This motion was brought before the court by Clark Equipment Company and 18 other creditors and policyholders (hereinafter, the "policyholders") of Integrity Insurance Company in Liquidation (hereinafter, "Integrity") for an order:
(1) establishing a policyholders' committee to represent policyholders in this proceeding;
(2) empowering the policyholders' committee to retain counsel, accountants and other professionals, as well as providing standing to commence and maintain litigation on behalf of the Integrity estate; and,
(3) authorizing the costs of the policyholders' committee, including those of counsel and experts, to be charged as expenses of administration of the Integrity estate, subject to the review and approval of the court.
In support of their application, the policyholders rely upon:
(1) the assertion that this court has the general equitable power to create such a committee;
(2) the Federal Bankruptcy Code provisions governing the appointment and powers of a creditors' committee in a chapter 11 reorganization are consistent with the public policy of having creditors participate in the liquidation; and,
(3) insurance insolvency precedent.
Objections to this application have been filed by the liquidator and deputy liquidator, the New Jersey Property-Liability Insurance Guaranty Association, the Superintendent of Insurance of the State of New York as ancillary receiver of Integrity Insurance Company and Surety Reinsurers.
The arguments advanced in opposition to the application include assertions that:
(1) the court lacks authority to create a policyholders' committee;
(2) the Federal Bankruptcy Code does not provide authority or precedent for the establishment of a policyholders' committee; and,
(3) movants have failed to establish the necessity and purpose for such a committee.
The procedural history in this case is as follows. On December 30, 1986, the Commissioner of Insurance of the State of New Jersey (hereinafter, the "Commissioner") filed a verified complaint for the rehabilitation of Integrity. On March 24, 1987, this court entered an order of liquidation, which was amended on March 25, 1987, placing Integrity into liquidation and terminating the rehabilitation phase of the delinquency proceeding. Pursuant to the New Jersey Rehabilitation and Liquidation Act, N.J.S.A. 17:30C-1 et seq., Kenneth D. Merin, the Commissioner of ...