Is the New York Liquidation Bureau a State Agency?

March 20, 2007

A recent Appellate Division decision has again raised the question of what exactly is the New York Liquidation Bureau — a state agency, subject to all the oversight imposed on any other state agency, a private employees of the Superintendent of Insurance in his fiduciary role as receiver of insolvent insurers, or some other kind of hybrid?

As early as 1988 the lower courts of New York had held that the Liquidation Bureau was not a state agency and therefore not subject to the Freedom of Information Act. See Consolidated Edison Company of New York, Inc. v. The Insurance Department of the State of New York, 532 NY Supp.2d, 140 Misc.2d 969 (Sup.Ct., NY County, 1988). Thus when the State Comptroller sought to audit the activities of the Liquidation Bureau and issue subpoenas to Liquidation Bureau personnel, the lower court quashed the subpoenas under the Con Ed line of cases. The Appellate Division, First Department, however, has overturned this decision and reinstated the subpoenas concluding in a 3 to 2 decision that the Superintendent of Insurance is a State Officer, and the Liquidation Bureau is therefore carrying out the functions of a State Officer. Hence it is a State Agency subject to audit by the Comptroller. Serio v. Hevesi, 2007 NY Slip Op 01820 (App. Div., 1st Dept., March 6, 2007). The decision can be obtained from the New York Unified Court System web site at, or by contacting me at

The core of the majority opinion is that as a State Officer, the handling of any funds under the Superintendent’s control are subject to audit by the Comptroller. The dissent disagrees, however, stating that the funds of insolvent insurers are private funds “owned” by the creditors and policyholders of the estates, and are not State funds. In this capacity, the Superintendent is a fiduciary subject to the oversight of the Courts, not the Comptroller. The reach of the majority decision, however, could extend far beyond this one issue, and it is quite likely that the decision will be appealed to the Court of Appeals. Stay tuned!

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