or more special deputies, who shall have all the powers and responsibilities of the rehabilitator granted under this section, and the commissioner may employ such counsel, clerks and assistants as deemed necessary. The commissioner may fix the compensation of employees and agents of the insurer and, with the approval of the court, the special deputy, counsel, clerks and assistants, other than employees of the insurer, and all expenses of taking possession of the insurer and of conducting the proceedings shall be paid out of the funds or assets of the insurer. The persons appointed under this section shall serve at the pleasure of the commissioner. The commissioner, as rehabilitator, may, with the approval of the court, appoint an advisory committee of policyholders, claimants or other creditors, including guaranty associations, should he deem such a committee to be necessary. The committee shall serve at the pleasure of the commissioner and shall serve without compensation. No other committee of any nature shall be appointed by the commissioner or the court in rehabilitation proceedings conducted under this act. b. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the commissioner may advance the costs so incurred out of any appropriation for the maintenance of the department. Any amounts so advanced for expenses of administration shall be repaid to the commissioner for the use of the department out of the first available money of the insurer. c. The rehabilitator may take such action as he deems necessary or appropriate to reform and revitalize the insurer, including, but not limited to, any of the actions which could be taken by a liquidator under paragraphs (6) through (24) of subsection a. of section 20 of this act. He shall have all the powers of the directors, officers and managers, whose authority shall be suspended, except as they are redelegated by the rehabilitator. He shall have full power to direct and manage, to hire and discharge employees subject to any contract rights they may have, and to deal with the property and business of the insurer. d. If it appears to the rehabilitator that there has been criminal or tortious conduct, or breach of any contractual or fiduciary obligation detrimental to the insurer by any officer, manager, agent, broker, employee or other person, he may pursue all appropriate legal remedies on behalf of the insurer. e. If the rehabilitator determines that reorganization, consolidation, conversion, reinsurance, merger or other transformation of the insurer is appropriate, he shall prepare a plan to effect such changes. Upon application of the rehabilitator for approval of the plan, and after such notice and hearings as the court may prescribe, the court may either approve or disapprove the plan proposed, or may modify it and approve it as modified. Any plan approved under this section shall be, in the judgment of the court, fair and equitable to all parties concerned. If the plan is approved, the rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the imposition of liens upon the policies of the company, if all rights of shareholders are first relinquished. A plan for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under policies, for such period and to such an extent as may be necessary. f. The rehabilitator shall have the power under sections 25 and 26 of this act to avoid fraudulent transfers. L.1992,c.65,s.13.

N.J. Stat. § 17B:32-44 Staying of pending actions

14. a. Any court in this State before which any action or proceeding in which the insurer is a party, or is obligated to defend a party, is pending when a rehabilitation order against the insurer is entered shall stay the action or proceeding for 90 days and such additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take such action respecting the pending litigation as he deems necessary in the interests of justice and for the protection of creditors, policyholders and the public. The rehabilitator shall immediately consider all litigation pending outside this State and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer. b. No statute of limitations or defense of laches shall run with respect to any action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the order of rehabilitation is entered. The rehabilitator may, upon an order for rehabilitation, within one year or such other longer time as applicable law may permit, institute an action or proceeding on behalf of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered. c. Any guaranty association or foreign guaranty association covering life or health insurance or annuities shall have standing to appear in any court proceeding concerning the rehabilitation of an insurer if that association is or may become liable to act as a result of the rehabilitation. L.1992,c.65,s.14.

N.J. Stat. § 17B:32-45 Petition for order of liquidation

15. a. Whenever the commissioner believes further attempts to rehabilitate an insurer would substantially increase the risk of loss to creditors, policyholders or the public, or would be futile, the commissioner may petition the Superior Court for an order of liquidation. A petition under this subsection shall have the same effect as a petition under section 16 of this act. The Superior Court shall permit the directors of the insurer to take such actions as are reasonably necessary to defend against the petition and may order payment from the estate of the insurer of such costs and other expenses of defense as justice may require. b. The protection of the interests of insureds, claimants and the public requires the timely performance of all insurance policy obligations. If the payment of policy obligations is suspended in substantial part for a period of 12 months at any time after the appointment of the rehabilitator and the rehabilitator has not filed an application for approval of a plan under subsection e. of section 13 of this act during the 12-month period, the rehabilitator shall petition the court for an order of liquidation on the grounds of insolvency; provided, however, that prior to the end of that 12-month period the commissioner may petition the court for an extension of the time period to file an application for approval of a plan. c. The rehabilitator may at any time petition the Superior Court for an order terminating rehabilitation of an insurer. The court shall also permit the directors of the insurer to petition the court for an order terminating rehabilitation of the insurer and may order payment from the estate of the insurer of such costs and other expenses of that petition as justice may require. If the court finds that rehabilitation has been accomplished and that grounds for rehabilitation under section 11 of this act no longer exist, it shall order that the insurer be restored to possession of its property and the control of the business. The court may also make that finding and issue that order at any time upon its own motion. L.1992,c.65,s.15.

N.J. Stat. § 17B:32-46 Basis for order of liquidation

16. The commissioner may petition the Superior Court for an order directing him to liquidate a domestic insurer or an alien insurer domiciled in this State on the basis: a. Of any ground for an order of rehabilitation as specified in section 11 of this act, whether or not there has been a prior order directing the rehabilitation of the insurer; b. That the insurer is insolvent; or c. That the insurer is in such condition that the further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors or the public. L.1992,c.65,s.16.

N.J. Stat. § 17B:32-47 Appointment of liquidator

17. a. An order to liquidate the business of a domestic insurer shall appoint the commissioner and his successors in office liquidator and shall direct the liquidator forthwith to take possession of the assets of the insurer and to administer them under the general supervision of the court. The liquidator shall be vested by operation of law with the title to all of the property, contracts and rights of action, and all of the books and records of the insurer ordered liquidated, wherever located, as of the entry of the final order of liquidation. The filing or recording of the order with the clerk of the Superior Court and the recorder of deeds of the county in which its principal office or place of business is located, or, in the case of real estate, with the recorder of deeds of the county where the property is located, shall impart the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with that recorder of deeds would have imparted. b. Upon issuance of the order, the rights and liabilities of that insurer and of its creditors, policyholders, shareholders, members and all other persons interested in its estate shall become fixed as of the date of entry of the order of liquidation, except as provided in sections 18 and 36 of this act. c. An order to liquidate the business of an alien insurer domiciled in this State shall be in the same terms and have the same legal effect as an order to liquidate a domestic insurer, except that the assets and the business in the United States shall be the only assets and business included therein. d. At the time of petitioning for an order of liquidation, or at any time thereafter, the commissioner, after making appropriate findings of an insurer's insolvency, may petition the court for a judicial declaration of that insolvency. After providing such notice and hearing as it deems proper, the court may make the declaration. e. Any order issued under this section shall require financial reports to the court by the liquidator. Financial reports shall include, at a minimum, the assets and liabilities of the insurer and all funds received or disbursed by the liquidator during the current period. Financial reports shall be filed within one year of the liquidation order and at least annually thereafter. f. (1) Within 90 days of the effective date of this act, or within 90 days after the initiation of an appeal of an order of liquidation, which order has not been stayed, whichever is later, the commissioner shall present for the court's approval a plan for the continued performance of the defendant insurer's policy claims obligations during the pendency of an appeal. The plan shall provide for the continued performance and payment of policy claims obligations in the normal course of events, notwithstanding the grounds alleged in support of the order of liquidation including the ground of insolvency. If the defendant insurer's financial condition will not, in the judgment of the commissioner, support the full performance of all policy claims obligations during the appeal pendency period, the plan may prefer the claims of certain policyholders and claimants over creditors and interested parties as well as other policyholders and claimants, as the commissioner finds to be fair and equitable, considering the relative circumstances of such policyholders and claimants. The court shall examine the plan submitted by the commissioner and if it finds the plan to be in the best interests of the parties, the court shall approve the plan. No action shall lie against the commissioner or any of his deputies, agents, clerks, assistants or attorneys by any party based on preference in an appeal pendency plan approved by the court. (2) The appeal pendency plan shall not supersede or affect the obligations of the guaranty association or of any applicable foreign guaranty association. (3) Any such plans shall provide for equitable adjustments to be made by the liquidator to any distributions of assets to guaranty associations, in the event that the liquidator pays claims from assets of the estate, which would otherwise be the obligations of any particular guaranty association, but for the appeal of the order of liquidation, such that all guaranty associations equally benefit on a pro rata basis from the assets of the estate. Further, if an order of liquidation is set aside upon any appeal, the insurer shall not be released from delinquency proceedings unless and until all funds advanced by any guaranty association, including reasonable administrative expenses in connection therewith relating to obligations of the insurer, shall be repaid in full, together with interest at the judgment rate of interest or unless an arrangement for repayment thereof has been made with the consent of all applicable guaranty associations. L.1992,c.65,s.17.

N.J. Stat. § 17B:32-48 Policies to continue in force

18. a. Policies of life or health insurance or annuities shall continue in force for such period and under such terms as is provided for by the guaranty association or any applicable foreign guaranty association. b. Policies of life or health insurance or annuities or any period or coverage of those policies not covered by the guaranty association or a foreign guaranty association shall continue in force only for the lesser of: (1) A period of 30 days from the date of entry of the liquidation orders; (2) The expiration of the policy coverage; (3) The date when the insured has replaced the insurance coverage with equivalent insurance in another insurer or otherwise terminated the policy; (4) The liquidator has effected a transfer of the policy obligation pursuant to paragraph (9) of subsection a. of section 20 of this act; or (5) The date proposed by the liquidator and approved by the court to cancel coverage. An order for liquidation under section 17 of this act shall terminate coverages at the time specified in this subsection b. for purposes of any other law. L.1992,c.65,s.18.

N.J. Stat. § 17B:32-49 Petition for dissolution

19. The commissioner may petition for an order dissolving the corporate existence of a domestic insurer, or the United States branch of an alien insurer domiciled in this State, at the time he applies for a liquidation order. The court shall order dissolution of the corporation upon petition by the commissioner upon or after the granting of a liquidation order. If the dissolution has not previously been ordered, it shall be effected by operation of law upon the discharge of the liquidator if the insurer is insolvent but may be ordered by the court upon the discharge of the liquidator if the insurer is under a liquidation order for some other reason. L.1992,c.65,s.19.

N.J. Stat. § 17B:32-50 Powers of liquidator

20. a. The liquidator shall have the power: (1) To appoint a special deputy or deputies to act for him under this act, and to determine his reasonable compensation. The special deputy shall have all powers of the liquidator granted by this section. The special deputy shall serve at the pleasure of the liquidator. (2) To employ employees and agents, legal counsel, actuaries, accountants, appraisers, consultants and such other personnel as he may deem necessary to assist in the liquidation. (3) To appoint, with the approval of the court, an advisory committee of policyholders, claimants or other creditors, including guaranty associations, should he deem such a committee to be necessary. Such committee shall serve at the pleasure of the commissioner and shall serve without compensation. No other committee of any nature shall be appointed by the commissioner or the court in liquidation proceedings conducted under this act. (4) To fix the reasonable compensation of employees and agents of the insurer, and, with the approval of the court, legal counsel, actuaries, accountants, appraisers and consultants, other than employees and agents of the insurer. (5) To pay reasonable compensation to persons appointed and to defray from the funds or assets of the insurer all expenses of taking possession of, conserving, conducting, liquidating, disposing of, or otherwise dealing with the business and property of the insurer. If the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the commissioner may advance the costs so incurred out of any appropriation for the maintenance of the department. Any amounts so advanced for expenses of administration shall be repaid to the commissioner for the use of the department out of the first available moneys of the insurer. (6) To hold hearings, to subpoena witnesses to compel their attendance, to administer oaths, to examine any person under oath, and to compel any person to subscribe to his testimony after it has been correctly reduced to writing; and in connection therewith to require the production of any books, papers, records or other documents which he deems relevant to the inquiry. (7) To audit the books and records of all agents of the insurer insofar as those records relate to the business activities of the insurer. (8) To collect all debts and moneys due and claims belonging to the insurer, wherever located, and for this purpose: (a) To institute timely action in other jurisdictions, in order to forestall garnishment and attachment proceedings against those debts; (b) To take other actions necessary or expedient to collect, conserve or protect its assets or property, including the power to sell, compound, compromise or assign debts for purposes of collection upon such terms and conditions as he deems best; and (c) To pursue any creditor's remedies available to enforce his claims. (9) To conduct public and private sales of the property of the insurer. (10) To use assets of the estate of an insurer under a liquidation order to transfer policy obligations to a solvent assuming insurer, if the transfer can be arranged without prejudice to applicable priorities under section 41 of this act. (11) To acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon or otherwise dispose of or deal with, any property of the insurer at its market value or upon such terms and conditions as are fair and reasonable. He shall also have power to execute, acknowledge and deliver any and all deeds, assignments, releases and other instruments necessary or proper to effectuate any sale of property or other transaction in connection with the liquidation. (12) To borrow money on the security of the insurer's assets, or without security, and to execute and deliver all documents necessary to that transaction for the purpose of facilitating the liquidation. Any funds so borrowed may be repaid as an administrative expense and have priority over any other claims in Class 1 under the priority of distribution of claims pursuant to section 41 of this act. (13) To enter into any contracts necessary to carry out the order to liquidate, and to affirm or disavow any contracts to which the insurer is a party. (14) To continue to prosecute and to institute in the name of the insurer or in his own name any and all suits and other legal proceedings, in this State or elsewhere, and to abandon the prosecution of claims he deems unprofitable to pursue further. If the insurer is dissolved under section 19 of this act, he shall have the power to apply to any court in this State or elsewhere for leave to substitute himself for the insurer as plaintiff. (15) To prosecute any action which may exist on behalf of the creditors, members, policyholders or shareholders of the insurer against any director or officer of the insurer, or any other person. (16) To remove any or all records and property of the insurer to the offices of the commissioner or to such other place as may be convenient for the purposes of efficient and orderly execution of the liquidation. Guaranty associations and foreign guaranty associations shall have reasonable access to the records of the insurer as is necessary for them to carry out their legal obligations. (17) To deposit in one or more banks in this State any sums required for meeting current administration expenses and dividend distributions. (18) To invest all sums not currently needed, unless the court orders otherwise. (19) To file any necessary documents for record in the office of any recorder of deeds or record office in this State or elsewhere where property of the insurer is located. (20) To assert all defenses available to the insurer as against third persons, including statutes of limitation, statutes of frauds, and the defense of usury. A waiver of any defense by the insurer after a petition in liquidation has been filed shall not bind the liquidator. Whenever the guaranty association or a foreign guaranty association has an obligation to defend any suit, the liquidator shall give precedence to that obligation and may defend only in the absence of a defense by those guaranty associations. (21) To exercise and enforce all the rights, remedies and powers of any creditor, shareholder, policyholder or member; including any power to avoid any transfer or lien that may be given by law and that is not included with sections 25 through 27 of this act. (22) To intervene in any proceeding, wherever instituted, that might lead to the appointment of a receiver or trustee, and to act as the receiver or trustee whenever the appointment is offered. (23) To enter into agreements with any receiver or commissioner or insurance regulator of any other state relating to the rehabilitation, liquidation, conservation or dissolution of an insurer doing business in both states. (24) To exercise all powers now held or hereafter conferred upon receivers by the laws of this State not inconsistent with the provisions of this act. b. The enumeration in this section of the powers and authority of the liquidator shall not be construed as a limitation upon him, nor shall it exclude in any manner his right to do such other acts not herein specifically enumerated, or otherwise provided for, as may be necessary or appropriate for the accomplishment of or in aid of the purpose of liquidation. c. Notwithstanding the powers of the liquidator as stated in subsections a. and b. of this section, the liquidator shall have no obligation to defend claims or to continue to defend claims subsequent to the entry of a liquidation order. L.1992,c.65,s.20.

N.J. Stat. § 17B:32-51 Notice of liquidation order

21. a. Unless the court otherwise directs, the liquidator shall give or cause to be given notice of the liquidation order as soon as possible: (1) By first class mail and either by telegram or telephone to the commissioner or insurance regulator of each jurisdiction in which the insurer is doing business; (2) By first class mail to the guaranty association and any foreign guaranty association which is or may become obligated as a result of the liquidation; (3) By first class mail to all insurance agents of the insurer; (4) By first class mail to all persons known or reasonably expected to have claims against the insurer, including all policyholders, at their last known address as indicated by the records of the insurer; and (5) By publication in a newspaper of general circulation in the county in which the insurer has its principal place of business and in such other locations as the liquidator deems appropriate. b. Except as otherwise established by the liquidator with approval of the court, notice to potential claimants under subsection a. of this section shall require claimants to file with the liquidator their claims, together with proper proofs thereof under section 35 of this act, on or before a date the liquidator shall specify in the notice. The liquidator need not require persons claiming cash surrender values or other investment values in life insurance and annuities to file a claim. All claimants shall have a duty to keep the liquidator informed of any changes of address. c. (1) Notice under subsection a. of this section to agents of the insurer and to potential claimants who are policyholders shall include, where applicable, notice that coverage by state guaranty associations may be available for all or part of policy benefits in accordance with applicable state guaranty association laws. (2) The liquidator shall promptly provide to the guaranty associations such information concerning the identities and addresses of policyholders and their policy coverages as may be within the liquidator's possession or control, and otherwise cooperate with guaranty associations to assist them in providing to those policyholders timely notice of the guaranty associations' coverage of policy benefits, including, as applicable, coverage of claims and continuation or termination of coverages. d. If notice is given in accordance with this section, the distribution of assets of the insurer under this act shall be conclusive with respect to all claimants, whether or not they received notice. L.1992,c.65,s.21.

N.J. Stat. § 17B:32-52 Provision of information to liquidator by agents, licensing affected

22. a. Every person who receives notice, in the form prescribed in section 21 of this act, that an insurer which he represents as an agent is the subject of a liquidation order, shall within 30 days of such notice provide to the liquidator, in addition to the information he may be required to provide pursuant to section 6 of this act, the information in the agent's records related to any policy issued by the insurer through the agent, and, if the agent is a general agent, the information in the general agent's records related to any policy issued by the insurer through an agent under contract to him, including the name and address of such subagent. A policy shall be deemed issued through an agent if the agent has a property interest in the expiration of the policy, or if the agent has had in his possession a copy of the declarations of the policy at any time during the life of the policy, except where the ownership of the expiration of the policy has been transferred to another. b. The commissioner may refuse to renew a license, or may suspend or revoke a license, if he finds after notice and an opportunity for a hearing that an agent has failed to provide information to the liquidator as required in subsection a. of this section. In addition or an alternative to any other penalty, the commissioner may, after a hearing, impose an administrative penalty of not more than $10,000 for each violation of this section. L.1992,c.65,s.22.

N.J. Stat. § 17B:32-53 Actions against or by insurer, liquidator

23. a. Upon issuance of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this State, no action at law or equity or in arbitration shall be brought against the insurer or liquidator, whether in this State or elsewhere, nor shall any such existing actions be maintained or further presented after issuance of that order. The courts of this State shall give full faith and credit to injunctions against the liquidator or the insurer or the continuation of existing actions against the liquidator or the insurer, when those injunctions are included in an order to liquidate an insurer issued pursuant to corresponding provisions in other states. Whenever, in the liquidator's judgment, protection of the estate of the insurer necessitates intervention in an action against the insurer that is pending outside this State, he may intervene in the action. The liquidator may defend any action in which he intervenes under this section at the expense of the estate of the insurer. b. The liquidator may, upon or after an order for liquidation, institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which that order is entered. If, by any agreement, a period of limitation is fixed for instituting an action or proceeding upon any claim, or for filing any claim, proof of claim, proof of loss, demand, notice or the like, or if in any proceeding, judicial or otherwise, a period of limitation is fixed, either in the proceeding or by applicable law, for taking any action, filing any claim or pleading, or doing any act, and if in any such case the period had not expired at the date of the filing of the petition, the liquidator may, for the benefit of the estate, take any such action or do any such act, required of or permitted to the insurer, within a period of 180 days subsequent to the entry of an order for liquidation, or within any further period as is shown to the satisfaction of the court not to be unfairly prejudicial to the other party. c. No statute of limitation or defense of laches shall run with respect to any action against an insurer between the filing of a petition for liquidation against an insurer and the denial of the petition. d. Any guaranty association or foreign guaranty association shall have standing to appear in any court proceeding concerning the liquidation of an insurer if such association is or may become liable to act as a result of the liquidation. L.1992,c.65,s.23.

N.J. Stat. § 17B:32-54 Preparation of list of insurer's assets

24. a. As soon as practicable after the liquidation order but not later than 120 days thereafter, the liquidator shall prepare in duplicate a list of the insurer's assets. The list shall be amended or supplemented from time to time as the liquidator may determine. One copy shall be filed in the office of the clerk of the Superior Court and one copy shall be retained for the liquidator's files. All amendments and supplements shall be similarly filed. b. The liquidator shall reduce the assets to a degree of liquidity that is consistent with the effective execution of the liquidation. c. A submission to the court for disbursement of assets in accordance with section 33 of this act fulfills the requirements of subsection a. of this section. L.1992,c.65,s.24.

N.J. Stat. § 17B:32-55 Transfers, obligations deemed fraudulent.

25. a. Every transfer made or suffered and every obligation incurred by an insurer within one year prior to the filing of a successful petition for rehabilitation or liquidation under this act shall be fraudulent as to then existing and future creditors if made or incurred without fair consideration, or with actual intent to hinder, delay or defraud either existing or future creditors. A transfer made or an obligation incurred by an insurer ordered to be rehabilitated or liquidated under this act, which is fraudulent under this section, may be avoided by the receiver, except as to a person who in good faith is a purchaser, lienholder or obligee for a present fair equivalent value, and except that any purchaser, lienholder or obligee, who in good faith has given a consideration which is less than fair for that transfer, lien or obligation, may retain the property, lien or obligation as security for repayment. The court may, on due notice, order any such transfer or obligation to be preserved for the benefit of the estate, and in that event, the receiver shall succeed to and may enforce the rights of the purchaser, lienholder or obligee. 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 under subsection c. of section 27 of this act. (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) Any 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 any liens or persons who might have become bona fide purchasers. c. Any transaction of the insurer with a reinsurer shall be deemed fraudulent and may be avoided by the receiver under subsection a. of this section if: (1) The transaction consists of the termination, adjustment or settlement of a reinsurance contract in which the reinsurer is released from any part of its duty to pay the originally specified share of losses that had occurred prior to the time of the transactions, unless the reinsurer gives a present fair equivalent value for the release; and (2) Any part of the transaction took place within one year prior to the date of filing of the petition through which the receivership was commenced. d. Every director, officer, employee, stockholder, policyholder and any other person acting on behalf of the insurer who is concerned in any fraudulent transfer and every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection a. of this section shall be personally liable therefor and shall be bound to account to the liquidator. e. (1) A receiver for an insurer-member subject to a delinquency shall not void a transfer made to a federal home loan bank provided that the transfer: (a) is made in the ordinary course of business and in compliance with the advance agreement with that federal home loan bank; and (b) is valid pursuant to State law and the "Federal Home Loan Bank Act" (12 U.S.C. s.1421 et seq.). (2) A receiver shall not void a redemption or repurchase of any stock or equity securities made by the federal home loan bank if the redemption or repurchase: (a) is made within 12 months of the commencement of the delinquency proceeding; or (b) has received prior approval of the receiver. (3) A receiver may void any transfer if the transfer is made with actual intent to hinder, delay, or defraud the insurer-member, a receiver appointed for the insurer-member, or existing or future creditors. f. Following the appointment of a receiver for an insurer-member and upon request of the receiver, the federal home loan bank shall, within 10 days of that request, provide a process and establish a timeline for: (1) the release of collateral that exceeds the lending value required to support secured obligations remaining after a repayment of advances, as determined in accordance with the federal home loan bank security agreement; (2) the release of any collateral remaining in the federal home loan bank's possession following repayment of all outstanding secured obligations in full; (3) the payment of fees and the operation of deposits and other accounts with the federal home loan bank; and (4) the possible redemption or repurchase of federal home loan bank stock or excess stock of any class that an insurer-member is required to own. g. Upon the request of the receiver for an insurer-member, the federal home loan bank shall provide any available options for the insurer-member to renew or restructure an advance to defer associated prepayment fees, to the extent that market conditions, the terms of the advance outstanding to the insurer-member, the applicable policies of the federal home loan bank, and compliance with the "Federal Home Loan Bank Act" (12 U.S.C. s.1421 et seq.) and corresponding regulations permit. h. Nothing in this section shall affect the receiver's rights pursuant to 12 C.F.R. s.1266.4 regarding advances to an insurer-member in delinquency proceedings. L.1992,c.65,s.25; amended 2023, c.172, s.7.

N.J. Stat. § 17B:32-56 Transfer of real property deemed valid

26. a. After a petition for rehabilitation or liquidation has been filed, but before an order of rehabilitation or liquidation is granted, a transfer of any of the real property of the insurer made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value; or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred. The commencement of a proceeding in rehabilitation or liquidation shall be constructive notice upon the recording of a copy of the petition for or order of rehabilitation or liquidation with the recorder of deeds in the county where any real property in question is located. The exercise by a court of the United States or any state or jurisdiction to authorize or effect a judicial sale of real property of the insurer within any county in any state shall not be impaired by the pendency of such a proceeding unless the copy is recorded in the county prior to the consummation of the judicial sale. b. After a petition for rehabilitation or liquidation has been filed and before either the receiver takes possession of the property of the insurer or an order of rehabilitation or liquidation is granted: (1) A transfer of any of the property of the insurer, other than real property, made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value; or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred. (2) A person indebted to the insurer or holding property of the insurer may, if acting in good faith, pay the indebtedness or deliver the property, or any part thereof, to the insurer or upon his order, with the same effect as if the petition were not pending. (3) A person having actual knowledge of the pending rehabilitation or liquidation shall be deemed not to act in good faith pursuant to the provisions of this section. (4) A person asserting the validity of a transfer under this section shall have the burden of proof. Except as elsewhere provided in this section, no transfer by or on behalf of the insurer after the date of the petition for liquidation by any person other than the liquidator shall be valid against the liquidator. c. Every director, officer, employee, stockholder, policyholder and any other person acting on behalf of the insurer who is concerned in any fraudulent transfer, and every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection a. of this section shall be personally liable therefor and shall be bound to account to the liquidator. d. Nothing in this act shall impair the negotiability of currency or negotiable instruments. L.1992,c.65,s.26.

N.J. Stat. § 17B:32-57 Preferences.

27. 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 act, 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 benefitted thereby or his agent acting with reference thereto had, at the time 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 on the insurer to an officer, whether or not he held such position, or any shareholder holding directly or indirectly more than five percent 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) If 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, if a bona fide purchaser or lienholder 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. If 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 may become superior to the rights of a transferee, or a purchaser may 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 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 paragraph (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 this act 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 that 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. If 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 indemnified 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 a reasonable time 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 from him. j. If an insurer shall, directly or indirectly, within four months before the filing of a successful petition for liquidation under this act, 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 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. If, however, the attorney is in a position of influence on 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 provision of subparagraph (d) of paragraph (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 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. l. (1) A receiver for an insurer-member subject to a delinquency shall not void a transfer made to a federal home loan bank provided that the transfer: (a) is made in the ordinary course of business and in compliance with the advance agreement with that federal home loan bank; and (b) is valid pursuant to State law and the "Federal Home Loan Bank Act" (12 U.S.C. s.1421 et seq.). (2) A receiver shall not void a redemption or repurchase of any stock or equity securities made by the federal home loan bank if the redemption or repurchase: (a) is made within 12 months of the commencement of the delinquency proceeding; or (b) has received prior approval of the receiver. (3) A receiver may void any transfer if the transfer is made with actual intent to hinder, delay, or defraud the insurer-member, a receiver appointed for the insurer-member, or existing or future creditors. L.1992, c.65, s.27; amended 2023, c.172, s.8.

N.J. Stat. § 17B:32-58 Claims of creditor

28. a. No claims of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment or encumbrance voidable under this act, shall be allowed unless he surrenders the preference, lien, conveyance, transfer, assignment or encumbrance. If the avoidance is effected by a proceeding in which a final judgment has been entered, the claim shall not be allowed unless the money is paid or the property is delivered to the liquidator within 30 days from the date of the entering of the final judgment, except that the court having jurisdiction over the liquidation may allow further time if there is an appeal or other continuation of the proceeding. b. A claim allowable under subsection a. of this section by reason of the avoidance, whether voluntary or involuntary, of a preference, lien, conveyance, transfer, assignment or encumbrance, may be filed as an excused last filing under section 34 of this act if filed within 30 days from the date of the avoidance, or within the further time allowed by the court under subsection a. of this section. L.1992,c.65,s.28.

N.J. Stat. § 17B:32-59 Mutual debts, credits

29. a. Mutual debts or mutual credits, whether arising out of one or more contracts between the insurer and another person in connection with any action or proceeding under this act, shall be set off and the balance only shall be allowed or paid, except as provided in subsections b., c. and d. of this section and section 32 of this act. b. No setoff shall be allowed in favor of any person if: (1) The obligation of the insurer to the person would not at the date of the filing of a petition for liquidation entitle the person to share as a claimant in the assets of the insurer; or (2) The obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff; or (3) The obligation of the insurer is owed to an affiliate of such person, or any other entity or association other than the person; or (4) The obligation of the person is owed to an affiliate of the insurer, or any other entity or association other than the insurer; or (5) The obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution; or (6) The obligations between the person and the insurer arise from business which is both ceded to and assumed from the insurer except that the rehabilitator may, with regard to such business, allow certain setoffs in rehabilitation if he finds the allowance of said setoffs appropriate. c. The liquidator shall provide persons that assumed business from the insurer with accounting statements identifying debts which are currently due and payable. Such persons may set off against such debts only mutual credits which are currently due and payable by the insurer to such persons for the period covered by the accounting statement. d. A person that ceded business to the insurer may set off debts due the insurer against only those mutual credits which the person has paid or which have been allowed in the insurer's delinquency proceedings. e. Notwithstanding the foregoing, a setoff of sums due on obligations in the nature of those set forth in paragraph (6) of subsection b. of this section shall be allowed for those sums accruing from business written if: the contracts were entered into, renewed or extended with the express written approval of the commissioner or other insurance regulator of the state of domicile of the insolvent insurer, when in the judgment of that commissioner or regulator it was necessary to provide reinsurance in order to prevent or mitigate a threatened impairment or insolvency of a domiciliary insurer in connection with the exercise of the commissioner's or regulator's regulatory responsibilities. f. The provisions of this section shall become effective on the 180th day following the effective date of this act and shall apply to all contracts entered into, renewed, extended or amended on or after that 180th day, and to debts or credits arising from any business written or transactions occurring after that 180th day pursuant to any contract, including any contract in existence prior to that 180th day, and shall supersede any agreements or contractual provisions which might be construed to enlarge the setoff rights of any person under any contract with the insurer. For purposes of this section, any change in the terms of, or consideration for, any such contract shall be deemed an amendment. L.1992,c.65,s.29.

N.J. Stat. § 17B:32-60 Report by liquidator

30. a. As soon as practicable, but not more than two years from the date of an order of liquidation under section 17 of this act of an insurer issuing assessable policies, the liquidator shall make a report to the court setting forth: (1) The reasonable value of the assets of the insurer; (2) The insurer's probable total liabilities; (3) The probable aggregate amount of the assessment necessary to pay all claims of creditors and expenses in full, including expenses of administration and costs of collecting the assessment; and (4) A recommendation as to whether or not an assessment should be made and in what amount. b. (1) Upon the basis of the report provided in subsection a. of this section, the Superior Court may levy one or more assessments against all members of the insurer who are subject to assessment. (2) Subject to any applicable legal limits on assessability, the aggregate assessment shall be for the amount that the sum of the probable liabilities, the expenses of administration, and the estimated cost of collection of the assessment, exceeds the value of existing assets, with due regard being given to assessments that cannot be collected economically. c. After levy of assessment under subsection b. of this section, the liquidator shall issue an order directing each member who has not paid the assessment pursuant to the order, to show cause why the liquidator should not pursue a judgment therefor. d. The liquidator shall give notice of the order to show cause by publication and by first class mail to each member liable thereunder mailed to his last known address as it appears on the insurer's records, at least 20 days before the return day of the order to show cause. e. (1) If a member does not appear and serve duly verified objections upon the liquidator on or before the return day of the order to show cause under subsection c. of this section, the court shall make an order adjudging the member liable for the amount of the assessment against him pursuant to subsection c. of this section, together with costs, and the liquidator shall have a judgment against the member therefor. (2) If on or before such return day, the member appears and serves duly verified objections upon the liquidator, the commissioner may hear and determine the matter or may appoint a referee to hear it and make such order as the facts warrant. In the event that the commissioner determines that such objections do not warrant relief from assessment, the member may request the court to review the matter and vacate the order to show cause. f. The liquidator may enforce any order or collect any judgment under subsection e. of this section by any lawful means. L.1992,c.65,s.30.

N.J. Stat. § 17B:32-61 Amount recoverable not affected by delinquency proceedings

31. The amount recoverable by the liquidator from reinsurers shall not be reduced as a result of the delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurer's obligation to the insurer's estate except when the reinsurance contract provided for direct coverage of a named insured and the payment was made in discharge of that obligation. L.1992,c.65,s.31.

N.J. Stat. § 17B:32-62 Payment of unpaid premium, violations; penalties; appeals

32. a. (1) An agent, broker, premium finance company, or any other person, other than the insured, responsible for the payment of a premium shall be obligated to pay any unpaid premium for the full policy term due the insurer at the time of the declaration of insolvency, whether earned or unearned, as shown on the records of the insurer. The liquidator shall also have the right to recover from such person any part of an unearned premium that represents commission of such person. Credits or setoffs or both shall not be allowed to an agent, broker or premium finance company for any amounts advanced to the insurer by the agent, broker or premium finance company on behalf of, but in the absence of a payment by, the insured. (2) An insured shall be obligated to pay any unpaid earned premium due the insurer, as shown on the records of the insurer, at the time of the declaration of insolvency. b. Upon satisfactory evidence of a violation of this section, the commissioner may pursue either one or both of the following courses of action: (1) Suspend or revoke or refuse to renew the licenses of such offending party or parties. (2) After a hearing, impose an administrative penalty of not more than $10,000 for each violation of this section. c. Before the commissioner takes any action as set forth in subsection b. of this section, he shall give written notice to the person, company, association or exchange accused of violating the law, stating specifically the nature of the alleged violation; and fixing a time and place, at least 10 days thereafter, when a hearing on the matter shall be held. After that hearing, or upon failure of the accused to appear at the hearing, the commissioner, if he shall find a violation, shall impose those penalties under subsection b. of this section as he deems advisable. d. When the commissioner takes action in any or all of the ways set out in subsection b. of this section, the party aggrieved may appeal from that action to the Superior Court. L.1992,c.65,s.32.

N.J. Stat. § 17B:32-63 Proposal to disburse assets

33. a. Within 120 days of a final determination of insolvency of an insurer by a court of competent jurisdiction of this State, the liquidator shall make application to the court for approval of a proposal to disburse assets out of marshalled assets, from time to time as those assets become available, to a guaranty association or foreign guaranty association having obligations because of that insolvency. If the liquidator determines that there are insufficient assets to disburse, the application required by this section shall be considered satisfied by a filing by the liquidator stating the reasons for this determination. b. The proposal shall at least include provisions for: (1) Reserving amounts for the payment of expenses of administration and the payment of claims of secured creditors, to the extent of the value of the security held, and claims falling within Classes 1 and 2 of the priorities of distribution established pursuant to paragraphs (1) and (2) of subsection a. of section 41 of this act; (2) Disbursement of the assets marshalled to date and subsequent disbursement of assets as they become available; (3) Equitable allocation of disbursements to each guaranty association and foreign guaranty association entitled thereto; (4) The securing by the liquidator from each guaranty association and foreign guaranty association entitled to disbursements pursuant to this section of an agreement to return to the liquidator such assets, together with income earned on assets previously disbursed, as may be required to pay claims of secured creditors and claims falling within the priorities of distribution established in section 41 of this act in accordance with those priorities. No bond shall be required of any guaranty association or foreign guaranty association; and (5) A full report to be made by each guaranty association and foreign guaranty association to the liquidator accounting for all assets so disbursed to the association, all disbursements made therefrom, any interest earned by the association on those assets and any other matter as the court may direct. c. The liquidator's proposal shall provide for disbursements to each guaranty association and foreign guaranty association in amounts estimated at least equal to the claim payments made or to be made thereby for which such association could assert a claim against the liquidator, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of those claims payments made or to be made by the association, then disbursements shall be in the amount of available assets. d. Notice of application pursuant to this section shall be given to the guaranty association and foreign guaranty associations and the commissioners or other insurance regulators of each of the states. Any such notice shall be deemed to have been given when deposited in the United States certified mails, first class postage prepaid, at least 30 days prior to submission of the application to the court. Action on the application may be taken by the court provided the above required notice has been given and provided further that the liquidator's proposal complies with paragraphs (1) and (2) of subsection b. of this section. L.1992,c.65,s.33.

N.J. Stat. § 17B:32-64 Filing of proof of claims

34. a. Proof of all claims shall be filed with the liquidator in the form required by section 35 of this act on or before the last day for filing specified in the notice required under section 21 of this act, except that proof of claims for cash surrender values or other investment values in life insurance and annuities need not be filed unless the liquidator expressly so requires. b. The liquidator may permit a claimant making a late filing to share in distributions, whether past or future, as if he were not late, to the extent that any such payment will not prejudice the orderly administration of the liquidation, under the following circumstances: (1) The existence of the claim was not known to the claimant and he filed his claim as promptly thereafter as reasonably possible after learning of it; (2) A transfer to a creditor was avoided under sections 25 through 27 of this act, or was voluntarily surrendered under section 28 of this act, and that the filing satisfies the conditions of section 28 of this act; (3) The valuation under section 40 of this act, of any security held by a secured creditor shows a deficiency, which is filed within 30 days after the valuation; and c. The liquidator shall permit late filing claims to share in distributions, whether past or future, as if they were not late, if they are claims of a guaranty association or foreign guaranty association for reimbursement of covered claims paid or expenses incurred, or both, subsequent to the last day for filing if those payments were made and expenses incurred as provided by law. d. The liquidator may consider any claim filed late which is not covered by subsection b. of this section, and permit it to receive distributions which are subsequently declared on any claims of the same or lower priority if the payment does not prejudice the orderly administration of the liquidation. The late-filing claimant shall receive, at each distribution, the same percentage of the amount allowed on his claim as is then being paid to claimants of any lower priority. This shall continue until his claim has been paid in full. L.1992,c.65,s.34.

N.J. Stat. § 17B:32-65 Statement to proof of claim

35. a. Proof of claim shall consist of a statement signed by the claimant that includes all of the following that are applicable: (1) The particulars of the claim including the consideration given for it; (2) The identity and amount of the security on the claim; (3) The payments made on the debt, if any; (4) That the sum claimed is justly owing and that there is no setoff, counterclaim or defense to the claim; (5) Any right of priority of payment or other specific right asserted by the claimants; (6) A copy of the written instrument which is the foundation of the claim; and (7) The name and address of the claimant and the attorney who represents him, if any. b. No claim need be considered or allowed if it does not contain all the information in subsection a. of this section which may be applicable. The liquidator may require that a prescribed form be used, and may require that other information and documents be included. c. At any time the liquidator may request the claimant to present information or evidence supplementary to that required under subsection a. of this section and may take testimony under oath, require production of affidavits or depositions, or otherwise obtain additional information or evidence. d. No judgment or order against an insured or the insurer entered after the date of filing of a successful petition for liquidation, and no judgment or order against an insured or the insurer entered at any time by default or by collusion need be considered as evidence of liability or of quantum of damages. No judgment or order against an insured or the insurer entered within four months before the filing of the petition need be considered as evidence of liability or of the quantum of damages. e. All claims of a guaranty association or foreign guaranty association shall be in such form and contain such substantiation as may be agreed to by the association and the liquidator. L.1992,c.65,s.35.

N.J. Stat. § 17B:32-66 Contingent, absolute, limited claims

36. a. A claim may be allowed even if contingent, if it is filed in accordance with section 34 of this act. It may be allowed and may participate in all distributions declared after it is filed to the extent that it does not prejudice the orderly administration of the liquidation. b. Claims that are due except for the passage of time shall be treated as absolute claims are treated, except that such claims may be discounted at a rate of interest determined by the commissioner. c. Claims made under employment contracts by directors, principal officers, or persons in fact performing similar functions or having similar powers are limited to payment for services rendered prior to the issuance of any order of rehabilitation or liquidation under section 12 or 17 of this act. L.1992,c.65,s.36.

N.J. Stat. § 17B:32-67 Third party, insured claims

37. a. Whenever any third party asserts a cause of action against an insured of an insurer in liquidation, the third party may file a claim with the liquidator. b. Whether or not the third party files a claim, the insured may file a claim on its own behalf in the liquidation. If the insured fails to file a claim by the date for filing claims specified in the order of liquidation or within 60 days after mailing of the notice required by section 21 of this act, whichever is later, he is an unexcused late filer. c. The liquidator shall make his recommendations to the court under section 42 of this act, for the allowance of an insured's claim under subsection b. of this section after consideration of the probable outcome of any pending action against the insured on which the claim is based, the probable damages recoverable in the action and the probable costs and expenses of defense. After allowance by the court, the liquidator shall withhold any dividends payable on the claim, pending the outcome of litigation and negotiation with the insured. Whenever it seems appropriate, he shall reconsider the claim on the basis of additional information and amend his recommendations to the court. The insured shall be afforded the same notice and opportunity to be heard on all changes in the recommendation as in its initial determination. The court may amend its allowance as it deems appropriate. As claims against the insured are settled or barred, the insured shall be paid from the amount withheld the same percentage dividend as was paid on other claims of like property, based on the lesser of: (1) the amount actually recovered from the insured by action or paid by agreement plus the reasonable costs and expense of defense, or (2) the amount allowed on the claims by the court. After all claims are settled or barred, any sum remaining from the amount withheld shall revert to the undistributed assets of the insurer. Delay in final payment under this subsection shall not be a reason for unreasonable delay of final distribution and discharge of the liquidator. d. If several claims founded upon one policy are filed, whether by third parties or as claims by the insured under this section, and the aggregate allowed amount of the claims to which the same limit of liability in the policy is applicable exceeds that limit, each claim as allowed shall be reduced in the same proportion so that the total equals the policy limit. Claims by the insured shall be evaluated as in subsection c. of this section. If any insured's claim is subsequently reduced under subsection c., the amount thus freed shall be apportioned ratably among the claims which have been reduced under this subsection. e. No claim may be presented under this section if it is or may be covered by any guaranty association or foreign guaranty association. L.1992,c.65,s.37.

N.J. Stat. § 17B:32-68 Denial of claims

38. a. When a claim is denied in whole or in part by the liquidator, written notice of the determination shall be given to the claimant or his attorney by first class mail at the address shown in the proof of claim. Within 60 days from the mailing of the notice, the claimant may file his objections with the liquidator. If no such filing is made, the claimant may not further object to the determination. b. Whenever objections are filed with the liquidator and the liquidator does not alter his denial of the claim as a result of the objections, the liquidator shall ask the court for a hearing as soon as practicable and give notice of the hearing by first class mail to the claimant or his attorney and to any other persons directly affected, not less than 10 nor more than 30 days before the date of the hearing. The matter may be heard by the court or by a court-appointed referee who shall submit findings of fact along with his recommendation. L.1992,c.65,s.38.

N.J. Stat. § 17B:32-69 Proving, filing of claim of subrogee

39. Whenever a creditor, whose claim against an insurer is secured, in whole or in part, by the undertaking of another person, fails to prove and file that claim, the other person may do so in the creditor's name, and shall be subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the other person in the creditor's name, to the extent that he discharges the undertaking. In the absence of an agreement with the creditor to the contrary, the other person shall not be entitled to any distribution, however, until the amount paid to the creditor on the undertaking plus the distributions paid on the claim from the insurer's estate to the creditor equals the amount of the entire claim of the creditor. Any excess received by the creditor shall be held by him in trust for that other person. The term "other person," as used in this section, shall not apply to a guaranty association or foreign guaranty association. L.1992,c.65,s.39.

N.J. Stat. § 17B:32-70 Determination of value of security

40. a. The value of any security held by a secured creditor shall be determined in one of the following ways, as the court may direct: (1) By converting the same into money according to the terms of the agreement pursuant to which the security was delivered to the creditor; or (2) By agreement, arbitration, compromise or litigation between the creditor and the liquidator. b. The determination shall be under the supervision and control of the court with due regard for the recommendation of the liquidator. The amount so determined shall be credited upon the secured claim, and any deficiency shall be treated as an unsecured claim. If the claimant shall surrender his security to the liquidator, the entire claim shall be allowed as if unsecured. L.1992,c.65,s.40.

N.J. Stat. § 17B:32-71 Priority of distribution of claims

41. a. The priority of distribution of claims from the insurer's estate shall be in accordance with the order in which each class of claims is set forth in this section. Every claim in each class shall be paid in full or adequate funds or other assets retained for such payment before the members of the next class receive any payment. No subclasses shall be established within any class. The order of distribution of claims shall be: (1) Class 1. The costs and expenses of administration during rehabilitation and liquidation, including but not limited to the following: (a) The actual and necessary costs of preserving or recovering the assets of the insurer; (b) Compensation for all authorized services rendered in the rehabilitation and liquidation; (c) Any necessary filing fees; (d) The fees and mileage payable to witnesses; (e) Authorized reasonable attorney's fees and other professional services rendered in the rehabilitation and liquidation; (f) The reasonable expenses of a guaranty association or foreign guaranty association for unallocated loss adjustment expenses. For purposes of this subparagraph, "unallocated loss adjustment expenses" means expenses associated with claims settlement due to the insolvency of a member insurer that cannot be assigned to an individual claim. (2) Class 2. Reasonable compensation to employees for services performed to the extent that they do not exceed two months of monetary compensation and represent payment for services performed within one year before the filing of the petition for liquidation or, if rehabilitation preceded liquidation, within one year before the filing of the petition for rehabilitation. Principal officers and directors shall not be entitled to the benefit of this priority except as otherwise approved by the liquidator and the court. Such priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of employees. (3) Class 3. All claims under policies, including claims of the federal or any state or local government for losses incurred and including third party claims and all claims of a guaranty association or foreign guaranty association, but excluding amounts recoverable under Class 1 claims pursuant to paragraph (1) of this subsection. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values, shall be treated as loss claims. For the purpose of this section, life insurance and annuity policies shall include, but not be limited to, any and all individual and group annuity and investment contracts issued by an insurer under or in connection with an employee benefit plan or program to which section 401, 403(b), 408 or 457 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.401, 403(b), 408 or 457) relates, to whomever or whatever persons or entities such contracts are issued, together with all individual annuities issued pursuant to any such contracts. That portion of any loss, indemnification for which is provided by other benefits or advantages recovered by the claimant, shall not be included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligation of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment by an employer to his employee shall be treated as a gratuity. Claims of enrollees, members or subscribers, and their beneficiaries, of a fraternal benefit society, mutual benefit association, hospital service corporation, medical service corporation, health service corporation, dental service corporation, dental plan organization or health maintenance organization, as the case may be, shall have the same priority established by this section for policyholders and beneficiaries of insurers. Any provider of health care services to an enrollee, member or subscriber shall have a priority of distribution of general assets immediately following that of enrollees, members or subscribers and their beneficiaries, and immediately preceding Class 4 claims under paragraph (4) of this subsection. (4) Class 4. Claims under nonassessable policies for unearned premium or other premium refunds and claims of general creditors including claims of ceding and assuming companies in their capacity as such. (5) Class 5. Claims of the federal or any state or local government except those under Class 3 claims pursuant to paragraph (3) of subsection a. of this section. Claims, including those of any governmental body for a penalty or forfeiture, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of such claims shall be postponed to the Class 8 claims under paragraph (8) of this subsection. (6) Class 6. Claims filed late or any other claims other than Class 7 and Class 8 claims under paragraphs (7) and (8) of this subsection. (7) Class 7. Surplus or contribution notes, or similar obligations, and premium refunds on assessable policies. Payments to members of domestic mutual insurance companies shall be limited in accordance with law. (8) Class 8. The claims of shareholders or other owners in their capacity as shareholders. b. Every claim under a separate account agreement providing, in effect, that the assets in the separate account shall not be chargeable with liabilities arising out of any other business of the insurer shall be satisfied out of the assets in the separate account equal to the reserves maintained in that account for that agreement. To the extent, if any, that a claim under a separate account agreement is not fully discharged by such assets, such claim shall be treated as a Class 3 claim pursuant to paragraph (3) of subsection a. of this section against the estate of the insurer. L.1992,c.65,s.41.

N.J. Stat. § 17B:32-72 Review of claims

42. a. The liquidator shall review all claims duly filed in the liquidation and shall make such further investigation as he shall deem necessary. He may compound, compromise or in any other manner negotiate the amount for which claims will be recommended to the court except where the liquidator is required by law to accept claims as settled by any person or organization, including any guaranty association or foreign guaranty association. Unresolved disputes shall be determined under section 38 of this act. As soon as practicable, he shall present to the court a report of the claims against the insurer with his recommendations. The report shall include the name and address of each claimant and the amount of the claim finally recommended, if any. If the insurer has issued annuities or life insurance policies, the liquidator shall report the persons to whom, according to the records of the insurer, amounts are owed as cash surrender values or other investment value and the amounts owed. b. The court may approve, disapprove or modify the report on claims by the liquidator. Reports that are not modified by the court within a period of 60 days following submission by the liquidator shall be treated by the liquidator as allowed claims, subject thereafter to later modification or to rulings made by the court pursuant to section 38 of this act. No claim under a policy of insurance shall be allowed for an amount in excess of the applicable policy limits. L.1992,c.65,s.42.

N.J. Stat. § 17B:32-73 Payment of distributions

43. Under the direction of the court, the liquidator shall pay distributions in a manner that will assure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims, including third party claims. Distribution of assets in kind may be made at valuations set by agreement between the liquidator and the creditor and approved by the court. L.1992,c.65,s.43.

N.J. Stat. § 17B:32-74 Distribution of unclaimed funds

44. Distribution of all unclaimed funds subject to distribution remaining in the liquidator's hands when he is ready to apply to the court for discharge, including the amount distributable to any creditor, shareholder, member or other person who is unknown or cannot be found, shall be made in accordance with the "Uniform Unclaimed Property Act (1981)," R.S. 46:30B-1 et seq. L.1992,c.65,s.44.

N.J. Stat. § 17B:32-75 Application for discharge

45. a. When all assets justifying the expense of collection and distribution have been collected and distributed under this act, the liquidator shall apply to the court for discharge. The court may grant the discharge and make any other orders, including an order to transfer any remaining funds that are uneconomic to distribute, as may be deemed appropriate. b. Any other person may apply to the court at any time for an order under subsection a. of this section. If the application is denied, the applicant shall pay the costs and expenses of the liquidator in resisting the application, including reasonable attorney's fees. L.1992,c.65,s.45.

N.J. Stat. § 17B:32-76 Petition for reopening of proceedings

46. After the liquidation proceeding has been terminated and the liquidator discharged, the commissioner or other interested party may at any time petition the Superior Court to reopen the proceedings for good cause, including the discovery of additional assets. If the court is satisfied that there is justification for reopening, it shall so order. L.1992,c.65,s.46.

N.J. Stat. § 17B:32-77 Retaining, destruction of records

47. Whenever it shall appear to the commissioner that the records of any insurer in the process of liquidation or completely liquidated are no longer useful, he may recommend to the court and the court shall direct what records should be retained for future reference and what should be destroyed. L.1992,c.65,s.47.

N.J. Stat. § 17B:32-78 Audits of receiverships

48. The Superior Court may, as it deems appropriate, cause audits to be made of the books of the commissioner relating to any receivership established under this act, and a report of each audit shall be filed with the commissioner and with the court. The books, records and other documents of the receivership shall be made available to the auditor at any time without notice. The expense of each audit shall be considered a cost of administration of the receivership. L.1992,c.65,s.48.

N.J. Stat. § 17B:32-79 Grounds for appointment of conservator

49. a. If a domiciliary liquidator has not been appointed, the commissioner may apply to the Superior Court by verified petition for an order directing him to act as conservator to conserve the property of an alien insurer not domiciled in this state or a foreign insurer on any one or more of the following grounds: (1) Any of the grounds in section 11 of this act; (2) That any of its property has been sequestered by official action in its domiciliary state, or in any other state; (3) That enough of its property has been sequestered in a foreign country to give reasonable cause to fear that the insurer is or may become insolvent; (4) (a) That its certificate of authority to do business in this State has been revoked or that none was ever issued; and (b) That there are residents of this State with outstanding claims or outstanding policies. b. When an order is sought under subsection a. of this section, the court shall give the insurer notice and time to respond thereto as is reasonable under the circumstances. c. The court may issue the order in whatever terms it shall deem appropriate. The filing or recording of the order with the clerk of the Superior Court or the recorder of deeds of the county in which the principal business of the insurer is located, shall impart the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with that recorder of deeds would have imparted. d. The conservator may at any time petition for and the court may grant an order under section 50 of this act to liquidate assets of a foreign or alien insurer under conservation, or, if appropriate, for an order under section 52 of this act, to be appointed ancillary receiver. e. The conservator may at any time petition the court for an order terminating conservation of an insurer. If the court finds that the conservation is no longer necessary, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also make such finding and issue such order at any time upon motion of any interested party, but if such motion is denied all costs shall be assessed against that party. L.1992,c.65,s.49.

N.J. Stat. § 17B:32-80 Grounds for liquidation of assets of insurer

50. a. If no domiciliary receiver has been appointed, the commissioner may apply to the Superior Court by verified petition for an order directing him to liquidate the assets found in this State of a foreign insurer or an alien insurer not domiciled in this State, on any of the following grounds: (1) Any of the grounds in section 11 or 16 of this act; or (2) Any of the grounds specified in paragraphs (2) through (4) of subsection a. of section 49 of this act. b. When an order is sought under subsection a. of this section, the court shall give the insurer notice and time to respond thereto as is reasonable under the circumstances. c. If it shall appear to the court that the best interests of creditors, policyholders and the public require, the court may issue an order to liquidate in whatever terms it shall deem appropriate. The filing or recording of the order with the clerk of the Superior Court or the recorder of deeds of the county in which the principal business of the insurer is located or the county in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with that recorder of deeds would have imparted. d. If a domiciliary liquidator is appointed in a reciprocal state while a liquidation is proceeding under this section, the liquidator under this section shall thereafter act as ancillary receiver under section 52 of this act. If a domiciliary liquidator is appointed in a nonreciprocal state while a liquidation is proceeding under this section, the liquidator under this section may petition the court for permission to act as ancillary receiver under section 52 of this act. e. On the same grounds as are specified in subsection a. of this section, the commissioner may petition any appropriate federal district court to be appointed receiver to liquidate that portion of the insurer's assets and business over which the court will exercise jurisdiction, or any lesser part thereof that the commissioner deems desirable for the protection of the policyholders and creditors in this State. f. The court may order the commissioner, when he has liquidated the assets of a foreign or alien insurer under this section, to pay claims of residents of this State against the insurer under such rules as to the liquidation of insurers under this act as are otherwise compatible with the provisions of this section. L.1992,c.65,s.50.

N.J. Stat. § 17B:32-81 Vesting of title with domiciliary liquidator

51. a. The domiciliary liquidator of an insurer domiciled in a reciprocal state shall, except as to special deposits and security on secured claims under subsection c. of section 52 of this act, be vested by operation of law with the title to all of the assets, property, contracts and rights of action, agents' balances, and all of the books, accounts and other records of the insurer located in this State. The date of vesting shall be the date of the filing of the petition, if that date is specified by the domiciliary law for the vesting of property in the domiciliary state. Otherwise, the date of vesting shall be the date of entry of the order directing possession to be taken. The domiciliary liquidator shall have the immediate right to recover balances due from agents and to obtain possession of the books, accounts and other records of the insurer located in this State. He also shall have the right to recover all other assets of the insurer located in this State, subject to the provisions of section 52 of this act. b. If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the commissioner of this State shall be vested by operation of law with the title to all of the property, contracts and right of action, and all of the books, accounts and other records of the insurer located in this State, at the same time that the domiciliary liquidator is vested with title in the domicile. The commissioner of this State may petition for a conservation or liquidation order under section 49 or 50 of this act, or for an ancillary receivership under section 52 of this act, or after approval by the Superior Court may transfer title to the domiciliary liquidator, as the interests of justice and the equitable distribution of the assets require. c. Claimants residing in this State may file claims with the liquidator or ancillary receiver, if any, in this State or with the domiciliary liquidator, if the domiciliary law permits. The claims shall be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceedings. L.1992,c.65,s.51.

N.J. Stat. § 17B:32-82 Petition for appointment as ancillary receiver

52. a. If a domiciliary liquidator has been appointed for an insurer not domiciled in this State, the commissioner may file a petition with the Superior Court requesting appointment as ancillary receiver in this State: (1) If he finds that there are sufficient assets of the insurer located in this State to justify the appointment of an ancillary receiver; (2) If the protection of creditors or policyholders in this State so requires. b. The court may issue an order appointing an ancillary receiver in whatever terms it shall deem appropriate. The filing or recording of the order with the recorder of deeds in this State imparts the same notice as a deed, bill of sale or other evidence of title duly filed or recorded with that recorder of deeds. c. When a domiciliary liquidator has been appointed in a reciprocal state, then the ancillary receiver appointed in this State may, whenever necessary, aid and assist the domiciliary liquidator in recovering assets of the insurer located in this State. The ancillary receiver shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this State, and shall pay the necessary expenses of the proceedings. He shall promptly transfer all remaining assets, books, accounts and records to the domiciliary liquidator. Subject to this section, the ancillary receiver and his deputies shall have the same powers and be subject to the same duties with respect to the administration of assets as a liquidator of an insurer domiciled in this State. d. When a domiciliary liquidator has been appointed in this State, ancillary receivers appointed in reciprocal states shall have, as to assets and books, accounts and other records in their respective states, corresponding rights, duties and powers to those provided in subsection c. of this section for ancillary receivers appointed in this State. L.1992,c.65,s.52.

N.J. Stat. § 17B:32-83 Institution of proceedings

53. The commissioner in his sole discretion may institute proceedings under sections 9 and 10 of this act at the request of the commissioner or other appropriate insurance official of the domiciliary state of any foreign or alien insurer having property located in this State. L.1992,c.65,s.53.

N.J. Stat. § 17B:32-84 Claims filed in liquidation proceedings begun in State

54. a. In a liquidation proceeding begun in this State against an insurer domiciled in this State, claimants residing in foreign countries or in states not reciprocal states must file claims in this State, and claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states, or with the domiciliary liquidator. Claims shall be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceeding. b. Claims belonging to claimants residing in reciprocal states may be proved either in the liquidation proceeding in this State as provided in this act, or in ancillary proceedings, if any, in the reciprocal states. If notice of the claims and opportunity to appear and be heard is afforded the domiciliary liquidator of this State as provided in subsection b. of section 55 of this act with respect to ancillary proceedings, the final allowance of claims by the courts in ancillary proceedings in reciprocal states shall be conclusive as to amount and as to priority against special deposits or other security located in such ancillary states, but shall not be conclusive with respect to priorities against general assets under section 41 of this act. L.1992,c.65,s.54.

N.J. Stat. § 17B:32-85 Claims filed in liquidation proceedings in reciprocal state

55. a. In a liquidation proceeding in a reciprocal state against an insurer domiciled in that state, claimants against the insurer who reside within this State may file claims either with the ancillary receiver, if any, in this State, or with the domiciliary liquidator. Claims shall be filed on or before the last dates fixed for the filing of claims in the domiciliary liquidation proceeding. b. Claims belonging to claimants residing in this State may be proved either in the domiciliary state under the law of that state, or in ancillary proceedings, if any, in this State. If a claimant elects to prove his claim in this State, he shall file his claim with the liquidator in the manner provided in sections 34 and 35 of this act. The ancillary receiver shall make his recommendation to the court as under section 42 of this act. He shall also arrange a date for hearing if necessary under section 38 of this act and shall give notice to the liquidator in the domiciliary state, either by certified mail or by personal service at least 40 days prior to the date set for hearing. If the domiciliary liquidator, within 30 days after the giving of such notice, gives notice in writing to the ancillary receiver and to the claimant, either by certified mail or by personal service, of his intention to contest the claim, he shall be entitled to appear or to be represented in any proceeding in this State involving the adjudication of the claim. c. The final allowance of the claim by the courts of this State shall be accepted as conclusive as to amount and as to priority against special deposits or other security located in this State. L.1992,c.65,s.55.

N.J. Stat. § 17B:32-86 Actions, proceedings prohibited during pendency of liquidation proceeding

56. During the pendency in this or any other state of a liquidation proceeding, whether called by that name or not, no action or proceeding in the nature of an attachment, garnishment or levy of execution shall be commenced or maintained in this State against the delinquent insurer or its assets. L.1992,c.65,s.56.

N.J. Stat. § 17B:32-87 Order of distribution of claims

57. a. In a liquidation proceeding in this State involving one or more reciprocal states, the order of distribution of the domiciliary state shall control as to all claims of residents of this and reciprocal states. All claims of residents of reciprocal states shall be given equal priority of payment from general assets regardless of where such assets are located. b. The owners of special deposit claims against an insurer for which a liquidator is appointed in this or any other state shall be given priority against the special deposits in accordance with the laws governing the creation and maintenance of the deposits. If there is a deficiency in any deposit, so that the claims secured by it are not fully discharged from it, the claimants may share in the general assets, but the sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit. c. The owner of a secured claim against an insurer for which a liquidator has been appointed in this or any other state may surrender his security and file his claim as a general creditor, or the claim may be discharged by resort to the security in accordance with section 40 of this act, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors, except to the extent such deficiency is treated as a Class 3 claim pursuant to subsection b. of section 41 of this act. L.1992,c.65,s.57.

N.J. Stat. § 17B:32-88 Failure of ancillary receiver to transfer assets

58. If an ancillary receiver in another state or foreign country, whether called by that name or not, fails to transfer to the domiciliary liquidator in this State any assets within his control, other than special deposits, diminished only by the expenses of the ancillary receivership, if any, the claims filed in the ancillary receivership, other than special deposit claims or secured claims, shall be Class 7 claims pursuant to paragraph (7) of subsection a. of section 41 of this act. L.1992,c.65,s.58.

N.J. Stat. § 17B:32-89 Persons entitled to protection

59. a. For the purpose of this section, the following persons are entitled to protection under subsection b. of this section: (1) All receivers responsible for the conduct of a delinquency proceeding under this act including present and former receivers; and (2) Their employees, including all present and former special deputies and assistant special deputies appointed by the commissioner and all persons whom the commissioner, special deputies, or assistant special deputies have employed to assist in a delinquency proceeding under this act. Attorneys, accountants, auditors and other professional persons or firms who are retained by the receiver as independent contractors and their employees shall not be considered employees of the receiver for purposes of this section. b. No person covered under subsection a. of this section shall be liable, either personally or in his official capacity, for any claim for damage to or loss of property or personal injury or other civil liability caused by or resulting from any alleged act, error or omission of that person arising out of or by reason of his duties as a receiver, or employment by a receiver, except that nothing in this subsection shall be deemed to grant immunity to any person causing such damage by his willful, wanton or grossly negligent act of commission or omission. L.1992,c.65,s.59.

N.J. Stat. § 17B:32-90 Commissioner's powers unaffected

60. This act shall not be interpreted to limit the powers granted to the commissioner by other provisions of law. L.1992,c.65,s.60.

N.J. Stat. § 17B:32-91 Rules, regulations

61. The commissioner may, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), promulgate necessary rules and regulations to implement the provisions of this act. L.1992,c.65,s.61.

N.J. Stat. § 17B:32-92 Rights relative to certain financial agreements; terms defined.

1. a. (1) Notwithstanding any other provision of the "Life and Health Insurers Rehabilitation and Liquidation Act," P.L.1992, c.65 (C.17B:32-31 et seq.) to the contrary, a person shall not be stayed or prohibited from exercising: (a) A contractual right to cause the termination, liquidation, acceleration or close out of any obligation under or in connection with a netting agreement or qualified financial contract with an insurer because of: (i) the insolvency, financial condition or default of the insurer at any time, provided that the right is enforceable under applicable law other than the provisions of P.L.1992, c.65 (C.17B:32-31 et seq.); or (ii) the commencement of a formal delinquency proceeding under P.L.1992, c.65 (C.17B:32-31 et seq.); (b) Any right under a security arrangement relating to one or more netting agreements or qualified financial contracts; or (c) Subject to subsection b. of section 29 of P.L.1992, c.65 (C.17B:32-59), any right to setoff or net out any termination value, payment amount, or other transfer obligation arising under or in connection with one or more netting agreements or qualified financial contracts where the counterparty or its guarantor is organized under the laws of the United States, a state, or a foreign jurisdiction approved by the Securities Valuation Office of the National Association of Insurance Commissioners as eligible for netting. (2) If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under P.L.1992, c.65 (C.17B:32-31 et seq.) terminates, liquidates, closes out or accelerates the agreement or contract, damages shall be measured as of the date or dates of termination, liquidation, close out or acceleration. The amount of a claim for damages shall be actual direct compensatory damages. b. Upon termination of a netting agreement or qualified financial contract, the net or settlement amount, if any, owed by a non-defaulting party to an insurer against which a petition has been filed pursuant to P.L.1992, c.65 (C.17B:32-31 et seq.) shall be transferred to the receiver for the insurer or as directed by the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any walkaway clause in the netting agreement or qualified financial contract. Any limited two-way payment or first method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be deemed to be a full two-way payment or second method provision as against the defaulting insurer. Any such net or settlement amount shall, except to the extent it is subject to one or more secondary liens or encumbrances or rights of netting or setoff, be an asset of the insurer. c. In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a proceeding under P.L.1992, c.65 (C.17B:32-31 et seq.), the receiver shall either: (1) Transfer to one party, other than an insurer subject to a proceeding under P.L.1992, c.65 (C.17B:32-31 et seq.), all netting agreements and qualified financial contracts between a counterparty or any affiliate of such counterparty and the insurer that is the subject of the proceeding, including: (a) all rights and obligations of each party under each such netting agreement and qualified financial contract; and (b) all property, including any guarantees or credit support documents, securing any claims of each party under each such netting agreement and qualified financial contract; or (2) Transfer none of the netting agreements, qualified financial contracts, rights, obligations, or property referred to in subparagraph (b) of paragraph (1) of this subsection with respect to such counterparty and any affiliate of such counterparty. d. If a receiver for an insurer makes a transfer of one or more netting agreements or qualified financial contracts, then the receiver shall use his or her best efforts to notify any person who is party to the netting agreements or qualified financial contracts of the transfer by 12 o'clock noon, the receiver's local time, on the business day following the transfer. For purposes of this subsection, "business day" means a day other than a Saturday, a Sunday, or any day on which either the New York Stock Exchange or the Federal Reserve Bank of New York is closed. e. Notwithstanding any other provision of P.L.1992, c.65 (C.17B:32-31 et seq.), a receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract or any security arrangement relating to a netting agreement or qualified financial contract that is made before the commencement of a formal delinquency proceeding under P.L.1992, c.65 (C.17B:32-31 et seq.), except that a transfer may be avoided under section 25 of P.L.1992, c.65 (C.17B:32-55) if the transfer was made with actual intent to hinder, delay, or defraud the insurer, a receiver appointed for the insurer, or existing or future creditors. f. (1) In exercising any rights of disaffirmance or repudiation of a receiver with respect to any netting agreement or qualified financial contract to which an insurer is a party, the receiver for the insurer shall either: (a) disaffirm or repudiate all netting agreements and qualified financial contracts between a counterparty or any affiliate of that counterparty and the insurer that is the subject of the proceeding; or (b) disaffirm or repudiate none of the netting agreements and qualified financial contracts referred to in subparagraph (a) of this paragraph with respect to that person or any affiliate of that person. (2) Notwithstanding any other provision of P.L.1992, c.65 (C.17B:32-31 et seq.), any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the liquidation proceeding or in the immediately preceding rehabilitation proceeding shall be determined and shall be allowed or disallowed: (a) as if the claim had arisen before the date of the filing of the petition for liquidation; or (b) if a rehabilitation proceeding is converted to a liquidation proceeding, as if the claim had arisen before the date of the filing of the petition for rehabilitation. (3) The amount of the claim identified in paragraph (2) of this subsection shall be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract. g. All rights of a counterparty under this section shall apply to a netting agreement and a qualified financial contract entered into on behalf of, or allocated to: (1) the general account of the insurer; or (2) a separate account of the insurer if the assets of the separate account are available only to a counterparty to a netting agreement and a qualified financial contract entered into on behalf of, or allocated to, that separate account. h. As used in this section: (1) "Actual direct compensatory damages" includes normal and reasonable costs of cover or other reasonable measures of damages utilized in the derivatives market for the contract and agreement claims, but does not include punitive and exemplary damages, damages for lost profit or lost opportunity, or damages for pain and suffering. (2) "Commodity contract" means any of the following: (a) A contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a board of trade designated as a contract market by the Commodity Futures Trading Commission under the "Commodity Exchange Act," 7 U.S.C. s.1 et seq., or board of trade outside the United States; (b) An agreement that is subject to regulation under section 19 of the "Commodity Exchange Act," 7 U.S.C. s.23, and that is commonly known to the commodities trade as a margin account, margin contract, leverage account, or leverage contract; (c) An agreement or transaction that is subject to regulation under subsection 4c(b) of the "Commodity Exchange Act," 7 U.S.C. s.6c(b), and that is commonly known to the commodities trade as a commodity option; (d) Any combination of the agreements or transactions referred to in this paragraph; or (e) Any option to enter into an agreement or transaction referred to in this paragraph. (3) "Contractual right" includes any right set forth in a rule or bylaw of a derivatives clearing organization as defined in the "Commodity Exchange Act," 7 U.S.C. s.1a(9), a multilateral clearing organization as defined in the "Federal Deposit Insurance Corporation Improvement Act of 1991," 12 U.S.C. s.4421(1), a national securities exchange, a national securities association, a securities clearing agency, or a contract market designated under the "Commodity Exchange Act," 7 U.S.C. s.1 et seq., a swap execution facility registered under the "Commodity Exchange Act," 7 U.S.C. s.1 et seq., or a board of trade as defined in the "Commodity Exchange Act," 7 U.S.C. s.1a(2), or in a resolution of the governing board thereof, and any right, whether or not evidenced in writing, arising under statutory or common law, or under law merchant, or by reason of normal business practice. (4) "Forward contract" means the same as the term is defined in the "Federal Deposit Insurance Act," 12 U.S.C. s.1821(e)(8)(D). (5) "Netting agreement" means: (a) A contract or agreement, including the terms and conditions incorporated by reference in such contract or agreement, including a master agreement, which master agreement, together with all schedules, confirmations, definitions and addenda thereto and transactions under any thereof, shall be treated as one netting agreement, that documents one or more transactions between the parties to the agreement for or involving one or more qualified financial contracts and that provides for the netting, setoff, liquidation, termination, acceleration or close out, under or in connection with one or more qualified financial contracts or present or future payment or delivery obligations or payment or delivery entitlements thereunder, including liquidation or close-out values relating to such obligations or entitlements, among the parties to the netting agreement; (b) Any master agreement or bridge agreement for one or more master agreements described in subparagraph (a) of this paragraph; or (c) Any security arrangement related to one or more contracts or agreements described in subparagraph (a) or (b) of this paragraph, provided that any contract or agreement described in subparagraph (a) or (b) of this paragraph relating to agreements or transactions that are not qualified financial contracts shall be deemed to be a netting agreement only with respect to those agreements or transactions that are qualified financial contracts. (6) "Qualified financial contract" means a commodity contract, forward contract, repurchase agreement, securities contract, swap agreement, and any similar agreement that the commissioner determines by regulation to be a qualified financial contract for the purposes of this section. (7) "Repurchase agreement" means the same as that term is defined in the "Federal Deposit Insurance Act," 12 U.S.C. s.1821(e)(8)(D). The term "repurchase agreement" shall include a reverse repurchase agreement. (8) "Security arrangement" means any security agreement or arrangement or other credit enhancement or guarantee or reimbursement obligation, including a pledge, security, collateral or guarantee agreement or credit support document. (9) "Securities contract" means the same as that term is defined in the "Federal Deposit Insurance Act," 12 U.S.C. s.1821(e)(8)(D). (10) "Separate account" means the same as that term is defined in N.J.S.17B:28-1. (11) "Swap agreement" means the same as that term is defined in the "Federal Deposit Insurance Act," 12 U.S.C. s.1821(e)(8)(D). (12) "Walkaway clause" means a provision in a netting agreement or a qualified financial contract that, after calculation of a value of a party's position or an amount due to or from one of the parties in accordance with its terms upon termination, liquidation or acceleration of the netting agreement or qualified financial contract, either does not create a payment obligation of a party or extinguishes a payment obligation of a party in whole or in part solely because of the party's status as a non-defaulting party. L.2011, c.160, s.1.
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