Section 7309. Conversion of domestic reciprocal insurers into mutual property/casualty insurance companies

Any domestic  reciprocal  insurer  doing  business  under the provisions of this article which has in force
  contracts  of  insurance,   of   the   kinds   which   domestic   mutual
  property/casualty   insurance  companies  may  be  authorized  to  make,
  covering not less than three hundred separate risks  and  on  which  the
  premiums  in  force  aggregate  not less than one hundred fifty thousand
  dollars, may be  converted  into  and  licensed  as  a  domestic  mutual
  property/casualty  insurance  company,  in the manner prescribed in this
  section and subject to any other requirements  of  law.  The  successive
  steps shall be as follows:
    (a)  Not  less  than  a majority of the advisory committee of any such
  reciprocal insurer proposing so to  convert  shall  adopt  a  resolution
  approving the proposed conversion and appointing a committee of not less
  than  three  from  its  membership  to  prepare  a  draft  of a proposed
  declaration, charter and by-laws.
    (b) Such committee shall prepare a proposed declaration,  charter  and
  by-laws,  which shall be submitted with an appropriate resolution to the
  advisory committee for approval.
    (c) Not less than a majority of the advisory committee, at any regular
  or special meeting thereof,  shall  approve  by  resolution  a  proposed
  declaration,   charter   and   by-laws,   which  shall  conform  to  the
  requirements of this chapter relative to the contents  of  charters  and
  by-laws   of   domestic  mutual  property/casualty  insurance  companies
  hereafter organized to do the  kinds  of  business  transacted  by  such
  reciprocal  insurer,  with  such additions thereto as the superintendent
  shall approve, in order  to  make  provision  on  account  of  insurance
  contracts  then  in  force.  Such  resolution  shall  also  instruct the
  attorney-in-fact of such  reciprocal  insurer  to  give  notice  of  the
  meeting  at  which  the proposed conversion is to be voted upon and of a
  hearing of the subscribers before the superintendent.   A copy  of  such
  resolution,  together  with  copies of those required in subsections (a)
  and (b) of this section, a copy of the proposed declaration, charter and
  by-laws and a suitable proxy form approved by the superintendent,  shall
  accompany  such  notice,  which  notice  shall  be  mailed, with postage
  prepaid, to all subscribers at their post office addresses shown on  the
  records  of  the  reciprocal  insurer, at least thirty days prior to the
  date of the meeting. At the hearing, the superintendent shall pass  upon
  the  fairness of the terms and conditions of the proposed conversion and
  of the issuance of certificates  of  interest  in  the  surplus  of  the
  corporation and he shall approve or disapprove the proposed conversion.
    (d)  At least two-thirds of the votes of subscribers at any reciprocal
  insurer, voting at such meeting, either in person or  by  proxy  on  the
  form  furnished  the  subscriber,  if the subscriber's agreement at such
  reciprocal insurer provides for a vote by proxy, shall be cast in  favor
  of  the  proposed  conversion  and  of  the  adoption  of  the  proposed
  declaration, charter  and  by-laws.  A  resolution  shall  be  similarly
  adopted  authorizing thirteen persons, who shall be either members of an
  advisory committee of a reciprocal insurer  proposing  to  convert,  the
  attorney-in-fact,  if an individual, officers of the attorney-in-fact if
  a corporation, or subscribers  at  a  reciprocal  insurer  proposing  to
  convert,    to    execute    the   declaration   and   authorizing   the
  attorney-in-fact, if an individual, or the president or a vice-president
  and one other officer of the  attorney-in-fact,  if  a  corporation,  to
  execute  or  certify  and  file  all  necessary  papers  and instruments
  incident to the proposed conversion.
    (e) The  proposed  declaration  executed  as  aforesaid  and  proposed
  charter  with proof of mailing of notice of the subscribers' meeting and

  copies of all other papers and instruments referred to in this  section,
  together  with  a certificate of their adoption, subscribed and affirmed
  as true under the penalties of perjury, as provided  for  in  subsection
  (d) of this section, shall be submitted to the superintendent.
    (f)   If,   after  examination,  the  superintendent  finds  that  the
  proceedings for the change to a mutual insurance corporation  have  been
  regularly  taken  in conformity with law and the declaration and charter
  conform to all requirements of  paragraph  five  of  subsection  (a)  of
  section  one thousand two hundred one of this chapter, he shall file the
  declaration and charter in his office and issue a certified copy thereof
  to  the  proposed  incorporators.  If   requested   by   such   proposed
  incorporators, the superintendent shall also issue to them a certificate
  of incorporation executed by him in the name of the people of the state.
  Upon  the  issuance  of  such  certified  copy, such incorporators shall
  become a body corporate, and shall then have power to receive payment of
  subscriptions to its surplus as set forth  in  subsection  (g)  of  this
  section, but such corporation shall not be authorized to do the business
  of insurance until it shall have obtained a license therefor.
    (g)  Those  subscribers  who  have voted in person or by proxy for the
  conversion and any other subscribers who thereafter agree  to  subscribe
  to  the surplus of the corporation shall be deemed to have subscribed to
  the surplus of the corporation to an amount  equal  to  their  operating
  reserve  accumulations at the reciprocal insurer, and such subscriptions
  shall be paid by a transfer of their operating reserve accumulations  to
  the  corporation.    Certificates  of  interest in said surplus shall be
  issued  to  such  subscribers  in  amounts  equal  to  their  respective
  operating reserve accumulations at the time when the proposal to convert
  is  adopted  by  the subscribers. Such certificates of interest shall be
  issued upon the agreement  set  forth  in  section  one  thousand  three
  hundred seven of this chapter.
    (h)  If,  after  examination,  the  superintendent  finds that the new
  corporation meets  the  requirements  of  this  chapter,  including  the
  requirements as to initial surplus and reserves applicable under section
  four  thousand one hundred seven of this chapter, he may issue a license
  to the insurer to do business under  the  provisions  of  this  chapter.
  Thereupon,  the  remaining  assets  of  the  reciprocal insurer shall be
  transferred to the corporation and the reciprocal insurer shall cease to
  have authority to do business as such and shall be deemed  extinguished.
  Every  such  corporation  resulting  from  conversion  shall  assume and
  succeed to all of the obligations  and  liabilities  of  the  reciprocal
  insurer and shall be held liable to pay and discharge all such debts and
  liabilities  in  the  same  manner  as  if  they  had  been  incurred or
  contracted by the corporation, but the  subscribers  of  the  reciprocal
  insurer  shall  continue  subject  to  all  the  liabilities, claims and
  demands which shall then exist, or which may thereafter  accrue  against
  them,  or  any of them, by reason of any obligations incurred by them or
  on their behalf as such subscribers before the date  of  conversion  and
  such subscribers who become subscribers to the surplus shall be entitled
  to  recoup  from  the  corporation  any  payment  made by reason of such
  liabilities, claims or demands.
    (i) No action or proceeding, pending at the time of the conversion  to
  which  the  reciprocal  insurer  may  be  a  party,  shall  be abated or
  discontinued  by  reason  of  such  conversion,  but  the  same  may  be
  prosecuted to final judgment in the same manner as if the conversion had
  not  taken place, or the corporation may be substituted in place of such
  reciprocal insurer by  order  of  the  court  in  which  the  action  or
  proceeding may be pending.

    (j)  Upon  such  conversion  the  accumulated  operating  reserves  of
  subscribers who  shall  not  have  subscribed  to  the  surplus  of  the
  corporation,  held on deposit with the reciprocal insurer as of the date
  of the conversion shall be held by the corporation for  the  benefit  of
  such subscribers until all the obligations incurred on their behalf have
  been  extinguished. When all of such obligations have been discharged or
  terminated, and the superintendent shall have  so  certified,  the  said
  subscribers'  deposits or the balances thereof remaining to their credit
  shall  be  released  and  returned,  whereupon   the   powers   of   the
  attorney-in-fact relating thereto shall cease and terminate.