We previously posted on the trial court's ruling addressing the statute of limitations in this case on June 23, 2016. By way of background, the underlying contract between the insurer and the reinsurer required the insurer to calculate the balances due to the respective parties and send statements to the reinsurer reflecting those balances on a quarterly basis. The liquidator complied with this requirement for a number of years until it stopped without explanation. Then, 15 years later, the liquidator sent the reinsurer a statement netting all of the balances purportedly due to the parties under the contract and a demand for $2 million.
The plaintiff assignee of the reinsurance balance (Pine Top) argued that the Illinois statute governing set-offs and counterclaims permitted the liquidator to ignore the underlying contractual provisions requiring quarterly statements and to instead wait until the end of the liquidation, at which point it would submit one bill netting all of the balances due to the parties. The Seventh Circuit disagreed. Although the court acknowledged a possible exception for cases where a liquidator proposes a time for netting and a judge approves that proposal after notice and a hearing, the opinion states that in the absence of such an agreement, the underlying contractual provisions continue to apply. As a result, the liquidator's demand for the balance due was barred by the statute of limitations. Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, No. 16-3499 (7th Cir. Aug. 7, 2017).
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