The RTC found Insurance Commissioner Eduardo T. Malinis guilty of indirect contempt for refusing to comply with the lawful order allowing the withdrawal of the security deposit of Capital Insurance and Surety Co. (CISCO)
Whether or not the security deposit held by the Insurance Commissioner pursuant to Section 203 of the Insurance Code may be levied or garnished in favor of only one insured.”
NO. Section 203 of the Insurance Code expressly and clearly states that the security deposit shall be (1) answerable for all the obligations of the depositing insurer under its insurance contracts; (2) at all times free from any liens or encumbrance; and (3) exempt from levy by any claimant.
To be sure, CISCO, though presently under conservatorship, has valid outstanding policies. Its policyholders have a right under the law to be equally protected by its security deposit. To allow the garnishment of that deposit would impair the fund by decreasing it to less than the percentage of paid-up capital that the law requires to be maintained. Further, this move would create, in favor of respondent, a preference of credit over the other policyholders and beneficiaries.
Our Insurance Code is patterned after that of California. Thus, the ruling of the state’s Supreme Court on a similar concept as that of the security deposit is instructive.
Basic is the statutory construction rule that provisions of a statute should be construed in accordance with the purpose for which it was enacted. That is, the securities are held as a contingency fund to answer for the claims against the insurance company by all its policy holders and their beneficiaries.
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