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Causey v. Cannon Surety, LLC

Court of Appeals of North Carolina

January 7, 2020

MIKE CAUSEY, COMMISSIONER OF INSURANCE OF NORTH CAROLINA, Petitioner,
v.
CANNON SURETY, LLC, A North Carolina Limited Liability Company, Respondent. MARK L. BIBBS, Attorney at Law D/B/A BIBBS LAW GROUP, Plaintiff,
v.
CANNON SURETY, LLC, A NORTH CAROLINA LIMITED LIABILITY COMPANY, Defendant.

          Heard in the Court of Appeals 22 August 2019.

          Appeal by Plaintiff from orders entered 18 April 2018 by Judge A. Graham Shirley, II, in Wake County Nos. 17 CVS 11692, 17 CVS 15505 Superior Court.

          Bibbs Law Group of North Carolina, by Mark L. Bibbs, for Plaintiff-Appellant.

          Attorney General Joshua H. Stein, by Special Deputy Attorney General Daniel S. Johnson, Special Deputy Attorney General M. Denise Stanford, and Assistant Attorney General Heather H. Freeman, for Petitioner-Movant-Appellee and Respondent-Defendant-Appellee in Rehabilitation.

          COLLINS, Judge.

         Attorney Mark L. Bibbs ("Bibbs") appeals from orders granting motions filed by Commissioner of Insurance Mike Causey ("Commissioner") to strike a confession of judgment against Cannon Surety, LLC ("Cannon") in favor of Bibbs for $227, 850.50 plus 8% interest, arising from Cannon's breach of contract to pay for Bibbs' legal services. The confession of judgment violated an existing seizure order entered under the North Carolina Captive Insurance Act, and it was void. Accordingly, we affirm the trial court's orders.

         I. Statutory Background: North Carolina Captive Insurance Act

         A captive insurance company is "an insurance company that is owned by another organization and whose exclusive purpose is to insure risks of the parent organization and affiliated companies." N.C. Gen. Stat. § 58-3-165 (2018). Captive insurance companies must be licensed, must meet certain capital and surplus requirements, and must file annual reports to the Commissioner. N.C. Gen. Stat. §§ 58-10-345, -370, -405(b), -415 (2018). A captive insurance company failing to meet these requirements may be subject to seizure, rehabilitation, and liquidation by the Commissioner of Insurance. N.C. Gen. Stat. §§ 58-10-475, 58-30-1 to -310 (2018).

         To initiate seizure, the Commissioner must file a petition in Wake County Superior Court requesting a formal delinquency proceeding, after which the trial court may issue an ex parte seizure order directing the Commissioner to

take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer, . . . and that, until further order of the Court, enjoins the insurer and its officers, managers, agents, and employees from disposing of its property and from transacting its business except with the written consent of the Commissioner.

N.C. Gen. Stat. § 58-30-65(b) (2018).

         To initiate rehabilitation, the Commissioner must petition the court on one or more specified grounds. N.C. Gen. Stat. § 58-30-75 (2018). If granted, a rehabilitation order appoints the Commissioner as the rehabilitator and directs the Commissioner to "take possession of the assets of the insurer and to administer them under the general supervision of the Court." N.C. Gen. Stat. § 58-30-80 (2018). As the rehabilitator, the Commissioner has "all the powers of the directors, officers, and managers, whose authority shall be suspended" and has broad powers to "take such action as he considers necessary or appropriate to reform and revitalize the insurer." N.C. Gen. Stat. § 58-30-85(c) (2018).

         II. Factual and Procedural History

         Cannon was a licensed special purpose captive insurance company. Accordingly, Cannon was governed by the requirements set forth in the North Carolina Captive Insurance Act, N.C. Gen. Stat. §§ 58-10-335 to -655, and regulated by the Department of Insurance, which included oversight and enforcement by the Commissioner. Cannon's license permitted it to transact insurance for judicial appearance bonds written by or on behalf of the members of its parent company, Premier Judicial Consultants, LLC.

         On 27 September 2017, the Commissioner filed a verified petition in Wake County Superior Court requesting a seizure order, an order of rehabilitation, an order appointing a receiver, and injunctive relief against Cannon. This filing commenced case number 17 CVS 11692 (the "Insurance Action"). On that day, the trial court entered a 60-day seizure order and an injunction as follows:

SEIZURE ORDER
1. Pursuant to the provisions of N.C. Gen. Stat. § 58-30-65, Mike Causey, in his capacity as Commissioner of Insurance of the State of North Carolina, is HEREBY ORDERED to take possession and control of all the property, books, accounts, documents, and other records of [Cannon], and of the premises occupied by it for transaction of its business.
2. The Commissioner is hereby authorized, empowered and directed to take into his possession and control all property, stocks, bonds, securities, bank accounts, savings accounts, monies, accounts receivable, books, papers, records, data bases, printouts and computations, . . . and all other assets of any and all kinds and nature whatsoever belonging to [Cannon], wherever located, ...

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