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This entry was published on 2014-09-22
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SECTION 7309
Conversion of domestic reciprocal insurers into mutual property/casualty insurance companies
Insurance (ISC) CHAPTER 28, ARTICLE 73
§ 7309. Conversion of domestic reciprocal insurers into mutual
property/casualty insurance companies. Any domestic reciprocal insurer
doing business under the provisions of this article which has in force
contracts of insurance, of the kinds which domestic mutual
property/casualty insurance companies may be authorized to make,
covering not less than three hundred separate risks and on which the
premiums in force aggregate not less than one hundred fifty thousand
dollars, may be converted into and licensed as a domestic mutual
property/casualty insurance company, in the manner prescribed in this
section and subject to any other requirements of law. The successive
steps shall be as follows:

(a) Not less than a majority of the advisory committee of any such
reciprocal insurer proposing so to convert shall adopt a resolution
approving the proposed conversion and appointing a committee of not less
than three from its membership to prepare a draft of a proposed
declaration, charter and by-laws.

(b) Such committee shall prepare a proposed declaration, charter and
by-laws, which shall be submitted with an appropriate resolution to the
advisory committee for approval.

(c) Not less than a majority of the advisory committee, at any regular
or special meeting thereof, shall approve by resolution a proposed
declaration, charter and by-laws, which shall conform to the
requirements of this chapter relative to the contents of charters and
by-laws of domestic mutual property/casualty insurance companies
hereafter organized to do the kinds of business transacted by such
reciprocal insurer, with such additions thereto as the superintendent
shall approve, in order to make provision on account of insurance
contracts then in force. Such resolution shall also instruct the
attorney-in-fact of such reciprocal insurer to give notice of the
meeting at which the proposed conversion is to be voted upon and of a
hearing of the subscribers before the superintendent. A copy of such
resolution, together with copies of those required in subsections (a)
and (b) of this section, a copy of the proposed declaration, charter and
by-laws and a suitable proxy form approved by the superintendent, shall
accompany such notice, which notice shall be mailed, with postage
prepaid, to all subscribers at their post office addresses shown on the
records of the reciprocal insurer, at least thirty days prior to the
date of the meeting. At the hearing, the superintendent shall pass upon
the fairness of the terms and conditions of the proposed conversion and
of the issuance of certificates of interest in the surplus of the
corporation and he shall approve or disapprove the proposed conversion.

(d) At least two-thirds of the votes of subscribers at any reciprocal
insurer, voting at such meeting, either in person or by proxy on the
form furnished the subscriber, if the subscriber's agreement at such
reciprocal insurer provides for a vote by proxy, shall be cast in favor
of the proposed conversion and of the adoption of the proposed
declaration, charter and by-laws. A resolution shall be similarly
adopted authorizing thirteen persons, who shall be either members of an
advisory committee of a reciprocal insurer proposing to convert, the
attorney-in-fact, if an individual, officers of the attorney-in-fact if
a corporation, or subscribers at a reciprocal insurer proposing to
convert, to execute the declaration and authorizing the
attorney-in-fact, if an individual, or the president or a vice-president
and one other officer of the attorney-in-fact, if a corporation, to
execute or certify and file all necessary papers and instruments
incident to the proposed conversion.

(e) The proposed declaration executed as aforesaid and proposed
charter with proof of mailing of notice of the subscribers' meeting and
copies of all other papers and instruments referred to in this section,
together with a certificate of their adoption, subscribed and affirmed
as true under the penalties of perjury, as provided for in subsection
(d) of this section, shall be submitted to the superintendent.

(f) If, after examination, the superintendent finds that the
proceedings for the change to a mutual insurance corporation have been
regularly taken in conformity with law and the declaration and charter
conform to all requirements of paragraph five of subsection (a) of
section one thousand two hundred one of this chapter, he shall file the
declaration and charter in his office and issue a certified copy thereof
to the proposed incorporators. If requested by such proposed
incorporators, the superintendent shall also issue to them a certificate
of incorporation executed by him in the name of the people of the state.
Upon the issuance of such certified copy, such incorporators shall
become a body corporate, and shall then have power to receive payment of
subscriptions to its surplus as set forth in subsection (g) of this
section, but such corporation shall not be authorized to do the business
of insurance until it shall have obtained a license therefor.

(g) Those subscribers who have voted in person or by proxy for the
conversion and any other subscribers who thereafter agree to subscribe
to the surplus of the corporation shall be deemed to have subscribed to
the surplus of the corporation to an amount equal to their operating
reserve accumulations at the reciprocal insurer, and such subscriptions
shall be paid by a transfer of their operating reserve accumulations to
the corporation. Certificates of interest in said surplus shall be
issued to such subscribers in amounts equal to their respective
operating reserve accumulations at the time when the proposal to convert
is adopted by the subscribers. Such certificates of interest shall be
issued upon the agreement set forth in section one thousand three
hundred seven of this chapter.

(h) If, after examination, the superintendent finds that the new
corporation meets the requirements of this chapter, including the
requirements as to initial surplus and reserves applicable under section
four thousand one hundred seven of this chapter, he may issue a license
to the insurer to do business under the provisions of this chapter.
Thereupon, the remaining assets of the reciprocal insurer shall be
transferred to the corporation and the reciprocal insurer shall cease to
have authority to do business as such and shall be deemed extinguished.
Every such corporation resulting from conversion shall assume and
succeed to all of the obligations and liabilities of the reciprocal
insurer and shall be held liable to pay and discharge all such debts and
liabilities in the same manner as if they had been incurred or
contracted by the corporation, but the subscribers of the reciprocal
insurer shall continue subject to all the liabilities, claims and
demands which shall then exist, or which may thereafter accrue against
them, or any of them, by reason of any obligations incurred by them or
on their behalf as such subscribers before the date of conversion and
such subscribers who become subscribers to the surplus shall be entitled
to recoup from the corporation any payment made by reason of such
liabilities, claims or demands.

(i) No action or proceeding, pending at the time of the conversion to
which the reciprocal insurer may be a party, shall be abated or
discontinued by reason of such conversion, but the same may be
prosecuted to final judgment in the same manner as if the conversion had
not taken place, or the corporation may be substituted in place of such
reciprocal insurer by order of the court in which the action or
proceeding may be pending.

(j) Upon such conversion the accumulated operating reserves of
subscribers who shall not have subscribed to the surplus of the
corporation, held on deposit with the reciprocal insurer as of the date
of the conversion shall be held by the corporation for the benefit of
such subscribers until all the obligations incurred on their behalf have
been extinguished. When all of such obligations have been discharged or
terminated, and the superintendent shall have so certified, the said
subscribers' deposits or the balances thereof remaining to their credit
shall be released and returned, whereupon the powers of the
attorney-in-fact relating thereto shall cease and terminate.