Matter of Harris

Matter of Harris

2024 NY Slip Op 33414(U)

September 27, 2024

Supreme Court, New York County

Docket Number: Index No. 450124/2024

Judge: Shahabuddeen Abid Ally

Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York

State and local government sources, including the New

York State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for official

publication.

INDEX NO. 450124/2024

NYSCEF DOC. NO. 95 RECEIVED NYSCEF: 09/27/2024

SUPREME COURT OF THE STATE OF NEW YORK

NEW YORK COUNTY

PRESENT: HON. SHAHABUDDEEN ABID ALLY PART16

Justice

INDEX NO. 450124/2024

In the Matter of the Application of MOTION DATE 6/4/2024

MOTION SEQ. NO. 001

Adrienne A. Harris, Superintendent of Financial Services of

the State of New York, for an Order of Appointment as

Ancillary Receiver of

DECISION & ORDER

ARROWOOD INDEMNITY COMPANY.

The following e-filed documents, listed by NYSCEF document number, were read

on this motion (Seq. No. 1) to/for INSURANCE LAW ARTICLE 74 (ANCILLARY

RECEIVER): 1-7, 11, 15-19, 21-41, 45-53, 55-56, 58-69, 72-73

Arrowood Indemnity Company ("Arrowood") is an insurance company domiciled in the

State of Delaware and licensed to do business as an authorized foreign insurer in the State of New

York pursuant to Insurance Law§ 1113(a). (Verified Pet. <JI<JI 2-4). On November 8, 2023, the Court

of Chancery of the State of Delaware issued a Liquidation and Injunction Order with Bar Date

that, among other things, appointed the Delaware Insurance Commissioner as receiver of Ar-

rowood and set January 15, 2025, as the bar date for the filing of claims against Arrowood. (Id.

<JI<JI 5-7; id. Ex. 2 ("Allen Aff."), Ex. A)

At the Delaware Insurance Commissioner's request, made by letter dated November 21,

2023, Adrienne A. Harris, Superintendent of Financial Services of the State of New York (the "Su-

perintendent"), seeks to be appointed ancillary receiver of Arrowood pursuant to Insurance Law

§ 7407(c). 1 (Id. <JI<JI 9-10; Allen Aff. Ex. B) In aid of the ancillary receivership, the Superintendent

also seeks an order, pursuant to Insurance Law§ 7419(b), permanently enjoining and restraining

all persons from the commencement or prosecution of any actions, law-

suits, or proceedings in the State of New York, the obtaining of prefer-

ences, judgments, attachments, or other liens, or the making of any levy in

the State of New York against Arrowood, the Superintendent as Ancillary

1 Delaware is reciprocal state under the Uniform Insurers Liquidation Act. See Ins. Law§§ 7408-15; Del. Code tit.

18, § 5920.

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NYSCEF DOC. NO. 95 RECEIVED NYSCEF: 09/27/2024

Receiver or as administrator of the P/C Fund and the WC Fund ... , the

New York Liquidation Bureau ... (the organization serving as the Ancil-

lary Receiver's staff), or their employees, attorneys, or agents, with respect

to this proceeding or in the discharge of their duties under Insurance Law

Article 74 in relation thereto.

(Verified Pet. <JI 15) Additionally, the Superintendent seeks an order: (1) "temporarily staying all

litigations against insureds of Arrowood or in which Arrowood is obligated to defend an insured

or provide a defense to a party pursuant to an insurance policy, for a period of 180 days from the

date an Order commencing the ancillary receivership is signed"; and (2) "temporarily enjoying

and restraining all persons who have first-party policyholder loss claims against Arrowood in the

State of New York from presenting and filing claims with the Ancillary Receiver for a period of

90 days from the date an Order commencing the ancillary receivership is signed." (Id. <JI<JI 17-18)

A number of objections have been lodged against the Superintendent's application. One

group of objectors are plaintiffs in pending actions pursuant to the Child Victims Act (the "CVA

Objectors"), and they make essentially identical arguments as to why the Superintendent's re-

quested stay of actions against Arrowood' s insureds should not be issued or, alternatively, why

their actions should be exempted from such stay. (See NYSCEF Docs. 15 ("Keller Aff."), 21, 27

("Aliaga Aff."), 58, 62, 66, 72) The CVA Objectors contend that imposing a stay on their pending

actions would violate the strong public policy that Child Victims Act (the "CVA") claims are to

be resolved expeditiously and otherwise would be highly prejudicial or unjust to the CVA Objec-

tors, whose claims are inherently old.

As support for the public policy on which they rely, the CVA Objectors cite the New York

Senate Sponsor's Memorandum for the CVA, which provides, in relevant part:

New York is one of the worst states in the nation for survivors of child

sexual abuse. New York currently requires most survivors to file civil ac-

tions or criminal charges against their abusers by the age of 23 at most,

long before most survivors report or come to terms with their abuse,

which has been estimated to be as high as 52 years old on average. Because

of these restrictive statutes of limitations, thousands of survivors are una-

ble to sue or press charges against their abusers, who remain hidden from

law enforcement and pose a persistent threat to public safety.

Passage of the Child Victims Act will finally allow justice for past and fu-

ture survivors of child sexual abuse, help the public identify hidden child

predators through civil litigation discovery, and shift the significant and

lasting costs of child sexual abuse to the responsible parties.

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NYSCEF DOC. NO. 95 RECEIVED NYSCEF: 09/27/2024

2019 N.Y. Sen. Bill No. 2440, available at https://www.nysenate.gov/legislation/bills/2019/S2440.

The CVA Objectors also rely on several press releases issued contemporaneously with the passage

of the CVA. In the first, New York Assembly Speaker Carl E. Heastie stated, "For too long survi-

vors of childhood sexual abuse have had to live with their trauma while their perpetrators es-

caped justice because of New York's inadequate laws. This legislation [the CVA] would ensure

that they are finally given their day in court and that their abusers are exposed and held account-

able." (Keller Aff. Ex. C (NYSCEF Doc. 18)) In the second, the Honorable Lawrence K. Marks, then

New York's Chief Administrative Judge, stated, "The revived Child Victims Act cases are criti-

cally important cases ... , that must be adjudicated as consistently and expeditiously across the

State." (Id. Ex. D (NYSCEF Doc. 19)) In the third, issued by the New York State Office of Children

and Family Services on February 14, 2019, and collecting quotes from relevant government actors,

then-Governor Andrew Cuomo is quoted as having said, "[The CVA] brings justice to people who

were abused, and rights the wrongs that went unacknowledged and unpunished for too long,"

and New York Senate Majority Leader Andrea Stewart-Cousins is quoted as having said, "When

we took up this fight for the [CVA], none of us thought it was going to be this tough or take this

long. Government has a responsibility to stand up for the survivors of these heinous crimes."

(Aliaga Aff. Ex. F (NYSCEF Doc. 33))

As the CVA Objectors further note, Judiciary Law§ 219-d provides that "[t]he chief ad-

ministrator of the courts shall promulgate rules for the timely adjudication of revived actions

brought pursuant to [the CVA]," and that under such directive and authority, the court system

implemented 22 N.Y.C.R.R. § 202.72, which provides that discovery should be completed and a

note of issue should be filed in a CVA action within one year of the preliminary conference and

that a trial should then be held within 60 days of the filing of the note of issue (unless dispositive

motions have been filed).

Notwithstanding the foregoing, the Court is unpersuaded. To be sure, the Legislature in-

tended that CVA claims should be timely resolved, subject to the specific needs and circumstances

of each case. Given the nature of such claims, that intent is certainly laudable, and courts should

seek, to the best of their ability, to fulfill it. But as explained by the Superintendent, "[t]he purpose

of the ancillary receivership is to trigger the benefits of the New York Property and Casualty In-

surance Security Fund ... for New York policyholders that hold Arrowood policies and have

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covered claims under New York Insurance Law Article 76," and the proposed stay will "permit

the Security Fund to carry out all of its statutory functions in a reasonable time as required under

Insurance Law Article 76 and the applicable insurance policies." (Gagion Affirm. (NYSCEF Doc.

45) 112, 7) Those functions include: "(i) receiv[ing] claims and related files referred to [the Se-

curity Fund] by the domestic liquidator (i.e., the Delaware liquidator); (ii) review[ing] and ana-

lyz[ing] the relevant claim files; (iii) assign[ing] outside counsel, if necessary; and (iv) provid[ing]

an appropriate defense to the insured and determin[ing] the appropriate next steps within the

litigation." (Id. 1 7) The Superintendent avers that it anticipates being referred more than 3,000

property and casualty claims. (Verified Pet. 1 7) So, clearly, there are competing policies and in-

terests at stake here.

The Court has broad discretion to weigh and resolve those competing policies and inter-

ests when deciding whether to issue an anti-suit injunction in the context of the liquidation of an

insurer. Cf In re Liquidation of Midland Ins. Co., 87 A.D.3d 487, 488 (1st Dep't 2011) ("Insurance

Law§ 7419(b) vests a liquidation court with broad authority to issue injunctions as it deems nec-

essary to prevent interference with the liquidator or the proceeding, or the waste of the insurer's

assets."). Initially, it is significant that the proposed stay is temporary, so while the CVA Objec-

tors' actions will indeed be delayed by the imposition of the stay, that delay will be finite, with a

set beginning and end date. Other than expressing generalized concerns about continued delay,

none of the CVA Objectors have identified any particularized, nonspeculative prejudice that they

would be likely to suffer directly as a result of the stay. Furthermore, nowhere in the Sponsor's

Memorandum for the CVA or in the statements contained in the submitted press releases does

the Court discern any intent that the policy of expeditious resolution of CVA claims should pre-

clude the temporary staying of actions involving such claims in these circumstances-i.e., for

other legitimate statutory purposes. Nor, in this Court's view, does Judiciary Law§ 219-d's di-

rective to the court system to implement rules for the "timely" adjudication of CVA claims reflect

such an intent. In other words, it is not apparent to the Court that the Legislature intended that

the policies and purposes embodied in the Insurance Law should give way to resolution of CVA

claims without temporary, purposeful interruption, or that concerns about the swift resolution of

CVA claims should predominate all others in all situations. Finally, the timetable for adjudication

of CVA actions set forth in 22 N.Y.C.R.R. § 202.72 is expressly aspirational, and because it was

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implemented pursuant to Judiciary Law§ 219-d, it cannot embody a policy or intent that§ 219-d

does not.

At the same time, the Superintendent has statutory functions to fulfill. To aid her in doing

so, she asks for a temporary pause on pending litigations in which, once she is appointed ancillary

receiver for Arrowood, she will effectively stand in Arrowood' s place, thereby assuming its con-

tractual obligations to provide legal representation to insureds or to pay any settlements or judg-

ments. It is not unreasonable that the Superintendent should request reasonable time to assess

whether to retain or replace counsel previously appointed by Arrowood, to attempt to settle cer-

tain actions, and to make any other decisions it might need concerning its management of Ar-

rowood' s assets in New York or those of the Security Fund. As the Superintendent points out,

New York courts routinely grant such stays (see Verified Pet. <]120; id. Ex3 (NYSCEF Doc. 6)), and

the CVA Objectors have not offered any examples of a court declining to issue such a stay in

similar circumstances. In the end, the temporary and routine nature of the proposed stay, the lack

of clear public policy precluding the stay, and the countervailing interests of the Superintendent

militate in favor of granting the stay.

The cases on which the CVA Objectors rely are inapposite and do not require a different

result. Both Caimares v. Erickson, 173 A.D.3d 417 (1st Dep't 2019), and Hala v. Orange Regional Med-

ical Center, 178 A.D.3d 151 (2d Dep't 2019), involved a stay sought based on a stay order issued

by a court of another state in connection with the liquidation of a risk-retention group ("RRG")

domiciled in that state. In Caimares, the First Department determined that an RRG is not an insur-

ance company subject to New York's version of the Uniform Insurers Liquidation Act (the

"UILA''). 173 A.D.3d at 417. Arrowood, however, is not an RRG but is indisputably an insurer

within the meaning of the UILA, pursuant to which the Superintendent seeks its appointment

here. Further, the jurisdictional issues that concerned the Second Department are not present

here, because the stay would arise from this proceeding before this Court, a New York court.

Finally, the stay at issue in both Caimares and Hala was permanent, whereas the proposed stay

here is, again, merely temporary. See Hala, 178 A.D.3d at 166 (recognizing that "the jurisprudence

of this state, the public policy expressed in New York's adoption of the UILA, and the principles

of comity could, in the case of a temporary order of another state, weigh in favor of recognition

and enforcement of such order by this Court"). Thus, unlike the plaintiffs in Caimares and Hala,

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the CVA Objectors will not be deprived of their opportunity for redress of the wrongs allegedly

committed against them.

The Roman Catholic Diocese of Brooklyn, New York, along with a number of related en-

tities (the "Diocese"), also object to the Superintendent's application to the extent that it seeks to

exempt the insurance-coverage litigation Arrowood Indemnity Co. v. The Roman Catholic Diocese of

Brooklyn, New York, et al., Index No. 20-cv-06281, pending in the U.S. District Court for the Eastern

District of New York (the "Coverage Action"), from the injunctive relief sought herein. (See Artese

Affirm. (NYSCEF Doc. 35); id. Ex. 1 (listing 28 related entities)) The Diocese otherwise supports

the imposition of such injunctive relief.

The Court cannot exempt from the proposed injunctive relief, however, an action that was

never covered by such relief to begin with. As the Superintendent and the Delaware receiver both

point out, the proposed injunctive relief, by its plain terms, does not enjoin any actions main-

tained by Arrowood, such as the Coverage Action. (Black Affirm. (NYSCEF Doc. 48) 1 4; Gagion

Affirm. (NYSCEF Doc. 49) 1 6)

The proposed injunctive relief does not apply to the Coverage Action for another, inde-

pendent reason. It is well settled that, with one exception not applicable here, a state court is

without power to enjoin an action pending in a federal court. Leake v. Merrill Lynch, Pierce, Fenner

& Smith, 213 A.D.2d 155, 156 (1st Dep't 1995) (citing Donovan v. City of Dallas, 377 U.S. 408, 412-

413 (1964)). Therefore, if the district court were to enjoin the continued litigation of the Coverage

Action, it would do so of its own accord, presumably under principles of comity. This Court,

however, has no power to order the district court to stay the Coverage Action. If the Diocese

wishes that the Coverage Action (or any part thereof) be stayed, it must make its application to

the district court.

Accordingly, it is hereby:

ORDERED and ADJUDGED that the Verified Petition and Order to Show Cause (Seq.

No. 1) are GRANTED, and Adrienne A. Harris, Superintendent of Financial Services of the State

of New York, and her successors in office, are appointed as ancillary receiver of Arrowood In-

demnity Company in accordance with and subject to the terms of the annexed Order of Ancil-

lary Receivership, dated September 27, 2024; and it is further

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ORDERED that petitioner shall serve a copy of this Decision and Order and the annexed

Order of Ancillary Receivership upon the Clerk of the General Clerk's Office and upon the Trial

Support Office (60 Centre Street, Room 148, New York, NY 10007), with notice of entry within

twenty (20) days thereof, and shall separately file and upload the notice required by CPLR 8019( c)

in a completed Form EF-22 within twenty (20) days of the entry of this Decision and Order and

the annexed Order of Ancillary Receivership; and it is further

ORDERED that service upon the Clerk of Court and Trial Support Office shall be made

in accordance with the procedures set forth in the Protocol on Courthouse and County Clerk

Procedures for Electronically Filed Cases (Revised August 15, 2019); 2 and it is further

ORDERED that the Clerk shall mark Motion Sequence No. 1 decided in all court records;

and it is further

ORDERED that the Clerk shall mark this proceeding disposed in all court records.

This constitutes the decision, order, and judgment of the Court.

September 27, 2024

DATE DEEN ABID ALLY, A.J.S.C.

CHECK ONE: CASE DISPOSED ~ NON-FINAL DISPOSITION

APPLICATION: GRANTED □ DENIED GRANTED IN PART OTHER

CHECK IF APPROPRIATE: SETTLE ORDER

INCLUDES TRANSFER/REASSIGN

SUBMIT ORDER

FIDUCIARY APPOINTMENT

D STAY CASE

REFERENCE

2

The protocols are available at https:Uwww.nycourts.gov/LegacyPDFS/courts/ljd/supctmanh/Efil-protocol.pdf.

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NTFTIEB°F·~ YORK COUNTY CLERK 01/05/2024 07: 04 AM) RECE\~xNN§~Ef5 o~ifh7dz2,p24

NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2024

At IAS Part 16 of the Supreme

Court of the State of New York,

County of New York, at the

Courthouse, 111 Centre Street in

the County, City and State of New

York, on the 27th day of September ,

2024.

PRESENT:

HON. SHAHABUDDEEN A. ALLY, A.J.S.C.

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

-----------------------------------------------------------------X

In the Matter of Index No.:

the Application of

Adrienne A. Harris, Superintendent of Financial Services ORDER OF

of the State of New York, for an Order of Appointment ANCILLARY

as Ancillary Receiver of RECEIVERSHIP

ARROWOOD INDEMNITY COMPANY.

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Adrienne A. Harris, Superintendent of Financial Services of the State of New York

("Superintendent"), having moved this Court for an order appointing the Superintendent and her

successors in office as ancillary receiver ("Ancillary Receiver") of Arrowood Indemnity Company

("Arrowood"), and upon reading and filing the petition of the Superintendent, duly verified on the

3rd day of January, 2024 ("Verified Petition"), the Affidavit of Marc Allen, Assistant Chief

Examiner, Property Bureau, New York State Department of Financial Services, sworn to on the

19th day of December, 2023, and the exhibits annexed thereto, this Court finds that:

1. Arrowood is a property/casualty insurer organized under the laws of the State of

Delaware, with its main administrative office located in Charlotte, North Carolina;

2. Arrowood was licensed in the State of New York to transact the kinds of insurance

specified in New York Insurance Law§§ l l 13(a)(3)- (17) and (19-21);

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Nl-l!!flfiEfP.C.Nffii 'roRK COUNTY CLERK 01/05/2024 07: 04 AMl RECE~~~EXNMSCE~50:il94"/4?2Il/,)2!024

NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2024

3. By order dated November 8, 2023, the Delaware Court of Chancery issued a

Liquidation and Injunction Order with Bar Date (the "Liquidation Order"). The Liquidation Order

found Arrowood to be insolvent and appointed the Insurance Commissioner of the State of

Delaware as receiver of Arrowood (the "Delaware Receiver"). The Liquidation Order also, among

other things, established January 15, 2025, as the bar date for the filing of claims against Arrowood

(the "Claims Bar Date");

4. Arrowood is subject to Article 74 of the New York Insurance Law ("Insurance

Law");

5. Delaware is a reciprocal state within the meaning oflnsurance Law§ 7408(b)(6);

6. The Delaware Receiver requested that the Superintendent commence an ancillary

receivership proceeding for Arrowood; and

7. Insurance Law§ 7410(a) mandates that the Superintendent be appointed Ancillary

Receiver of Arrowood.

NOW, on the motion of the Honorable Letitia James, Attorney General of the State of New

York, it is hereby

ORDERED as follows:

1. The relief requested in the Verified Petition seeking an order of ancillary

receivership ("Order") is granted in its entirety;

2. The Superintendent and her successors in office are appointed Ancillary Receiver

of Arrowood and are vested with all rights and obligations granted to and imposed

upon her pursuant to Article 74 of the Insurance Law;

3. In accordance with Insurance Law§ 7412(a), the Claims Bar Date of January 15,

2025, established in paragraph 24 of the Liquidation Order, applies to this ancillary

receivership proceeding and all New York claims under Arrowood policies and

evidence supporting such claims must be submitted to the Ancillary Receiver by

January 15, 2025, and if not submitted by that date shall be barred;

2

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N'@£t1EBqc.Nlw YORK COUNTY CLERK 01/05/2024 07: 04 AM) RECEj~§§xN~§~Ef501Q:!1./;q02~024

NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2024

4. All persons are permanently enjoined and restrained from commencing or

prosecuting any actions, lawsuits or proceedings in the State of New York against

Arrowood, and all persons are permanently enjoined and restrained from obtaining

preferences, judgments, attachments, or other liens, or making any levy in the State

of New York against Arrowood, the Superintendent as Ancillary Receiver or as

administrator of the New York Property/Casualty Insurance Security Fund or

Workers' Compensation Security Fund ("New York security funds"), the New

York Liquidation Bureau, and their employees, attorneys, or agents, with respect to

this proceeding or in the discharge of their duties;

5. All parties to actions, lawsuits, and special or other proceedings against insureds of

Arrowood or in which Arrowood is obligated to defend an insured or provide a

defense to a party pursuant to an insurance policy are enjoined and restrained from

obtaining any judgment or proceeding with any discovery, court proceedings, or

other litigation tasks or procedures, including, but not limited to, conferences, trials,

applications for judgment, or proceedings on settlement or judgment, for a period

of 180 days from the date this Order is signed;

6. All persons who have first party policyholder loss claims against Arrowood in the

State of New York are enjoined and restrained from presenting and filing claims

with the Ancillary Receiver for a period of 90 days from the date this Order is

signed;

7. Judicial immunity is extended to the Superintendent in her capacities as Ancillary

Receiver of Arrowood and as administrator of the New York security funds, her

successors in office, the New York Liquidation Bureau, and their agents and

employees, for any cause of action of any nature against them, individually or

jointly, for any act or omission when acting in good faith, in accordance with the

orders of this Court, or in the performance of their duties pursuant to Insurance Law

Articles 74 and 76;

8. The Ancillary Receiver shall serve a copy of this Order on the Delaware Insurance

Commissioner, in his capacity as Receiver of Arrowood Indemnity Company, c/o

James J. Black, III, at Black & Gemgross, PC, 1617 John F. Kennedy Blvd., Suite

1575, Philadelphia, PA 19103, and Gene T. Reed, Jr., Deputy Receiver,

Rehabilitation & Liquidation Bureau at 704 King Street, Suite 602, Wilmington,

DE 19801, by overnight mail within 10 days after the entry of this Order;

9. The Ancillary Receiver shall provide notice of this Order to all creditors, claimants,

and interested persons located in the State of New York by posting this Order on

the Internet web page maintained by the New York Liquidation Bureau at

http://www.nylb.org within 10 days after the entry of this Order;

10. Arrowood's license to do business in the State of New York is hereby revoked;

11. The caption for this proceeding is hereby amended as follows:

3

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Nlffi1E:i99C·Nfw ffiRK COUNTY CLERK 01/05/2024 07: 04 AMl RECEIMB~XNN~CEf5:0la:9l//22~£~024

NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 01/05/2024

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

--------------------------------------------------------------------X

In the matter of

the Ancillary Receivership of

ARROWOOD INDEMNITY COMPANY.

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12. All further papers in this proceeding shall bear the above amended caption.

NTER

HON. HA ABUDDEEN A. ALLY, A.J.S.C.

4

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