Big companies, who put up large collateral with their insurersto cover deductible portions of claims, could have a problemgetting that money back if the carrier goes bankrupt, according toa New York State legal opinion.

But the ruling is not definitive, explained Supervising AttorneyMichael Campanelli with the New York Insurance Department.

He said generally it will depend on the facts and circumstancesof each case, but it is not always clear whether collateral is in aprotected category or part of the general assets that can go tocreditors.

Generally, collateral posting is not a common situation and isgenerally limited to large, sophisticated insureds, heexplained.

The ruling was sought, he said, by an insurance company thatsought to reassure a commercial policyholder that its collateralwas untouchable. It was issued on Dec. 31, 2008.

According to the opinion, "in situations where there is a bonafide agreement between a policyholder and an insurer thatspecifically characterizes an asset as collateral and not part ofthe general assets of the insurer, such collateral will not beincluded in the general assets of the insurer's estate inliquidation or rehabilitation."

But, "with respect to cash collateral held on an unsegregatedbasis, it is not possible to state categorically in advance howsuch collateral would be treated. A decision regarding such assetscan be made only after an examination of the particular facts andcircumstances of the case.

"Nevertheless, in cases where such cash collateral does notrepresent premiums earned by the insurer, and where a policyholdercan demonstrate that it has posted an amount of collateral with aninsurer for a specific purpose, that policyholder's contractualexpectations as to the use, application and return of its cashcollateral will be respected even in the event of therehabilitation or liquidation of the insurer."