After a lengthy legal battle between New York’s Comptroller and the Superintendent of Insurance, New York’s highest court has held that the Comptroller may not exercise its audit powers over the New York Liquidation Bureau (NYLB) and may not audit funds/assets under the NYLB’s control.  Dinallo v. DiNapoli, 2007 N.Y. Slip. Op. 07497 (N.Y.  Oct. 11, 2007).  Click here to read the decision.

In reaching its conclusion, the opinion emphasizes the two “separate and distinct” roles of the Superintendent of Insurance:  (i) as supervisor and regulator of the insurance industry in New York; and (ii) as a court-appointed receiver on behalf of distressed insurers.  The opinion holds, among other things, that:

  • The NYLB is not a state agency;
  • The Superintendent, as liquidator, is acting in a capacity as liquidator of a private business and is not a “state officer”;
  • The Superintendent’s role as liquidator is “judicial and private, while the Superintendent’s role as regulator and supervisor is “administrative and public”;
  • Equitable title to estate assets under NYLB control rests with the distressed insurer, while legal title is held by the Superintendent; and,
  • The estate assets are not “moneys of the state” and not subject to audit by the Comptroller.

Thus, the decision serves to limit not only the ability of the Comptroller to audit the NYLB, but also to delineate the limited and separate role of the Superintendent when acting as liquidator.