O'Connor v. Insurance Company of North America
United States District Court for the Northern District of Illinois
622 F. Supp. 611 (1985)
Reserve Insurance Company, a reinsurer participating in the multi-party "3400 pool" alongside other reinsurers and managed successively by several managers (defendants), regularly incurred losses exceeding its premiums, and as its finances deteriorated, the pool's manager stopped issuing new Reserve policies and cancelled existing ones, replacing them with policies issued in other companies' names. After Reserve was declared insolvent, its liquidator, Phillip O'Connor (plaintiff), sued the pool managers seeking reinsurance proceeds, funds paid on policyholder claims from Reserve's money, unearned premiums, and unearned commissions on cancelled policies; the defendants sought summary judgment that any amounts owed to Reserve should be reduced (set off) by Reserve's own debts to them, while O'Connor argued no such reduction should apply.
Whether debts owed under reinsurance contracts, which had not yet become due at the time an insurer became insolvent, may still be used to set off amounts owed to that insurer, so long as the underlying liability had already been determined.