In New Jersey, an insurance company may be declared insolvent upon the application of the
Commissioner of the New Jersey Department of Banking and Insurance. Once an insurance company
is declared insolvent by a court of competent jurisdiction in this State or the state in which
the property-casualty insurer was domiciled, the Association is authorized, by statute, to administer
the claims of policyholders and claimants.
The court then appoints a Liquidator (often referred to as the Receiver) to liquidate the company,
settle its affairs and manage the estate. The Liquidator is usually the Commissioner of Banking and
Insurance or his or her designee. The Liquidator stops payments to all creditors of the insolvent
company, including general creditors, policy claimants, defense attorneys and adjusters. The court
can later order a distribution of assets.
Notice of the liquidation is usually mailed to policyholders advising of the court determination. Generally,
a notice of insolvency is also published in New Jersey newspapers of general circulation.
The Liquidator will forward all files on unpaid New Jersey claims to the Association, Fund or WCSF for
handling and payment pursuant to statute. This may include the defense of litigation.
Claimants and general creditors must file a "Proof of Claim" (“POC”) with the Liquidator after an insolvency.
POC’s must be filed even though claims were reported to the company prior to its insolvency.
This must be done before the "bar date" which is a final date for filing claims established by the court.
The filing of claims with the Association is not sufficient to perfect the claim with the Liquidator.
The unearned premiums due on a property-casualty insurance policy canceled upon liquidation may be refunded
by the Association.