CopyCited 1 times | Published | Florida 1st District Court of Appeal | 1995 Fla. App. LEXIS 10285, 1995 WL 573047
...s's issuance of four surplus notes pursuant to a settlement agreement with the receiver for MCA Insurance Company was permissible under Florida law and rendered Cypress statutorily solvent, where the surplus notes fail to satisfy the requirements of section 628.401, Florida Statutes (1991), and rule 4-137.001, Florida Administrative Code, for lack of approval by the Department; and (3) whether the circuit court abused its discretion in overturning rather than giving great deference or weight to...
...luding the issuance of surplus notes contemplated in the Settlement Agreement is valid. 3. The Department's purported disapproval of the surplus notes issued pursuant to the Settlement Agreement by the Florida Department is nonbinding on Cypress. 4. Section 628.401, Florida Statutes, entitled Borrowed Surplus, addresses only borrowed money and therefore is inapplicable to the surplus notes contemplated in the Settlement Agreement between Cypress and MCA....
...was permissible under Florida law. The Department argues that the instruments Cypress seeks to treat as surplus notes fail to fulfill several requirements of the NAIC [2] Practices Manual, adopted by rule 4-137.001, Florida Administrative Code, and section 628.401, Florida Statutes; therefore, the notes should be treated as a liability because: (1) they are not issued for cash or cash equivalents, but instead represent a shadowy promise against a real liability; (2) they have not been approved...
...Additionally, the Department argues, even if Cypress were empowered to issue these instruments, it could not thereby compel the Department to treat them, for statutory accounting purposes, as legitimate surplus notes when they do not satisfy the NAIC or statutory criteria for such treatment. Cypress responds that section 628.401 is inapplicable to the surplus notes at issue because that statute unambiguously states that it contemplates an exchange of "borrowed money" for issuance of "surplus notes." Cypress argues that the notes in this case were not issued i...
...e conditional payments designed to maintain the solvency of Cypress. Cypress denies that the surplus notes at issue were subject to prior approval by the Department, but even if they were, the Department could not disapprove the notes pursuant to subsection 628.401(3) because the Department could not argue in good faith that the notes were unnecessary or that the transaction was unfair and inequitable to Cypress or the MCA receiver, as required by that subsection....
...statements and December 1992 annual statement filed with the Department; and he demonstrated that the manner of handling these items on the financial statements to reduce Cypress's liabilities complied with accepted accounting practice. We hold that section 628.401 does not apply to the surplus notes issued pursuant to the settlement agreement because that statute applies only to "borrowed surplus," i.e., money borrowed by "[a] domestic stock or mutual insurer ......
...to defray the expenses of its organization, to provide itself with surplus funds, or for any purpose of its business, upon a written agreement that such money is required to be repaid only out of the insurer's surplus in excess of that stipulated in the agreement." § 628.401(1), Fla....
...insurance claims caused by Hurricane Andrew, thereby preventing Cypress from becoming insolvent as a result of having to make immediate payment of the claims in full. Cypress's surplus notes do not constitute borrowed surplus, so the provision in subsection 628.401(3) requiring the Department's approval prior to issuance does not apply....
