Really, Hot …and Cool

I had to read it twice.

Hard to believe it.

See if you get it the first time.

In a motion made by Park Insurance to have the  NY State Supreme Court vacate its order placing Park into Liquidation, the initial text reads as follows:

Respondent Park Insurance Company (“Respondent” or “Park”) respectfully submits this memorandum of law in support of its motion: (i) to vacate the Court’s Decision and Order, dated and entered September 22, 2020, which granted the Superintendent of the Department of Financial Services of the State of New York’s (“Petitioner” or “DFS”) Petition for an order appointing the Superintendent and her successors in office as liquidator of Park and directing the liquidator to take possession of the property of Park to liquidate its business and affairs (NYSCEF Doc. No. 477, hereinafter, the “Liquidation Order”); and (ii) for recusal. For the reasons set forth below, the Liquidation Order should be vacated in its entirety and presiding Justice Shlomo Hagler should then recuse himself from further participation in these proceedings.

This case presents the extraordinary circumstance of an unprecedented order by this Court directing the immediate liquidation of Park while the Court’s brother not only had an existing financial relationship with Park, but was also leveraging his brother’s decision in this case for his personal advantage. Justice Hagler issued the Liquidation Order without disclosing to the parties the disqualifying fact that his brother, Daryl Hagler, is a principal of Park’s single largest policyholder, Senior Care Ambulance, and is otherwise significantly intertwined with Park’s financial prospects.

Senior Care Ambulance is the largest provider of ambulances in New York City and Justice Hagler was aware of his brother Daryl’s ownership of Senior Care Ambulance long before the trial in this action. Yet no cautionary disclosure of his brother’s interest in Senior Care Ambulance was made by the Court, even when the evidence at trial revealed that ambulances and ambulettes comprised a significant part of Park’s insurance business. Indeed, while these proceedings were ongoing, Senior Care Ambulance extracted a significant premium reduction from Park for its 2019 renewal policy, and Daryl Hagler advised Mr. Polsinelli that he “knew everything” about this proceeding pending before his brother. Park, for its part, was in no position to refuse the demands of its largest policyholder because of the temporary restraining order entered by Justice Hagler prohibiting it from writing new business.

If the existing financial relationship between Park and Justice Hagler’s brother was not enough, Daryl Hagler continued to inject himself into Park’s financial affairs as a result of Justice Hagler’s Liquidation Order. Critically, once that order was entered, Daryl Hagler began exploring a potential acquisition of an interest in Park through two separate groups with whom Thomas Polsinelli, the President of Park, was in discussions. It can hardly be coincidence that Daryl Hagler, who had previously told Mr. Polsinelli that he “knew everything” about Park’s pending proceedings before his brother, suddenly materialized to explore taking a controlling position in Park and save it from liquidation soon after his brother ordered that very liquidation. Importantly, during a conference before Justice Hagler, where these disqualifying conflicts were raised, Justice Hagler was unable to say definitively that the investment entity in which he personally held an interest, along with Daryl Hagler, was not the intended source of funds for the proposed investment(s) in Park.

Justice Hagler’s close familial (and financial) relationship with a person so entangled in Park’s financial fate, who stands to gain from the business opportunity created by the Liquidation Order, creates a non-waivable conflict of interest which requires Justice Hagler’s recusal. Because Daryl Hagler’s interest in Park could be, and, in fact, was substantially affected by the outcome of these liquidation proceedings, Justice Hagler’s recusal is mandatory under applicable law. Consequently, Justice Hagler lacked jurisdiction to issue the Liquidation Order, and the decision was void ab initio. This disqualifying conflict is not cured by Justice Hagler’s assertion that he was unaware of his brother’s, or Senior Care Ambulance’s, involvement with Park. Vacatur is, therefore, proper pursuant to CPLR 5015(a)(4). Alternatively, given Justice Hagler’s disqualifying conflict of interest, vacatur is appropriate in the interests of substantial justice. At a minimum, these unseemly circumstances give rise to a powerful appearance of impropriety, warranting both vacatur of the Liquidation Order and Justice Hagler’s recusal.

We remind readers that this is a motion, that Judge Hagler is “innocent untilproven guilty”, like any citizen, and may not necessarily be faced with vacating a decision or recusal or both or even faced with conflict itself, as we are unaware of the specific conflict disclosure requirements.

We note that there is a long history here and that there is another side to all of this. Park has had its bouts with DFS, right and wrong, for some time. It has been an epic contest largely over reserves and restrictions on underwriting.

But this motion looks pretty ugly, doesn’t it?

Pass the smell test?

Park could use a financial boost, perhaps a partner enterprise to bolster its surplus and set it all right.

Liquidation is drastic and basically causes another problem.

New York can use all the markets it can get and Park provides sensitive ones.

This case will be heating up…and we will follow it, hopefully to a happy ending for Park and the public interest….

………….NOW FOR THE COOL   Arthur J. Gallagher & Co. continues its buying spree, acquiring Cool Insuring Agency Inc.,. Cool, founded in 1857, provides commercial, personal, and life and health insurance and services to clients in the northeastern U.S. from offices in Queensbury and Latham, New York, with a focus on the construction, health care and government sectors, which together account for more than half of its revenue. Anthony Mashuta, president and principal of Cool; Ira Neifeld, senior vice president, director and principal; and their associates will continue to operate from their current locations under the direction of Patrick Kennedy, head of Gallagher’s Northeast Region retail property/casualty brokerage operations, and Tom Belmont, Jr., head of Gallagher’s Atlantic Region employee benefit consulting and brokerage operations. Gallagher is headquartered in Rolling Meadows, Illinois and is the fourth-largest brokerage ranked by revenue generated by U.S. clients, according to Business Insurance’s 2020 ranking. SA