Insolvent insurer recoups claims payments made to insureds and retains reinsurance recovery for same claims

The Utah Supreme Court has ruled on issues relating to whether payments received under various insurance and reinsurance agreements constituted voidable preferences under the Utah Insurers Rehabilitation and Liquidation Act, holding that the payments constituted voidable preferences. Wilcox v. Anchor Wate Co., Case No. 20050324 (Utah Nov. 3, 2006). An insurer had paid claims to its insured and received reimbursement from its reinsurers. The insurer was declared insolvent, and successfully recouped the claims payments it had made to its insured as a voidable preference, even though it had received reinsurance payments. The Court held that the insured had no right to the reinsurance proceeds, and that under the liquidation statute, the insolvent insurer could keep the reinsurance payments and recoup the claim payments it had made to its insured.