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REFERENCE HANDBOOK ON
INSURANCE COMPANY
RUNOFF AND
RECEIVERSHIPS
PROPERTY/CASUALTY
&
LIFE/HEALTH
FIFTH EDITION
Edited by Dennis G. LaGory
Sponsored by the Excess, Surplus Lines & Reinsurance,
Insurance Regulation, Insurance Coverage,
Self Insurance and Risk Managers Committees
of the
Tort Trial& Insurance Practice Section
of the
American Bar Association

Contributing Editors
United States Insolvencies
First Circuit:
J. David Leslie
Margaret L. Hayes
Rackemann, Sawyer & Brewster, PC
Boston, MA
Third Circuit:
Second Circuit:
Francine L. Semaya
William K. Broudy
Nelson Levine
de Luca & Horst, LLC
New York, NY
Fourth Circuit:
Laurence D. Shapiro
Cozen O’Connor
New York, NY
Cynthia J. Borrelli
James P. Sasso
Risa M. David
Stephanie Robshaw
Sara Ward
Bressler, Amery & Ross, P.C.
Florham Park, NJ
Fifth Circuit:
Alan N. Gamse
Brett S. Lininger
Semmes, Bowen & Semmes, P.C.
Baltimore, MD
Sixth Circuit:
Patrick H. Cantilo
Susan E. Salch
Cantilo & Bennett, L.L.P.
Austin, TX
Seventh Circuit:
Robert H. Katz
Bricker & Eckler LLP
Columbus, OH
Eighth Circuit:
Suzanne Sahakian
Dykema
Detroit, MI
Colin M. Proksel
Schiff Hardin LLP
Chicago, IL
Ninth Circuit:
Carl H. Poedtke III
DLA Piper US LLP
Chicago, IL
Michael J. Rothman
David M. Aafedt
Winthrop & Weinstine
Minneapolis, MN
Tenth Circuit:
Gary A. Hernandez
John F. Finston
Sonnenschein Nath & Rosenthal LLP
San Francisco, CA
Eleventh Circuit:
Kelly A. Cruz‐Brown
Carlton Fields
Tallahassee, FL
Robert M. Ferm
Beth A. Dickhaus
Hall & Evans, L.L.C.
Denver, CO
DC Circuit:
William O’Neill
Matthew W. Cheney
Crowell & Moring LLP
Washington, DC

Contributing Editors
Cross‐Border Insolvencies
United Kingdom:
Vivien Tyrell
Edwards Angel Palmer & Dodge UK LLP
London, UK
United States:
Selinda A. Melnik
Edwards Angel Palmer & Dodge LLP
Wilmington, DE
Bermuda:
Kehinde A.L. George
Larry Mussenden
Attride‐Stirling & Woloniecki
Hamilton, Bermuda
Canada:
Graham D. Smith
Goodmans LLP
Toronto, ON
PREFACE
This Fifth Edition of the Reference Handbook on Insurance Company Runoff and Receiverships: Property/Casualty
& Life/Health, was developed in connection with the ABA National Program on Receivership and Runoff held
on June 4‐5, 2009, in New York, New York. This Handbook compiles existing model legislation on which
current state insolvency laws are based, as well as a digest of the case law interpreting state insolvency laws.
The Handbook provides illuminating commentary on cross‐border insolvency procedure, written by prominent
practitioners in the United Kingdom, Canada, Bermuda and the U.S. Bankruptcy Courts. The Handbook also
contains valuable reference materials, including directories of state insurance department web sites, lists of
state insurance laws and regulations available on the internet and lists of state guaranty funds and insurance
commissioners. In addition to the contributing editors identified above, we would like to express our gratitude
to Donald Quarles and Janet Hummons of the ABA, without whose assistance this Handbook would not have
been possible. We would also like to thank Stephen W. Schwab of DLA Piper LLP (US) and Cynthia J. Borrelli of
Bressler, Amery & Ross, PC , who served as Co‐Chairs of the Program. Finally, we wish to express special
thanks to the Association of Insurance and Reinsurance Run‐Off Companies and the International Association
of Insurance Receivers, who served as Program Sponsors.
Dennis G. LaGory
Schiff Hardin LLP
Chicago, Illinois
June 2009

Reference Handbook on
Insurance Company Runoff and Receiverships
Property/Casualty & Life/Health
FIFTH EDITION
Table of Contents
PART I Run‐Off, Administration, Supervision, Rehabilitation and Liquidation
A. Introduction
B. Statutes
1. Insurers Rehabilitation and Liquidation Model Act
2. Insurance Receivership Model Act
3. Rhode Island Statutes, Chapter 27‐14.5, Voluntary Restructuring of
Solvent Insurers
C. Case Law Digest
1. Run‐Off
2. Receiverships
a. General Provisions
Persons Covered
Definitions of Insolvency
Jurisdiction of the Federal Courts
Jurisdiction of the State Receivership Court
Venue
Filing Fees and Exemptions
Injunctions and Other Court Orders
Rules of Civil Procedure in Proceedings
Retroactive Application
Applicability of the McCarran‐Ferguson Act
Arbitration in Liquidation Proceedings
Uniform Commercial Code in Liquidation Proceedings
Dropdown
b. Summary Proceedings
Powers and Duties of the Commissioner
Summary Seizure ‐ Constitutionality
c. Formal Proceedings
Formal Proceedings ‐ In General

Formal Proceedings ‐ Constitutionality
Authority to Initiate Proceedings
Exclusive Remedy
Right to Intervene
Interpleader
Court Orders of Rehabilitation or Liquidation ‐ In General
Court Orders of Rehabilitation or Liquidation ‐ Burden of Proof
Grounds for Rehabilitation or Liquidation
Notice of Hearing
Powers and Duties of the Rehabilitator or Liquidator ‐ Constitutionality
Powers and Duties of the Rehabilitator or Liquidator
Powers and Duties of the Receivership Court
Plan of Rehabilitation
Stay of Proceedings
Pre‐Answer Security Requirements
Notice to Creditors and Others ‐ In General
Notice to Creditors and Others ‐ Constitutionality
Duties of Agent
Cancellation of Policies
Transfer of Obligations to Another Insurer or Reinsurer
Liability of the Insurance Commissioner
Liability of Company Directors or Officers
Mutualization of an Insolvent Insurer
Dissolution of Corporate Existence
Termination of Receivership or Rehabilitation Proceedings
Reopening Liquidation
d. Assets of the Insolvent Insurer’s Estate
Assets of the Estate ‐ In General
Unpaid Stock Subscriptions
Fraudulent Conveyances
Voidable Preferences and Liens
Setoffs and Counterclaims
Assessments
Assessments ‐ Notice of Hearing
Liability of the Insured
Liability of the Excess Insurer
Reinsurer’s Liability
Cut‐Through Agreements
Premiums Owned and Unearned Commissions
Valuation of Assets
Claims Against Regulators
2

e. Claims Against the Estate
Plan of Liquidation
Date of Vesting of Rights and Liabilities
Filing of Claims
Court Approval or Rejection of Claims ‐ Adequate Proof
Court Approval or Rejection of Claims ‐ Notice of Hearing
Claims Against the Estate ‐ in General
Policyholders’ Claims
Policyholder Collatera
Agent’s Claims for Commissions and in General
Claims for Unearned Premiums
Secured Creditors
Claims of Surety
Claims of Guaranty Funds
Third Party Claims
Class Action Claims
Shareholders’ Claims
Contingent Claims
Estimation Schemes
Claims for Interest
Tax Claims
Governmental/Superpriority Claims
Assignment of Claims
f. Distribution of the Assets
Priorities in Allowance of Claims ‐ In General
Priorities ‐ Federal
Expenses of Administration
Attorney’s Fees
Taxation of the Insolvent Insurer’s Estate
Unclaimed and Withheld Funds
g. Interstate Relations
Conservator ‐ Constitutionality
Conservator ‐ Appointment
Conservator ‐ Powers and Duties
Ancillary Receiver ‐ Appointment
Ancillary Receiver ‐ Filing of Claims
Ancillary Receiver ‐ Powers and Duties
Ancillary Receiver ‐ Relation to Domiciliary Receiver
Liquidation of Special Deposits
Liquidation of Alien Insurers
Attachment, Garnishment or Execution
3

Priorities ‐ Interstate Claimants
Reciprocity
Judicial Comity and Jurisdiction
h. Interactions With Bankruptcy Estates
PART II
Cross‐Border Run‐Offs and Receiverships
A. United States – United States Assistance to Non‐U.S. Re/Insurance Run‐Off,
Liquidation, Administration
1. Introduction
2. Chapter 15 Reinsurance Cases Filed Through February 2009
3. What is Chapter 15?
a. Purpose and Effect of Chapter 15
b. Judicial Discretion Under Chapter 15
c. Eligibility Basics for Chapter 15 Recognition and Relief
4. Case Law Digest: Significant Reinsurance Chapter 15 Court Decisions
5. Policyholder Articulated Objections to Chapter 15 Relief in Aid of
Solvent Schemes of Arrangement
a. U.S. Bankruptcy Courts Do Not Have Jurisdiction to Grant
Chapter 15 Recognition and Relief in Aid of Solvent Schemes of
Arrangement
b. Solvent Schemes Are Not “Foreign Proceedings” Eligible for
Chapter 15 Relief
c. The Scheme Process Denies Claimants Due Process, and Thus
U.S. Bankruptcy Courts May Not Grant Chapter 15 Recognition and
Relief in Aid of Such Schemes
d. Schemes Violate the Sanctity of Contractual Rights in Violation
of U.S. Law
e. UK Court Sanction of Solvent Schemes Does Not Preclude U.S.
Bankruptcy Court Consideration of Objections
4

6. Chapter 15 ~ Official Text
B. United Kingdom – The Position in the UK
1. Introduction
2. Insolvency
3. Non EU Cross‐Border
4. Schemes of Arrangement
5. Case Law Digest
a. Schemes of Arrangement
b. Insolvency
C. Canada – Canadian Insurance Regulation
1. Canada – Insurance Regulation
2. Canada – Insurance Insolvency
3. Special Provisions for Winding‐up of Canadian Insurance Companies
with Non‐Canadian Branches
4. Case Law Digest
a. Cross‐Border Aspects of the Liquidation of Canadian Insurance
Companies and Canadian Branches of Foreign Insurance
Companies
i. Jurisdiction of the Canadian Court
ii.
iii.
iv.
The Canadian Stay of Proceedings
Set‐Off
Distribution of Assets
v. Proceedings in Canada to Assist Non‐Canadian
Insolvency Officers Where there is No Canadian Branch
b. Solvent Schemes of Arrangement – Canada
5

Part III
PART IV
APPENDIX
D. Bermuda – The Bermuda Perspective
1. Chapter 15
2. Parallel Proceedings
3. Recognition of Foreign Proceedings in respect of a Bermudian
Company
4. Liquidation of Alien Insurers
5. Ancillary Proceedings
Property and Casualty Guaranty Funds
A. The National Association of Insurance Commissioners’ Post‐Assessment
Property and Liability Insurance Guaranty Association Model Act, Table of
Enacting States and Case Law Digest
B. Case Law Digest Supplement
Life and Health Guaranty Funds
A. The National Association of Insurance Commissioners’ Life and Health Insurance
Guaranty Association Model Act, Table of Enacting States and Case Law Digest
B. Case Law Digest Supplement
A. Directory of State Insurance Department, Statutory and Regulatory Web Sites
B. NAIC List of Members
C. NCIGF Property and Casualty Guaranty Fund Directory
D. NOLHGA State Life and Health Guaranty Association Contact Information
6

PART I
Run‐Off, Administration, Supervision, Rehabilitation and Liquidation
Law has developed at the state level empowering a state’s insurance commissioner to petition for and conduct
the liquidation of insolvent insurers. Thus, unlike federal bankruptcies, which are directed by one law, insurer
insolvency is addressed by fifty different state regulators. Among the significant milestones in the
development of such law was the 1967 enactment in Wisconsin of a sophisticated insurer rehabilitation and
liquidation statute. In 1968, the National Association of Insurance Commissioners (the “NAIC”) recommended
that the Wisconsin law serve as the basis for model legislation in the various statutes.
In 1977, the NAIC replaced the Wisconsin law with a model act. This model, among other things, recognized
the existence of guaranty funds and their relationship to the liquidation process. This model act, with
amendments, has been adopted by most of the states and represents the current state of the law of insurance
receiverships. In December 2005, the NAIC adopted a new model act, which provides for innovative
procedures in several areas, including an enhanced role for the conservation process, as well as reinsurance
commutations and arbitrations. Only two states have thus far enacted provisions of the new model act. In
addition, some states, such as Rhode Island, have adopted innovative procedures to facilitate insurance
company run‐off. These laws are supplemented by state guaranty fund laws.
The following reference material is included in Part I:
• The NAIC Insurers Supervision, Rehabilitation and Liquidation Act with all amendments adopted by the NAIC
through January, 1998.
• The NAIC Insurance Receivership Model Act (“IRMA”) as amended through October, 2007, with a listing of
those states that have adopted legislation based on IRMA or related insurance company receivership laws
and the statutory references of those enactments.
• Chapter 27‐14.5 of the Rhode Island Insurance Code, which provides for the voluntary restructuring of
solvent insurers.
• A digest of cases addressing insolvency related issues. This digest incorporates and adds to the case
summaries which appeared in the first, second, third and fourth editions of the Reference Handbook.
Summaries of court decisions pertaining to the property and liability guaranty fund systems and to the life
and health guaranty fund system are located at PARTS III and IV, respectively.

Rhode Island Statutes
TITLE 27
Insurance
CHAPTER 27-14.5
Voluntary Restructuring of Solvent Insurers
§ 27-14.5-1 Definitions. – As used in this chapter:
(1) "Applicant" means a commercial run-off insurer applying under § 27-14.5-4.
(2) "Assessment deficit" means the amount that the assessment for the previous year under §
27-14.5-5 is less than, and "assessment surplus" is the amount that the assessment for the
previous year exceeds:
(i) The run-off insurer's proportionate share of regulatory expenditure for the previous year, if
the run-off insurer was domiciled in Rhode Island on March 15 of the previous year; or
(ii) The redomestication expenditure for the previous year attributable to the run-off insurer, if
the run-off insurer was not domiciled in Rhode Island on March 15 of the previous year.
(3) "Assumption policyholder" means a policyholder whose policy is reinsured under an
assumption reinsurance agreement between the applicant and a reinsurer.
(4) "Assumption reinsurance agreement" has the meaning given in § 27-53.1-3(b), subject to
the following:
(i) The agreement may be conditioned upon the court's entry of an implementation order.
(ii) If any policy subject to the agreement is protected through a guarantee association, then the
assuming insurer must have been and be licensed, and must have been and be a member of the
guarantee association, in all states known to the applicant in which either: (A) any property
covered under the policy has a permanent situs; or (B) the policyholder resided while the policy
was in force.
(5) "Class of creditors" means:
(i) All voting policyholders, including those without known claims;
(ii) Voting creditors, other than policyholders; or

(iii) Any separate class of creditors as the court may in its discretion determine should approve
the commutation plan.
(6) "Commercial run-off insurer" means:
(i) A run-off insurer domiciled in Rhode Island whose business, excluding all business subject
to an assumption reinsurance agreement, includes only the reinsuring of any line(s) of business
other than life and/or the insuring of any line(s) of business other than life, workers'
compensation, and personal lines insurance; or
(ii) A Rhode Island domestic insurance company meeting the requirements of subsection (i)
hereof and formed or re-activated for the sole purpose of entering into a voluntary restructuring
under this chapter and whose liabilities consist of commercial liabilities transferred to said
company with the approval of the commissioners and pursuant to the regulations issued by the
department under this chapter. The amount of the commercial liabilities transferred must be less
than or equal to the amount of assets transferred to the newly formed or re-activated company.
(7) "Commissioner" means the director of the department.
(8) "Commutation plan" means a plan for extinguishing the outstanding liabilities of a
commercial run-off insurer.
(9) "Creditor" means:
(i) Any person that has a claim against the applicant; or
(ii) A policyholder other than an assumption policyholder.
(10) "Department" means the department of business regulation.
(11) "Guarantee association" means a guarantee association or foreign guarantee association, as
those terms are defined in § 27-14.3-3(10), that is potentially obligated with respect to the
applicant's policies.
(12) "Implementation order" means an order under § 27-14.5-4(c).
(13) "Insurer" has the meaning given in § 27-14.3-3(12).
(14) "Person" means an individual, corporation, partnership, association, joint stock company,
trust, unincorporated organization, or any similar entity or any combination of the foregoing
acting in concert.
(15) "Personal lines insurance" means insurance issued for personal, family, or household
purposes.
(16) "Policy" means a contract of insurance or a contract of reinsurance.

(17) "Policyholder" means an insured or a reinsured of the insurer.
(18) "Proportionate share" means, for a particular run-off insurer as of December 31 of the
previous year, the ratio of:
(i) The gross assets of that run-off insurer; to
(ii) The gross assets of all run-off insurers, other than those that were not domiciled in Rhode
Island on March 15 of that calendar year.
(19) "Redomestication expenditure" means, for any calendar year:
(i) The amount that the department's expenditures attributable to the regulation of run-off
insurers increases as a result of any run-off insurer redomiciling to Rhode Island on or after
March 15 of that year; less
(ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in this
state paid to this state by run-off insurers that redomiciled to Rhode Island on or after March 15
of that year, but excluding any premium taxes.
(20) "Regulatory expenditure" means, for any calendar year:
(i) The amount of the department's expenditures attributable to the regulation of run-off
insurers domiciled in Rhode Island on March 15 of that year; less
(ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in this
state paid to this state by run-off insurers domiciled in Rhode Island on March 15 of that year,
but excluding any premium taxes.
(21) "Run-off insurer" means an insurer that:
(i) Is domiciled in Rhode Island;
(ii) Has liabilities under policies for property and casualty lines of business;
(iii) Has ceased underwriting new business; and
(iv) Is only renewing ongoing business to the extent required by law or by contract.
§ 27-14.5-2 Jurisdiction, venue, and court orders. – (a) The court considering applications
brought under this chapter shall have the same jurisdiction as a court under chapter 14.3 of this
title.
(b) Venue for all court proceedings under this chapter shall lie in the superior court for the
county of Providence.

(c) The court may issue any order, process, or judgment that is necessary or appropriate to
carry out the provisions of this chapter. No provision of this chapter providing for the raising of
an issue by a party in interest shall be construed to preclude the court from, on its own motion,
taking any action or making any determination necessary or appropriate to enforce or implement
court orders or rules, or to prevent an abuse of process.
§ 27-14.5-3 Notice. – (a) Wherever in this chapter notice is required, the applicant shall, within
ten (10) days of the event triggering the requirement, cause transmittal of the notice:
(1) By first class mail and facsimile to the insurance regulator in each jurisdiction in which the
applicant is doing business;
(2) By first class mail to all guarantee associations;
(3) Pursuant to the notice provisions of reinsurance agreements or, where an agreement has no
provision for notice, by first class mail to all reinsures of the applicant;
(4) By first class mail to all insurance agents or insurance producers of the applicant;
(5) By first class mail to all persons known or reasonably expected to have claims against the
applicant including all policyholders, at their last known address as indicated by the records of
the applicant;
(6) By first class mail to federal, state, and local government agencies and instrumentalities as
their interests may arise; and
(7) By publication in a newspaper of general circulation in the state in which the applicant has
its principal place of business and in any other locations that the court overseeing the proceeding
deems appropriate.
(b) If notice is given in accordance with this section, any orders under this chapter shall be
conclusive with respect to all claimants and policyholders, whether or not they received notice.
(c) Where this chapter requires that the applicant provide notice but the commissioner has been
named receiver of the applicant, the commissioner shall provide the required notice.
§ 27-14.5-4 Commutation plans. – (a) Application. Any commercial run-off insurer may apply
to the court for an order implementing a commutation plan.
(b) Procedure.
(1) The applicant shall give notice of the application and proposed commutation plan.
(2) All creditors shall be given the opportunity to vote on the plan.

(3) All creditors, assumption policyholders, reinsurers, and guaranty associations shall be
provided with access to the same information relating to the proposed plan and shall be given the
opportunity to file comments or objections with the court.
(4) Approval of a commutation plan requires consent of: (i) fifty percent (50%) of each class of
creditors; and (ii) the holders of seventy-five percent (75%) in value of the liabilities owed to
each class of creditors.
(c) Implementation order.
(1) The court shall enter an implementation order if: (i) the plan is approved under subdivision
(b)(4) of this section; and (ii) the court determines that implementation of the commutation plan
would not materially adversely affect either the interests of objecting creditors or the interests of
assumption policyholders.
(2) The implementation order shall:
(i) Order implementation of the commutation plan;
(ii) Subject to any limitations in the commutation plan, enjoin all litigation in all jurisdictions
between the applicant and creditors other than with the leave of the court;
(iii) Require all creditors to submit information requested by the bar date specified in the plan;
(iv) Require that upon a noticed application, the applicant obtain court approval before making
any payments to creditors other than, to the extent permitted under the commutation plan,
payments in the ordinary course of business, this approval to be based upon a showing that the
applicant's assets exceed the payments required under the terms of the commutation plan as
determined based upon the information submitted by creditors under paragraph (iii) of this
subdivision;
(v) Release the applicant of all obligations to its creditors upon payment of the amounts
specified in the commutation plan;
(vi) Require quarterly reports from the applicant to the court and commissioner regarding
progress in implementing the plan; and
(vii) Be binding upon the applicant and upon all creditors and owners of the applicant, whether
or not a particular creditor or owner is affected by the commutation plan or has accepted it or has
filed any information on or before the bar date, and whether or not a creditor or owner ultimately
receives any payments under the plan.
(3) The applicant shall give notice of entry of the order.
(d) Order of dissolution or discharge.

(1) Upon completion of the commutation plan, the applicant shall advise the court.
(2) The court shall then enter an order that:
(i) Is effective upon filing with the court proof that the applicant has provided notice of entry of
the order;
(ii) Transfers those liabilities subject to an assumption reinsurance agreement to the
assumption reinsurer, thereby notating the original policy by substituting the assumption
reinsurer for the applicant and releasing the applicant of any liability relating to the transferred
liabilities;
(iii) Assigns each assumption reinsurer the benefit of reinsurance on transferred liabilities,
except that the assignment shall only be effective upon the consent of the reinsurer if either:
(A) The reinsurance contract requires that consent; or
(B) The consent would otherwise be required under applicable law; and
(iv) Either:
(A) The applicant be discharged from the proceeding without any liabilities; or
(B) The applicant be dissolved.
(3) The applicant shall provide notice of entry of the order.
(e) Reinsurance. Nothing in this chapter shall be construed as authorizing the applicant, or any
other entity, to compel payment from a reinsurer on the basis of estimated incurred but not
reported losses or loss expenses, or case reserves for unpaid losses and loss expenses.
(f) Modifications to plan. After provision of notice and an opportunity to object, and upon a
showing that some material factor in approving the plan has changed, the court may modify or
change a commutation plan, except that upon entry of an order under subdivision (d)(2) of this
section, there shall be no recourse against the applicant's owners absent a showing of fraud.
(g) Role of commissioner and guaranty funds; relationship to rehabilitation/liquidation statutes.
(1) The commissioner and guaranty funds shall have the right to intervene in any and all
proceedings under this section; provided, that notwithstanding any provision of title 27, any
action taken by a commercial run-off insurer to restructure pursuant to chapter 14.5, including
the formation or re-activation of an insurance company for the sole purpose of entering into a
voluntary restructuring shall not affect the guaranty fund coverage existing on the business of
such commercial run-off insurer prior to the taking of such action.

(2) If, at any time, the conditions for placing an insurer in rehabilitation or liquidation specified
in chapter 14.3 of this title exist, the commissioner may request and, upon a proper showing, the
court shall order that the commissioner be named statutory receiver of the applicant.
(3) If no implementation order has been entered, then upon being named receiver, the
commissioner may request, and if requested, the court shall order, that the proceeding under this
chapter be converted to a rehabilitation or liquidation pursuant to chapter 14.3 of this title. If an
implementation order has already been entered, then the court may order a conversion upon a
showing that some material factor in approving the original order has changed.
(4) The commissioner, any creditor, or the court on its own motion may move to have the
commissioner named as receiver. The court may enter such an order only upon finding either that
one or more grounds for rehabilitation or liquidation specified in chapter 14.3 of this title exist or
that the applicant has materially failed to follow the commutation plan or any other court
instructions.
(5) Unless and until the commissioner is named receiver, the board of directors or other
controlling body of the applicant shall remain in control of the applicant.
§ 27-14.5-5 Taxes, fees, assessments, pools, and regulatory and supervision fund. – (a)
Application fee. Upon application to a court pursuant to § 27-14.5-4, the applicant shall pay a fee
to the department in the amount of one hundred and twenty-five thousand dollars ($125,000) or
any lesser amount that the commissioner shall deem adequate for appropriate and thorough
review of the application.
(b) Assessment.
(1) Every March 15, the commissioner shall assess each run-off insurer an amount equal to the
greater of: (i) one thousand dollars ($1,000), or (ii) the sum of that run-off insurer's proportionate
share of estimated regulatory expenditure for that calendar year and that run-off insurer's
assessment deficit, less its assessment surplus.
(2) The calculation of the assessment surplus or deficit shall reflect the total cost of any
examinations, which shall be borne by the companies so examined, and shall include the
following expenses:
(i) One hundred fifty percent (150%) of the total salaries and benefits paid to the examining
personnel of the department of business regulation engaged in those examinations, including, but
not limited to, examiners, actuaries, attorneys, managers, and para-professionals, less any salary
reimbursements;
(ii) All reasonable technology costs related to the examination process. Technology costs shall
include the actual cost of software and hardware utilized in the examination process and the cost
of training examination personnel in the proper use of the software or hardware;

(iii) All necessary and reasonable education and training costs incurred by the state to maintain
the proficiency and competence of the examining personnel. All such costs shall be incurred in
accordance with appropriate state of Rhode Island regulations, guidelines and procedures.
(3) Each run-off insurer shall pay the assessment to the department on or before the following
fifteenth (15th) day of April.
(4) An insurer that redomiciles to Rhode Island after March 15 of any year and that qualifies as
a run-off insurer upon redomestication shall pay an assessment equal to the commissioner's
estimate of redomestication expenditure attributable to that run-off insurer.
(5) All revenues collected pursuant to this section shall be deposited as general revenues. That
assessment shall be in addition to any taxes and fees otherwise payable to the state.
(c) Pools. Except with respect to policy renewals required by law or contract, no run-off
insurer shall be subject to any assessment or assignment in connection with any residual market,
fair plan, or assigned-risk plan mechanisms in this state.
(d) Scope. This section shall only apply to run-off insurers that cease underwriting new
business after January 1, 2002, or that were not domiciled in Rhode Island on January 1, 2002.
§ 27-14.5-6 Rules and regulations. – The commissioner shall promulgate rules and regulations
that may be necessary to effectuate the purposes of this chapter no later than January 1, 2003.
The department shall not accept applications under § 27-14.5-4 until the time that these
regulations have been promulgated.

Run‐Off
New York Seaton Ins. Co. v. Cavell USA Inc., No. 07‐07032 (S.D.N.Y. May 14, 2008),
reported in 20‐1 Mealey’s Litig. Rep. Ins. Insolv. 3 (2008). A suit by two insurers
in run‐off against the former run‐off manager, alleging fraudulent misconduct
with respect to the run‐off service agreements, was filed in New York and later
dismissed for improper venue. The term sheet used to terminate the
agreements included an English forum selection clause, therefore the New York
court lacked subject matter jurisdiction and suit was required to be filed in
England.
Ispat Island Inc. v. Kemper Environmental Ltd., No. 05‐cv‐0540, 2007 U.S. Dist.
LEXIS 86489 (S.D. N.Y. Dec. 12, 2006). The court denied an insurer’s motion to
implead a third party in an action against it alleging breach of an insurance
contract and seeking declaratory relief. Because the insurer was in run‐off,
granting the motion for impleader would result in delay and prejudice to the
insured.
General Provisions
Persons Covered
California
California Physicians Service v. Garrison, 28 Cal.2d 790, 172 P.2d 4 (1946). The
Supreme Court of California concluded that the Service, which assumed no
risks and made no promises to provide any medical care to its members, and
which acted merely as an agent for the physicians who furnished the medical
services, was not engaged in the insurance business within the meaning of the
statute.
In re Family Health Services, Inc., 143 Bankr. 232 (C.D. Cal. 1992). The District
Court held that a health maintenance organization was a "domestic insurance
company" and was therefore ineligible for federal bankruptcy protection. In
reaching its conclusion, the court applied the "state classification test." Under
this test, courts must examine the laws of the particular company's domicile to
determine how that state classifies the entity. Applying the HMO's domiciliary
law (i.e., the law of Wisconsin) (see Wis. Stat. Ann., § 609), the court concluded
that the company was an insurance company because it was incorporated and
regulated as an insurance company; received its certificate of incorporation
from the Insurance Commissioner; and had the same powers and duties as any
other Wisconsin insurance company.
In Re Oil & Gas Ins. Co., 1992 W.L. 308033, (C.D. Cal., July 31, 1992). In an
unpublished decision, the U.S. District Court held that an insolvent carrier could
not seek protection under federal bankruptcy laws. The insolvent insurance
company filed for protection under the Bankruptcy Code, notwithstanding a
provision in the Code which makes a "domestic insurance company" ineligible
for relief. The insolvent company asserted that upon the entry of the state
court liquidation order, it ceased being a "domestic insurance company"
because it was no longer engaged in the business of insurance. The court
rejected the insolvent company's assertion, noting that its position would
undermine Congress' clear intention to provide for unfettered state regulation
of insurance. The court also noted that permitting insolvent insurers to file for

federal bankruptcy protection would devastate policyholders by eliminating
their priority over general creditors.
Maloney v. American Independent Medical and Health Association, 119 Cal.
App.2d 319, 259 P.2d 503 (Cal. App. 1953). The court affirmed a trial court
finding that a medical association was transacting the insurance of business, as
opposed to merely rendering a service to its members when it agreed, in
return for dues paid, to indemnify its members against the hazards of illness or
injury by paying medical and hospital bills. Thus, the association was subject to
liquidation under the insurance code.
Mitchell v. Pacific Greyhound Lines Inc., 33 Cal. App.2d 53, 91 P.2d 176 (Cal. App.
1939). The court rejected the argument that a reciprocal exchange was not an
entity but a mere place for the exchange of insurance contracts which could
not become insolvent and be subject to liquidation. The court read the
California reciprocal and liquidation laws and concluded that a reciprocal
exchange was to be treated as an entity for purposes of liquidation, as well as
for purposes of regulation and supervision.
Indiana Eakin v. American Underwriters Group, Inc., 552 N.E.2d 50 (Ind. App. 1990).
Insurance Commissioner filed petition to rehabilitate underwriter, who was
attorney‐in‐fact for reciprocal insurer, on the grounds that reasonable cause
existed to believe underwriter was in such condition to render continuance of
its business financially hazardous. The trial court held in favor of underwriter.
The Appellate Court reversed and remanded, holding that the underwriter was
an insurer and was subject to the authority of the Commissioner, and that
evidence of insolvency was sufficient to meet Commissioner's burden of
proving statutory prerequisite for his petition to rehabilitate underwriter.
Louisiana Green v. Champion Insurance Company, 577 So.2d 249 (La. App. 1st Cir. 1991),
writ den'd, 580 So.2d 668 (La. 1991). Champion Insurance Company was
declared insolvent and the Insurance Commissioner was appointed liquidator.
Faced with criminal charges relating to Champion, the Commissioner moved to
recuse himself as liquidator, and a liquidator ad hoc was appointed. The
liquidator ad hoc sued twelve individual defendants, all officers and
stockholders of Champion or its various affiliates, and nine corporate
defendants related to Champion, including holding companies, a premium
finance company and managing general agent corporations. The trial court
found that all of the corporate defendants had been operated as a "single
business enterprise," and issued an order declaring that the assets of the
defendant corporations were assets of Champion to be distributed in the
liquidation proceeding. He further issued an injunction restraining the
defendants from using or otherwise disposing of those assets without a prior
hearing.
In response to a challenge that the appointment of the ad hoc liquidator was
an unconstitutional exercise of powers reserved to the executive branch, the
appellate court held that the Louisiana statutory scheme merely expresses a
non‐mandatory preference for the appointment of the Commissioner of
Insurance as liquidator, and the trial judge had authority to appoint a liquidator
ad hoc of his own choosing. The court affirmed the finding that the corporate
defendants had been operated as a "single business enterprise" and
delineated the factors to be considered in reaching such a determination. The
court concluded that once the judicial determination was made that the
entities were in fact a "single business enterprise," the liquidator was vested
with the defendants' assets by operation of law, and no further actions, such

as writs of seizure, were necessary to bring those assets into the liquidation
proceeding. The court rejected the claim that the liquidator was thereby
regulating non‐insurer corporations, finding the order was simply in
furtherance of the liquidator's duty to marshal the assets that are properly
included in the liquidation. The court squarely held that the insurance code
which authorizes the issuance of an injunction restraining, inter alia, "all other
persons from transacting any insurance business or disposing of its property,"
is intentionally broad to ensure that the jurisdiction of the liquidation court
extends to persons or entities such as defendants, who may have access,
control, or possession of the insurer's assets. Finally, the court held that it was
not required to stay the civil action pending the outcome of the criminal
proceedings filed against various individuals, because to do so would prejudice
the liquidator's civil remedy against those persons.
State v. Green, 94 1138 (La. App. 1 Cir. 6/23/95), 657 So.2d 610. The
Commissioner of Insurance sought the declaration that a risk retention
group and its affiliated entities were a single business enterprise. The
insolvent risk retention group and its affiliated entities were declared to be a
single business entity, subject to receivership by the Commissioner. The
court further concluded that the Commissioner is entitled to injunctive relief
in the liquidation proceeding enjoining the affiliated entities from disposing
of property, preventing interference, or preventing waste. The court stated
that it is not necessary for the commissioner to show irreparable injury in
order to obtain injunctive relief against the affiliated entities, because the
remedy of an injunction is specifically provided for by La.R.S. 22:734.
Missouri Leggett v. General Indemnity Exchange, 363 Mo. 273, 250 S.W. 2d 710 (1952).
The Missouri insurance commissioner was authorized to seek dissolution of a
reciprocal insurance exchange if the corporation ceased to transact the
business of insurance for one year irrespective of the existence or
nonexistence of claims or creditors.
Youree v. Hometown Mutual Ins. Co., 180 Mo. 153, 79 S.W. 175 (1904). In
upholding the appointment of a receiver for an insurance company, the court
noted that although the former officers had sold the company to others and
empowered them to act as officers, they had been ousted on the ground that
they were never eligible to act as directors and officers, such that the company
then became insolvent. Yet the corporate entity, nevertheless, still existed for
purposes of the litigation by creditors of the insurer.
Nebraska State ex rel. Smrha v. Cosmopolitan Old Line Life Ins. Co., 287 N.W. 654, 136
Neb. 833, vacated, 137 Neb. 742, 291 N.W. 72 (1939). The Nebraska Supreme
Court vacated an earlier opinion and held that a benefit thrift certificate
containing both savings features and renewable term insurance for ten years
in an amount always exceeding the amount of premiums paid; application
attached to the certificate giving personal data concerning applicant and
beneficiary designation, providing that the certificate should not take effect
until the first payment would be received during good health of the applicant;
and providing for cash and loan values and other insurance features, was an
insurance contract, notwithstanding the absence of a required medical
examination, a change in premium rate with age and other features.
New Mexico
In re Rehabilitation of Western Investors Life Ins. Co., 100 N.M. 370, 671 P.2d
31 (1983). The provisions of the Life Insurance Guaranty Act establishing a
Life Insurance Guaranty Association to ensure that policyholders of an
insolvent or financially disabled company receive their policy benefits did not

apply to policy issued by an insurer that was insolvent or unable to fulfill its
contractual obligations on the effective date of the act. Consequently, the
Act did not apply to policies originally issued and assumed by an insurer that
was unable to fulfill its contractual obligations on that date, because the
Legislature intended to make sure that disabled companies were left outside
the Act.
Krahling v. First Trust Nat’l Assoc., 123 N.M. 685, 944 P.2d 914 (Ct. App.), cert
denied, 123 N.M. 446, 942 P.2d 189 (1997). Guaranteed Investment Contracts
(GICs) were not “annuities” under New Mexico statute providing that Life
and Health Guaranty Fund covered annuity contracts, because payment was
not dependent upon continuance of human life. As a result, the Guaranty
Fund did not cover claims by employees who were seeking to recover their
deferred compensation that had been invested in GIC’s issued by an insurer
that later became insolvent.
New Jersey
Jendrzewski v. Allstate Ins. Co., 341 N.J. Super. 460, 775 A.2d 583 (N.J. Super. Ct.
2001). Allstate appealed a decision that it was responsible for all medical,
hospital, and pharmaceutical expenses incurred by the plaintiff. The plaintiff
was struck by a car insured by Allstate. At the time of the trial the plaintiff had
automobile insurance with another company, but his insurer was declared
insolvent three months prior to the accident and the New Jersey Property‐
Liability Insurance Guaranty Association (“NJPLIGA”) assumed the insolvent
insurer’s obligations. The plaintiff filed for PIP benefits from both NJPLIGA and
Allstate. NJPLIGA refused to provide coverage, arguing the plaintiff must first
exhaust his health insurance benefits and then receive the remainder of PIP
coverage from Allstate. The lower court held Allstate was responsible. On
appeal, Allstate argued that a person is excluded from collecting under an
insurance policy if they were the owner of a motor vehicle at the time of an
accident and failed to maintain medical expense benefits coverage. The appeals
court affirmed the judgment and held that despite the plaintiff’s insolvent
insurer’s PIP benefits no longer being available, the plaintiff was not uninsured
and subject to the exclusions of N.J.S.A. 39:6A‐4.5(a) and 39:6A‐7.
New York Application of Thacher, 29 Misc.2d 936, 216 N.Y.S.2d 299 (1961), affirmed, 14
A.D.2d 736, 218 N.Y.S.2d 524, affirmed, 10 N.Y.2d 439, 224 N.Y.S.2d 657, 180
N.E.2d 245. Regarding union welfare funds, the court held that Congress
neither pre‐empted the field of legislation nor did it preclude proceedings by
the state to take possession of and liquidate such funds.
Dairy Transport Ass'n v. Decker, 42 Misc.2d 734, 248 N.Y.S.2d 672 (1964). The
insurance commissioner has exclusive jurisdiction over liquidation of an
employee welfare fund which had been created pursuant to a collective
bargaining agreement.
Hamberg v. Guaranteed Mortgage Co. of New York, 180 Misc. 276, 38 N.Y.S.2d
165 (1942). The court found a mortgage guarantee company which guaranteed
the payment of principal and interest on mortgage loans to be conducting the
business of insurance within the meaning of the insurance code provisions
dealing with delinquent insurers. The court concluded that the insurance code
applied to the claims made against the guarantor, despite the fact that the
guarantor was organized under the banking law. The court found it immaterial
that some of the claims against the guarantor antedated the enactment of the
applicable insurance law.

Igel v. Phillips, 183 A.D. 220, 169 N.Y.S. 897 (1918). The insurance commissioner
was entitled to custody of a fund raised by a subordinate lodge of a fraternal
society, as required by lodge regulations, to pay the lodge expenses and
assessments of the insolvent grand lodge.
In re New York Title & Mortgage Co., 171 Misc. 207, 12 N.Y.S.2d 977 (1939),
affirmed, 257 A.D. 926, 12 N.Y.S.2d 1022, reargument denied, 257 A.D. 948, 14
N.Y.S.2d 146. Subsidiaries of a mortgage guaranty company in liquidation in
state court were not "insurance corporations" under state court jurisdiction.
Their business was the taking of title to and operating properties foreclosed by
the guaranty company. Thus, the federal court had exclusive jurisdiction to
determine the fairness of plans for the termination of federal receivership of
those subsidiaries.
In re St. Cecelia Service Club, Inc., 194 Misc. 999, 86 N.Y.S.2d 733 (1949). The
insurance commissioner sought an order for the liquidation of a fraternal
organization alleging that the organization had violated certain provisions of
the insurance code. The court concluded that it was fair to assume that the
anticipation of insurance benefits was reason for joining the club and that
therefore the commissioner could exercise supervision over the fraternal
organization.
People v. Reed, 66 Misc. 425, 123 N.Y.S. 305 (1910). The liquidation law applied
to "all corporations, associations, societies and orders," which the court
liberally construed to include insurance corporations of every character, as
otherwise the law would be rendered meaningless. The court held that the
insurance commissioner could exercise authority pursuant over
unincorporated or voluntary associations engaged in the business of insurance.
Oklahoma
Intervenor Policy Holders of Am. Indem. Trust v. Oklahoma Life & Health Ins.
Guar. Assoc., 1992 Okla. 17, 825 P.2d 1341 (1992). The Oklahoma Life and
Health Insurance Guaranty Association did not have to pay claims of
policyholders of medical benefits contracts issued by insolvent multiple
employer Employee Retirement Income Security Act (ERISA) trust. The trust
was not an “insolvent insurer” under the Life and Health Insurance Guaranty
Association Act, since it was not licensed and was not dues‐paying member
of the Association. The duty of the Life and Health Insurance Guaranty
Association to guarantee, assume or reinsure policies of “insolvent insurer”
is not absolute, but rather is conditioned upon status of the insurer as a
licensed member insurer.
Pennsylvania Keystone Aerial Surveys, Inc. v. Pennsylvania Prop. & Cas. Ins. Guar. Ass’n, 574
Pa. 147, 829 A.2d 297 (Pa. 2003). Insured, a decedent’s spouse and children,
brought an action against the Pennsylvania Property and Casualty Insurance
Guaranty Association (“PPCIGA”) for a declaratory judgment that they were
separate claimants and each entitled to a individual claim for $300,000. The
decedent was killed while operating an airplane owned by Keystone, who was
insured by American. American was declared insolvent while defending
Keystone. PPCIGA assumed the defense and coverage obligations of American.
The court defined a claimant under the PPCIGA’s Act as “one possessed with a
covered claim, subsuming, losses occasioned to third parties caused by the
insured, and for which the insured would be entitled to recompense from its
insurer, but for the insurer insolvency.” Id. at 157 (quotations omitted). It held
that third parties holding judgments against insureds are claimants under the
PPCIGA Act and entitled to their own separate claim.

Sotack v. Pennsylvania Prop. and Cas. Ins. Guar. Ass’n, 104 F. Supp. 2d 471 (E.D.
Pa. 2000). The Pennsylvania Property and Casualty Insurance Guaranty
Association (“PPCIGA”) and its operatives moved for summary judgment
against Sotack’s claim that under state law PPCIGA deprived her of her
constitutionally‐protected property right in not providing her insurance
coverage. PPCIGA argued that it could not be liable under 42 U.S.C. §1983
because it was not a state actor. The court held that PPCIGA was a government
entity and its operatives were state actors. Thus, the district court denied
PPCIGA’s motion.
Texas
Wyoming
Manning v. State, 423 S.W.2d 406 (Tex. Civ. App. 1967) writ ref. n.r.e. The court
held that an action could be brought against several individuals for conducting
the business of insurance without a certificate of authority. The affairs of the
company were placed into receivership, and the individuals involved were held
to be jointly and severally liable for engaging in an insurance business without
proper authority to do so. The actions of the individuals were not considered
to be those of a surplus lines broker. Rather, because the corporation was
used by the individuals as a shell, the corporate veil was pierced in order to
hold the persons individually liable. The penalties against the individual were
also upheld.
Wyoming Ins. Guar. Assoc. v. Woods, 888 P.2d 192 (Wyo. 1994). The United
States District Court for the District of Wyoming certified a question to the
United States Supreme Court as to whether individual claimant could have
multiple residences within the context of the Wyoming Insurance Guaranty
Association Act. The Supreme Court held that the term “resident,” as used in
the Act did not contemplate that a resident could simultaneously be a
resident of more than one state. Therefore, an individual’s single fixed
abode and dwelling place at the time the insured event occurred determines
his residence under the Act.
Definition of Insolvency
Eighth Circuit Royal Union Life Ins. Co. v. Gross and Great Republic Life Ins. Co. v. Gross; 76
F.2d 219, (8th Cir. 1934), cert. denied,294 U.S. 754 (1935). A stockholder
challenged the court's findings that the insurer was insolvent. The court
upheld the finding of insolvency and the court's power to use the assets of the
insolvent insurer to obtain reinsurance for the policyholders without subjecting
the assets to judicial sale.
Arizona
Arkansas
Kentucky Central Life Ins. Co. v. Rozar, 108 Ariz. 77, 492 P.2d 1184 (1972). A
creditor challenged the termination of rehabilitation. The Arizona Supreme
Court held that the lower court judge had not abused discretion in finding that
the insurer was solvent and by refusing to continue the receivership despite its
failure to maintain appropriate reserves. The creditor also attacked the
termination order on the ground that the statement showing its solvency was
merely an itemized recapitulation of changes, and it only reflected an increase
in the market value of four parcels of real estate due to reappraisals obtained.
The Court held that in the absence of plain error in the property appraisals, the
acceptance of such appraisals were within the lower court's discretion.
Better Way Life Ins. Co. v. Graves, 210 Ark. 13, 194 S.W.2d 10 (1946). The court
held that a life insurance company, liable in judgment and bills payable for an
amount exceeding the total value of the sole asset (note and mortgage) and
its subscribed stock, was insolvent so as to require appointment of receiver to

wind up its affairs, even if the note and mortgage rendered the stock paid up
as required by the statute.
California
Florida
Illinois
Rhode Island Ins. Co. v. Downey, 95 Cal. App.2d 220, 212 P.2d 965 (1950). The
court found that an insurance company may be "insolvent" even if it is in a
position to make available within a reasonable time sufficient monies to meet
promptly any demand which might in the ordinary course of events be made
against it. An alleged insolvency was not merely "technical", where the
apparent impairment of capital amounted to approximately 48.5% of the
company's stock par value, and the company appeared to have been losing
over $1,000,000 a year for the preceding three years. The fact that other state
commissioners disagreed as to whether an insurance company is insolvent
does not prevent the appointment of the commissioner as receiver if the
record provides grounds for a reasonable belief by the commissioner that the
company is insolvent under California law. An auditor for the commissioner
was not, as a matter of law, wrong in crediting the insurance company only
with guaranteed commissions and disallowing certain insured notes as assets.
Vanderhorst v. Knott, 159 Fla. 394, 31 So.2d 857 (1947). The court held that the
aggregate of weekly or monthly premium receipts should not be taken into
account when determining whether a company is solvent, because a going
insurance concern cannot pay claims out of this amount until the company
ceases to be a going concern.
Chicago Life Ins. Co. v. Auditor of Public Accounts, 101 Ill. 82 (1881) affirmed,
Chicago Life Ins. Co. v. Needs, 113 U.S. 574. In upholding the constitutionality of
the Illinois Auditor of Public Accounts to pursue the dissolution of an insolvent
insurance company, the court held that the law requires a higher standard of
solvency for an insurance company in that its assets must be equal to its
liabilities, and not just sufficient to meet and pay its matured liabilities. The
court then reviewed the various assets of the insolvent company and rejected
the use of good will as an asset and using a 4% calculation of interest on a
reserve instead of 6%.
People ex rel. American Bankers v. Palmer, 363 Ill. 499, 2 N.E.2d 728 (1936).
The insurer in question filed a petition to compel the insurance commissioner
to recognize policy liens in evaluating the company's statutory deficiency.
Pursuant to a proposal presented to policyholders, the company solicited its
policyholders to accept written waivers, or "voluntary liens," whereby a 50%
voluntary lien was placed on their policies. The commissioner rejected such
"voluntary liens" in a computation of the reserve liabilities or policy values so
that the company was subject to dissolution. The court held that the
commissioner should have permitted the company to reduce liabilities by the
amount of the "voluntary liens" on the annual report.
Indiana City of South Bend v. Century Indem. Co., 824 N.E.2d 794 (Ind. Ct. App. 2005).
Dissolution of insured corporation is not “insolvency” under Indiana Code § 27‐1‐
13‐7, which requires liability policies to contain a provision stating that the
“insolvency or bankruptcy of the . . . insured shall not release the insurance
carrier form the payment of damages for injury sustained or loss occasioned
during the life of such policy . . . .”
Kentucky
Kentucky Central Life Insurance Company v. Stephens, 898 S.W.2d 83 (Ky.
1995). The Supreme Court of Kentucky concluded that the Commissioner
need not wait until disaster deepens or until the insurer is hopelessly
insolvent to step in and remedy a situation. The court stated that a

determination of insolvency is made by reference to the statutory
accounting principles, which mandated that conservative methods be
employed in valuing the assets of an insurance company. The court affirmed
the trial court’s holding that the Commissioner’s actions were reasonable in
determining that the real estate assets did not meet the requirements of the
mortgage industry based on the fact that the company’s mortgage
operations were hazardous, there were excessive concentrations of
investments, insufficient return for mortgaged property, failure to consider
mortgages in default, and an insufficiency of appraisals of mortgaged
property.
Michigan Adams v. Michigan Surety Co., 364 Mich, 299, 110 N.W.2d 677 (1961). In
reversing a lower court decree finding that a surety company was solvent, the
court disagreed with several of the lower court's findings concerning the
valuation of the insurance company's assets, holding that (1) for purposes of
determining solvency, the value of company property acquired in
contravention of laws limiting the types of assets and investments of insurance
companies should not have been included in valuing its assets, (2) dealings by a
company with its directors or other corporations with interlocking directors
should be carefully scrutinized, and (3) so much of the book value of realty as
was attributable to the sale of salvage items could not be considered as an
asset of the company in determining its financial condition, where such realty
was acquired by a direct purchase, contrary to a statute restricting acquisition
of realty by insurance companies.
Gauss v. American Life Ins. Co., 290 Mich. 33, 287 N.W. 368 (1939). The court
upheld an order appointing the commissioner of insurance as temporary
receiver of the American Life Insurance Company as there was competent
evidence to sustain the trial court's finding that the defendant insurance
company was insolvent, since a stock insurance company is insolvent when it is
actuarially insolvent, i.e., when its capital has become impaired.
New Jersey
Ainsworth v. State Farm Mut’l Ins. Co., 284 N.J. Super. 117 (App. Div.), certif.
denied, 143 N.J. 328 (1996). Although not technically insolvent under the
provisions of the New Jersey Liquidation Act, N.J.S.A. 17:30C‐3, the Appellate
Division held that the Automobile Full Insurance Underwriting Association
("JUA") was insolvent for purposes of permitting an insured to seek uninsured
motorist coverage. This decision was due to the fact that the JUA had an
operating deficit in excess of $3 billion, an inability to pay debts as they became
due, was subject to liquidation required by legislation ongoing for five years and
had no legal or contractual requirement to pay its debts in full. The Appellate
Court further recognized that the JUA is not an insurer in the traditional sense of
the term and, therefore, could not meet the definition of an insolvent insurer
under the New Jersey Property‐Liability Insurance Guaranty Association Act,
N.J.S.A. 17:30A‐1 et seq. Nonetheless, for purposes of New Jersey's Uninsured
Motorist Coverage Law, N.J.S.A. 17:28‐1.1 et seq., the JUA was deemed an
insurer to the extent that its financial constraints caused it to deny coverage to
the tortfeasor and, further, because the JUA's operation fit the definition of an
insurer in all other respects.
Fortunato v. New Jersey Life Ins., 254 N.J. Super. 420 (App. Div. 1991). The
Appellate Division held that the Chancery Division should not have denied the
Commissioner's request for an order directing him to rehabilitate New Jersey
Life Insurance Company. The Chancery judge had refused to grant the request
for rehabilitation because there were issues of fact concerning the existence of

insolvency, including the issue of whether a reinsurance agreement had been
repudiated. The reinsurance issue was scheduled for arbitration at a later date.
While the Uniform Insurers Liquidation Act [N.J.S.A. 17B:32‐2, before
amendment by P.L.1992, c. 65] gives the Superior Court original jurisdiction
over the Commissioner's petition, it does not require a full hearing before the
court issues orders. The Commissioner's determination that further business
by the insurer would be hazardous was a finding of fact, an informed
prediction, and was neither arbitrary nor unreasonable. Because the insurer
failed to demonstrate to the contrary, the Commissioner's determination was
sufficient to grant the rehabilitation order.
Oklahoma
Pennsylvania
In re New State Life Ins. Co., 23 P.2d 376, 164 Okla. 208 (1933). The court held
that an insurer's liability to repay sums under a contract that was ultra vires
could be considered for the purpose of ascertaining the insurer's insolvency in
the dissolution proceeding, and therefore the lower court's determination of
insolvency was affirmed.
Commonwealth Insurance Department v. Safeguard Mutual Ins. Co., 18 Pa.
Cmwlth. 195, 336 A.2d 674 (1975), modified on other grounds, 478 Pa. 592, 387
A.2d 647 (1978). An insurance company is "insolvent" under the insurance
code when it has stopped paying its debts, particularly claims, in the ordinary
course of business or as they become due, or when the fair value of the
company's assets is less than its liabilities. An insurance company is in a
"hazardous condition" financially when insolvency is imminent, i.e., surplus is
dwindling and there is a substantial likelihood, given recent trends within the
company, that insolvency will occur in the near future.
State Farm Ins. Co. v. Bullock, 316 Pa. Super. 475, 463 A.2d 463 (1983). When
the insurance commissioner had suspended an insurer from doing business
upon finding that it was "insolvent," a plaintiff could recover against her own
insurer under her policy's uninsured motorist provision.
Texas
John L. Hammond Life Ins. Co. vs. State of Texas, 299 S.W.2d 163 (Tex. Civ.
App. 1957). The court held that under the insurance code, an insurer is
insolvent when its liabilities exceed its lawful assets, regardless of whether it
was in default in payment of its debts.
Pacific Finance Corp. v. Knox, 247 S.W.2d 154 (Tex. Civ. App. 1952). The receiver
for a reciprocal insurance exchange filed a class action against various
subscribers and policyholders of the reciprocal to assess one additional
premium in order to pay off claims and expenses that arose during insolvency.
The issue was whether or not the reciprocal's subscribers premium deposit is
to be considered in determining solvency. The court held that the advance
deposit was not to be considered in the calculation of solvency.
Utah
In re Rehabilitation of American Investors Assurance Co., 521 P.2d 560 (Utah
1974). Solvency of insurance company must be determined according to
accounting techniques used by insurance companies, although, under a
different accounting method, assets may be shown to have substantially
greater value and might show a new equity of the insurance company.
Jurisdiction of the Federal Courts
U.S. Supreme
Lion Bonding & Surety Co. v. Karatz, 262 U.S. 77 (1923). Where a court of
competent jurisdiction has, by appropriate proceedings, taken possession of

property, jurisdiction over such property is withdrawn from all other courts.
The Nebraska Department of Trade & Commerce was permitted to liquidate a
domestic insurance company under Nebraska law.
Penn General Casualty Co. v. Pennsylvania, 294 U.S. 189 (1935). Both state and
federal courts have concurrent jurisdiction in an action in personam for
recovery of money or an injunction, but if the suit is in rem or quasi in rem, the
court first assuming jurisdiction over the property may exercise jurisdiction to
the exclusion of the other. Pennsylvania Supreme Court's holding permitting
insurance commissioner to take possession of the property and enjoining
insolvent company from surrendering its books and records to anyone other
than the insurance commissioner was reversed since federal district court
obtained in rem jurisdiction first. The Court remanded the proceeding and
noted the commissioner could apply to the federal court for a voluntary
surrender of its jurisdiction.
Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996). The Supreme Court
affirmed the decision of the Ninth Circuit in Garamendi v. Allstate Ins. Co., 47
F.3d 350 (9th Cir. 1995), holding that a federal court can abstain under the
Burford doctrine from exercising its jurisdiction only where the relief sought
is equitable or otherwise discretionary, and may not abstain in a common
law action for damages. The Court based its decision on the well‐settled
principle that, given the potentially disruptive effect of such equitable
remedies as injunctions on state proceedings, federal courts have the power
to dismiss or remand cases based on abstention principles where the relief
sought is equitable or otherwise discretionary.
U.S. v. Bank of New York & Trust Co., 296 U.S. 463 (1935). The U.S. Supreme
Court held that the United States as the assignee of the Russian government
was not entitled to maintain suit in the federal district court for an accounting
and delivery of the assets of Russian insurance companies whose funds had
been appropriated by the Russian government to the exclusion of all other
claimants on such contention that such suit would not interfere with the
proceedings in the New York state court. The state court proceedings directed
the insurance commissioner to take possession of the assets, and the Supreme
Court stated that the principle that a court first assuming jurisdiction over
property may maintain and exercise that jurisdiction to the exclusion of all
other applies equally to cases where the assets are actually seized or where
suit is brought to marshal assets, administer trusts or liquidate estates ‐‐
whenever the court must control the property. Therefore, the state court took
jurisdiction of the res to the exclusion of the United States.
First Circuit
Fragoso v. Lopez, 991 F.2d 878 (1 st Cir. 1993). After the appeal of a medical
malpractice action in federal court, an insurer‐defendant was placed in
liquidation and the receiver requested abstention of the federal court under
Burford. The Court declined to abstain after analyzing the effect that New
Orleans Pub. Serv., Inc. v. City Council of New Orleans [NOPSI], 491 U.S. 350
(1989), has on the Burford abstention doctrine. It concluded that: (i) NOPSI
requires a significant disruption of a state regulatory scheme before
abstention is appropriate; (ii) previous circuit court decisions favoring
abstention are "suspect" after NOPSI; and (iii) the "mere existence" of a
"complex state apparatus" does not necessarily justify abstention.
Gonzales v. Media Elements, Inc., 946 F.2d 157 (1st Cir. 1991). In personal injury
action against an insolvent insurer, court held that abstention was required
under Burford v. Sun Oil Co., 319 U.S. 315 (1943), because federal jurisdiction

over action would: (i) defeat domiciliary jurisdiction's (Puerto Rico) purpose of
concentrating all claims against the insolvent insurer in one forum; (ii) force
Puerto Rico's insurance commissioner to dissipate funds in defense of the
federal litigation; and (iii) create risk of inconsistent policy interpretations,
defeating Puerto Rico's interest in consistent disposition of all claims against
the insurer.
MRCO, Inc. v. Ins. Comm. of Puerto Rico, 521 F.3d 88 (1 st Cir. 2008). Where a
claimant sought return of funds loaned to the insurer just prior to liquidation,
the federal court held that the liquidator, rather than any court, has the
exclusive authority in the first instance to determine what constitutes an
“asset” of the insurer. Further, because the state substantive law precluded all
actions against the insolvent insurer, the district court must dismiss the action
for failure to state a claim. Claimant must look to the liquidation court.
Sevigny v. Employers Ins. of Wausau, 411 F.3d 24 (1 st Cir. 2005). Where the
liquidator sought federal abstention under Burford with respect to an offset
issue, the federal court held that the nature of the issues in dispute were
“conventional,” and not “discretionary policy or administrative judgments”
such that decision by a federal court would “imperil a complex regulatory
scheme,” and thus did not merit abstention. The court suggested that
questions regarding interpretation of state statutes could be certified to the
state court while the federal court resolved other issues.
Second Circuit
Corcoran v. Ardra Ins. Co., Ltd., 842 F.2d 31 (2nd Cir. 1988). The court dismissed
an appeal claiming that the district court had abused its discretionary power
when it decided to abstain from exercising jurisdiction. New York's complex
administrative and judicial system for regulating and liquidating domestic
insurers, the court explained, is the type of regulatory scheme that indicates
the court should seriously consider abstention from asserting jurisdiction when
it faces a novel question. It added that state courts should first define the
powers of the Superintendent.
Dempsey v. Pink, 92 F.2d 573 (2nd Cir. 1937). The federal court could decide
whether the plaintiff had liens for legal services in the funds of an insolvent
insurer and whether plaintiff was entitled to preferential payment as this
would not be an in rem proceeding which would interfere with the state
court's jurisdiction and possession of property.
Law Enforcement Ins. Co., Ltd. v. Corcoran, 807 F.2d 38 (2nd Cir. 1986), cert.
denied, 481 U.S. 1017 (1987). The court held that abstention from jurisdiction
by the district court was warranted under the Burford doctrine given New
York's complex administrative and judicial system for regulating and liquidating
domestic insurance companies, the expertise of the Superintendent, the
necessity of marshalling the claims and assets, and the express federal policy
of non‐interference in insurance matters embodied in the McCarran‐Ferguson
Act. It asserted that federal court intervention would only impair the
comprehensive state plan for regulating the rehabilitation and liquidation of
insurers.
Levy v. Lewis, 635 F.2d 960 (2nd Cir. 1980). The court refused to exercise
concurrent jurisdiction over a class action brought by an insurance company's
retired employee alleging that the insurance commissioner violated the
employee benefit plan when retirement benefits were terminated. The court
held that (1) to do otherwise would result in duplicative litigation in state and

federal courts; and (2) the regulation of insurance matters should be left to the
states.
Superintendent of Insurance v. Bankers Life & Casualty Ins. Co., 401 F. Supp.
640 (S.D. N.Y.) aff'd. mem. 526 F.2d 856 (2nd Cir. 1975). The court held that the
state court alone had jurisdiction to adjudicate the validity of the insurance
commissioner's settlement of a federal securities claim the commissioner
brought against the insolvent insurer.
Tolfree v. New York Title and Mortgage Co., 72 F.2d 702 (2nd Cir. 1934). cert.
denied, 293 U.S. 619 (1934). When the superintendent of insurance took over
the assets of an insolvent title company, the bonds and mortgages guaranteed
by the insurer and the principal secured by them, the federal courts should not
interfere with the state's possession. Thus, the district court cannot appoint
trustees for such bonds and mortgages and cannot prevent the insurance
commissioner from interfering with their possession. The court applied this
rule of jurisdiction to the rehabilitation process as it found no difference
between the general character of rehabilitation as opposed to liquidation.
Third Circuit General Glass Industries Corp. v. Monsour Medical Foundation, 973 F.2d 197
(3rd Cir 1992). Plaintiff, on behalf of its 300 workers, brought RICO, ERISA and
Commonwealth tort claims against the Company's employee health insurer in
liquidation (Keystone Medical Services and its successor, Monsour Medical
Foundation). The Third Circuit vacated so much of the District Court's order
dismissing plaintiff's claims that were broader than, or different from, those
asserted by the Pennsylvania Commissioner of Insurance in the
Commonwealth court action and declared that the Federal action be stayed
during the pendency of the liquidation proceedings. The retention of
jurisdiction by the District Court was hoped to avoid any applicable statute of
limitations defense.
O'Neil v. Welch, 245 F. 261 (3rd Cir. 1917). The Pennsylvania state court first
acquired jurisdiction over the corporation and its property for the full purpose
of the judicial proceeding, which includes possession, liquidation, and
distribution, and the state is entitled to retain that jurisdiction until completion.
Riley v. Simmons, 45 F.3d 764 (3rd Cir.), reh'ing denied, 1995 U.S. App. LEXIS
5492 (3d Cir. 1995). Where plaintiffs sought relief under federal securities law
alleging misrepresentations which induced them to purchase annuities issued
by an insolvent insurer (Mutual Benefit Life Insurance Company), the Third
Circuit Court of Appeals held that abstention under Burford was not
appropriate. Reversing the lower court, cited at 839 F. Supp. 1113 (D.N.J. 1993),
and reasoning that the Securities Exchange Act, the basis of plaintiffs' claims,
gives Federal District Courts exclusive jurisdiction over claims arising thereunder,
the Court found that the plaintiffs would not otherwise have timely and
adequate state court review of their claims.
University of Maryland v. Peat Marwick & Co., 923 F.2d 265 (3rd Cir. 1991). The
Third Circuit vacated an Order dismissing the policy holders' Amended
Complaint and remanded to the Pennsylvania District Court an action brought
against the independent auditor (Peat Marwick) of insolvent Mutual Fire,
Marine and Inland Insurance Company, holding that Burford and Colorado
River abstention doctrines did not apply to bar the Federal action because (1) it
did not appear that the Commonwealth court would have jurisdiction over the
policyholder(s)' claims in the insolvency estate but rather a third party (Peat
Marwick); (2) the policyholder(s)' claims were distinct from those brought by

the Commissioner of Insurance on behalf of the insolvent insurer in the
Commonwealth court action; and (3) the action was at law, not in equity, and
sought only money damages. 1 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Fourth Circuit
Fifth Circuit
Safety Trails, Inc. v. Stuyvesant Ins. Co., 316 F.2d 234 (4th Cir. 1963). Plaintiffs
must prove their claims against an insolvent insurer in the state liquidation
proceeding, and cannot bring an action in federal court to have reinsurance
proceeds paid directly to them.
Anshutz v. J. Ray McDermott Company, 642 F.2d 94 (5th Cir. 1981). The court
ordered a stay of plaintiff's appeal of a judgment for the insolvent insurer on a
coverage question pending liquidation proceedings. The court stated that an
orderly liquidation requires that this (federal) court not interfere with the stay
granted by the state court.
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). An insurance broker brought an action to
recover from insolvent insurer unearned premiums paid by the broker on
cancelled policies. New England International Surety of America (NEISA)
was placed in liquidation and under the control of the Commissioner of
Insurance. The policies placed by the broker were canceled resulting in the
loss of premiums. The broker refunded the premiums to his clients and
brought action after acquiring their rights as subrogee. The broker’s action
was dismissed from federal court due to the Burford doctrine. The court
reasoned that the existence of administrative procedures in the state
precluded the federal action. The court concluded that the allegations
should be resolved in the state liquidation proceeding.
Brown v. Link Belt Division of FMC Corp., 606 F.2d 110, (5th Cir. 1982). The
District Court did not abuse its discretion in staying all claims against an insurer,
which during the pendency of the proceedings, was placed in liquidation.
Federal policy favors state control of the insurance business and a state court
order staying all proceedings against the insolvent insurer made the district
court reluctant to proceed.
Clark v. Fitzgibbons, 105 F.3d 1049 (5 th Cir. 1997). Burford abstention applied
to dismiss case brought in federal district court in Texas against an Arizona
insurance company subject to a state court issued receivership order
mandating that claims be brought against the estate in the court issuing the
receivership order. American Bonding Co. (“ABC”), an Arizona insurance
company, was placed in receivership by the Arizona Superior Court with the
Arizona director of insurance as receiver. The plaintiffs brought suit in
federal court representing the interests of various individuals insured by ABC
who purchased policies from two “county mutual” insurance companies
who under Texas law are exempt from insurance regulatory oversight. ABC
provided reinsurance of the policies to the two Texas county mutual
insurance companies. The court disregarded choice of law provisions in the
reinsurance contracts which provided that Texas law would govern any
dispute by determining that the preceding action taken by the Arizona court
made abstention appropriate.
1 On remand, the Pennsylvania District Court dismissed plaintiff's case based on a statute of
limitations and lack of causation grounds. 1991 U.S. District LEXIS 13561 (9/25/91).

Dale v. Colagiovanni, 443 F.3d 425 (5th Cir. 2006). Various insurance companies
were negatively affected by a fraudulent conspiracy. Receivers for the insurers
brought suit and named among the conspirators: the Vatican. The Vatican was
implicated because the fraudulent conspiracy was carried out by an agent acting
with apparent authority from the Vatican. The court of appeals reversed a
lower court’s denial of immunity to the Vatican under the Foreign Sovereign
Immunities Act (“FSIA”). In doing so, the court of appeals concurred with
previous holdings in the Fourth and Ninth Circuits that an agent’s acts,
conducted with the apparent authority of the state, is insufficient to trigger the
commercial exception to FSIA.
Health Net, Inc. v. Wooley, 534 F.3d 487 (5th Cir. 2008). Texas, Oklahoma, and
Louisiana receivers successfully brought suits against Health Net, Inc., claiming
breach of fiduciary duty, fraud, and conspiracy, all to the detriment of an
insolvent insurer in receivership. The receivers obtained compensatory and
exemplary damages. Health Net then sought an injunction to block the verdict
and awards against it on the grounds that the judgments were obtained by
fraud. The receivers acknowledged in the appeal that ex parte communications
with the judge had taken place. The Louisiana Court of Appeals dismissed
Health Net, Inc.’s injunction request but placed sanctions on the receivers’
counsel. The court of appeals affirmed the injunction dismissal and vacated the
sanctions on the grounds that Louisiana’s state laws regarding insurer
insolvency may necessitate some ex parte communications. Furthermore, the
involvement of the federal courts in this process would disrupt the state’s
treatment of insolvent insurers. Both the Younger and Burford abstention
doctrines apply in this case.
Martin Insurance Agency, Inc. v. Prudential Reinsurance Company, 910 F.2d 249
(5th Cir. 1990). After the insolvency of Transit Casualty Insurance Company, a
Missouri domiciliary, the plaintiff insurance agency paid the
policyholder/claimants and sought reimbursement directly from reinsurers.
The reinsurance certificates at issue contained standard insolvency clauses,
requiring payment to the receiver in the event of insolvency of Transit; thus,
the reinsurance proceeds could be considered assets of the estate. Further,
the reinsurers were exposed to double liability because claims to the
reinsurance would likely be asserted both by plaintiff and by the receiver.
Although the court found that it had subject matter jurisdiction, it found that
the action should nevertheless be dismissed based on the abstention doctrine
of Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098 (1943), without prejudice to
plaintiff's right to re‐assert the claim in the Missouri liquidation court.
Webb v. B.C. Rogers Poultry, Inc., 174 F.3d 697 (5 th Cir. 1999). The State of
Texas place Employers National Insurance Company (ENIC) in receivership.
A permanent injunction was ordered preventing any person from interfering
with the state receivership court proceedings. The receiver brought suit in
state court against B.C. Rogers, an ENIC policyholder, to collect unpaid
worker’s compensation premiums. B.C. Rogers removed to federal court on
the grounds of diversity. The receiver sought to have the case remanded to
state court. The basis for remand was that the Burford abstention doctrine
applied and that the permanent injunction enjoined B.C. Rogers from
litigating the dispute anywhere other than the receivership court. The court
failed to recognize the Burford abstention doctrine stating that the Burford
doctrine applies only where relief being sought is equitable or otherwise
discretionary. The court reasoned that the state’s interest must yield the
federal court’s “strict duty to exercise the jurisdiction that is conferred upon
if by Congress.”

Sixth Circuit
AmSouth Bank v. Dale, 386 F.3d 763 (6th Cir. 2004). The underlying coercive
action was a state court suit by the receivers, various state insurance
commissioners, to recover funds embezzled from a number of insurance
companies. The receivers claimed the banks were negligent in not discovering
the embezzler’s fraud. The banks sought a declaratory judgment in federal
court saying that they were not liable to the receivers. The district court
enjoined the receivers from pursuing their state coercive action further and the
receivers appealed. The Sixth Circuit declined to find McCarran‐Ferguson
reverse preemption because an action to evade liability in a threatened
common‐law coercive action by the insurance companies had only an
attenuated connection to the regulation of insurance. However, the court
noted that (1) the declaratory judgments would serve no useful purpose and (2)
that the banks filed the declaratory actions not to resolve liability issues but
instead to gain procedural advantage. Because of these two factors, the
appellate court held that jurisdiction over these declaratory actions should not
have been exercised and the district court’s decision to the contrary was an
abuse of discretion.
Dykhouse v. Corporate Risk Management, No. 91‐1646, 1992 U.S. App. LEXIS
11238, unreported (6th Cir. 1992). Even though the district court had
jurisdiction, Court of Appeals held that the abstention doctrine set forth by the
United States Supreme Court in Burford v. Sun Oil Company, 319 U.S. 315 (1943)
required the district court to abstain from exercising that jurisdiction stating
that Burford abstention is appropriate to avoid considering questions
regarding state liquidation proceedings in order to protect the state's
substantial interests in this regard, provided that no direct federal questions
are involved.
McDonough v. Academy of Medicine, 888 F.2d 1392, 1989 U.S. App. LEXIS
16344, unreported (6th Cir. 1989). State insurance commissioner appealed the
district court disposition of an interpleader action filed pursuant to 28 U.S.C.
§ 1335. The interpleader claimants asserted that the district court erred in not
abstaining from jurisdiction, arguing that the New York state court in which
liquidation proceedings were simultaneously being conducted was the proper
forum to adjudicate claims to the interpleader fund. On appeal, this court
concluded that the district court did not err in refusing to dismiss the
interpleader action on abstention grounds stating that the res before the
district court was not concurrently before the New York court and that until
the issue of ownership of the res was determined, the res could not properly
be part of the liquidation proceedings.
Seventh Circuit
Barrett v. International Underwriters, Inc., 346 F.2d 345 (7th Cir. 1965). While
the court that first invokes jurisdiction over property has exclusive jurisdiction
regarding all other courts with concurrent jurisdiction, that does not preclude
other courts from hearing questions related to the property which do not
interfere with the constructive possession of court with the exclusive
jurisdiction. The federal court could properly permit judgment creditor to
obtain valid lien in the property of insolvent reinsurance group after insurance
commissioner initiated liquidation, but before state court vested insurance
commissioner with title to insolvent group's assets, without invading the State
Court's jurisdiction.
Blackhawk Heating & Plumbing Co., Inc. v. Geeslin, 530 F.2d 154 (7th Cir. 1976).
In an in rem proceeding involving an escrow account, the Illinois State Court
first obtained jurisdiction by initiation of liquidation proceedings and the

appointment of a receiver even though liquidation and this Court had
constructive possession of the property and the trustee of the escrow account
had actual possession. Plaintiff's rights to securities in escrow account,
obtained by assignment in federal lawsuit, were those of an assignee and the
plaintiff had no priority in state liquidation.
Central States, Southeast and Southwest Areas Health and Welfare Fund v. Old
Security Life Ins. Co., 600 F.2d 671 (7th Cir. 1979). State court in which
receivership proceedings were pending against insolvent insurer could not
enjoin federal district court from hearing an in personam action under the
Employee Retirement Income Security Act (ERISA) against the insolvent
insurer. Such insurer had no right to a single liquidation forum as the state
liquidation law expressly authorizes separate claim proceedings in ancillary
states. Further, federal courts have exclusive jurisdiction over ERISA claims for
breach of fiduciary duty and state liquidation laws cannot be read to preclude a
congressionally created federal claim.
General Railway Signal Company v. Corcoran, 921 F.2d 700 (7th Cir. 1991). In
this interpleader case, the Liquidator of an insolvent insurance company
appealed the denial of a motion to vacate a temporary restraining order of
funds from state judgment proceedings, arguing that no diversity existed
between the two claimants in the case, because the Small Business
Administration ("SBA"), as an agency of the United States, was a citizen of
no state and therefore could not be sued in diversity. Agreeing with the
Liquidator, the appellate court reversed the lower court, and held that a suit
which names an administrator as a defendant is the equivalent of a suit
naming the United States as a party. However, the court still maintained
federal question jurisdiction over the case, because 15 U.S.C. § 634(b)
created federal question jurisdiction over contract claims against the SBA.
Finally, the court stated that it may be appropriate for the district court to
abstain exercising jurisdiction over the case pursuant to the Burford
abstention doctrine.
General Railway Signal Company v. Engeleiter, 969 F.2d 519 (7th Cir. 1992). In
this case involving a statutory interpleader action regarding a state court
judgment, the Seventh Circuit held that the district court had misinterpreted
the Seventh Circuit's prior opinion when the district court subsequently
abstained from exercising jurisdiction over the case pursuant to the Burford
abstention doctrine. The appellate court stated that the issue of abstention
was open for consideration by the district court, and suggested that the
district court allow briefing from both parties on the issue.
General Railway Signal Company v. Engeleiter, 969 F.2d 519 (7th Cir. 1992). This
was an interpleader action involving funds awarded in a judgment against
plaintiff and in favor of an insurance company. The insurance company had
since become the subject of liquidation proceedings under a comprehensive
New York regulatory scheme. In this opinion, the Court stated that its
extensive discussion of Burford abstention in its prior opinion, General Railway
Signal Co. v. Corcoran, 921 F.2d 700 (7th Cir. 1991), was not intended to
preclude the district court from considering the propriety of abstention on
remand. In the prior opinion, the Court set forth the factors to be considered
by the district court in determining whether abstention is appropriate: 1)
whether the suit is based on an exclusively federal cause of action, 2) whether
difficult state laws are at issue, 3) the need for coherent state doctrine, and 4)
whether the state intended to have the issues adjudicated in specialized state
forums. The Court further held that the fact that this was an interpleader

action did not automatically preclude the district court from abstaining. See
921 F.2d at 709.
Hartford Cas. Ins. Co. v. Borg‐Warner Corp., 913 F.2d 419 (7th Cir. 1990). Federal
court abstention under the Burford doctrine was appropriate where creditor
of an insolvent insurance company attempted to sue the insolvent insurer's
parent corporation and other subsidiaries in federal court, outside of the state
court rehabilitation proceedings. The court held that any federal court action
would interfere with the state court's administration of the estate, and would
wrongfully usurp control over the rehabilitation proceedings.
Hartford Casualty Ins. Co. v. Borg‐Warner Corp., 913 F.2d 419 (7th Cir. 1990).
A reinsurer of an insolvent insurer filed a federal court action against
defendant alleging abuses of the corporate structure, fraud, reckless
misrepresentation and promissory estoppel. The district court dismissed the
complaint without prejudice on grounds of ripeness, since defendant's
liability to plaintiff would not be fixed until the conclusion of the state court
liquidation proceedings. The Seventh Circuit held that it should abstain
pursuant to the Burford abstention doctrine, since any federal court
judgment would overlap with the state court liquidation proceedings.
Following the lead of the Tenth Circuit in Grimes v. Crown Life Ins. Co., 857
F.2d 699, 704‐05 (10th Cir. 1988), the Seventh Circuit also considered four
nonexclusive factors that help in determining whether a federal court should
exercise its jurisdiction within the context of the insurance industry. First, is
the cause of action that is the basis of the suit exclusively federal? Second,
does the suit require the court to determine issues that are directly relevant
to state insurance regulation policy? Third, do state procedures indicate a
desire to create a special state forum to regulate and adjudicate insurance
issues? Fourth, are difficult or unusual state laws at issue? Where there is a
high probability that inconsistent decisions between the state and federal
system would lead to incongruous results in insurance insolvency cases, the
federal court should abstain. To allow such federal‐state overlap would
offend general notions of comity and be inconsistent with the McCarran‐
Ferguson Act, which gives states the power to regulate the insurance
industry.
Property & Casualty Ins. Ltd. v. Central National Ins. Co. of Omaha, 936 F.2d 319
(7th Cir. 1991). For federal court to abstain in deference to complex state
administrative proceedings, the state must offer a forum for claims to be
litigated, and that forum must offer a specialized claims adjudication
procedure. The court remanded the case to the district court for
determination of whether the state of Nebraska in fact provided a specialized
claim adjudication process within the rehabilitation proceeding, so that
Burford abstention would be appropriate.
Eighth Circuit
Bilden v. United Equitable Insurance Co., 921 F.2d 822 (8th Cir. 1990). Bilden, the
insured, filed suit against United for denial of nursing home insurance benefits.
District court entered judgment in favor of Bilden. United appealed. While the
appeal was pending, United was placed into rehabilitation. The order of
rehabilitation prohibited persons from instituting or further prosecuting any
actions against United. United sought a stay of the appeal under the doctrine of
Burford v. Sun Oil Co., 319 U.S. 315 (1943). The Eighth Circuit found that the
order of rehabilitation did not bar Bilden from seeking to finalize the appeal.
Also, the order did not require abstention. In addition, no other exceptional
circumstances favored abstention. The court turned to the merits of the appeal
and affirmed the judgment in favor of Bilden.

Hertz v. Knudson, 6 F.2d 812 (8th Cir. 1925). Following the case of Lyon Bonding
& Surety Company v. Karatz, 262 U.S. 77, in which receivers appointed by a
federal court were found to be without any jurisdiction, the receivers petitioned
for the payment of their expenses and fees. The court noted that normally no
compensation would be payable but in the circumstances of the case, the
Nebraska liquidator of Lyon Bonding had reached an agreement with the
federal receivers to perform certain functions in Minnesota during the
pendency of the litigation to determine their jurisdiction. However, the court
stated that it had no jurisdiction over the dispute and that the parties must go to
the Nebraska state courts to have the compensation issue resolved.
Holley v. General American Life Ins. Co., 101 F.2d 172 (8th Cir. 1939). An
unsecured creditor and a shareholder of an insolvent insurer intervened to
challenge the sale of assets of the insolvent insurer. In rejecting the petition and
intervention, the federal court noted that the Missouri liquidation court had
exclusive jurisdiction and that the federal court could not entertain a suit for
appointment of receiver and review of the sale of assets. Further, the suit was
an obvious attempt to interfere in the disposition of the property of an
insolvent Missouri insurance company under the supervision of a Missouri state
court and on that basis alone, could not be maintained since it constituted a
collateral attack.
Melahn v. Pennock Insurance, Inc., 965 F. 2d 1497 (8th Cir. 1990). Transit
Casualty Company's receiver brought state court action against its agent,
Pennock, for an accounting and the recovery of unearned commissions on
premiums due but not collected and on premiums collected but not remitted.
Pennock removed the case to federal court based on diversity of citizenship and
filed a motion to dismiss on the grounds that the court lacked personal
jurisdiction. Melahn moved to remand the case to state court some eighty days
later on the basis of abstention under Burford v. Sun Oil, 319 U.S. 315 (1943). The
Eighth Circuit held that the district court had the authority to remand the case
to the state court based on abstention even though section 1447(c) U.S.C. does
not expressly provide for this type of remand. Moreover, the motion to remand
on these grounds need not be made within the thirty‐day time limit set forth in
section 1447(c). The district court in this case, however, did not properly
exercise its authority to remand. The factors in favor of abstention were
insufficient in weight and number to override the obligation of federal courts to
decide cases over which they have subject matter jurisdiction. Melahn failed to
prove that the exercise of federal jurisdiction would frustrate the state's
interests in the matter. Accordingly, the district court abused its discretion in
ordering remand under the circumstances.
Moss v. Kansas City Life Ins., 96 F.2d 108 (8th Cir. 1938). The policyholders of an
insolvent Missouri insurer sued the insurance commissioner and another insurer
to which the commissioner had transferred assets belonging to the insolvent
insurer. There was no final adjudication of insolvency and therefore, the
insolvent insurer was not yet legally dissolved. Nevertheless, the court held that
given the other aspects of the order, which enjoined the company from
defending actions against it and then only in the name of the Missouri
commissioner, the company is not capable of being a party in an action in
federal court.
Motlow v. Southern Holding & Securities Corp., 95 F.2d 721 (8th Cir. 1938) cert.
denied, 305 U.S. 609 (1938). The federal district court could not set aside
allegedly fraudulent transfers of an insolvent insurer involved in liquidation

proceedings. The New York insurance commissioner had first obtained
jurisdiction and other courts, except when called on by the court of primary
jurisdiction for assistance, are excluded from participation.
Warmus v. Melahn, et al., 110 F. 3rd. 566 (8 th Cir. 1997). Plaintiff controlled an
insurance holding company including Missouri‐domiciled American Financial
Security Life Insurance Company (“AFSLIC”). Plaintiff filed suit in federal
court against the Director of Insurance, Melahn, in his personal capacity. The
suit was for damages that allegedly resulted from Melahn’s state petition
placing AFSLIC in rehabilitation. The District Court dismissed on a threepronged
Younger abstention and Plaintiff appealed. The appellate court
affirmed finding that there was the potential for undue federal interference
present.
Wolfson v. Mutual Benefit Life Ins. Co., 51 F.3d 141 (8 th Cir. 1995). Mutual
Benefit issued group life policies to the employees of Dippy Donuts, Inc.
Plaintiff was the beneficiary of a deceased employee, but her claim for
benefits under the policy was denied based upon contractual issues.
Plaintiff sued in Nebraska state court and Mutual Benefit removed. Plaintiff
amended her claim to include an ERISA count. Subsequently, Mutual Benefit
was placed in rehabilitation and Plaintiff’s action was temporarily stayed
pending action by the court overseeing Mutual Benefit’s rehabilitation. As
part of the recovery plan, Mutual Benefit’s group life policies were sold by
the rehabilitator to Fortis Benefits Insurance company. Plaintiff attempted
on four occasions to get relief from the stay and to amend her complaint to
add Fortis as an additional party. All were denied by the U.S. District Court
and Plaintiff appealed. The appellate court found that both Burford and
Colorado River abstention was proper in light of the state insolvency
proceedings surrounding Mutual Benefit. This holding was subsequently
rejected by the U.S. Supreme Court in Quackenbush v. Allstate Ins. Co., 517
U.S. 706 (1996), which held that the power to dismiss or remand cases based
on abstention principles only applied where the relief being sought was
equitable or otherwise discretionary.
Ninth Circuit
Garamendi v. Allstate Ins. Co., 47 F.3d 350 (9th Cir. 1995). The Ninth Circuit
held that a remand order based on Burford abstention was a final collateral
order and therefore was reviewable on appeal, rather than by writ of
mandamus. The court further held that the Burford abstention doctrine did
not apply to a suit solely seeking legal relief. The suit was commenced in
state court by the Insurance Commissioner seeking contract and tort
damages against a reinsurer of an insolvent insurer. The reinsurer removed
the action to federal court on diversity grounds and filed a motion to compel
arbitration. The Commissioner then sought remand to the state court. The
Commissioner argued that the federal court’s resolution of the action might
interfere with California’s regulation of insurer insolvencies because the
issue of the reinsurer’s setoff rights, which was before the federal court, was
also before the state court. Accordingly, the Commissioner argued,
abstention was proper. The Ninth Circuit vacated the District Court’s
decision to abstain and remanded for further proceedings.
Hutchins v. Pacific Mutual Life Ins. Co. of California, 97 F.2d 58 (9th Cir. 1938),
cert. denied, 305 U.S. 630, (1938). The Ninth Circuit repeated the settled law
that where a state and a federal court both have concurrent jurisdiction in suits
in rem or quasi in rem, the court first assuming jurisdiction over the property
may maintain and exercise that jurisdiction to the exclusion of the other. Since
the state court acquired possession of the res, it had power to determine,

subject to review and appeal or certiorari, all questions germane to the
proceeding.
Mitchell v. Lay, 48 F.2d 79 (9th Cir. 1931), cert. denied, 283 U.S. 864 (1931). The
Ninth Circuit found the district court's order that the insurance commissioner
turn over a fund in the state's custody for the protection of creditors to a
receiver in the federal court to be flatly improper. The Ninth Circuit observed
that the district court's order effectively prohibited the insurance commissioner
of performing his/her duties under the state laws providing for liquidation of
insolvent insurance companies.
Morgan Stanley Mortgage Capital Inc. v. Insurance Comm. of the State of
California, 18 F.3d 790 (9th Cir. 1994). The purchaser of negotiable mortgage
notes issued by two partnerships that were affiliated with an insolvent
insurer filed a diversity action in federal court to determine its rights of
ownership and possession. The Ninth Circuit affirmed the District Court’s
dismissal of the action in deference to the California insolvency court’s prior
assumption of in rem jurisdiction over the notes given the issuers' affiliation
with the insolvent insurer. The court determined that the appellant's
argument that the conservation court's jurisdiction was preempted by
federal bankruptcy law was precluded by the decision of the California Court
of Appeals in Garamendi v. Executive Life Ins. Co., 17 Cal. App. 4th 504 (Ct.
App. 1993).
Tenth Circuit
Duggins v. Hunt, 323 F.2d 746 (10th Cir. 1963). The court held that the dismissal
of a declaratory judgment was proper where the federal action would interfere
with the state's administration of the assets of an insolvent insurer.
Grimes v. Crown Life Ins. Co., 857 F.2d 699 (10th Cir. 1988), cert denied, 489 U.S.
1096, 109 S. Ct. 1568. The insurance commissioner, as receiver of an insolvent
carrier, sought to interpret the provisions of a reinsurance contract in state
court. The reinsurance carrier removed the action to federal district court which
declined to remand the action and decided the merits of the case. In reversing
the decision of the district court, the United States Court of Appeals for the
Tenth Circuit held that the State of Oklahoma had "adopted a comprehensive
scheme to oversee the liquidation of insolvent insurers" and, therefore, the
district court should have abstained from exercising its jurisdiction in the matter.
857 F.2d at 705.
Inland Empire Ins. Co. v. Bair, 246 F.2d 505 (10th Cir. 1957). New Mexico agent of
insolvent Idaho insurer obtained judgment for commissions earned on policies
issued before insurer's insolvency. Judgment was rendered after a federal
receiver had been appointed for the insurer. The court held that appointment
of the federal receiver did not oust the New Mexico court's jurisdiction, since
the agent was not allowed to set‐off the judgment against the premium funds
which the agent held, but instead would share in the pro‐rata distribution of the
insurer's estate.
Inland Empire Insurance Co. v. Freed, 239 F.2d 289 (10th Cir. 1956). The court
held that the federal appointment of a receiver was proper where: the
hopelessly insolvent insurance company had to be liquidated, was doing
business in 21 states and the state of its domicile and principal place of doing
business had conceded their inability to rehabilitate or liquidate the company,
its creditors, policyholders and stockholders. Also important to the court's
decision was the fact that only six states involved had adopted the Uniform
Insurers Liquidation Act and the only alternative to a federal receiver was

independent receivership proceedings in each state for the liquidation of the
company and distribution of its assets. Under the above outlined special
circumstances, the appointment of a federal receiver was therefore necessary
and proper.
Strong v. W. United Life Assurance Co. (In re Tri‐Valley Distrib.), BAP No. UT‐05‐
119, BAP No. UT‐06‐048, 2006 Bankr. LEXIS 3252 (B.A.P. 10th Cir. 2006). The
receiver for an insolvent insurance company and a bankruptcy examiner
entered an agreement regarding the sale of certain assets claimed to be
property of the estates being administered by the receiver and bankruptcy
examiner, respectively. The agreement provided that the funds from the sale of
the subject properties would be held in escrow pending a negotiated resolution
of the dispute as to ownership, or pending a final order of the United States
Bankruptcy Court for the District of Utah. Ultimately, the bankruptcy examiner
filed an adversarial proceeding claiming that the properties at issue were
fraudulently transferred to the insolvent insurance company. The receiver
asserted that the bankruptcy court had no jurisdiction due to the reverse
preemption provisions of the McCarran‐Ferguson Act, or alternatively, due to
the permissive abstention powers under federal law. The court first held that
the McCarran‐Ferguson Act did not apply, because the bankruptcy court’s
jurisdiction does not invalidate, impair, or supersede the state insolvency law.
The court reasoned that to deny the court jurisdiction in this case on the basis of
the McCarran‐Ferguson Act would remove federal jurisdiction from every claim
involving an insolvent insurer. Moreover, the receiver agreed to submit to the
jurisdiction of the bankruptcy court in the agreement with the bankruptcy
examiner related to the disposition and sale of the subject receivership
property. After denying the receiver’s challenge to jurisdiction on the basis of
McCarran‐Ferguson, the court denied the receiver’s alternative request that the
bankruptcy court abstain from hearing the bankruptcy examiner’s petition for
adversarial proceeding. The court reasoned that the abstention was within the
sound discretion of the lower court and would not be overturned on appeal.
Alabama
In re Consolidated "Non‐Filing Ins." Fee v. Beneficial Corporation, 2001 WL
35840127 (M.D. Ala. 2001). McCarran precludes the application of a federal
statute if: (1) the [federal] statute does not “specifically relate” to the business
of insurance, (2) the acts challenged under the statute constitute the business
of insurance, (3) the state has enacted a law or laws regulating the challenged
acts, and (4) the state law would be superseded, impaired or invalidated by the
application of the federal statute. 2001 WL 35840127 at 4. The Eleventh Circuit
issued a McCarran preemption opinion after the Supreme Court's opinion in
Humana, Inc. v. Forsyth, 525 U.S. 299 (1999). 2001 WL 35840127 at 6.
The Eleventh Circuit issued a McCarran preemption opinion after the Supreme
Court's opinion in Humana, supra. 2001 WL 35840127 at 5 (citing Blackfeet Nat.
Bank v. Nelson, 171 F.3d 1237 (11th Cir.1999)), in which it applied the following
test involving an inquiry into whether: 1) the state statute was enacted for the
purpose regulating the business of insurance, and 2) whether the conduct at
issue was considered “the business of insurance.” 2001 WL 35840127 at 6.
Truth in Lending Act ("TILA") regulates credit finance disclosures and Racketeer
Influenced and Corrupt Organizations Act ("RICO") prohibits racketeering. The
TILA, RICO, and the Florida insurance statutes can, and do, coexist. Thus, the
TILA disclosure requirements and RICO do not interfere with the defendants'
ability to sell or purchase non‐filing insurance in Florida. 2001 WL 35840127 at 6.
A creditor who has not filed a UCC‐1 and, consequently, is unperfected will

almost invariably lose its ability to obtain possession of the collateral pledge to
secure the loan if the borrower files bankruptcy. 2001 WL 35840127 at 13.
Moody v. State ex rel. De Bellis, 487 So.2d 852 (Ala. 1986). The Alabama
Supreme Court held that a restraining order issued in Federal Bankruptcy court
in the bankruptcy of a creditor of an insolvent insurance company was not
effective to halt proceedings in the state receivership court with respect to an
insolvent insurance company, even though the creditor's claims would be
affected by the receivership court's proceedings. The court held that the state
court had exclusive jurisdiction over the assets of the insurance company.
Moody v. State ex rel. Payne, 295 Ala. 299, 329 So.2d 73 (1976). When the
insurance commissioner, as receiver of an insolvent company, obtained an
injunction restraining the president of the insolvent insurer and others from
filing any lawsuits or claims relating to the affairs of the insolvent insurer, the
court held that receivership court may require that any party seeking to bring
action against receiver first obtain permission of receivership court, and that
state court could restrain proceeding in federal court where action was not truly
in personam, but was an attempt to remove assets from the estate of the
insolvent insurer.
Arizona Navajo Life Ins. Co. v. Fidelity and Deposit Co. of Maryland, (D. Ariz., Nov. 9,
1992). In this case, the Arizona receiver claimed that the federal court had no
jurisdiction over the contractual dispute between the receiver and a third party.
The court concluded that the dispute was not in rem, but rather was in
personam, and that its hearing the case would not interfere with the receiver's
constructive possession of any asset. Therefore, the court concluded that it had
jurisdiction over the dispute. Nevertheless, the District Court abstained from
hearing the matter under the Burford abstention doctrine, based on Burford v.
Sun Oil Co., 319 U.S. 315 (1943). In deciding to abstain, the court determined that
its hearing the case would disrupt a complex state process dealing with
insurance company liquidations.
Colorado
In re First Assured Warranty Corp., 383 B.R. 502 (Bankr. D. Colo. 2007). The
Insurance Commissioner of the State of Hawaii seized the assets of PrimeGuard,
an insurance company licensed and domiciled in Hawaii, and thereafter found
PrimeGuard to be insolvent and placed the company in liquidation in the
liquidation court in Hawaii. The Commissioner then filed a motion in the
receivership court seeking to declare PrimeGuard a single business enterprise or
alter ego of two Colorado companies. Before a hearing could be held on the
Commissioner’s motion, the Colorado companies (“Debtors”) filed a petition for
voluntary bankruptcy in Colorado. The Commissioner filed motions to dismiss
the petition and stay the proceedings in the bankruptcy court or abstain from
deciding pending a determination by the Hawaii receivership court that
PrimeGuard and Debtors were a single business enterprise. The bankruptcy
court denied both of the Commissioner’s motions reasoning that corporate
formalities were not disregarded under Colorado law. The court held that
abstention was premature in this context, and a stay was improper. The
Debtors were not insurance companies under Colorado law and could find no
protection under the Colorado insurance receivership statutes. Moreover, the
McCarran‐Ferguson Act provides no assistance to the Commissioner, because
no Hawaii insurance laws will be impaired by the Bankruptcy Code when both
laws are applied to each entity individually. In sum, the court held that the
Commissioner did not demonstrate cause requiring dismissal or stay of the
bankruptcy petition filed by Debtors.

Connecticut
Florida
Grasso v. City of Ansonia, No. Civ 302CV455MRK, 2003 WL 22918494 (D. Conn.
Nov. 7, 2003). State courts are powerless to enjoin federal courts from
exercising the jurisdiction that Congress has conferred nor may state courts
divest federal courts of jurisdiction. The court denied the defendant insured
city’s motion to stay a federal question action (brought on the basis of alleged
violations of Constitutional rights), despite insolvency and ongoing liquidation of
the defendant’s insurer in Pennsylvania state court. The Connecticut Insurance
Guaranty Act does not divest federal courts of jurisdiction, and the court
declined to abstain.
Fla. Dep't. Fin. Serv. v. Midwest Merger Mgmt., LLC, No. 4:07cv207‐SPM/WCS,
2008 WL 3259045 (N.D. Fla. Aug. 6, 2008). Federal laws will not be applied to
interfere with state regulation of insurance unless it appears that Congress
intended to affect the business of insurance as a part of its regulation of
interstate commerce. 2008 WL 3259045 at 2 (citing Humana Inc. v. Forsyth, 525
U.S. 299, 307, 119 S. Ct. 710, 142 L. Ed. 2d 753 (1999)). Where the receivership
court does not have exclusive jurisdiction under Florida law and there is no
conflict between the federal removal statute and Florida laws regulating the
business of insurance, reverse preemption under the McCarran‐Ferguson Act is
not warranted. 2008 WL 3259045 at 4. Discussing, but declining to apply the
Younger, Burford, Pullman and Colorado‐River abstention doctrines. 2008 WL
3259045 at 5.
Florida Dep't. of Ins. v. Chase Bank of Texas Nat'l Assoc., 243 F. Supp. 2d 1293
(Fla. N.D. 2002). State court action by liquidator of insolvent insurer where claim
was filed within and as part of ongoing delinquency proceeding, claim did not
arise under federal law, and both parties were citizens of same state. This holds
true even if liquidator's claim under “revised demand notice” was separate and
independent claim. There is no basis for original federal jurisdiction over the
delinquency proceeding itself and although the claim at issue is a “separate and
independent claim” within the meaning of 28 U.S.C. § 1441(c), Congress
amended that section in 1990 to preclude removal of a separate and
independent claim unless it arises under federal law, which this claim does not.
Removal thus was improper. The delinquency proceeding itself is not a civil
action “of which the district courts of the United States have original
jurisdiction.” The proceeding does not arise under federal law, and it is not
between citizens of different states. Nor is there any other basis for federal
jurisdiction. In short, the delinquency proceeding is non‐removable. 243 F. Supp.
2d at 1294‐95.
Illinois General Railway Signal Company v. Corcoran, 748 F. Supp. 639 (N.D. Ill. 1990),
reversed in part by General Railway Signal Company v. Corcoran, 921 F.2d 700
(7th Cir. 1991). American Fidelity Fire Insurance (AFFI) was a surety on two
performance bonds given by Transit Systems Technology, Inc. in favor of a
public transit agency in California and a private bus company in New York. The
United States Small Business Association (SBA) issued Surety Bond Guarantee
Agreements in connection with these performance bonds. AFFI sued General
Railway, alleging that it had breached obligations to perform on the California
and New York contracts, causing AFFI to pay out on its bonds. AFFI was
successful in these claims in the Illinois state court. In the meantime, AFFI
became insolvent, and liquidation proceedings were initiated in New York.
Joseph Corcoran, the Superintendent of Insurance of the State of New York,
was named Liquidator. The SBA notified General Railway that it was making a
claim to the proceeds of the Illinois state judgment. General Railway filed an

interpleader action, claiming that it was subject to multiple liability on the same
funds.
The Liquidator moved to dismiss the interpleader action, arguing that
diversity jurisdiction did not exist because the Liquidator (i.e., the
Superintendent) was not a citizen of any state. The court disagreed, and
held that it could exercise diversity jurisdiction over the case. The court held
that the Superintendent was also not eligible for sovereign immunity under
the 11th amendment, as he was not a real party in interest. In making these
rulings, the court was persuaded by the body of case law holding that where
a state insurance officer is a party only because of his status as receiver or
liquidator of an insolvent insurance company, the state is not the real party
in interest. Furthermore, the court determined that abstention was not
appropriate after examining three factors: (1) the case involved federal law;
(2) the interpleader action had little effect upon the state liquidation
proceedings; and (3) no other forum could adequately protect the rights of
all parties. In addition, the law firm representing the insolvent insurer could
intervene as of right because it held an attorneys' fee lien against the
proceeds for judgment in the state court. Finally, the court held that
because the SBA paid out on a guaranty agreement upon the default of a
contractor and became subrogated to the rights of AFFI, it had become the
equitable owner of AFFI's rights against General Railway, and thus could
collect directly.
General Railway Signal Company v. Corcoran, 757 F. Supp. 911 (N.D. Ill. 1991).
In interpreting the Court of Appeals' prior decision regarding abstention, the
trial court determined that it should abstain from exercising jurisdiction over
the case, notwithstanding its own earlier, contrary decision on this topic
[General Railway Signal Company v. Corcoran, 748 F. Supp. 639 (N.D. Ill.
1990) ]. In explaining its ruling, the court pointed to the fact that the case
involved contract issues governed by state law, the fact that the case could
cause disruption of the state liquidation proceedings, and the fact that the
Seventh Circuit had indicated that it believed abstention may be warranted.
General Railway Company v. Corcoran, 807 F. Supp. 1361 (N.D. Ill. 1992).
Upon remand from the Seventh Circuit in General Railway Signal Company v.
Engeleiter, 969 F.2d 519 (7th Cir. 1992), the trial court once again considered
the issue of Burford abstention. Considering the issue de novo, the trial
court determined that Burford abstention was appropriate in the case, as
state liquidation proceedings were pending. Furthermore, the circumstances
of the case had changed since the first time the trial court had considered
the issue of abstention, because one of the claimants, General Railway, had
paid the entire amount of the state court judgment to the Liquidator, and
these assets were now part of the insolvent insurer's estate in the New York
liquidation proceedings. In light of these changed circumstances, the trial
court decided to abstain from exercising jurisdiction in deference to the New
York liquidation proceedings.
Gerling‐Konzern Globale Rueckversicherungs v. Selcke, 1993 U.S. Dist. LEXIS
15316 (N.D. Ill. Oct. 29, 1993). Reinsurers sued the Liquidator of an insolvent
insurance company seeking money allegedly due to them under reinsurance
treaties. The Liquidator brought a motion to dismiss, arguing that: (1) the
court should abstain from exercising jurisdiction due to pending liquidation
proceedings in state court, pursuant to the McCarran‐Ferguson Act and
federal abstention doctrines; (2) lack of subject matter jurisdiction; and (3)
lack of ripeness. The court held that abstention is appropriate in this

instance, because the regulation of the insurance industry is a statedominated
arena, and exercising federal jurisdiction over this case would
disrupt the state's administration of this area. The court granted the motion
to dismiss without addressing the Liquidator's last two arguments.
Mountain Funding, Inc. v. Frontier Ins. Co., 329 F.Supp.2d 994 (N.D. Ill. 2004).
In the Seventh Circuit, under Buford, courts should abstain from deciding
“difficult questions of state law bearing on policy problems of substantial
public import whose importance transcends the result in the present case”
and from action that would be “disruptive of state efforts to establish a
coherent policy with respect to a matter of substantial public concern.”
Under the latter circumstance, two elements must be present: the state
must offer a forum in which claims may be litigated and the forum “must
stand in a special relationship of technical oversight or concentrated review
to the evaluation of those claims.” Rehabilitation proceedings stand in a
special relation of concentrated review because they facilitate judicial review
of an insolvent insurer’s claims, expedite resolution of such claims, prevent
unnecessary expenditure of assets, and provide a unified procedure for all
claimants.
The Mutual Benefit Life Ins. Co. of Newark, New Jersey v. Material Sciences
Corp., No. 91 C 0262, (N.D. Ill. September 3, 1992). In order for Burford
abstention doctrine to apply, state must have complex and thorough regulatory
system, and state must offer a special forum where claims may be litigated. The
court held that New Jersey's complex regulatory scheme would be thwarted if
separate lawsuits were allowed in various federal forums, and accordingly
dismissed the claims.
O'Connor v. Ins. Co. of North America, 622 F. Supp. 611 (N.D. Ill. 1985). The court
held that the reinsurers were not restrained by the state court stay order from
asserting their setoffs since the reinsurance proceeds sought by the state
liquidator in the federal court action were not in possession of the liquidator.
QBE Int’l Ins. Ltd. v. Shapo, No. 01 C 0508, 2002 WL 276233 (N.D. Ill Feb. 27,
2002). After Director of Insurance obtained order of liquidation against
workers’ compensation trust, Director then brought a separate suit against its
trustees for breach of fiduciary duties. Subsequently, trust’s directors and
officers’ liability insurer sought rescission under 215 Ill. Comp. Stat. 5/154. Court
held that Buford abstention was not appropriate where dispute was properly
framed as a contract action between insurer and insured rather than a claim
against an insolvent insurance entity. The court reasoned that any rescission
ordered by it would not affected the state liquidation proceedings because
insurer was not seeking monetary relief or prioritization of a claim.
Nevertheless, the court stayed case in absence of abstention to resolve pending
issues because the “underlying genesis of [the] case is [a] liquidation
proceeding” that does not affect the immediate case.
Rewerts v. Reliance Ins. Co., 170 F.Supp.2d 847 (C.D. Ill. 2001). After obtaining
judgment against insured, judgment creditor sought declaratory judgment that
insured’s automobile liability insurer, which was in rehabilitation under state
court order, was required to indemnify insured. Under Buford doctrine, court
found that three of the four factors in Hartford Cas. Ins. Co. v. Borg‐Warner
Corp., 913 F.2d 419 (7th Cir. 1990) militated in favor of abstention. Under
Hartford, abstention is warranted where the cause of action is not exclusively
federal, the suit involves determinations relevant to state insurance policy, and
state procedures indicate a desire to create special state forums. To the extent

that the state law at issue is neither difficult nor unusual, the first three factors
outweigh this Hartford factor against abstention.
Schacht v. Cadillac Ins. Co., No. 91 C 1188, (N.D. Ill. August 20, 1991). The court
held that Burford abstention was not warranted because the maintenance of
the federal court action would not unduly interfere with the liquidation
proceedings in Michigan. In the federal court case, the Illinois Director of
Insurance, as liquidator in a related Illinois insolvency proceeding, sought to
recover funds allegedly illegally transferred to another insurer who was now
subject to insolvency proceedings in Michigan. The court noted that one of the
principle reasons for applying federal court abstention to claims related to state
insurance insolvency proceedings, to prevent creditors from jumping ahead of
the state's preference scheme for distribution of the estate, was not applicable
to this case.
Selcke v. Medcare HMO, No. 92 C 5704 (N.D. Ill. Dec. 1, 1992). Illinois Director of
Insurance appealed bankruptcy court's refusal to dismiss HMO's bankruptcy
petition. The district court reversed the bankruptcy court and dismissed the
HMO's bankruptcy petition, holding that an HMO is a "domestic insurance
company" for purposes of Section 109(b) of the Bankruptcy Code. The court
rejected the Director's first argument that the bankruptcy court lacked
jurisdiction over HMOs on the ground that Congress in fact intended to exclude
HMOs from federal bankruptcy scheme. However, the court agreed with the
Director that, under Illinois law, an HMO is a domestic insurance company for
purposes of insolvency, and, therefore, an excluded entity under Section 109(b)
of the Bankruptcy Code. In addition, the Court also agreed with the Director
that the HMO was an excluded entity because it is the substantial equivalent of
a domestic insurance company. The HMO's subsequent motion for a stay of the
district court's order pending appeal was denied. See Order, No. 92 C 5704
(N.D. Ill. Dec. 8, 1992).
Tribune Co. v. Swiss Reinsurance Am. Corp., No. 02 C 4772, 2005 WL 692859
(N.D. Ill. Mar. 21, 2005). Under Buford, court held abstention proper where
company filed breach of action against allegedly nominal reinsurer after insurer
entered liquidation because a determination that the agreement between
insurer and reinsurer was not a reinsurance contract would remove the assets
of the agreement from the insurer’s asset pool. The court reasoned that
decreasing the assets available for distribution to insurer’s creditors would be
no less intrusive on the liquidation process than entering a judgment against the
insurer.
Indiana
Kansas
Holz v. H.C. Baldwin Agency, Inc., 140 F. Supp. 860 (S.D. Ind. 1956). The New
York liquidator of an insolvent insurer brought an action against an Indiana
agent of the insurer to recover premiums. The agent raised three distinct
grounds for set‐offs against the premiums due to the liquidator: commissions,
bonuses, and claims expenses. The New York liquidator's effort to have these
issues dismissed on the basis that Indiana should defer to the liquidation
proceeding pending in New York was rejected by the federal court because it
had jurisdiction to resolve the claims between the parties and, in fact, was
compelled to do so because the liquidator has submitted to the jurisdiction of
the court and the rights of the agent under New York law to file a claim were
lost because the last date for filing claims had past.
Hartung v. Sebelius, 40 F. Supp. 2d 1257 (D. Kan. 1999). Applying the abstention
and comity principles of the McCarran‐Ferguson Act and the Burford doctrine,
the court dismissed a case in which rehabilitators of an Idaho insurance

company filed a motion for declaratory judgment in federal court against
liquidators of a Kansas insurance company. Because the Kansas insurance
company entered into liquidation proceedings in state court, the court decided
dismissal was appropriate where the issues would likely be resolved during the
state liquidation proceedings, and where disposition of the claims by a federal
court would usurp state control over liquidation proceedings.
Sebelius v. Universe Life Ins. Co., No. 98‐4114‐RDR, 1999 U.S. Dist. LEXIS 2284 (D.
Kan. Feb. 9, 1999). Applying the principles of abstention under the McCarran‐
Ferguson Act and the Burford doctrine, the court remanded to state court a
case in which an insurance commissioner and a deputy rehabilitator brought an
action in their capacities as rehabilitators for an insolvent insurer. The insolvent
insurer sought to avoid, as alleged preferences, certain transfers of assets to a
now insolvent insurance company. The case originally was removed to federal
court based on federal question jurisdiction and diversity of citizenship, but
upon motion to remand, was sent back to state court to avoid usurping control
from the state where liquidation proceedings were pending.
Universe Life Ins. Co. v. Centennial Life Ins. Co., 35 F. Supp. 2d 1297 (D. Kan.
1999). Finding that exercise of federal jurisdiction would be disruptive to state
liquidation proceedings of an insolvent insurer, the court found that abstention
under Burford principles was proper. The court found, however, that a stay of
proceedings rather than a dismissal was appropriate for a garnishment action
brought before the federal court as this would retain plaintiff’s right to litigate
its claim in the federal forum should the state court fail to adjudicate the claim.
This would ensure plaintiff’s claim would not become time‐barred should
jurisdiction be lacking in the state court.
Kentucky
Louisiana
Nichols v. Vesta Fire Ins. Corp., 56 F. Supp. 2d 778 (E.D. Ky. 1999). The federal
district court denied the Commissioner’s motion to remand to state court and
granted the defendant’s motion to compel arbitration. The Commissioner, who
was the liquidator of an insolvent insurer, sued the defendant for monetary
damages for breach of contract. Thus, the action was not a “delinquency
proceeding” as referred to in Kentucky Revised Statutes § 304.33‐10(6), and the
state court therefore did not have exclusive jurisdiction under §§ 304.33‐
040(3)(a) or 304‐33.190(2). Rather, the action was the type described in §
304.33‐240, a statute that would have allowed the liquidator to bring the action
in the federal district court in the first place.
Avery v. Schmidt, 1995 WL 562302 (E.D. La.). In a civil RICO action filed by
creditors of Physicians National Risk Retention Group, a medical malpractice
insurer, against the Commissioner as Liquidator of PNRRG and certain
individuals alleged to have defrauded the creditors. The Defendants filed
motions to dismiss under FRCP Rule 12(b) 6 asserting the applicability of
McCarran‐ Ferguson and Burford abstention. The Court determined that
while RICO does not specifically relate to the business of insurance, the
application of RICO would “invalidate, impair or supersede” those state laws
enacted to regulate the business of insurance in the State of Louisiana.
Furthermore, the Court determined that Burford Abstention is also
appropriate. As such, the Court granted the motions to dismiss without
prejudice so that the action could be refiled in state court.
Champion Shipyards, Inc. v. Bayly, Martin & Fay of Louisiana, (unpublished,
available on WESTLAW, DCT Library), 1987 W.L. 13896 (E.D. La. 1987). The
federal district court abstained from exercising jurisdiction over this third‐party
claim because it found that the policy of centralizing claims against an insolvent

insurer in one forum was entitled to recognition and supported abstention
under the Burford doctrine.
Munich American Reinsurance Company; NAC Reinsurance Corporation v.
John P. Crawford, as Receiver of Employers National Insurance Corporation,
(5 th Cir. 6/2/98) 141 Fed. 3 rd 585; 1998 U.S. App. LEXIS 11366 The Fifth Circuit
affirmed a district court finding that the Federal Arbitration Act was reverse
pre‐empted by Oklahoma law under the McCarran Ferguson Act and the
dismissal of the petition to compel arbitration. The case arose out of a
dispute over salvage proceeds obtained subsequent to the payment of a loss
arising under a reinsurance agreement between Employers National
Insurance Corporation (ENIC) and Munich American Reinsurance Company
(“Munich”) and NAC Reinsurance Corporation (“NAC”). Prior to the
recovery of the salvage proceeds, ENIC was placed into liquidation.
Pursuant to the liquidation order, ENIC’s attorneys remitted the proceeds to
the Liquidator. Munich and NAC disputed the Liquidator’s claim to the funds
and sought to compel arbitration by filing a petition in federal district court.
Crawford responded by filing a motion in state court to enjoin the arbitration
pursuant to the injunction in the state court Liquidation Order. When the
state court determined that Munich and NAC’s petition violated the
Liquidation Order, the federal district court dismissed the arbitration
proceeding, asserting Burford abstention.
Maine
Envision Realty, LLC v. Henderson, 2002 U.S. Dist. LEXIS 9087 (D. Me. 2002). The
Court refused to abstain under Burford in a civil rights case after plaintiffs
sought to stay the federal proceeding due to their insurer’s rehabilitation
proceeding. The plaintiff contented that they would not know the extent of the
coverage available to them, but the Court found that pursing the case would
not “undercut the purposes of the rehabilitation proceeding.”
Massachusetts Doughty v. Underwriters at Lloyds, London, CA No. 92‐10941‐T (D. Mass. Jan. 27,
1993) (reprinted in Mealey's Insur. Insolv. Lit. Rep. (Feb. 17, 1993), at B‐1). The
Commissioner of Insurance, acting as receiver of an insolvent insurer,
commenced an action in state court against various reinsurers to recover
proceeds due under several reinsurance contracts. The defendants removed
the case to federal court under 9 U.S.C. § 205, claiming that the litigation related
to an arbitration agreement covered under the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards. The district court remanded,
holding that Burford abstention was warranted for two reasons. First, the
federal court action would interfere with the joint efforts of state officers and
state courts to devise and operate the complex administrative and judicial
insurer liquidation process created under state law. Second, continued federal
litigation would create the risk of inconsistent federal and state court
interpretation of the policy terms.
New Jersey
Chandler v. Omnicare/HMO, Inc., 756 F. Supp. 187 (D.N.J. 1990). The New Jersey
District Court dismissed (1) an action brought by a terminated employee against
the former employer's insolvent health insurer (Omnicare/The HMO, Inc.) for
continuation of health insurance coverage and damages; and (2) a cross‐claim
by the former employer against the insurer in rehabilitation on Burford
abstention grounds. The court found that New Jersey has a complex and
thorough regulatory scheme to rehabilitate insolvent insurers which can best be
accomplished without interference from outside courts that would
simultaneously dissipate the insolvent insurer's assets.

Commissioner of Ins. v. Mid‐American Gen. Agency, No. 91‐1380, 1991 U.S. Dist.
LEXIS 15214 (D.N.J. Oct. 21, 1991). New Jersey State Commissioner of Insurance,
as Liquidator of Integrity Insurance Company, brought a contract action against
general agent of insolvent insurer and general agent's guarantor of
performance. After the defendants successfully removed the action to federal
district court, the Commissioner filed a motion to remand the action to state
superior court under the Burford abstention doctrine. The federal district court
granted the motion, reasoning that: 1) a complex regulatory scheme to regulate
a matter of substantial public concern was involved; 2) a coherent policy was an
important goal of the regulatory scheme; 3) the exercise of federal jurisdiction
would serve to improperly disrupt New Jersey's regulatory scheme and destroy
uniformity; 4) the action at bar involved only state contract law; 5) the
regulatory scheme was designed to protect the party who brought the action;
and 6) the state superior court had jurisdiction to hear the state contract action.
G‐I Holdings v. Reliance Ins. Co., 2006 WL 3825142 (D.N.J. 2006). Defendant,
New York Property‐Casualty Insurance Security Fund (“Fund”) brought a
motion to dismiss plaintiff’s claim that it was statutorily obligated to make
payments on plaintiff’s covered claims due to the plaintiff’s primary insurer’s
bankruptcy. The Fund argued that under Burford v. Sun Oil Co., 319 U.S. 315
(1943) the federal court must abstain from disrupting the statutorily established
administrative scheme. The issue was “whether the insolvency of an insurance
company and the resulting liquidation proceedings [were] a matter of
substantial public concern,” which would trigger the abstention. G‐I, 2006 WL
3825142 at *7. The court held that it was well recognized in the Third Circuit that
the Burford abstention is often applied to cases involving state regulation of
insurance. Further, the regulation of insolvent insurance companies is the type
of strong state interest for which a Burford abstention is proper. Lastly, the
court noted the Third Circuit has not found a Burford abstention only
appropriate when the insolvent insurer is a party to the action.
New York American Centennial Ins. Co. v. Armco, Inc., 746 F. Supp. 350 (S.D.N.Y. 1990).
Defendant Armco owned American Druggists Insurance Co. ("ADI") which was
adjudged insolvent by Ohio in 1986. ADI owed its share of outstanding losses to
American Centennial on various reinsurance treaties. American Centennial
brought a declaratory judgment action against Armco on the grounds that
Armco's acts rendered ADI its alter ego. Although rejecting the argument that
alter ego claims are the exclusive property of a liquidator, the Court, in recognition
of both Ohio's comprehensive regulatory scheme for rehabilitation and
liquidation of insurers and the fact that the issues sought to be adjudicated
were largely matters of state of law, abstained pursuant to Burford v. Sun Oil
Co., 319 U.S. 315 (1943).
Callon Petroleum Co. v. Superintendent of Ins., 863 N.Y.S.2d 92 (App. Div. 2008).
Federal courts typically exercise Burford abstention in cases involving state
rehabilitation proceedings. The federal court found that abstention was
inappropriate in this case due to the dilatory, cavalier conduct of the
rehabilitator of an insolvent surety who ignored a valid claim for payment under
a performance bond.
Cam Xuan Tran v. Antoine Aviation Co., Inc., No. 85 Civ. 102, slip op. (S.D.N.Y.
1985). In a diversity action brought by plaintiff in federal district court for
damages arising out of an automobile accident, defendants' motion for a stay of
the pretrial order date on the ground that the defendant's insurer was in a
liquidation proceeding in a New York state court was granted. While state

courts have no power to stay a federal court's exercise of its own power, the
court decided to observe the New York court's stay as a matter of comity.
Violating the stay, it reasoned, might deprive defendants of their bargained for
protection granted under their now cancelled policy. A delay of the trial would
permit the New York court to determine whether New York's insurance fund
would assume the bankrupt insurer's responsibility to defend the defendants.
Corcoran v. Universal Reins. Corp., 713 F. Supp. 77 (S.D.N.Y. 1989). The
Liquidator of Dominion Insurance Company brought suit in New York Supreme
Court against Universal Re to recover balances owed Dominion under a Quota
Share Agreement. Universal Re claimed set‐offs, disclaimed liability and
removed to Federal Court on grounds of diversity. The Superintendent moved
to remand. Rejecting Universal Re's claims that Burford abstention is
appropriate only when state law is unclear or novel, the district court abstained,
finding that New York had an interest in unified liquidation proceedings and that
abstention was consistent with the McCarran‐Ferguson Act.
Crist v. J. Henry Schroder Bank & Trust Co., 696 F. Supp. 981 (S.D. N.Y. 1988).
The court decided to abstain from further entertaining an offset claim against
the Missouri receiver for an insolvent insurer because to exercise jurisdiction
over the claim would "interfere with a specialized, unified system of
adjudication in the state courts that is designed to avoid inconsistent
adjudication of claims arising from a complex state regulatory scheme, where
the subject of that regulatory scheme is one of special state interest, and where
the issues to be litigated in federal court primarily involve state law."
Curiale v. Amberco Brokers, Ltd., 766 F. Supp. 171 (S.D.N.Y. 1991). The Liquidator
of Union Indemnity Insurance Company brought an action in federal court
against defendants, a reinsurer and intermediary, for amounts due under a
reinsurance agreement. The defendants argued that the District Court should
abstain from the case in deference to the state liquidation proceeding. The
District Court found that because the Liquidator opposed abstention and the
federal case only involved claims that would enhance, rather than deplete, the
insolvent company's assets, abstention was not required under Burford.
Similarly, the Court found that Colorado River abstention was not required. The
Court noted in particular that the issue in dispute in the federal action was not
present in the state action, no res was involved, and there was no argument
that the federal forum was inconvenient.
Dale v. Banque SCS Alliance S.A., No. 02CIV.3592 (RCC) (KNF), 2005 WL 2347853
(S.D.N.Y. Sept. 22, 2005). In a RICO action brought by the receivers of seven
insurance companies against the defendant Swiss corporation bank and its
officer, a Belgian citizen, the federal district court ruled that it had personal
jurisdiction over the bank which maintained several correspondent bank
accounts in New York.
Farrell v. Stoddard, 1 F.2d 802 (N.D. N.Y. 1924). The insurance commissioner, as
the liquidator of insurance companies, acts as an officer of the executive
department. Despite the fact that the commissioner is required to obtain an
order of court to take over the property of a company, the commissioner's
possession is under the statute and not the possession of the court. Thus, in a
suit to recover a fund alleged to be held by the commissioner in trust, federal
court had no jurisdiction.
The Greyhound, 4 F. Supp. 184 (E.D.N.Y. 1933), affirmed, 687 F. 832. A vessel
was seized for violation of federal laws and released on bond. The federal

district court had exclusive jurisdiction where the claimant failed to give new
security after notice, even though the surety was in the hands of the state
insurance liquidator.
In re Agway, Inc., 357 B.R. 195 (Bankr. N.D.N.Y. 2006). The bankruptcy court
denied the liquidator’s motion for a determination that the court lacked
jurisdiction or should abstain. By filing a proof of claim in a debtor’s Chapter 11
case, the insurance company in liquidation submitted itself to the bankruptcy
court’s core jurisdiction, and the bankruptcy court could adjudicate the trustee’s
motion to expunge the insurance company’s claim. Also, the court did not
abstain from hearing the motion to expunge, and the “first assuming
jurisdiction” doctrine did not prevent the court from hearing and deciding an
objection to the insurance company’s proof of claim, even though the
liquidation was pending in another court.
In re Concord Casualty & Surety Co., 171 Misc. 893, 14 N.Y.S.2d 94 (1939). The
New York Supreme Court had jurisdiction to determine whether the taxes were
due to the United States for employees employed by the State Liquidation
Bureau in the liquidation proceeding as opposed to the federal courts having
sole jurisdiction.
In re National Surety Co., 7 F. Supp. 959 (D.C.N.Y. 1934). An insurance company
is no longer in possession of or has title to its property upon the filing an order
of liquidation. Such an order gives notice similar to the filing and recording of a
deed or bill of sale or other evidence of title and, therefore, under the Federal
Bankruptcy Act, a court could not exercise jurisdiction over the company for the
purpose of reorganization.
In re New York Title & Mortgage Co., 171 Misc. 207, 12 N.Y.S.2d 977 (1939),
affirmed, 257 A.D. 926, 12 N.Y.S.2d 1022, reargument denied, 257 A.D. 948, 14
N.Y.S.2d 146. Subsidiaries of a mortgage guaranty company in liquidation in
state court were not "insurance corporations" under state court jurisdiction.
Their business was the taking of title to and operating properties foreclosed by
the guaranty company. Thus, the federal court had exclusive jurisdiction to
determine the fairness of plans for the termination of federal receivership of
those subsidiaries.
In re Reliance Group Holdings Inc. Sec. Litig., No. 00‐CV‐4653 (TPG), 2004 WL
943545 (S.D.N.Y. Apr. 30, 2004). The federal district court declined to abstain,
and rejected the liquidator’s argument that the federal court should not
exercise jurisdiction over matters involving the insolvent insurer’s policy
proceeds although the liquidator had filed an emergency petition in federal
court in Pennsylvania. The federal court in Pennsylvania had not yet ruled or
asserted in rem or quasi in rem jurisdiction, the “first filed” rule was inapplicable
because the action had been filed before the liquidator’s emergency petition,
and it would be manifestly unjust to deny the plaintiff’s motion to enforce an
agreement with the insolvent insurer.
Levin v. Tiber Holding Co., No. 98 CIV. 8643 (SHS), 1999 WL 649002 (S.D.N.Y.
Aug. 25, 1999). The court had subject matter jurisdiction, and denied the
liquidator’s motion for remand to state court. The liquidator originally filed a
state court action against an insurer and its owners and obtained a consent
order prohibiting transfer or conversion of the insurer’s assets. Subsequently,
the liquidator commenced a special proceeding in state court, alleging improper
transfers and contempt and seeking a fine against the insurer’s owners. The
defendants removed the special proceeding to federal court, where the court

held that the special proceeding was separate and independent from the
original state action, thus federal subject matter jurisdiction could be asserted,
and remand to state court was denied.
Mathias v. Lennon, 474 F. Supp. 949 (S.D. N.Y. 1979). The powerful interest of
the state in regulating the insurance industry dictates that the federal court
should abstain from interfering with the rehabilitation process. The Court
refused to decide whether New York's cancellation of Illinois policies in a New
York rehabilitation proceeding violated either New York and Illinois law or
constitutional guarantees. Plaintiff's claims must be raised in state court.
Matter of Bean v. Stoddard, 238 N.Y. 618, 144 N.E. 916, (1924). Even though the
receivership court had enjoined all persons from commencing actions against an
insurance company in liquidation and from meddling with the insurance
commissioner in such actions, this court nevertheless had jurisdiction to grant
leave to an applicant to bring suit against the insurance commissioner in federal
courts to impress certain funds with a trust in favor of the applicant. In this
case, the commissioner had taken possession of the assets of an insolvent life
insurance company, and the applicant (the receiver of a foreign bank) had
attempted to recover the value of the securities which were allegedly converted
pursuant to a fraudulent scheme by the life insurance company.
Moscow Fire Ins. Co. of Moscow, Russia v. Bank of New York & Trust Co., 161
Misc. 903, 294 N.Y.S. 648 (1937). The situs of assets of a dissolved Russian
insurance company was New York, where the assets were held in a depository
in the state with either trust companies or with a bank by court order.
Therefore, the New York state courts had jurisdiction and dominion over the
funds deposited with the insurance commissioner by the Russian insurance
company, which were assets also claimed by the United States as an assignee of
amounts due from the Soviet government to American nationals which were
confiscated by the Soviet government. The United States was required to
follow the municipal law regarding physical control over the assets because
ownership depended on the law of the place where the securities were located.
Ohio Reins. Corp. v. Pacific Reins. Management Corp., No. 85 Civ. 1412, 1990 U.S.
Dist. LEXIS 15169 (S.D.N.Y. November 13, 1990). Plaintiff reinsurers sought
reconsideration of a federal district court order dismissing plaintiffs' action for
fraud against the defendant on Burford abstention grounds. The district court
held that abstention was appropriate because (1) the state proceeding was a
more appropriate forum to consider the state claims at issue, (2) the court's
ruling would have a broad impact on the state's reinsurance policies, (3) the
state had a strong interest in regulating the insurance industry, and (4) the
state's procedure was adequate to handle the claims at issue.
Pan Atlantic Group, Inc. v. Quantum Chem. Co., No. 90 Civ. 5155 (JSM), 1990 U.S.
Dist. LEXIS 15175 (S.D.N.Y. November 8, 1990). Plaintiff reinsurers moved in a
New York federal district court to enjoin the Liquidator from moving in
Kentucky state court for a stay of the New York action. The New York Court
denied the motion on grounds that the plaintiffs did not have a reasonable
probability of success on the merits on the question of personal jurisdiction over
the Liquidator. The Liquidator's contacts with New York consisted primarily of
his prosecution of a separate action in New York and his attendance at a
settlement conference on a related matter in New York. On this basis, the Court
found that the Liquidator's actions did not constitute "doing business" or
"transacting business" in New York.

SEC v. Republic National Life Ins. Co., 378 F. Supp. 430 (S.D. N.Y. 1974). The
court denied the Securities Exchange Commission's request for a federal
receiver because the insurer was under a state insurance regulator's
supervision, and the appointment of a federal receiver may invalidate or
supersede state insurance regulation, rather than supplement it.
Slotkin v. Brookdale Hospital Center, 357 F. Supp. 705 (S.D. N.Y. 1977). The court
held that a state court injunction in a liquidation proceeding does not prevent
plaintiffs from bringing an action in federal court for fraud against the insolvent
insurer. While it is true that the court to first obtain jurisdiction in rem has
exclusive jurisdiction, two actions may proceed simultaneously where one is in
rem and the other is in personam.
U.S. v. Brown, 3 F. Supp. 608 (D.C.N.Y. 1933). Even though the insurance code
permits an order preventing all persons from commencing an action against an
insolvent company or the insurance commissioner as liquidator of such
company, a federal court was held that it was not to be deprived of jurisdiction
in an action on a bond issued by the company, at least to the extent of recovery
of the judgment.
Walton Ins. Co. v. Chase Manhattan Bank, 90 Civ. 4798, 1990 U.S. Dist. LEXIS
10490 (S.D.N.Y. August 13, 1990). Plaintiff reinsurers sought to preliminarily
enjoin defendant, insolvent insurance companies from drawing down letters of
credit that the plaintiffs had issued pursuant to reinsurance agreements on the
ground that the money being drawn down covered debts that were currently at
issue in state court litigation. The District Court deferred to the liquidation
proceeding and denied the preliminary injunction on the grounds of Burford
abstention. The Court found that because the money being drawn from the
letters of credit would be kept in a sequestered account, the plaintiffs' interests
would be sufficiently protected. The Court stated that the only harm that the
plaintiffs could show was either speculative or monetary, both of which were
insufficient to meet the standard of "irreparable harm" needed to obtain a
preliminary injunction.
North Carolina
North Carolina Life and Accident and Health Insurance Guaranty Association
v. Alcatel, 876 F. Supp. 748 (E.D.N.C. 1995). State insurance guarantee
association sought a declaration of its liability on certain coverage issues
currently pending before the state department of insurance, and
subrogation of certain claims made pursuant to the Employee Retirement
Income Security Act (“ERISA”). The court held that a Burford abstention
applied to bar the claim for declaratory judgment because (1) the state
insurance guarantee association’s complaint raised complex, substantial and
serious issues concerning the state Insurance Guaranty Act, which had yet to
be decided by a state court and (2) issues of the instant matter were
important and could have significant public policy implications for state
insurance law and therefore would interfere with the Commissioner’s ability
to establish coherent policy as to Guaranty Act coverage for Guaranteed
Investment Contracts. Similarly, recognizing that a Brillhart abstention was
appropriate, the court refused to issue a declaratory judgment because a
parallel state proceeding involving the same parties was addressing the
same unsettled issue of state law presented in the Federal action at bar.
Furthermore, the court found that a Colorado River abstention was required
to bar the claim for declaratory judgment. The court noted in particular that
the proceedings before the state department of insurance and this court
involved substantially the same parties and issues and the application of the

Colorado River abstention would avoid duplicity and possible inconsistent
results and more effectively resolve the present matter. In addition, the
court refused to exercise supplemental jurisdiction over the state guaranty
association’s declaratory judgment claim because (1) the claim was based on
state law issues and was contingent on the federal ERISA claims; (2) the
claims involved matters that had yet to be decided by a North Carolina court;
and (3) the claims were totally dependent on the coverage claims.
The court dismissed the subrogation claims reasoning that because the state
insurance guaranty association had not paid any benefits, it had not suffered
any “injury in fact” and, therefore, did not have standing to bring the action.
Furthermore, the court found that the state guaranty association was
merely a potential subrogee and therefore did not have standing to bring its
breach of fiduciary duty claim because only the Secretary of Labor or a plan
participant, beneficiary or fiduciary may bring a civil action in the federal
courts for breach of fiduciary duty under ERISA.
Universal Marine Ins. Co., Ltd. v. Beacon Ins. Co., 592 F. Supp. 948 (W.D.N.C.
1984), appeal pending, Fourth Circuit No. St‐C‐83‐328. Where dispute arose
between insurers over which was entitled to letters of credit, and several of the
insurers went into rehabilitation, the federal court would not stay the
proceedings or abstain, since the federal litigation had substantially progressed
prior to the institution of the rehabilitation proceeding, and the litigation did not
interfere with the custody or control of the assets of the insolvent insurer. Any
party succeeding in the case would then present judgment to the state
rehabilitator for payment.
Ohio
Benjamin v. Credit Gen. Ins. Co., 2005 Ohio 1450 (Ohio Ct. App. 2005). The State
Superintendent of Insurance filed an action to recover monies owed the
liquidation estate. In response to the filing of the state action, the reinsurer
sought removal of the liquidation proceedings to federal court. The state
appellate court concluded that the actions taken in federal court violated the
legislature’s grant of exclusive jurisdiction to the Franklin County Court of
Common Pleas over insurance liquidation proceedings.
Benjamin v. Ernst & Young, LLP, 2007 Ohio 4176 (Ohio Ct. App. 2007). The State
Superintendent of Insurance filed an action in the state liquidation court against
an accounting firm and its attorneys who were alleged to have negligently
audited the insurance company’s financial statements. Subsequently, the
accounting firm’s attorneys filed a third‐party complaint against the Ohio
Department of Insurance seeking money damages. The third‐party complaint
was removed to the Ohio Court of Claims, whereupon it was dismissed on the
ground that the state liquidation court had exclusive jurisdiction. On appeal, it
was determined that the state liquidation court’s exclusive jurisdiction extends
only to delinquency proceedings and related actions commenced by the State
Superintendent of Insurance. Because the third‐party complaint did not fall
within these categories, the Ohio Court of Claims erred in dismissing it.
Covington v. Sun Life of Canada Holdings, Inc., 2000 U.S. Dist. LEXIS 20902 (S.D.
Ohio 2000). The liquidator of an insolvent insurance company sought to recover
monies used by the insurance company’s executives, while insolvent, to
purchase annuities and life insurance policies. Defendants removed the case to
federal court based upon diversity jurisdiction. The liquidator filed a motion to
remand, which was granted based upon the McCarran‐Ferguson Act (allowing
reverse preemption in certain situations). The court held that the Ohio

legislature granted exclusive jurisdiction to state court over insurance
liquidation proceedings.
Fabe v. Aneco Reinsurance Underwriters Limited, 784 F. Supp. 448 (S.D. Ohio
1991). State Superintendent of Insurance, acting in its capacity as liquidator of
an insurance company brought an action in state court against reinsurance
companies. After the Supreme Court of Bermuda placed one of the reinsurance
companies in liquidation and appointed liquidators, those liquidators sought
removal of the state court action to federal court based on their status as
agents of a foreign state. The State Superintendent of Insurance filed motion to
remand the action to the state court. The district court held that the Bermuda
liquidators were entitled to seek removal as agents of a foreign state; a forum
selection clause and a reinsurance agreement could not operate as waiver of
the Bermuda liquidators' right to remove the action; any other reinsurance
company did not have to join in the removal; and abstention from jurisdiction by
the federal court was not warranted.
Hudson v. Supreme Enter., Inc., 2007 U.S. Dist. LEXIS 58280 (S.D. Ohio 2007).
The State Superintendent of Insurance, acting as liquidator of an insurance
company, sought to recover unpaid deductibles. The defendant‐insureds
removed the case to federal court, whereupon the liquidator filed a motion to
remand. The motion to remand was granted based on the McCarran‐Ferguson
Act (allowing reverse preemption in certain situations), and the Ohio
legislature’s grant of exclusive jurisdiction to the Franklin County Court of
Common Pleas over insurance liquidation proceedings.
Oklahoma Okla. ex rel. Holland v. Employers Reinsurance Corp., No. CIV‐06‐0426‐HE, 2006
U.S. Dist. LEXIS 61680 (W.D. Okla. Aug. 29, 2006). The federal court denied the
motion of the receiver of an insolvent insurer to remand proceedings to a state
court. The court found that Burford abstention did not apply in this case
because difficult or complex issues of state law were not present. Having a
financial affect on the assets of an insurance company in liquidation
proceedings is not enough to implicate Burford. Because issues were not “so
intertwined with issues of agency authority or state regulatory policy that their
federal‐court resolution would imperil a complex regulatory scheme,”
abstention was not exercised.
Pennsylvania
AIMS Enterprises, Inc. v. Muir, 609 F. Supp. 257 (M.D. Pa. 1985). In a dispute
brought by the insurance commissioner of Delaware, domicile state of an
insolvent insurance company, against the insurance commissioner of
Pennsylvania over ownership of a reserve fund which had belonged to the
company, a federal district court exercised its discretion to abstain. The court
held that to proceed would intrude into Pennsylvania's regulatory process.
Moreover, plaintiffs had an opportunity to be heard in state court before the
commissioner could dispose of the fund.
Brainard v. Foster, Civil Action No. 91‐5308‐5318, 1992 U.S. Dist. LEXIS 3196 (E.D.
Pa. 1992). The Pennsylvania District Court's Memorandum and Order dismissed
without prejudice a suit brought by agents of an unlicensed insurance company,
American Independent Business Alliance Group ("AIBA"), in liquidation to enjoin
the Commonwealth's Insurance Commissioner and the Department of
Insurance from issuing a letter to other agents that threatened revocation of
the agent's license, the return of any commissions earned on the placement of
policies on AIBA's behalf and damages.

Plaintiffs constitute approximately 2,600 licensed agents who had received the
demand letter. Under Pennsylvania law, agents are personally liable for such
unlicensed insurance sales which are considered "unlawful" regardless of
whether they are received inadvertently. The court dismissed the action and
allowed the issuance of the letter because it entitled agents to due process prior
to license revocation and retrieval by the Commissioner.
Foster v. Berwind Corp. Civil Action No. 90‐0857, 1991 U.S. Dist LEXIS 1988 (E.D.
Pa. 2/13/91). Pennsylvania District Court applied Pennsylvania choice of law rules
and Pennsylvania law to govern an action brought by the Pennsylvania
Commissioner of Insurance to pierce the corporate veil of a defunct Bermuda
subsidiary (Norad) and hold the defendant liable for reinsurance loss claims of
the insolvent Mutual Fire, Marine & Inland Island Co. The court held that
Pennsylvania's interest in investigating the claims of its domiciliaries against its
own corporations outweighed Bermuda's interest in regulating its reinsurance
industry where the subsidiary is "exempt" because it "does not do business".
In re Grouphealth Partnership, Inc., 137 B.R. 593 (E.D. Pa. 1992), appeal granted,
1992 U.S. Dist. LEXIS 5277 (E.D. Pa. Apr. 14, 1992). Creditor filed motion to
dismiss debtor health maintenance organization's voluntary Chapter ll
bankruptcy petition. The bankruptcy court, on the recommendation of the
Pennsylvania Insurance Department, denied the motion and accepted
jurisdiction. The department reasoned that because the debtor's parent, an
entity not under the department's regulatory jurisdiction, had also filed a
voluntary Chapter ll petition with the bankruptcy court and because the debtor
had no subscribers at the time the bankruptcy proceeding was initiated, the
bankruptcy court should retain jurisdiction over the matter.
In re Reliance Group Holdings, Inc., 273 B.R. 374 (Bankr. E.D. Pa. 2002). The
Pennsylvania Insurance Commissioner (“Commissioner”) served as the
liquidator for an insurer. The Commissioner brought an action in state court for
a declaration that the insurance company’s assets included certain insurance
policies and sought to enjoin the debtor from consummating any settlements of
class actions that involved those policies. The proceedings were removed to
federal court based on Debtor’s Chapter 11 filing. In deciding a motion to
remand or to transfer venue, the court held the actions did not come within the
exception to the bankruptcy removal statute because the actions were not
enforcing “police or regulatory power” by a “governmental unit.” It used the
Halper test to determine that the mandatory abstention rule did not apply to
the “core proceedings” which arose under Title 11. Further, the court
determined that because most of the mandatory abstention factors were met it
was appropriate for the court to consider 28 U.S.C. §1334(c)(1)’s discretionary
abstention for the trust action. Since the issues in the trust action involved an
undeveloped area of Pennsylvania law that greatly impacted the State’s
insurance regulation the court determined the trust action should be remanded
for the state court to decide. It also determined it would hear the declaratory
action and the proceedings that were removed would be transferred to the
judicial district in which the debtor’s bankruptcy case was pending.
Koken v. Cologne Reinsurance (Bardados), Ltd., 34 F. Supp.2d 240 (M.D. Pa.
1999). The Pennsylvania Insurance Commissioner, as statutory liquidator of an
insolvent insurer, commenced an action in the Commonwealth Court against an
alien reinsurer, seeking damages and declaratory relief arising from a coinsurance
agreement. The reinsurer removed the case, based on federal
question and diversity jurisdiction, and the liquidator filed a motion to remand.
The reinsurer thereafter filed a motion to stay the action and compel arbitration.

Rejecting the liquidator's motion, the Court found that Burford abstention was
not warranted, except for the liquidator's claim for disbursement of funds in the
trust account set up pursuant to the co‐insurance agreement. The Court further
held that the reinsurer was not entitled to rescission as an affirmative defense,
but as a defensive measure, could present fraudulent circumstances that
allegedly justified rescission. Finally, the Court found that an arbitration will be
compelled based on the co‐insurance agreement and the Convention on the
Recognition of Foreign Arbitral Award.
Maleski v. DP Realty Trust, 869 F. Supp. 176 (E.D. Pa. 1994). The United States
District Court for the Eastern District of Pennsylvania granted the Commissioner
of Insurance's motion for a stay of two actions pending in the Commonwealth
Court. The Federal Court reasoned that where the Commissioner's petition and
the lower court proceedings were duplicative in their allegations as against the
insolvent insurer, a Burford abstention was appropriate.
Richardson v. Lloyds of London, 896 F. Supp. 428 (E.D. Pa. 1995). At the request
of the Commissioner of Insurance, the Federal District Court abstained from
hearing a matter brought by directors of an insolvent insurer. The plaintiff
directors sought to have Lloyds of London continue to pay their counsel fees in
defense of the Commissioner's fraud and negligence claims action pending
against them. The Commissioner, on the other hand, was seeking to recover
the amount held by Lloyds for the benefit of the policyholders and creditors of
the insolvent insurer on the grounds that the purchase of the Lloyds policy was
a fraudulent transfer under Pennsylvania insurance law. Finding that the
directors' claims dove‐tailed and paralleled those of the Commissioner, the
Court refused to interfere with the marshalling of the insolvent insurer's assets
and held that abstention was appropriate.
Ruthardt v. Sandmeyer Steel Co., 1995 U.S. Dist. LEXIS 10313 (E.D. Pa. 1995). In
this action, the receiver of two insolvent insurance companies asserted claims
for breach of contract and unjust enrichment to recover retrospective
premiums billed to a workers' compensation insured, which the insured refused
to pay. The insured, in turn, asserted counterclaims against the receiver on
behalf of the insolvent insurers. Applying the standards set forth in Burford, the
Federal District Court rejected the receiver's request for abstention of the
counterclaim, reasoning that the receiver did not demonstrate that the
counterclaims had raised difficult questions of state law bearing on policy
problems or that their resolution would be disruptive of the state's efforts to
establish policy on a matter of substantial public concern. The Court further
noted that it was the receiver who elected to resolve the retroactive premium
dispute in Federal Court and also that the counterclaims involved
straightforward questions regarding contractual obligations.
Safeguard Mutual Ins. Co. v. Commonwealth of Pa., 372 F. Supp. 939 (E.D. Pa.
1974). Federal court did not have jurisdiction in a suit against the state and its
insurance commissioner by an insurance company claiming that the
commissioner was using the insurance laws to circumvent a state court order
vacating the suspension of the insurer from transacting business in the state.
Safeguard Mutual Ins. Co. v. Commonwealth of Pa., 321 F. Supp. 996 (E.D. Pa.
1970) An insurance company, suspended from operation by the Pennsylvania
commissioner of insurance, challenged the constitutionality of the action in
federal court. The court ordered the federal proceedings stayed pending a final
determination of the issues in state court. Specifically, the company alleged
that the commissioner had directed the company not to transact any insurance

usiness and had informed brokers and agents that the company was not
authorized. Nevertheless, the federal court held that the remedy for illegal or
malicious actions by the insurance commissioner lay in the state courts or
before a federal district court judge.
United Nat'l. Ins. Co. v. Admiral Ins. Co., No. 90‐7625, 1992 U.S. Dist. LEXIS 12336
(E.D. Pa. Aug. 18, 1992). Insurance company brought action against two other
insurers seeking a declaration that it was entitled to contribution from them for
a settlement by it of a personal injury claim. Defendant insurer involved in
liquidation proceedings in a foreign state court moved for summary judgment
against both plaintiff and co‐defendant insurers and for a stay of the declaratory
judgment action in light of the liquidation proceedings pending against it. The
district court found that the defendant had been prejudiced by post‐settlement
notice of the personal injury claim and was, therefore, not liable for
contribution. The court granted defendant's summary judgment motion and
denied the stay. The court reasoned that federal abstention under Burford
would be inappropriate in this case because the summary judgment would in no
way disrupt or impede the liquidation proceedings filed against the defendant in
state court.
Puerto Rico
Texas
Phico Ins. Co. v. Pavia Health, Inc., 413 F. Supp 2d 76 (D. P.R. 2006). In dicta, the
Court said that the question whether a setoff could be applied as a counterclaim
against the insurer in liquidation was not a matter that would “threaten state
policy,” and that therefore, the federal court would not abstain from
adjudicating the case.
Bryant v. Shields, Britton & Fraser, 930 S.W.2d 836. (Tex. App. 1996). The
Tennessee insurance commissioner, as liquidator of Anchorage Fire &
Casualty Insurance Company (AFCIC), appealed a judgment of the Texas
court, which failed to give the Tennessee receivership court’s liquidation
order full faith and credit. The court in its ruling held that the liquidation
order of the Tennessee court was a final judgment and therefore should be
afforded full faith and credit. It also stated that the injunction issued along
with the liquidation order should be afforded full faith and credit, and that
the trial court erred in not dismissing plaintiff’s action for payment of
attorney’s fees owed to it by (AFCIC).
State of Tennessee v. Surety Bank, N.A., 1998 U.S. Dist. LEXIS 12076 (N.D.
Texas, Dallas Div. 1998) Court refused full, faith and credit to Texas Chancery
Court Order after determining the Texas Chancery Court did not have
jurisdiction over the subject matter. In reaching this conclusion, the Texas
court applied the conflict of laws rules of Texas; therefore, Texas applied
Tennessee law to the instant case as interpreted by Texas rather than
Tennessee. Accordingly the court herein was bound by a Texas appellate
court’s determination that the Tennessee chancery court did not have
subject matter jurisdiction over the property of Anchorage Fire and Casualty
Insurance Company assets located in the state of Texas. In this matter, the
Liquidator of Anchorage Fire & Casualty, a Tennessee insurer placed into
receivership, sought to recover assets located in Texas under the control of
Surety Bank, a lender who provided premium financing to insureds of
Anchorage.
Tapiador v. North American Lloyds of Texas, 778 S.W.2d 207 (Tex. App. ‐‐
Houston [1st Dist.]1989). After appeal was filed, insurance carrier was declared
insolvent. Appellants sought to add the receiver as a party on appeal, and
receiver resisted claiming that the court lacked jurisdiction over him until such

time as an administrative claim had been filed and rejected. The court held that
the receiver was properly added as a party on appeal, noting that the
administrative claim provision of the insurance code applies to claims which
arise after the insolvency and not to lawsuits which are pending at the time of
insolvency. Similarly, the provision which allows the receiver a one year period
after his appointment to appear in a lawsuit is applicable to suits begun at the
trial level, not on appeal. A contrary holding would cause unreasonable delays
in resolving suits which are pending prior to the appointment of the receiver.
Utah
Wisconsin
Old Standard Life Ins. Co. in Rehab. v. Duckhunt Family Ltd. P’ship, No. 2:05‐CV‐
00536 PGC, 2006 U.S. Dist. LEXIS 36781 (D. Utah June 2, 2006). Receiver of
insolvent insurance company sought an order to determine the validity and
priority of certain trust deeds. Defendant filed an answer and counterclaim
alleging various causes of action against the insolvent insurance company. The
receiver sought to dismiss, stay, or remand the claims of Duckhunt on the basis
of the McCarran‐Ferguson Act, the Younger and Burford abstention doctrines,
and the absolute immunity from suit provided by the state receivership order.
The court denied the receiver’s motion. The McCarran‐Ferguson Act, the
Younger and Burford abstention doctrines, and the receivership order do not
prevent the application of federal jurisdiction where the receiver has availed
itself of the federal forum and the defendant’s counterclaims were filed in
response thereto.
In the Matter of All‐Star Ins. Corp., 484 F. Supp. 623 (E.D. Wis. 1980). The
liquidator of an insolvent insurer filed actions in the Wisconsin state courts
against former non‐resident agents to recover sums owed to the insolvent
estate. The state court actions were removed to the federal court on the basis
of diversity of citizenship and were consolidated for purposes of decision on
motions to remand. While recognizing its ability to limit its ruling to a
declaration of the rights among the parties, the federal court chose to exercise
its discretionary powers and remanded the cases to the Wisconsin State Court
citing Wisconsin's strong state interest in orderly liquidation. The federal court
found that the comprehensive regulation of state domestic insurance
companies is of substantial public concern.
Metropolitan Life Ins. Co. v. Board of Directors of Wisconsin Insurance Security
Fund, 572 F. Supp. 460 (W.D. Wis. 1983). When the member insurance
companies of the Wisconsin guaranty fund challenged the guaranty fund's
power to make certain assessments for the liquidation of an insolvent insurer,
and the manner in which the guaranty fund was paying losses, the federal
district court held that abstention was necessary to avoid conflict with rulings
that had and would be made in the state liquidation proceeding. In so holding,
the court noted that the guaranty fund was an integral part of the statutory
liquidation process.
Wis. Comm'r Ins. v. Cal. Reinsurance Management Corp., 819 F. Supp. 797
(E.D. Wis. 1993). In a case brought under the Federal Arbitration Act, the
court rejected an argument that §9 of the Act creates subject matter
jurisdiction in federal courts for motions to confirm arbitration awards.
Sections 3 and 4 of the Act require an independent basis for federal subject
matter jurisdiction in order to apply to a federal court for an order to stay a
lawsuit pending arbitration (Section 3) or to apply for an order directing
parties to arbitration (Section 4). The court rejected the argument that § 9
independently creates federal subject matter jurisdiction because such an
interpretation "would achieve by indirection that which Congress has clearly
forbidden."

Jurisdiction of the State Receivership Courts
U.S. Supreme
Third Circuit
Tenth Circuit
Clark v. Willard, 294 U.S. 211 (1935). The Iowa liquidator sought to recover the
assets of a domestic insurer in Montana, but the Montana courts permitted
local residents to enforce liens and executions against such assets. The U.S.
Supreme Court affirmed the Montana decision and found that the Montana
courts did not deny full faith and credit to the Iowa laws or judicial proceedings.
Feige v. Sechrest, 90 F.3d 846 (3d Cir. 1996). Where a liquidation proceeding
was pending in the Pennsylvania Commonwealth Court, the Third Circuit Court
of Appeals held that the District Court properly stayed the action and retained
jurisdiction thereto. The Court found that because the claims alleged by
plaintiffs were derivative on behalf of the corporation, or intertwined with the
allegations pending in the liquidation proceeding, abstention was appropriate.
Jurisdiction in this action, the Court noted, was based on a liquidator's case
arising under the Insurance Act, and further, that were the plaintiffs to prevail,
the effect of the judgment would be to remove assets from the estate and
affect directly and adversely what the liquidator was attempting to achieve
through her proceedings; i.e., the protection of the policyholders.
Grimes v. Crown Life Ins. Co., 857 F.2d 699 (10th Cir. 1988), cert denied, 489 U.S.
1096, 109 S. Ct. 1568. The insurance commissioner, as receiver of an insolvent
carrier, sought to interpret the provisions of a reinsurance contract in state
court. The reinsurance carrier removed the action to federal district court which
declined to remand the action and decided the merits of the case. In reversing
the decision of the district court, the United States Court of Appeals for the
Tenth Circuit held that the State of Oklahoma had "adopted a comprehensive
scheme to oversee the liquidation of insolvent insurers" and, therefore, the
district court should have abstained from exercising its jurisdiction in the matter.
857 F.2d at 705.
Inland Empire Ins. Co. v. Bair, 246 F.2d 505 (10th Cir. 1957). New Mexico agent of
insolvent Idaho insurer obtained judgment for commissions earned on policies
issued before insurer's insolvency. Judgment was rendered after a federal
receiver had been appointed for the insurer. The court held that appointment
of the federal receiver did not oust the New Mexico court's jurisdiction, since
the agent was not allowed to set‐off the judgment against the premium funds
which the agent held, but instead would share in the pro‐rata distribution of the
insurer's estate.
Eleventh Circuit Federated Rural Ins. Exchange v. R.D. Moody & Associates, Inc., 468 F. 3d 1322
(11th Cir. 2006). Under Georgia choice of law rules, Georgia rather than Florida
law applied to electric utility's insurer's diversity subrogation action against
Florida manufacturer of insured's power lines and poles, seeking
indemnification for settlement paid to widow of individual who had died after
coming into contact with downed power line in Georgia; action sounded in tort,
not in contract, mandating that locus of accident controlled, because insurer
sought to prove that manufacturer was negligent, not that it had breached its
Florida insurance contract, or its manufacturing contracts with insured. 468 F.
3d 1325. Provision of Georgia Insurers Insolvency Pool Act (GIIP) providing that,
with respect to “covered claim” potentially recoverable under GIIP and also
under insolvency fund in another state, recovery would be under insolvency
fund of state of insured's residence, was not choice of law provision, but rather
one de‐signed to prevent duplicative recoveries; thus, provision did not

mandate application of Florida's insolvency scheme in subrogation action
against insolvent insurer's Florida‐based tortfeasor‐insured. 468 F. 3d 1326‐27.
Alabama Ex parte Gregory V. Serio v. Cay‐Chel, Inc., and Frontier Ins. Co., 893 So. 2d 1148
(Ala. 2004). Although the company was entitled to maintain its counterclaims,
its right was not superior to the trial court's interests in avoiding piecemeal and
possibly inconsistent dispositions of intertwined claims, and the company had
no clear legal right to a particular timing of the disposition of its claims. Trial
court retained the option of deciding whether to stay the counterclaims by the
company. 893 So. 2d at 1151‐53.
Alaska
Williams v. Wainscott, 974 P.2d 975 (Alaska 1999). The court found that
Alaska's insurer liquidation statute confers upon the superior court
"exclusive original jurisdiction" over insurance insolvency proceedings.
Arkansas Baldwin‐United Corp. v. Garner, 283 Ark. 385, 678 S.W.2d 754 (1984). The
insurance commissioner, as receiver of three insolvent insurance companies
owned by one corporation, proposed a rehabilitation plan which was approved
by the court. The parent corporation appealed the plan's provisions that: (i) the
rehabilitation court had exclusive jurisdiction over the assets of the companies,
and (ii) the rehabilitation court would refuse to honor a judgment obtained in
any other forum. In affirming the lower court's decision, the Supreme Court of
Arkansas announced that nothing contained in the McCarran‐Ferguson Act or
the Bankruptcy Act prohibits a state from determining the rights of an insurance
company's creditors. Furthermore, the appellate court added, the lower court
properly ordered that all claims to the companies' assets be adjudicated in the
rehabilitation court.
California Anderson v. Great Republic Life Ins. Co., 41 Cal. App. 2d 181, 106 P.2d 75 (1940).
The insurance commissioner brings liquidation proceedings against delinquent
insurance companies as an officer of the state acting in the public interest.
Since it is a special proceeding of a statutory nature, the jurisdiction of the
courts was limited by the provisions in the insurance code.
Checker Motors Corp. v. Superior Court, 13 Cal. App. 4th 1007 (Ct. App. 1993).
Appellate court affirmed the trial court's assertion of in personam
jurisdiction over out‐of‐state entities that had solicited a substantial
investment from a California insurance company. The entities attempted to
terminate the insurer's interest when California appointed a conservator for
the insurer. This would have deprived the estate and the creditors of the
benefit of the profits from the investment. The court determined that the
out‐of‐state entities had "minimum contacts" with California, and California's
strong interest in preserving assets for distribution to policyholders and the
insolvency court's interest in maintaining control over all of the insolvent
insurer's assets and liabilities were sufficient to confer personal jurisdiction
over the entities.
Copenhagen Reinsurance Co. Ltd. v. Superior Court, No. B099422 (Cal. Ct.
App. Sept. 10, 1996, reported in Mealey's Litig. Rep.‐Reinsurance, Vol. 7, No.
10 at G1 (Sept. 25, 1996). Court complied with a writ of mandate issued by
the California Court of Appeals and entered an order adopting the statement
of decision of a panel of referees granting judgment for members of the
Mission‐affiliated Pacific Reinsurance Management Corporation pool on
various issues.
Garamendi v. Executive Life Ins. Co., 17 Cal. App. 4th 504 (Ct. App. 1993). The

California Court of Appeals found that a court overseeing an insurance
insolvency proceeding has in rem jurisdiction over a third party's assets
when that party has an "identity of interest" with the insolvent insurer, even
if the third party is not involved in the business of insurance. Prior to
insolvency, the insurer formed and funded a separate partnership for the
purpose of real estate investment. A secured creditor of the partnership
brought contract and tort actions in federal court against the partnership
after the Insurance Commissioner had been named conservator of the
insolvent insurer. The Insurance Commissioner intervened and had the
federal court action dismissed and then moved in state court for jurisdiction
over the secured creditor's claims. The creditor appealed the denial of its
motion to vacate the trial court's order in favor of the Commissioner. On
appeal, the court found that because the insurer had a substantial part of its
business tied up in the partnership for the purpose of investing its capital
and this partnership accounted for 10% of the insurer's real estate
investment, there was an "identity of interest" between the insurer and the
partnership. The court also ruled that federal bankruptcy law does not
preempt a state court from assuming jurisdiction over a controversy
involving a non‐insurance entity when the state's exercise of jurisdiction is
reasonably necessary to promote the rehabilitation of the insolvent
insurance company. In so holding, the court stated that "the jurisdiction of a
state court overseeing an insurance insolvency cannot, in reason, be any less
comprehensive than that of a bankruptcy court in similar circumstances."
In re Executive Life Ins. Co., 32 Cal. App. 4th 344 (Ct. App. 1995). In reviewing
a trial court's approval of a plan of rehabilitation for an insolvent insurer, an
"abuse of discretion" standard should be applied.
Connecticut Connecticut Life and Health Insurance Guaranty Association v. Jackson, 173
Conn. 352, 377 A.2d 1099 (1977). The court ruled that the guaranty association
must exhaust its administrative remedies with the insurance commissioner in a
dispute with the commissioner over the interpretation of a provision in the
guaranty fund law before it could bring an action for a declaratory judgment in
the courts.
Florida Capitol Fidelity Life Insurance Co. v. State ex rel. Department of Insurance, 478
So.2d 1105 (Fla. Dist. Ct. App. 1985). In an insurer delinquency proceeding
brought by the Florida Department of Insurance against an insolvent life insurer,
alleged affiliates of the insolvent insurer appealed the denial of motions to
vacate orders which directed them to show cause why they should not be
required to make return of case distributions paid to them by the insolvent
insurer. The appellants could not raise at that time questions regarding the
court's subject matter jurisdiction over them, because such issues were not ripe
for review until the trial court determined its subject matter jurisdiction. In
addition, because these appellants were third‐party defendants in the insurer's
delinquency proceeding, they had no standing to challenge the venue of the
original action brought by the Florida Department of Insurance.
Chase Bank of Texas Nat. Ass'n v. Fla. Dep't. of Ins., 860 So. 2d 472 (Fla. 1st DCA
2003). Florida's Insurers Rehabilitation and Liquidation Act confers jurisdiction
on the circuit court over a third‐party claim in an insurance liquidation
proceeding. 860 So. 2d at 473. Whether the circuit court has subject matter
jurisdiction is a question of law that depends on the correctness of the court's
interpretation of various provisions of Chapter 631, Florida Statutes. 860 So. 2d
at 475. Section 631.021(1), Florida Statutes provides that “[t]he circuit court shall
have original jurisdiction of any delinquency proceeding under this chapter....”

This simple declarative sentence provides the answer to the question we have
been asked to address. The circuit court has jurisdiction. Whether it is proper to
assert a certain kind of claim within the context of a delinquency proceeding is
another matter. It may be that the Department of Insurance lacks standing to
bring certain claims that would otherwise restore the financial condition of the
insolvent insurer, but that is a question of authority, not jurisdiction. 860 So. 2d
at 476. A claim made by the receiver on behalf of a third party is among the
kinds of claims the court may consider under section 631.141 in the course of the
liquidation proceeding. 860 So. 2d at 477.
Florida Dep’t of Ins. v. Centex ‐ Great Southwest Corp. (In re the
Receivership of Southeastern Reinsurance Co., Inc.), 639 So. 2d 646 (Fla.
Dist. Ct. App. 1994). The trial court had subject matter jurisdiction over the
receiver’s claim to recover liquidated assets of an insolvent insurer in the
possession of a contractor where the receiver established that the contract
funds claimed on two subcontracts were the property of the insolvent
insurer and it was undisputed that the contract funds payable to the
subcontractors belonged to the receivership.
Fla. Dep't. Fin. Serv. v. Midwest Merger Mgmt., LLC, No. 4:07cv207‐SPM/WCS,
2008 WL 3259045 (N.D. Fla. Aug. 6, 2008). The domiciliary court acquiring
jurisdiction over persons subject to this chapter [Insurer's Rehabilitation and
Liquidation Act] may exercise jurisdiction to the exclusion of all other courts,
except as limited by provisions of this chapter. Upon the issuance of an order of
conservation, rehabilitation, or liquidation, the Circuit Court of Leon County shall
have exclusive jurisdiction with respect to assets or property of any insurer
subject to such proceedings and claims against said insurer's assets or property.
2008 WL 3259045 at 3 (citing § 631.021(6), Fla. Stat. (n.d.)).
Prucha v. Guarantee Reserve Life Ins. Co. of Hammond, 358 So.2d 1155 (Fla. App.
1978), 370 So.2d 459 (1970). An insured brought action against insurer who had
assigned policy to another insurer, seeking refund of premiums under policy
provision which provide for eighty‐percent premium refund if no claims were
made after 10 years. After the assignment, the insurer underwent rehabilitation
proceedings in Indiana. An Indiana trial court had held that insured, although
not a party to the proceeding, was bound by the plan of rehabilitation of the
insurer and had no rights against the assignor. The court held that the judgment
of the Indiana court was not binding on Florida court adjudicating rights of its
own citizen, who was not a party to the Indiana rehabilitation proceedings
against an insurance company who was not the subject of the Indiana
rehabilitation proceeding.
Hawaii
Takayama v. Financial Sec. Ins. Co., 898 P.2d 610 (Haw. Ct. App. 1995). The
Court of Appeals held that the involuntary dissolution of an insolvent insurer
by the Director of the Department of Commerce and Consumer Affairs was
void ab initio. The court found that such action violated the stay of actions
against the insurer and impermissibly interfered with the receivership court's
valid assertion of jurisdiction.
Illinois Larson v. Pacific Mutual Life Ins. Co. of California, 373 Ill. 614, 27 N.E.2d 458
(1940). The court held that rehabilitation proceedings in California determined
rights of all policyholders of an insolvent insurance company as to an election
between satisfaction of policyholder claims and acceptance of a rehabilitation
plan (composed of an assumption reinsurance agreement by another insurer),
and that it was an error for a court in another state to decree that the successor
company should give the policyholders the privilege of reinsurance upon

payment of the premium. Such an election must be made in accord with the
California proceedings.
Little v. Chicago National Life Ins. Co., 289 Ill. App. 433, 7 N.E.2d 326 (Ill. App.
1937). The court held that an action against an insurance company was properly
dismissed because circuit court of another county had acquired jurisdiction
through receivership ordered by that circuit court. Further, in all matters of
receivership, the court which first acquires jurisdiction of the subject matter and
the parties retains it until the final disposition of the cause to the exclusion of all
other courts of concurrent jurisdiction.
Iowa
Kansas
Kentucky
Hager v. Doubletree, No. 88‐581 (S. Ct. Iowa, May 17, 1989) (WESTLAW, IA‐CS,
52259). The insurance commissioner, as liquidator of an insolvent carrier, sued
several nonresident defendants to recover unpaid premiums. The defendants
argued that the statute conferring personal jurisdiction on the court was
unconstitutional. In upholding the statute and reciting the minimum contracts
that the defendants had with the State of Iowa, the Supreme Court of Iowa
reasoned: "This situation is a little like a marriage: While it was [the in‐state
company] who proposed, the [out‐of‐state company] accepted, and the
resulting relationship makes it relatively insignificant which party started it all."
Todd v. Lakeland Chrysler‐Plymouth Dodge, Inc., 17 Kan. App. 2d 1, 834 P.2d
387. In an insurance corporation liquidation proceeding in Kansas, the
submission of claims in the proceeding by an out‐of‐state party subjects that
party to personal jurisdiction in the proceeding.
Exec. Branch Ethics Comm’n v. Stephens, 92 S.W.3d 69 (Ky. 2002). Although the
Franklin Circuit Court has exclusive jurisdiction over all matters related to insurer
liquidation under Kentucky Revised Statutes § 304.33‐190(2), this jurisdiction has
its limits. It does not extend, for example, to charges of ethical violations.
Minor v. Stephens, 898 S.W.2d 71 (Ky. 1995). The Supreme Court of
Kentucky held that Subtitle 33 of Chapter 304 of the Kentucky Revised
Statutes provided that the Franklin Circuit Court had broad discretion as to
the supervision of proceedings. The court stated that KRS 304.33‐040
granted the court exclusive jurisdiction over all matters relating to the
proceeding, including all disputes over assets. The Supreme Court explained
that a court may issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of the subtitle and shall not be
precluded from taking any action to enforce or implement court orders or
rules or prevent an abuse of the process.
Wright v. Sullivan Payne Co., No. 91‐SC‐287‐DG, 1992 Ky. LEXIS 127, 839 S.W.2d
250 (Ky. 1992). The Commissioner of Insurance, as liquidator of an insolvent
reinsurer, instituted an action against an Iowa corporation, which served as an
intermediary in both the preparation of reinsurance contracts between the
reinsured and the reinsurer and the subsequent dealings between those parties,
seeking recovery of monies paid by the reinsured pursuant to its contract and
held by the intermediary. On appeal, the Supreme Court of Kentucky held that
no personal jurisdiction over the intermediary existed because (1) the
intermediary is considered an agent of the reinsured (and not an agent of the
reinsurer) and (2) no minimum contacts with Kentucky were raised by the
liquidator.
Louisiana
Bonura v. United Bankers Life Insurance Company, 552 So.2d 1248 (La. App. 1st
Cir. 1989), writ den'd, 558 So.2d 1125 (La. 1990). On appeal, the court affirmed

its earlier holding [Bonura v. United Bankers Life Insurance Company, 509 So.2d
8 (La. App. 1st Cir.), writ den'd, 512 So.2d 462 (La. 1987)] that the Uniform
Insurers Liquidation Act did not preclude Louisiana courts from exercising
jurisdiction over claims against an insolvent Texas domiciled insurance company,
because Texas is not a "reciprocal" state under that Act.
Bourgeois v. Daigle, 97 2235 (La. App. 1 Cir. 9/25/98), 720 So.2d 72. The court
held that the district court’s unilateral creation of the position of Insurance
Duty Judge to handle all cases related to insurance receivership matters
violated LSA‐C.C.P. 253.1 and the dictates of the Louisiana Supreme Court in
State of Louisiana v. Sprint Communications Company, L.P., 96‐3094 (La.
9/9/97); 699 So.2d 1058. Upon the expiration of a Louisiana Supreme Court
temporary order appointing a judge to oversee insurance receiverships, the
judges of the Nineteenth Judicial District Court created the de facto position
of Insurance Duty Judge to handle all pretrial matters relative to insurance
receivership matters, which was determined to be in violation of Louisiana
Code of Civil Procedure.
Krueger v. Tabor, 546 So.2d 1317 (La. App. 3rd Cir. 1989). A receiver was
appointed for the insolvent insurance carrier, a Texas domiciliary. Although
certain intervenors and third party claimants properly served the receiver,
plaintiffs failed to do so. The receiver challenged judgment for the plaintiffs
alleging lack of jurisdiction due to improper service and judgment for
intervenors/third party claimants alleging lack of subject matter jurisdiction due
to exclusive jurisdiction in the Texas liquidation court. The court reversed
judgment in favor of plaintiffs, holding the judgment null and void for the reason
that the receiver had not been served with process. The court upheld judgment
in favor of the intervenors and third party claimants (who had properly served
the receiver), finding the Louisiana courts had subject matter jurisdiction over
the controversy because Texas is not a "reciprocal" state under the Uniform
Insurers Liquidation Act. Therefore, the Louisiana claimants were not required
to bring their action in the Texas Court which appointed the receiver.
LeBlanc v. Bernard, 554 So.2d 1378 (La. App. 1st Cir. 1989), writ den'd, 559 So.2d
1357 (La. 1990). Plaintiff sold immovable property to an individual who
immediately transferred the property to Commonwealth Securities Corporation
("Commonwealth"), which was wholly owned by the purchaser. The Act of Sale
recited that the purchase price had been paid in full. Thereafter,
Commonwealth was placed in liquidation. Plaintiff sued for dissolution of the
sale for the failure of purchaser to pay the purchase price, a fact which was not
disputed by the liquidator at trial. Plaintiff claimed that the liquidator stood in
the shoes of the buyer/transferee and was therefore charged with knowledge
that the purchase price had not been paid. The Court relied upon the
comprehensive and exclusive statutory scheme developed for insurer
insolvencies and held that the liquidator did not stand in the shoes of the insurer
for all purposes. Accordingly, in furtherance of his statutory duty to marshal all
assets of the insolvent's estate for the benefit of the public, the liquidator was
entitled to rely upon the public records which recited that the purchase price
had been paid.
State ex rel. Guste v. ALIC Corporation, et al., 595 So.2d 797 (La. App. 2d Cir.
1992). Attorney General and Commissioner of Securities of the State of
Louisiana sued a Louisiana holding company and related Louisiana and Missouri
domiciled insurance companies in the parish of their principal place of business.
Thereafter, an order of liquidation was entered against the insurers in their
respective states and the Louisiana Insurance Commissioner was appointed

ancillary receiver of the Missouri insurer. Both insurers then excepted to subject
matter jurisdiction and venue. The appellate court affirmed the dismissal of the
action based on lack of subject matter jurisdiction. The court noted that both
Louisiana and Missouri have adopted the Uniform Insurers Liquidation Act and
that the Act's "statutory scheme for receiverships is comprehensive and
exclusive" [emphasis by court]. Accordingly, all persons asserting claims,
including the plaintiff state officials, were required to file in the parish court in
which the liquidations were pending, or, in the case of the Missouri insurer, in
the parish court in which the ancillary receiver had been appointed. The Court
rejected a claim that the objection was to venue and had therefore been
waived.
Missouri
Montana
State ex rel. Waddell v. Smith, 131 Mo. 176, 33 S.W. 11 (1985). The liquidator of an
insolvent Missouri insurer brought a writ of mandamus to stop the pursuit of an
appeal against the insurer. The court held that although the Missouri liquidator
may have been delinquent (6 months) in intervening in the appeals process, the
instant intervention foreclosed the appeal from going forward since the
appellate court no longer had jurisdiction since all actions were to be
transferred to the liquidation court.
Gerling Global Reinsurance Corp. (U.S. Branch) v. First Interstate Bank, 789 P.2d
1237, 242 Mont. 216 (1990). In 1985, First Interstate Bank ("FIB") issued a letter
of credit to Gerling Global to secure reinsurance receivables owed from Glacier
General Assurance Company ("Glacier"). When Glacier was placed in
rehabilitation and was unable to pay losses under the reinsurance agreement,
Gerling demanded that FIB make payments under the letter of credit. When FIB
refused to pay, Gerling sued in Montana state court; FIB moved for a change of
venue, claiming that the only permissible venue for hearing the case was the
liquidation court. The Montana Supreme Court held that the liquidation court
did not have exclusive jurisdiction over the dispute because the letter of credit
represented a relationship between the bank and Gerling, and did not involve
any assets of the estate.
New Jersey Commissioner v. Mid‐Am. General Agency, Inc., 1991 U.S. Dist. LEXIS 15214
(D.N.J. 1991). The New Jersey Federal District Court, in applying the Burford
abstention doctrine, declined jurisdiction in a matter which called the Court to
address provisions contained in the liquidation order. The matter was
remanded to the Superior Court of New Jersey, the court of original jurisdiction.
New York
Corcoran v. Haddon S. Fraser Assocs., Ltd., 171 A.D.2d 522, 567 N.Y.S.2d 246 (1st
Dep't 1991). The Liquidator of the U.S. branch of Northumberland General
Insurance Company, a Canadian insurer, brought an action against the insolvent
company's officers, directors, and Haddon S. Fraser Associates, the corporation
that served as Northumberland's managing general agent. The defendants
moved to dismiss on the grounds of forum non conveniens and lack of in
personam jurisdiction. The Court rejected defendants' forum non conveniens
claim, holding both that New York had sufficient nexus with the action and that
defendants failed to establish Canada as the more appropriate forum. The
Court also found that personal jurisdiction existed over the individual
defendants on the basis of both the doing‐business doctrine and the long‐arm
statute. Further, based in part on testimony that the corporate defendant
supervised the carrier's activities in New York without a sufficient degree of
separateness, the Court found jurisdiction over the managing general agent
under a veil‐piercing theory.

In re Application for an Order Staying Arbitration, No. 24632, slip op. (N.Y. App.
Div. 1st Dep't: Dec. 3, 1985). When an insurance company is in liquidation and a
court order prohibits any action or proceeding from being brought against it, a
preliminary trial to determine whether coverage by the liquidated company
existed should be assigned to the court supervising the liquidation. An insurer,
from whom uninsured motorist coverage was sought, applied for a preliminary
trial to determine whether the company in liquidation had in fact covered any of
the parties to the accident. The trial, however, should not be assigned to the
trial term court because the insurance law provides for the exclusive operation
and procedure of companies in liquidation.
In re Manhattan Casualty Co., 75 Misc.2d 357, 346 N.Y.S.2d 911 (1973). The state
court did not lack jurisdiction to pass on the proposal of the insurance
commissioner, as the liquidator of a New York insurance company, to settle a
suit brought by the commissioner in federal district court in which there were
no actual federal claims present. The court found that the descriptions of the
claims asserted by the commissioner were insufficient to find the proposed
settlement adequate.
In the Matter of the Attorney‐General v. The North America Life Ins. Co., 92 N.Y.
654 (1883). The New York Supreme Court issued an order directing the
insurance commissioner as to the distribution of a fund deposited as security for
the policyholders of the insolvent insurer. More than two years later, a motion
was made for an order changing the distribution of the fund. The court held
that the Supreme Court had obtained jurisdiction over the fund and refused to
disturb the original order.
In re National Surety Co., 176 Misc. 53, 26 N.Y.S.2d (1941). When an order for the
liquidation of an insolvent insurance company is entered, the court making such
an order is vested with exclusive jurisdiction to determine every issue in the
case. Another court issued an order nunc pro tunc changing the date of entry of
a judgment upon which a contingent claim against the insolvent insurance
company was based so as to make the claim absolute before the expiration of
the filing period. That order was found to be ineffective.
In re Serio, 769 N.Y.S.2d 530 (App. Div. 2003). The court granted the reinsurer’s
motion for permission to bring an action against the Superintendent of
Insurance as rehabilitator of the insolvent insurer, holding that by consenting to
an evidentiary hearing and discovery in the reinsurer’s action to require the
rehabilitator to segregate funds, the rehabilitator waived argument that the
liquidation court should not have permitted the reinsurer to bring a separate
action.
Knickerbocker Agency, Inc. v. Holz, 4 A.D.2d 71, 162 N.Y.S.2d 822 (1957),
affirmed, 4 N.Y.2d 245, 173 N.Y.S.2d 602, 149 N.E.2d 885. The insurance code
vests exclusive jurisdiction over all claims against an insolvent insurer in one
count. This prevails over a claimant's contractual right to arbitration. The court
was not moved by the fact that arbitration was sought as a defense and not to
establish a claim. The court also found unpersuasive the fact that the claimant
instituted arbitration proceedings after the insurance commissioner and
commenced an action against the claimant, which was separate from the
liquidation proceedings.
Ohio
Fabe v. Farm & Ranch Life Ins., No. 88AP‐1027, 1989 Ohio App. LEXIS 3748 (Ohio
Ct. App. Sept. 26, 1989). In Farm & Ranch Life Ins., plaintiff was appointed as
the Ohio ancillary receiver of an insolvent insurance company. Plaintiff brought

an action to recover for the benefit of the receivership estate certain sums of
money allegedly owed the insolvent insurance company. Defendant
counterclaimed alleging primarily an illegal seizure of funds. The court held that
since plaintiff was named in his official capacity as the Superintendent of
Insurance in the counterclaim, the relief requested was against the state.
Consequently, the counterclaim involved a civil suit for money damages against
the state and the Court of Claims had original, exclusive jurisdiction. Dismissal of
the counterclaim was therefore proper pursuant to Civ. R. 12(B)(6) for lack of
subject matter jurisdiction.
Oklahoma
Oklahoma Property & Cas. Ins. Guar. Assoc. v. Class Fire & Marine Ins. Co.,
963 P.2d 622 (Okla. Ct. App. 1998) cert. denied. The Oklahoma Guaranty
Association brought suit against general managing agent and insurer,
alleging that the insurer was liable for policies issued in the insolvent
insurer’s name under a fronting arrangement. The insurer argued that the
trial court lacked subject matter jurisdiction. The court held that the
insolvent foreign insurer’s state of domicile was not the only proper forum
for determining whether its relationship with second insurer was one of
reinsurance or whether second insurer was primary insurer liable directly on
workers’ compensation policies issued to insureds in another state.
State v. Liberty Investors Life Ins. Co., 543 P.2d 1390 (Okla. 1975). Guarantor of
insurance stocks seized by a receiver was subject to the personal jurisdiction of
the receivership court even though personal service was not made because
once the receivership court obtained possession of the stocks, the receivership
court is vested with the power over all controversies relating to those stocks.
Pennsylvania
Maleski v. Conning and Co., 1995 U.S. Dist. LEXIS 14064 (E.D. Pa. 1995). Where
defendants brought an action against an insolvent insurer involving state law
claims for breach of fiduciary duty, breach of contract, bad faith breach of
contract, professional negligence, and civil conspiracy, the Commissioner of
Insurance sought to remove the action to the Commonwealth Court of
Pennsylvania, claiming that abstention was appropriate to avoid interference
with the ongoing liquidation proceedings. Where the lawsuit directly involved
the assets of the insolvent estate of the insurer, and attack the liquidator's
authority to sell those assets, the Court held that abstention pursuant to
Burford was appropriate.
Texas Bard v. Charles R. Myers Ins. Agency, 839 S.W.2d 791 (Tex. 1992), reversing 811
S.W.2d 251 (Tex. App.‐‐San Antonio 1991). Receiver of insolvent Vermont insurer
sued insurance agents pursuant to correspondent's agreement for payment of
earned premiums. Defendants filed compulsory counterclaims, which resulted
in a jury award for defendants on the counterclaim. Receiver claimed the
Vermont liquidation order, which included injunctions against maintaining
counterclaims or other actions against the receiver in any court other than the
Vermont liquidation court, should have been enforced in the Texas court under
principles of full faith and credit and/or comity. Reversing a contrary appellate
court judgment, the Texas Supreme Court agreed. The court found the
liquidation order sufficiently final to be entitled to full faith and credit. The fact
that the receivership court retained jurisdiction to discharge the receiver and
enter further orders with respect to assets of the estate did not mandate a
finding that the liquidation order was an interlocutory judgment which was
therefore not entitled to full faith and credit.
Further, the fact that a receiver is entitled to prosecute claims of the insolvent
estate in foreign jurisdictions does not also require the receiver to be subjected

to prosecution of claims against him in that foreign jurisdiction. The Texas
compulsory counterclaim statute did not require a contrary result; the
counterclaim requirement is a procedural rule which fosters judicial economy by
foreclosing piecemeal litigation. The order of the liquidation court which
requires all claims against the receiver to be brought in Vermont (or to be heard
in Texas by a Special Master appointed by the liquidator) also operated to
further judicial economy by ensuring that all claims against the insolvent estate
are prosecuted in one forum, enabling the receivership court to ensure that all
claimants are treated uniformly. The claims were ordered dismissed without
prejudice to prosecute them in Vermont.
Odiorne v. Skyhawk Aviation, 733 S.W.2d 357 (Tex. App. ‐ El Paso 1987). The
plaintiff, after his claims were rejected by the receiver of an insurance company,
joined the receiver in pending litigation with the insurance company and other
defendants. The receiver maintained that the delinquency court should have
exclusive jurisdiction. The appellate court rejected the receiver's venue and
jurisdictional challenges holding that under the Texas statute in question, the
delinquency court's exclusive jurisdiction does not apply to stay pending suits,
only to those filed after the commencement of delinquency proceedings.
Tapiador v. North American Lloyds of Texas, 778 S.W.2d 207 (Tex. App. ‐‐
Houston [1st Dist.]1989). After appeal was filed, insurance carrier was declared
insolvent. Appellants sought to add the receiver as a party on appeal, and
receiver resisted claiming that the court lacked jurisdiction over him until such
time as an administrative claim had been filed and rejected. The court held that
the receiver was properly added as a party on appeal, noting that the
administrative claim provision of the insurance code applies to claims which
arise after the insolvency and not to lawsuits which are pending at the time of
insolvency. Similarly, the provision which allows the receiver a one year period
after his appointment to appear in a lawsuit is applicable to suits begun at the
trial level, not on appeal. A contrary holding would cause unreasonable delays
in resolving suits which are pending prior to the appointment of the receiver.
Virginia Eden Financial Group, Inc. v. The Fidelity Bankers Life Ins. Co., 778 F. Supp. 278
(E.D. Va. 1991). Marketing firm sought a declaratory judgment that the
application of the receivership order of an insolvent insurer and the State's
receivership statutes, to preclude it from use of a contractual arbitration
remedy, was preempted by the Federal Arbitration Act and violated the
Supremacy Clause of the Constitution. The court held that the Federal
Arbitration Act must defer to the exclusive jurisdiction of state proceedings
governing the rehabilitation of insurance companies.
Wisconsin Cheese Makers Mutual Casualty Co. v. Duel, 243 Wis. 406, 10 N.W.2d 125 (1943).
An insurer who was a reinsured of an insolvent insurer in liquidation, challenged
in a separate action the liquidator's assessment on the reinsurance contract
pursuant to the liquidation proceedings. The court elected not to address the
declaratory relief sought by the insurer since it did not want to interfere in the
liquidation proceedings and since the claim could be properly handled in the
liquidation proceedings.
Venue
U.S. Supreme Langdeau v. Republic National Bank of Dallas, 161 Tex. 349, 341 S.W.2d 161
(1960), reversed, Mercantile Nat. Bank v. Langdeau, 371 U.S. 555 (1963). The
receiver of insurer filed suit against national banks to recover assets which had

allegedly been obtained from the insurer by fraud, pursuant to the insurance
code, in the county in which the delinquency proceeding was pending. The
national banks asserted a privilege to be sued in their county of domicile
pursuant to federal civil procedure. The court held the insurance code
controlled, where action was filed in state court. The U.S. Supreme Court
reversed, holding 12 U.S.C.A. §94 to take precedence over state law.
California Black Diamond asphalt v. Superior Court, 109 Cal. App. 4th 166 (Ct. App. 2003).
In a proceeding challenging the venue of a case brought against the California
Insurance Guaranty Association (CIGA), the court held that the appropriate
venue was where CIGA’s alleged duty to defend and indemnify arose, not where
CIGA’s principal office was located.
Colorado Herstam v. Bd. of Dir. of Silvercreek Water Sanitation Dist., 895 P.2d 1131
(Colo. App. 1995). Trial court properly denied motion for change of venue
since C.R.S. § 10‐3‐504(5) specifically requires that all actions authorized
under the Colorado Insurers Rehabilitation and Liquidation Act be brought in
Denver district court. C.R.S. § 10‐3‐501(5) governs the action, not C.R.C.P.
98(b)(2). When there is a conflict between a statute and a rule, the statute
governs.
Florida
Georgia
Mall Bank v. State ex rel. Department of Insurance, 462 So.2d 519 (Fla. Dist. Ct.
App. 1985). In a delinquency proceeding against an insolvent insurer, a bank
which enforced a right of setoff by withholding deposit account funds of the
insolvent insurer was joined as a third party for its violation of statutory
procedure and court orders which required the bank to transfer the insurer's
funds to its receiver. The bank's motion to dismiss for improper venue was
denied because upon waiver of the venue issue by the insurer, the bank, as a
third party, could not assert venue objections.
McKey v. Wright, 147 Ga. 662, 95 S.E. 217 (1918). The court held that insurance
commissioner in charge of the affairs of an insolvent insurance company may in
equity join as defendants in one suit all unpaid subscribers to capital stock of the
company. Jurisdiction is proper even though not all defendants reside in the
county where the suit is brought.
Illinois Pine Top Ins. Co. v. Continental Reins. Corp., No. 88‐5402, (N.D. Ill. Oct. 5, 1988).
The court denied defendant reinsured's motion to compel arbitration where a
dispute between a reinsurer's liquidator and reinsured concerned an alleged
voidable preference. The court ruled that although the agreement between
the parties stated that any dispute between the parties with respect to
interpretation of the agreement would be submitted to arbitration, a dispute
as to whether a transfer is a voidable preference is not a dispute relating to the
interpretation of the agreement and thus is not subject to the arbitration
clause.
Schacht v. Hartford Fire Ins. Co., No. 91‐C‐2228 (N.D. Ill. Aug. 30, 1991).
Defendant insurance company moved to stay adjudication pending arbitration.
Plaintiff liquidator argued that "any dispute arising of" language contained in
arbitration clause should be narrowly construed to apply only to disputes
involving interpretation or performance of the reinsurance agreements. Court
held that, in light of federal policy requiring resolution of all ambiguities in
favor of arbitration, broad interpretation would apply. In addition, court held
that because plaintiff's nonarbitrable claims were based on the same factual
allegations as arbitrable claims, and the arbitrable and nonarbitrable claims

were closely intertwined, the entire action should be stayed in interests of
judicial economy.
Selcke v. New England Ins. Co., No. 92‐C‐5599 (N.D. Ill. Oct. 27, 1992).
Rehabilitator sued insurance company for breach of contract arising out of
amounts allegedly due under three reinsurance contracts. Defendant reinsurer
moved for stay pending arbitration, based on contractual provision for
arbitration "should an irreconcilable difference of opinion arise as to the
interpretation of" the agreement. Court denied stay, despite federal policy
favoring arbitration, on the ground that reinsurer, which attached letter to
motion apparently conceding liability and asserting set‐off as an affirmative
defense, failed to show that dispute involved a contractual interpretation
issue.
Indiana
Great Western Life Assurance Co. v. State ex rel. Honan, 181 Ind. 28, 102 N.E.
849 (1913), rehearing denied, 181 Ind. 28, 103 N.E. 843 (1914). As provided by
statute, the Attorney General shall start proceedings involving an insolvent
insurance company in the county wherein it has its principal office. In
sustaining the dismissal of a petition filed by the Indiana Attorney General for a
temporary receiver for the dissolution of an insolvent insurer, the court held
the Circuit Court of Marion County did not have jurisdiction since the insurer's
home office was in Vigo County. In Vigo County, a group of judgment creditors
had already secured appointment of a receiver for the insurer. The court
specifically rejected the theory that the existence of the agency in Marion
County provided grounds for jurisdiction.
Sayeed v. Dillon, 573 N.E.2d 468 (Ind. App. 1991). Persons sued in connection
with liquidation of insolvent prepaid health care delivery plan sought to
transfer venue from county in which any suit had to be brought under Indiana
statutory scheme governing liquidation. The trial court denied the motion. The
Appellate Court affirmed, holding that under specific provision of liquidation
scheme pursuant to which venue "may" be changed to an adjoining circuit as
interests of justice demand, court could not transfer venue to county that was
not contiguous with county in which any action had to be initiated under
scheme, notwithstanding contention that use of word "may" instead of "shall"
indicated that there was no mandatory limit on trial court's authority to
transfer case to given county.
State ex rel. Indiana Life and Health Insurance Guaranty Association v. Superior
Court of Marion County, 272 Ind. 421, 399 N.E.2d 356 (1980). The Indiana
Supreme Court rejected the Indiana life and health guaranty fund's challenge
to the jurisdiction of the Marion County Superior Court to hear the Indiana
insurance commissioner's petition to convert a rehabilitation proceeding to a
liquidation proceeding. Between the filing of the rehabilitation proceeding and
petition for liquidation, a new liquidation act had been enacted which required
all liquidation petitions to be filed in Marion County Circuit Court, whereas the
rehabilitation proceeding had been filed in the Marion County Superior Court.
The Indiana Supreme Court rejected the guaranty fund's argument holding
that the liquidation article merely provided for venue and not subject‐matter
jurisdiction in the Circuit Court of Marion County. The Circuit and Superior
Courts of Marion County have concurrent an coextensive jurisdiction.
Louisiana
State ex rel. Guste v. ALIC Corporation, et al., 595 So.2d 797 (La. App. 2d Cir.
1992). Attorney General and Commissioner of Securities of the State of
Louisiana sued a Louisiana holding company and related Louisiana and
Missouri domiciled insurance companies in the parish of their principal place of

usiness. Thereafter, an order of liquidation was entered against the insurers in
their respective states and the Louisiana Insurance Commissioner was
appointed ancillary receiver of the Missouri insurer. Both insurers then
excepted to subject matter jurisdiction and venue. The appellate court
affirmed the dismissal of the action based on lack of subject matter
jurisdiction. The court noted that both Louisiana and Missouri have adopted
the Uniform Insurers Liquidation Act and that the Act's "statutory scheme for
receiverships is comprehensive and exclusive" [emphasis by court].
Accordingly, all persons asserting claims, including the plaintiff state officials,
were required to file in the parish court in which the liquidations were pending,
or, in the case of the Missouri insurer, in the parish court in which the ancillary
receiver had been appointed. The Court rejected a claim that the objection
was to venue and had therefore been waived.
New Jersey
New York
Ballesteros v. New Jersey Property Liability Insurance Guaranty Association,
530 F. Supp. 1367 (D. N.J. 1982), affirmed, 696 F.2d 980 (3rd Cir. 1982). The
federal district court found that the New York Supreme Court had subject
matter jurisdiction to enter a rehabilitation order against an insurer located
outside the court's judicial district. Here, the insurance commissioner
petitioned for an order of rehabilitation against an insurer in the district where
the company was located. The broad jurisdiction of the court was deemed to
be neither qualified nor limited by the state legislature. The court found that
the provision requiring the commissioner to make an application in the judicial
district in which the principal office of the insurer involved is located dealt only
with venue and as such did not detract from the court's broad discretion.
Frontier Ins. Co. v. Big Apple Roofing Co., 855 N.Y.S.2d 702 (App. Div. 2008). The
court denied a motion for change of venue in a lawsuit filed by the insurer in
liquidation for indemnification under a performance bond, where the defendant
obligors who requested transfer failed to establish that convenience of material
witnesses would be promoted by a change of venue.
In re Board of Directors of Hopewell Internat’l Ins. Ltd., 275 B.R. 699 (S.D.N.Y.
2002). The directors of a foreign reinsurer in run‐off adopted a scheme of
arrangement providing that all disputes be submitted to binding arbitration in
Bermuda under Bermuda law. A petition for an ancillary case to aid in the
enforcement of the scheme of arrangement between the reinsurer in run‐off
and its creditors was properly venued in the Southern District of New York
where, among other things, the reinsurer’s principal assets in the U.S. were
located in New York.
Knickerbocker Agency, Inc. v. Holz, 4 N.Y.2d 245, 173 N.Y.S.2d 602, 149 N.E.2d
885 (1958). The New York Supreme Court, with the insurance commissioner as
its agent, was intended to have exclusive jurisdiction over claims against and
for an insurance company in liquidation under the insurance code. There is no
express provision requiring the commissioner to prosecute such claims only in
the state Supreme Court. However, in keeping with the overall scheme and
plan of the insurance code, the Supreme Court may not be divested of
jurisdiction in favor of an arbitration tribunal.
Ohio
Lerenman v. Ohio German Fire Ins. Co., 21 Ohio Dec. 269 (1910). Although
jurisdiction may be obtained over a dissolved company in an action brought for
an accounting in other than the county in which its principal place of business is
located, such jurisdiction does not extend to the trustees individually who are
administering the affairs of the insolvent company, and therefore the court
correctly quashed service as to the trustees in their individual capacities.

South Carolina
Texas
New South Life Ins. Co. v. Lindsay, 258 S.C. 198, 187 S.E.2d 794 (1972). The court
held that, while the South Carolina insurance code authorized any circuit court
in any county of the state to hear an action for the purpose of rehabilitating an
insurance company, the Ridgeland County Court nevertheless had no subject
matter jurisdiction over such an action, since it had only the jurisdiction
expressly conferred by the South Carolina insurance code.
A. B. Lewis Co., Inc. v. Wheeler, 323 S.W.2d 269 (Tex. Civ. App. 1959), writ dism.
w.o.j. When the receiver of the insurer filed suit in Travis County, the
defendant pled privilege to be sued in the defendant's county of residence,
since he had no office or agent in Travis County. The court held that under the
liquidation provisions, venue was proper in Travis County because receiver
alleged that delinquency proceedings were pending in that county and that the
receiver had instituted the suit after the commencement of the delinquency
proceeding, and there was an intimate connection between the subject of the
suit and the receivership proceeding.
Atkins v. Wheeler, 307 S.W.2d 294 (Tex. Civ. App. 1957), writ dismissed w.o.j. In
an action by receiver of insurance company for premiums and commissions
due on contract, it was held that venue provisions in contract did not
supersede the venue provisions established by the legislature in the insurance
code, in which venue is fixed in the county where the delinquency proceedings
are pending for all actions against an insurer after delinquency proceedings are
instituted. Allegations by the receiver that delinquency proceedings are
pending, and that suit was filed subsequent to commencement of the
proceedings is sufficient to fix jurisdiction under the code.
Bennett v. Langdeau, 348 S.W.2d 179 (Tex. Civ. App. 1961), writ dismissed, 362
S.W.2d 952 (Tex. 1962). When the receiver of insurer brought suit which
affected land located in Bexar County, the defendant argued that the Texas
Civil Statutes provided that venue was proper in county where land was
located, even though that conflicted with the insurance liquidation provisions,
which provided for venue in the county where the delinquency proceeding had
been commenced. The court held that the liquidation provision of the
insurance code controlled. On writ to the Supreme Court of Texas, this
decision was withdrawn for being correctly decided for the wrong reason.
That court held that the civil statute did not apply to an action to set aside a
lien upon land, and as a result, there was no conflict with the insurance code.
Bouknight v. Williamson, 314 S.W.2d 429 (Tex. Civ. App. 1958), writ dism. w.o.j.
In suit by receiver brought in Travis County, the agent pled to be sued in Harris
County, since the agent resided there and the contract provided that it was
fully performable there. The court held, that under the liquidation provision,
venue was proper in Travis County because delinquency proceedings were
pending there, and the suit was instituted by the receiver subsequent to the
commencement of the proceedings.
Brodhead v. Dodgin, 824 S.W.2d 616 (Tex App.‐‐Austin 1991). Upon rejection of
their proof of claim by the receiver of Mission National, the insolvent excess
carrier, injured claimants sued the receiver in the liquidation proceeding. The
receiver argued for dismissal, claiming the action was an intervention in the
liquidation proceeding not permitted by the insurance code. The court
severed the action from the liquidation proceeding, and assigned it a separate
suit number. The court held that the provision of the insurance code which
required the filing of a separate suit in the same court in which the liquidation

proceeding was pending was not a jurisdictional statute, but rather a
mandatory and exclusive venue provision. Accordingly, the trial court had
jurisdiction to order the action severed. The court rejected the receiver's policy
defenses finding that when an insurance carrier denies all liability and refuses
to defend, the receiver for that carrier cannot thereafter rely upon policy
defenses to defeat the claim. The court also rejected the receiver's claim that
because the insolvent primary carrier had not paid its policy limits, the
insolvent excess carrier was not liable.
Durish v. Newberry, 800 S.W.2d 610 (Tex. App.‐‐Houston [14th Dist.] 1990).
Receiver appealed an adverse judgment alleging that the venue provision in
the insurance code was exclusive and asserting that the trial court erred in
refusing to transfer the case to the county in which the receivership
proceeding was pending. The court agreed, reversed the judgment against the
receiver and remanded with orders to transfer, finding that the more specific
insurance statutes controlled over any conflicting venue provisions in the
worker's compensation laws.
Durish v. Panan International, N.V., 808 S.W.2d 175 (Tex. App.‐‐Houston [14th
Dist.] 1991). Corporation brought suit against title insurer, for which a receiver
was subsequently appointed. Receiver claimed the action should have been
abated, pending the filing and rejection of a proof of claim in the receivership
proceeding, and a transfer of venue to the receivership court. The court held
that the provisions of the insurance code relied upon by the receiver apply only
to lawsuits brought after delinquency proceedings had been commenced, not
to lawsuits pending at the time of insolvency. The court further rejected the
receiver's claim that liability against him, as receiver, had not been proven,
observing that he was sued in his capacity as receiver, not individually, and that
as receiver, he stood in the place of the insolvent carrier. Thus, entry of
judgment against him was proper.
Glau‐Moya Parapsychology Training Institute, Inc. v. Royal Life Ins. Co., 500
S.W.2d 884 (Texas Civ. App. 1973). The court held that a suit filed by an
insurance company in conservatorship, as opposed to suit filed against it, is not
subject to the mandatory venue provision of the insurance code.
Johnson v. Langdeau, 326 S.W.2d 866 (Tex. Civ. App. 1959). In a class action
filed by policyholders of insolvent insurer to enjoin the receiver from selling
land owned by the insolvent insurer or otherwise disposing of its assets, and
the suit was brought in county where land was located, rather than in county
of residence of receiver. It was held that the Texas Civil Statutes confined
jurisdiction to the county of residence of receiver, and thus, this suit must be
dismissed for want of jurisdiction.
Johnson v. Wheeler, 312 S.W.2d 266 (Tex. Civ. App. 1958). When the receiver of
insurance company and finance corporation brought action on a note due
from the finance company, the court held that venue provisions of the
insurance liquidation law were controlling, since insurance company held the
beneficial interest in the note. "Action or proceeding" as used in code means
any action or proceeding that is recognizable in a court of law.
Langdeau v. Burke Investment Co., 351 S.W.2d 287 (Tex. Civ. App. 1961),
affirmed, 163 Tex. 526, 358 S.W.2d 553 (1962). Plaintiffs filed actions to remove
encumbrances on land in the county where the land was located. The receiver
pled a privilege to be sued in Travis County, where delinquency proceedings
related to the land had been commenced, pursuant to the venue provision of

the insurance code. The trial court held that the civil statute venue provision
was mandatory and controlled the permissive venue provision in the insurance
code. The Texas Supreme Court affirmed, noting that venue was proper in
Bexar County, subject however to a plea of abatement to show that the Bexar
County suits were fraudulent, brought only for venue purposes, not actually
seeking to recover or clear title to Bexar County land.
Langdeau v. Jones, 364 S.W.2d 297 (Tex. Civ. App. 1963). When the receiver of
insurer was named as co‐defendant in tort action which had been brought in
another county before the commencement of the delinquency proceeding in
Travis County, the court held that, under the insurance code, venue was
proper, as to the receiver only in Travis County. The civil statutes did not
control.
McFarling v. Cavender, 469 S.W.2d 478 (Tex. Civ. App. 1971). The insurance
code, which fixes venue of actions against insurance companies in
conservatorship is mandatory, not permissive.
Wheeler v. Metteauer, 282 S.W.2d 95 (Tex. Civ. App. 1955). Nothing in the
insurance code contradicts the civil statutes which place venue for actions
against a receiver of a corporation in the county of the principal office of the
corporation. The purpose behind the civil statute was to abolish the common
law rule that only the court appointing receiver had jurisdiction and venue.
Thus, the court appointing receiver did not have exclusive jurisdiction to
determine claims against the receiver.
Whitson v. Harris, 682 S.W.2d 423 (Tex. Civ. App. 1984). The venue provision of
Deceptive Trade Practices ‐ Consumer Protection Act of the Business and
Commerce Code must yield to the mandatory venue provision provided in the
liquidation provision of the insurance code, which provides that actions upon
claims rejected by the receiver must be brought in the court in which the
delinquency proceeding is pending.
Whitson v. Harris, 792 S.W.2d 206 (Tex. App.‐‐Austin 1990, writ denied). After
rejection of their claim in the receivership proceeding, claimants timely filed
suit, but in a county other than the one in which the receivership was pending.
Suit was transferred to the court of proper venue, and the transfer was upheld
on appeal. Whitson v. Harris, 682 S.W.423 (Tex. App.‐‐Amarillo 1984, no writ).
Receiver then asserted that the statute in question was jurisdictional and that
the transferor court therefore lacked jurisdiction to transfer the suit. The court
held: (1) the provision of the insurance code in question is a mandatory venue
statute; (2) the timely filing of suit, even in a court of improper venue, tolled
the three month limitations period; (3) upon transfer, the action stood as if it
had originally been filed in the proper court; and (4) the action was therefore
timely, and the transferee court had jurisdiction to decide the case.
West Virginia
Sims v. Homeseekers Fire Ins. Co., 117 W.Va. 84, 183 S.E. 869 (1936). The
insurance commissioner determined that an insurer was insolvent, and
instituted a suit to appoint a receiver for the company. The insurance code
provided that the insurance commissioner could file a bill in the Circuit Court of
Kanawah County (state capitol) for the purpose of dissolving the company.
The insurer insisted that this was a mandatory jurisdictional section, and that
the receivership was invalid because it had been filed in another county. The
court held that the insurance commissioner had the discretion to bring the suit
in a county other than the county of the state capitol.

Wisconsin
In the Matter of the Liquidation of All‐Star Ins. Corp., 110 Wis.2d 72, 327 N.W.2d
648 (1983) on remand 332 N.W.2d 828, 112 Wis.2d 329 (1982), appeal dismissed
103 S. Ct. 2419. The court held that the Wisconsin state courts had personal
jurisdiction pursuant to special jurisdictional statute for liquidation proceedings
over two non‐resident insurance agencies for collection of unearned premiums
since the insurance agencies were linked to Wisconsin by virtue of their agency
contracts with the insolvent insurer. Neither agency was licensed to do
business in Wisconsin nor had a place of business in Wisconsin. However,
Wisconsin had a manifest interest in providing an efficient and inexpensive
forum in which to liquidate a domestic insurance company including the
pursuit of its assets, and the burden on non‐residents insurance agencies to
defend in Wisconsin was not unreasonable.
Filing Fees and Exemptions
California
Mitchell v. Taylor, 3 Cal.2d 217, 43 P.2d 803 (1935). The court of appeals held
that the insurance commissioner did not have to pay the statutory fee for the
filing of a transcript. In dicta, the court stated that the insurance commissioner
is not a mere private trustee or receiver dependent upon the appointing court
for its powers. The commissioner is a state officer, performing duties
conferred by statute, and in their performance the commissioner acts on
behalf of the state.
New York 1939 Op. N.Y. Att'y Gen. 225. When acting as a liquidator, the insurance
commissioner is required to pay fees for the service of process through the
Secretary of State.
1950 Op. N.Y. Att'y Gen. 189. The Secretary of State may not file a certificate of
dissolution of a wholly‐owned subsidiary of a corporation in liquidation for the
insurance commissioner without paying the prescribed filing fee.
1977 Op. N.Y. Att'y Gen. 248. The insurance code exempts the insurance
commissioner from having to pay a fee when submitting civil papers pursuant
to the exercise of any of the powers or duties conferred upon the
commissioner by Article 16 (now Art. 74) of the insurance code.
In the Matter of Louis H. Pink v. Ransom, 273 N.Y. 617 (1937). The insurance
commissioner moved to compel the county clerk to file a proposed judgment
rule in the commissioner's office without the payment of fees. The motion
was denied, and the court held that the exemption from payment of recording
fees is confined to orders and papers in proceedings authorized the Insurance
Code.
Pink v. Ransom, 273 N.Y. 617, 7 N.E.2d 722 (1937). The insurance code did not
exempt the insurance commissioner from having to pay a fee when filing a
proposed judgment roll when acting as the liquidator of an insurance company
to collect premiums due under a liability policy. The code exempts only orders
and papers in direct proceedings authorized by the insurance code. [Note:
This case was based on the predecessor statute to the current Section 7422.
Its wording differs greatly from the current statute.]
Van Schaick v. Marinelli, 243 A.D. 7, 276 N.Y.S. 241 (1934). The court found that
the transcript of a judgment, obtained by the insurance commissioner as
liquidator, was a paper or an instrument relating to a liquidation proceeding

within the meaning of the insurance code and as such, was entitled to be filed
without the payment of the fee ordinarily required for such a filing.
Injunctions and Other Court Orders
Third Circuit General Glass Industries Corp. v. Monsour Medical Foundation, 973 F.2d 197
(3rd Cir 1992). Plaintiff, on behalf of its 300 workers, brought RICO, ERISA and
Commonwealth tort claims against the Company's employee health insurer in
liquidation (Keystone Medical Services and its successor, Monsour Medical
Foundation). The Third Circuit vacated so much of the District Court's order
dismissing plaintiff's claims that were broader than, or different from, those
asserted by the Pennsylvania Commissioner of Insurance in the
Commonwealth court action and declared that the Federal action be stayed
during the pendency of the liquidation proceedings. The retention of
jurisdiction by the District Court was hoped to avoid any applicable statute of
limitations defense.
University of Maryland v. Peat Marwick & Co., 923 F.2d 265 (3rd Cir. 1991). The
Third Circuit vacated an Order dismissing the policy holders' Amended
Complaint and remanded to the Pennsylvania District Court an action brought
against the independent auditor (Peat Marwick) of insolvent Mutual Fire,
Marine and Inland Insurance Company, holding that Burford and Colorado
River abstention doctrines did not apply to bar the Federal action because (1) it
did not appear that the Commonwealth court would have jurisdiction over the
policyholder(s)' claims in the insolvency estate but rather a third party (Peat
Marwick); (2) the policyholder(s)' claims were distinct from those brought by
the Commissioner of Insurance on behalf of the insolvent insurer in the
Commonwealth court action; and (3) the action was at law, not in equity, and
sought only money damages. 2 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Fifth Circuit
Sixth Circuit
Health Net, Inc. v. Wooley, 534 F.3d 487 (5th Cir. 2008). Texas, Oklahoma, and
Louisiana receivers successfully brought suits against Health Net, Inc., claiming
breach of fiduciary duty, fraud, and conspiracy, all to the detriment of an
insolvent insurer in receivership. The receivers obtained compensatory and
exemplary damages. Health Net then sought an injunction to block the verdict
and awards against it on the grounds that the judgments were obtained by
fraud. The receivers acknowledged in the appeal that ex parte communications
with the judge had taken place. The Louisiana Court of Appeals dismissed
Health Net, Inc.’s injunction request but placed sanctions on the receivers’
counsel. The court of appeals affirmed the injunction dismissal and vacated the
sanctions on the grounds that Louisiana’s state laws regarding insurer
insolvency may necessitate some ex parte communications. Furthermore, the
involvement of the federal courts in this process would disrupt the state’s
treatment of insolvent insurers. Both the Younger and Burford abstention
doctrines apply in this case.
AmSouth Bank v. Dale, 386 F.3d 763 (6th Cir. 2004). The underlying coercive
action was a state court suit by the receivers, various state insurance
commissioners, to recover funds embezzled from a number of insurance
companies. The receivers claimed the banks were negligent in not discovering
2 On remand, the Pennsylvania District Court dismissed plaintiff's case based on a statute of
limitations and lack of causation grounds. 1991 U.S. District LEXIS 13561 (9/25/91).

the embezzler’s fraud. The banks sought a declaratory judgment in federal
court saying that they were not liable to the receivers. The district court
enjoined the receivers from pursuing their state coercive action further and the
receivers appealed. The Sixth Circuit declined to find McCarran‐Ferguson
reverse preemption because an action to evade liability in a threatened
common‐law coercive action by the insurance companies had only an
attenuated connection to the regulation of insurance. However, the court
noted that (1) the declaratory judgments would serve no useful purpose and (2)
that the banks filed the declaratory actions not to resolve liability issues but
instead to gain procedural advantage. Because of these two factors, the
appellate court held that jurisdiction over these declaratory actions should not
have been exercised and the district court’s decision to the contrary was an
abuse of discretion.
Arlans Agency, Inc. v. Dykema Gossett, 1995 U.S. App. LEXIS 1175 (6th Cir. 1995)
(unpublished opinion). The agency owned the insurance company, which was
in liquidation proceedings in the receivership court. The receivership court
issued an order enjoining all persons from bringing any action, including any
counterclaim, against the insurance company without prior authorization. Then,
the receiver filed a claim against the agency in a county court. The receivership
court found that the agency’s counterclaims in county court infringed on the
exclusive jurisdiction of the receivership court. The county court dismissed the
counterclaims. The agency then filed a § 1983 claim in federal district court
contending that it was denied a state forum for their constitutional claims. The
district court dismissed the claim. On appeal, the court affirmed, holding that
Congress did not intend § 1983 to enable creditors to circumvent state statutory
schemes for liquidating insolvent insurance companies, and because a state
forum was available to the agency for torts committed outside the receivership
process, its due process rights had not been violated.
Alabama M. Diane Koken, as Ins. Commissioner of the Commonwealth of Pennsylvania v.
Preferred Underwriting Alliance, No. 2:04CV03282 JEO, 2007 WL 521254 (N.D.
Ala. Feb. 7, 2007). The Rehabilitation Order directed the return of all assets
directly to the Rehabilitator at the insurance company offices within 30 days.
The Liquidation Order directs the Liquidator to take possession of all assets that
are the property of [the insurance company] including collected and
uncollected premiums. Defendant ordered to immediately disburse the
undisputed amount of collected premiums to the plaintiff. 2007 WL 521254 at 2
(quotation marks omitted).
Ex parte Gregory V. Serio v. Cay‐Chel, Inc., and Frontier Ins. Co., 893 So.2d 1148
(Ala. 2004).Uniform Insurers Liquidation Act ("UILA"); Effect of reciprocal
state's rehabilitation Orders‐‐Rehabilitation order that had been issued in
reciprocal state under the UILA and that enjoined any person from commencing
or prosecuting any action against insurance company entitled company to stay
of action to recover on payment and performance bonds. 893 So. 2d at 1151.
Ex parte Noble Trucking Co., 675 So. 2d 356 (Ala. 1996). Plaintiff brought
action in Alabama against alleged tortfeasor arising from a motor vehicle
collision. During the litigation, the tortfeasor’s insurer was placed into
rehabilitation in Indiana. The rehabilitation order enjoined all persons from,
inter alia, presenting actions against insureds of the insurer in rehabilitation.
Alabama and Indiana were reciprocal states under the Uniform Insurers
Liquidation Act. On a petition for a writ of mandamus after the trial court
refused to defer the trial date for more than ninety days, the Alabama
Supreme Court refused the writ. The Court held that the Indiana injunction

was overbroad in delaying indefinitely actions against tortfeasors to which
the insurer was not a party. The Court distinguished Ex Parte United
Equitable Life Ins. Co., 595 So. 2d 1373 (1992), which entered an indefinite
stay issued by an Illinois insolvency court and prohibited the contravention
of an action against the insurer itself, on the ground that the insolvent
insurer was not a party in Noble Trucking.
In re United Equitable Life Insurance Company, 595 So.2d 1373 (Ala. 1992). The
state supreme court held that the rehabilitation order entered in Illinois
restricting an insolvent insurance company from paying any claims to
policyholders entered in Illinois stayed litigation over entitlement to policy
proceeds in the Alabama court. The appellate court took the unusual step of
issuing a writ of mandamus to preclude the state court judge from entering a
judgment against the insolvent insurer while it was under a rehabilitation
order.
Moody v. State ex rel. Payne, 295 Ala. 299, 329 So.2d 73 (1976). When the
insurance commissioner, as receiver of an insolvent company, obtained an
injunction restraining the president of the insolvent insurer and others from
filing any lawsuits or claims relating to the affairs of the insolvent insurer, the
court held that receivership court may require that any party seeking to bring
action against receiver first obtain permission of receivership court, and that
state court could restrain proceeding in federal court where action was not
truly in personam, but was an attempt to remove assets from the estate of the
insolvent insurer.
Arkansas
Baldwin‐United Corp. v. Garner, 283 Ark. 385, 678 S.W.2d 754 (1984). The
insurance commissioner, as receiver of three insolvent insurance companies
owned by one corporation, proposed a rehabilitation plan which was approved
by the court. The parent corporation appealed the plan's provisions that: (i)
the rehabilitation court had exclusive jurisdiction over the assets of the
companies, and (ii) the rehabilitation court would refuse to honor a judgment
obtained in any other forum. In affirming the lower court's decision, the
Supreme Court of Arkansas announced that nothing contained in the
McCarran‐Ferguson Act or the Bankruptcy Act prohibits a state from
determining the rights of an insurance company's creditors. Furthermore, the
appellate court added, the lower court properly ordered that all claims to the
companies' assets be adjudicated in the rehabilitation court.
California W. J. Jones & Son v. Independence Indemnity Company, 52 Cal. App. 2d 374,
126 P.2d 463 (1942). In dicta, the appeals court stated that the court which
granted the liquidation order was authorized to issue such other injunctions or
orders as may be deemed necessary to prevent the obtaining of preferences,
judgments, attachments, or other liens against such person or its assets.
Colorado Herstam v. Bd. of Dir. of Silvercreek Water Sanitation Dist., 895 P.2d 1131
(Colo. App. 1995). Since the grant or denial of a preliminary injunction is a
decision that lies within the sound discretion of the trial court, an appellate
court reviewing the issuance of the injunction will substitute its judgment for
that of the trial court only if the trial court’s ruling was manifestly
unreasonable, arbitrary, or unfair. The trial court did not exceed its authority
in granting the receiver’s motion for preliminary injunction, since C.R.S. § 10‐
3‐505(1) grants the court broad authority to enjoin numerous acts, including
interference with the receiver and the institution or further prosecution of
any actions or proceedings.

District of Columbia
Florida
Consumers United Insurance Company v. Smith, et al., 644 A.2d 1328 (D.C.
1994). Consumers United Insurance Company (“CUIC”), a Delaware insurer
with its main office in the District of Columbia, sued its D.C. landlord in D.C.
Superior Court to rescind its lease, alleging asbestos issue. The landlord
countersued for rent and was awarded a judgment of $2.5 million. After the
landlord attempted to execute on the judgment, the Delaware Insurance
Department seized CUIC’s assets and obtained an injunction in Delaware
state court against further claims. The landlord ignored the Delaware
injunction and pursued its remedies in D.C. including the execution of its
judgment against a building transferred post‐judgment from CUIC to its
parent in return for a note against cash in a bank account. The Court of
Appeals posed the question presented as: “To what extent does the
appointment of a receiver for a Delaware insurance company by a chancery
court in Delaware – a state which has enacted the Uniform Insurers’
Liquidation Act…prevent a judgment creditor from executing on the
insurance company’s property located in the District of Columbia?” Prior to
the appointment of the receiver in Delaware, the landlord had served an
attachment on CUIC’s bank; a later attachment suggested additional funds
had been received by the bank. Held, landlord was entitled to those funds in
the bank at the time of the first attachment; additional cash collected after
the appointment of the receiver could not be attached by the landlord. The
transfer of the building to the parent company to protect it from attachment
was a fraudulent conveyance as a matter of law and thus ineffective. The
landlord’s lien, since it predated the receivership, could not be enforced by
foreclosure. Further, because the District of Columbia (unlike Delaware) had
not adopted the Uniform Liquidation of Insurers Act, the Delaware receiver
was not vested with title to the assets in question. The court further
declined to adopt the ULIA’s scheme of priorities as a matter of D.C.
common law.
Florida Dep’t of Ins. v. Cypress Ins. Co., 660 So. 2d 1177 (Fla. Dist. Ct. App.
1995). An Oklahoma insurer and a Florida reinsurer, which reinsured a
substantial portion of the Oklahoma insurer’s business, were rendered
insolvent by Hurricane Andrew. The Oklahoma direct insurer was placed into
liquidation in Oklahoma. The Florida Department of Insurance (the “Florida
Department”) petitioned the Florida court for an order placing the Florida
reinsurer in liquidation. The Florida Department alleged that losses owed to
the Oklahoma direct writer rendered insolvent the Florida reinsurer. Before
the petition for liquidation was heard, and while an injunction was pending
which prohibited any person from disposing of the Florida reinsurer’s assets,
the Florida reinsurer unilaterally settled with the Oklahoma reinsurer for a
reduced cash payment and surplus notes. The trial court denied the petition
for liquidation holding that the Florida reinsurer was no longer insolvent.
The appellate court agreed, holding that the insurer’s unilateral settlement
of the Oklahoma receiver’s claims did not violate the Florida injunction and
did not violate Florida statutes delegating exclusive authority upon the
Department of Insurance to rehabilitate an insurer. The appellate court also
held that because the surplus notes were not given in exchange for
borrowed money, the reinsurer did not need the Florida Department’s
approval before issuing the surplus notes.
Imagine Ins. Co. v. State of Florida ex rel. the Dep't of Financial Serv., 999 So. 2d
693 (Fla. 1st DCA 2008). The Circuit Court issued a Consent Order of
rehabilitation appointing the Department as Receiver of American Superior.
Among other things, the Consent Order vested all of American Superior's
property rights in the Receiver, placed or recoveries, ordered all banks and

financial institutions to transfer American Superior's assets to the Receiver
without executing any set‐off rights, and prohibited any transfers of assets
without the Receiver's consent. 999 So. 2d at 694‐95. Section 631.181, Florida
Statutes requires the filing of claims in the receivership court following the entry
of an Order of liquidation. Id. at 700.
Ocean Bank v. Fla. Dep't. Fin. Serv., 902 So. 2d 833 (Fla. 1st DCA 2005) (per
curiam), rev. dismissed, 944 So. 2d 251 (2006). Section 631.041(1), Florida
Statutes authorizes the receivership court to enter an Order initiating a
delinquency petition, which operates as an automatic stay applicable to all
persons and entities. 902 So. 2d 834.
Georgia Shaw v. Caldwell, 229 Ga. 87, 189 S.E.2d 684 (1972). The court held that
provision for injunctions under the state insurance liquidation law must be read
in concert with the Civil Practice Act, which provides that injunctions are
binding only on those who are parties or receive notice. Thus, plaintiff, who
had no notice of injunction in Georgia ancillary proceeding could successfully
prosecute action against insolvent Tennessee insurer. The holding of this case
was later overruled by Statute. See, Short v. State, 235 Ga. 394, 219 S.E.2d 728
(1975).
Smith v. Farm & Home Life Ins. Co., 269 Ga. 709, 506 S.E.2d 104 (1998). An
insurer, which owned and held security interests on properties in Georgia,
was placed into receivership in Arizona. The receivership order enjoined
actions against the insurer’s assets. The county taxing authorities in Georgia
sought to levy upon the insurer’s properties for taxes. The trial court ruled
in favor of the receiver, and the Georgia Supreme Court affirmed. The Court
held that the Georgia and Arizona statutes were sufficiently similar to make
them reciprocal states. As a reciprocal state, Georgia was obligated to defer
to the Arizona proceeding, particularly since Georgia had not instituted an
ancillary proceeding.
Illinois
Korman v. Matthias, 31 Ill. App. 2d 341, 177 N.E.2d 720 (1961). The trial court's
temporary restraining order prohibiting the payment of the salaries of
management of an insolvent insurer was held to be improper since only the
insurance commissioner can make the preliminary determination as to
whether an injunction or restraining order which interferes with the business
of an insurance company can be entered pursuant to conservation,
rehabilitation or liquidation.
Mahan v. Gunther, 278 Ill. App. 3d 1108, 663 N.E.2d 1139 (Ill. App. Ct. 1996).
The plaintiff, an Illinois resident, filed suit after she was involved in a car
accident with the defendant's employee. The Illinois trial court entered an
order staying the plaintiff's lawsuit because the defendant's insurer was in
rehabilitation in Indiana and had obtained an antisuit injunction from an
Indiana court. The appellate court found that the State of Indiana could not
and did not acquire personal jurisdiction over the plaintiff in this case, given
that she had no contacts with Indiana. In addition, the court held that there
is no constitutional compulsion on Illinois courts to give full faith and credit
or extend comity to foreign antisuit injunctions.
People ex rel. Parkinson v. Williams, 392 Ill. 224, 64 N.E.2d 464 (1946). The
court held the insurance code does not prohibit actions against insolvent
insurance companies, but instead prohibits the entry of orders enjoining,
restraining, or interfering with the prosecution of the business of an insolvent
insurance company. The court recognized that whether a particular order

interferes depends upon the facts, circumstances, and conditions of the case.
Nonetheless, it held that prosecution of actions based upon contractual rights
are not restrained by the insurance code. Both the presence of this exception
and "manifest legislative intent" indicated that persons having contractual
rights may obtain an adjudication of those rights in the courts and reduce them
to judgment without applying to the insurance commissioner in the liquidation
proceeding. Although accepting that an accounting would interfere with the
business of the company, an enforcement of contract rights pursuant to
policies with the pre‐consolidated mutual company was held not to interfere
with insolvent insurer's proceedings. As a general matter, the court noted that
it is only when "a state of unsoundness" is reached that the rights and
remedies of policyholders must yield to superior authority of the insurance
commissioner.
Schwartz v. Kemper, 69 F. Supp. 152 (N.D. Ill. 1946). A member and
policyholder of a clearly solvent insurance company brought an action against
its directors to account to the members for waste and diversion of assets. The
complaint could not be dismissed on the basis that only the insurance
commissioner could bring an action to restrain or enjoin an insurance company
because this action did not interfere with the business of an insurance
company as provided in the Illinois liquidation provisions.
Indiana State ex rel. Old Underwriters, Inc. v. Bell, 244 Ind. 701 195 N.E. 2d 464 (1964).
The insurance commissioner filed a petition for liquidation, and as part of the
filing of the petition, the court granted the commissioner a temporary
restraining order which effectively prohibited the insurer from providing a
defense to the petition for liquidation. The appellate Court modified the
temporary restraining order in order to allow the insurer to expand reasonable
amounts for attorney's fees in order to provide a defense to the petition for
liquidation.
Louisiana Green v. Champion Insurance Company, 577 So.2d 249 (La. App. 1st Cir. 1991),
writ den'd, 580 So.2d 668 (La. 1991). Champion Insurance Company was
declared insolvent and the Insurance Commissioner was appointed liquidator.
Faced with criminal charges relating to Champion, the Commissioner moved to
recuse himself as liquidator, and a liquidator ad hoc was appointed. The
liquidator ad hoc sued twelve individual defendants, all officers and
stockholders of Champion or its various affiliates, and nine corporate
defendants related to Champion, including holding companies, a premium
finance company and managing general agent corporations. The trial court
found that all of the corporate defendants had been operated as a "single
business enterprise," and issued an order declaring that the assets of the
defendant corporations were assets of Champion to be distributed in the
liquidation proceeding. He further issued an injunction restraining the
defendants from using or otherwise disposing of those assets without a prior
hearing.
In response to a challenge that the appointment of the ad hoc liquidator was
an unconstitutional exercise of powers reserved to the executive branch, the
appellate court held that the Louisiana statutory scheme merely expresses a
non‐mandatory preference for the appointment of the Commissioner of
Insurance as liquidator, and the trial judge had authority to appoint a liquidator
ad hoc of his own choosing. The court affirmed the finding that the corporate
defendants had been operated as a "single business enterprise" and
delineated the factors to be considered in reaching such a determination. The
court concluded that once the judicial determination was made that the

entities were in fact a "single business enterprise," the liquidator was vested
with the defendants' assets by operation of law, and no further actions, such
as writs of seizure, were necessary to bring those assets into the liquidation
proceeding. The court rejected the claim that the liquidator was thereby
regulating non‐insurer corporations, finding the order was simply in
furtherance of the liquidator's duty to marshal the assets that are properly
included in the liquidation. The court squarely held that the insurance code
which authorizes the issuance of an injunction restraining, inter alia, "all other
persons from transacting any insurance business or disposing of its property,"
is intentionally broad to ensure that the jurisdiction of the liquidation court
extends to persons or entities such as defendants, who may have access,
control, or possession of the insurer's assets. Finally, the court held that it was
not required to stay the civil action pending the outcome of the criminal
proceedings filed against various individuals, because to do so would prejudice
the liquidator's civil remedy against those persons.
Guste v. ALIC Corporation, 595 So.2d 797 (La. App. 2 Cir. 1992). When an
order is entered in receivership proceedings enjoining parties from
instituting or taking further action in proceedings against the insurer and
staying all suits and seizures against the insurer, it is applicable to State
agencies, including, the Attorney General and Commissioner of Securities
who sought to initiate suit alleging that the insurer had violated securities
laws and committed unfair trade practices. Once the receiver is appointed,
all claims against the insolvent receiver must be presented either to the
domiciliary receiver or to the ancillary receiver appointed in the reciprocal
state. Prior to the appointment of an ancillary receiver in Louisiana for an
insolvent foreign insurer, the only individual with authority over the assets of
the insurer or authority over liability claims against the insurer is the
insurance commissioner in the foreign state. After appointment of the
Louisiana Insurance Commissioner as ancillary receiver, claims against the
insurer may be brought in either domiciliary or ancillary forum. Subject
matter jurisdiction vests in the district court in which receivership
proceedings are instituted. Therefore, subject matter jurisdiction is
conferred exclusively to the courts where domiciliary and ancillary
receiverships are instituted, proceedings in any other courts lack subject
matter jurisdiction against the insurer.
Mississippi
New Jersey
State Security Life Insurance Co. v. State of Mississippi, 498 So.2d 825 (Miss.
1986). The Supreme Court of Mississippi held that the judge in an insurance
receivership proceeding may grant a temporary restraining order prohibiting
the allegedly‐insolvent insurer from transacting business and requiring the
insurer to produce documents and records. However, the court further found
that the judge erred in granting a default judgment on the trial date when an
answer had been filed and not stricken by the court.
Matter of Mutual Benefit Life Insurance Co., 258 N.J. Super. 356 (App. Div.
1992). A New Jersey state court presiding over the Mutual Benefit Life
Insurance Company rehabilitation proceeding, had the authority to enjoin outof‐state
indenture bond trustees from foreclosing on real estate projects in
which the insurer owned partnership interests or for which the insurer had
guaranteed debt. Even if the projects were not, technically, direct assets of the
insurer, they were partnership assets in which the insurer had a direct interest
and, because of the guarantees, foreclosure would trigger deficiency
judgments directly against the insurer.

As to jurisdiction, the non‐resident trustees had minimum contacts with the
insurer to subject the trustees to personal jurisdiction of the rehabilitation
proceeding.
New York Gallin v. Burdick, 152 Misc. 468, 273 N.Y.S. 456 (1934), affirmed, 241 A.D. 271
N.Y.S. 1086, affirmed, 265 N.Y. 492, 193 N.E. 286. A defendant mortgage
guaranty company, in rehabilitation, had issued guaranteed mortgage
participation certificates, and the order appointing the rehabilitator contained
injunctive provisions pursuant to the insurance code. The court held the
bringing of an equity action, without prior leave of court, by one of the holders
of the company's guaranteed mortgage participation certificates violated the
aforementioned injunctive provisions, even though the personal judgment was
demanded against the defendant.
In re Application for an Order Staying Arbitration, No. 24632, slip op. (N.Y. App.
Div. 1st Dep't. Dec. 3, 1985). When an insurance company is in liquidation and a
court order prohibits any action or proceeding from being brought against it, a
preliminary trial to determine whether coverage by the liquidated company
existed should be assigned to the court supervising the liquidation. An insurer,
from whom uninsured motorist coverage was sought, applied for a preliminary
trial to determine whether the company in liquidation had in fact covered any
of the parties to the accident. The trial, however, should not be assigned to
the trial term court because the insurance law provides for the exclusive
operation and procedure of companies in liquidation.
In re Rehab. of Frontier Ins., 813 N.Y.S. 2d 50 (App. Div. 2006). A temporary
restraining order issued in a rehabilitation proceeding, restraining the insolvent
insurer from transacting business and wasting or disposing of property but not
expressly staying litigation did not restrain the insurer from opposing summary
judgment in an action on a performance bond. Thus, by failing to respond, the
insurer defaulted on the summary judgment motion.
In the Matter of the Rehabilitation of United Community Insurance
Company, 226 A.D.2d 948, 641 N.Y. 2d 172 (3 rd Dept. 1996). Home Indemnity
Company was litigating an auto accident arbitration issue with United
Community Insurance Company at the time an Order of Rehabilitation was
issued, placing United Community in rehabilitation. The order contained an
injunction against all actions against United Community. Home Indemnity
attempted to modify the injunction and proceed with the underlying action.
The Home’s motion to modify the injunction was denied on the ground that
the trial court had not abused its discretion in declining to modify the
injunction contained in the Order of Rehabilitation.
Matter of Nemerov, 268 N.Y.S. 588, 149 Misc. 797 (1933). Where an order
which prohibited any interference with the Superintendent's rehabilitation of
mortgage companies was obtained after the companies received proper
notice, lack of notice to certificate holders did not render the order invalid.
Matter of People, 164 A.D. 586, 150 N.Y.S. 398 (1914), appeal dismissed, 214
N.Y. 659, 108 N.E. 1093. Where the insurance commissioner was permitted to
posses an insolvent insurance company's property the New York Supreme
Court could prevent one of the company's creditors from commencing a suit
against the company for the collection of a claim. After the creditor filed the
claim with the insurance commissioner and was served with a copy of the
injunction, the court could assert jurisdiction over the creditor, and if the
creditor filed the claim in another state's court subjecting a deposit made by

the company in that other state to claim, the Supreme Court could punish the
creditor for contempt.
Matter of People v. Second Russian Ins. Co., 255 N.Y. 436, 175 N.E. 121 (1931).
Once the insurance commissioner completed liquidation of the assets of a
branch of an insolvent Russian insurance corporation, it was permissible to
modify the injunction in the order of liquidation so as to allow assignment
without preference for a creditor's benefit, and also to allow a creditor to sue
and to enforce legal rights.
Muhl v. Trabucchi, 673 N.Y.S.2d.103 (App. Div. 1998). A consent order
prohibiting the transfer of any of an insolvent reinsured’s assets “located
anywhere in the United States,” also prohibited the transfer of funds to
Bermuda; the order encompassed the transfer of any assets that were located
in the United States regardless of where the assets were transferred.
People, by Beha, Sup't of Insurance v. Russian Reinsurance Co., 255 N.Y. 415,
175 N.E. 114 (1931). Once the insurance commissioner completed liquidation of
the New York branches of an insolvent Russian insurance company, which
were taken possession of in order to conserve assets for the benefit of entitled
parties, the court should have continued an injunction which restrained
creditors with claims not arising out of domestic business from pursuing their
legal remedies.
Pink v. Title Guarantee & Trust Co., 274 N.Y. 167, 8 N.E.2d 321 (1937),
reargument denied, 274 N.Y. 610, 10 N.E.2d 575. When the insurance
commissioner took possession of the affairs of an insolvent mortgage
guarantee company under an order of rehabilitation, the court held that all
persons including the insolvent company are enjoined from interfering with
the assets of the insolvent insurer or from obtaining a preference or from
bringing any action or other proceeding at law or in equity against the
insolvent or its assets or against the commissioner.
Powell v. All City Ins. Co., 74 A.D.2d 942, 426 N.Y.S.2d 135 (1980). Where one
judge enjoined all parties from commencing or further prosecuting any action
against an insolvent insurance company or its assets, both the first order of a
second judge directing that the trial of an action against such insurer
commence and the second order of the second judge to postpone the trial's
commencement contradicted the purpose and intent of the insurance code,
that being the promotion of orderly, court‐supervised proceedings.
Schenck v. Coordinated Coverage Corp., 50 A.D.2d 50, 376 N.Y.S.2d 131 (1975)
and Schenck v. Citizens Casualty Co., 66 Misc.2d 811, 322 N.Y.S.2d 483 (1971).
An injunction prohibiting counterclaims is necessarily implied in an order of
liquidation which contains an injunction staying all suits against an insurance
company during liquidation, even though the order does not mention
counterclaims.
Serio v. Black, Davis & Shue Agency, Inc., No. 05 CIV. 15 (MHD), 2005 WL 3642217
(S.D.N.Y. Dec. 30, 2005), stay denied, No. 05 CIV. 15 (MHD), 2006 WL 156395
(S.D.N.Y. Jan. 12, 2006). The Insurance Superintendent as rehabilitator sued to
recover premiums allegedly owed to the insolvent insurer under an agency
agreement, and also sought an injunction requiring the defendant agency to
deposit security representing premiums not transmitted to the insurer. The
court held that the rehabilitator satisfied preliminary injunction requisites and
ordered that sums be deposited, but would not require the liquidator to post

ond in conjunction with the preliminary injunction under Fed. R. Civ. P. 65(C),
absent proof of likelihood of harm.
Van Schaick v. Title Guarantee & Trust Co., 252 A.D. 188, 297 N.Y.S. 827 (1937).
The insurance code provides for an injunction against all other persons,
including creditors, from interfering with the insurance commissioner and from
prosecuting any actions against the corporation or its assets.
Ohio Benjamin v. Ernst & Young, LLP, 167 Ohio App. 3d 350, 358 (Ohio Ct. App. 2006).
This case affirmed the finding by the Court of Claims, which held that under
Ohio Revised Code § 3903.04(B), only the court of common pleas has
jurisdiction to entertain “any complaint praying for the dissolution, liquidation,
rehabilitation, sequestration, conservation, or restraining order, preliminary
injunction, or permanent injunction, or other relief preliminary to, incidental to,
or relating to delinquency proceedings other than in accordance with sections
3903.01 to 3903.59 of the Revised Code.” Thus, the court found that the
superintendent as liquidator was not subject to counterclaims arising from acts
or omissions of the superintendent in her capacity as regulator.
Boedeker v. Rogers, 140 Ohio App. 3d 11 (Ohio Ct. App. 2000). The insurer was
placed in liquidation, and intervenor, the liquidator, was allowed to intervene in
the action. The intervenor appealed the denial of his motion for an order
substituting him as the plaintiff in the action representing policyholders of the
insurer pursuant to Ohio Revised Code Chapter 3903. The court reversed in part
and remanded, finding that the intervenor should have been substituted as the
plaintiff with respect to plaintiffs’ derivative claims. The court affirmed in part,
however, because the intervenor was not entitled to be substituted as the
plaintiff on the individual claims.
Ti‐Bert Systems, Inc. v. Union Indem. Ins. Co., No. 14207, 1990 Ohio App. LEXIS
2160 (Ohio Ct. App. May 30, 1990). The Supreme Court of New York issued an
order of liquidation that stayed all proceedings against the insolvent insurance
company and its successor‐in‐interest. Affirming the lower court's judgment
enforcing that order, the Ohio appellate court found that actions taken by the
successor‐in‐interest subsequent to the filing of the order of liquidation did not
constitute a waiver of the protection of the stay. The liquidation order
imposed a stay of proceedings against the insurance company and its
successor‐in‐interest only; it did not impose a stay on actions brought by those
parties.
Pennsylvania
Foster v. Berwind Corp. Civil Action No. 90‐0857, 1991 U.S. Dist LEXIS 1988 (E.D.
Pa. 2/13/91). Pennsylvania District Court applied Pennsylvania choice of law
rules and Pennsylvania law to govern an action brought by the Pennsylvania
Commissioner of Insurance to pierce the corporate veil of a defunct Bermuda
subsidiary (Norad) and hold the defendant liable for reinsurance loss claims of
the insolvent Mutual Fire, Marine & Inland Island Co. The court held that
Pennsylvania's interest in investigating the claims of its domiciliaries against its
own corporations outweighed Bermuda's interest in regulating its reinsurance
industry where the subsidiary is "exempt" because it does not "do business".
Grode v. Mutual Fire, Marine and Inland Ins. Co., No. 91‐1179, 1992 U.S. Dist.
LEXIS 22 (E.D. Pa. Jan. 2, 1992). Defendant reinsurer and its parent companies
moved for an order permitting interlocutory appeal of the district court's
finding that a statutory rehabilitator of an insolvent Pennsylvania insurance
company has standing to assert claims common to the insurance company's
policyholders and other creditors. The district court denied the motion

easoning that: 1) its earlier finding did not involve a controlling question of
law; 2) there was no substantial ground for differing opinions about its earlier
finding; and 3) the defendants failed to show how an immediate appeal could
materially advance the termination of the litigation.
Tennessee Flowers v. Tennessee Trucking Ass’n Self Ins. Group Trust, 209 S.W.3d 602
(Tenn. Ct. App. 2006). The court had authority to enter a civil contempt
sanction against members of a compensation self‐insured group trust who
failed to make court‐ordered payments to the trust as requested by the
liquidator.
Texas Bard v. Charles R. Myers Ins. Agency, 839 S.W.2d 791 (Tex. 1992), reversing 811
S.W.2d 251 (Tex. App.‐‐San Antonio 1991). Receiver of insolvent Vermont
insurer sued insurance agents pursuant to correspondent's agreement for
payment of earned premiums. Defendants filed compulsory counterclaims,
which resulted in a jury award for defendants on the counterclaim. Receiver
claimed the Vermont liquidation order, which included injunctions against
maintaining counterclaims or other actions against the receiver in any court
other than the Vermont liquidation court, should have been enforced in the
Texas court under principles of full faith and credit and/or comity. Reversing a
contrary appellate court judgment, the Texas Supreme Court agreed. The
court found the liquidation order sufficiently final to be entitled to full faith and
credit. The fact that the receivership court retained jurisdiction to discharge
the receiver and enter further orders with respect to assets of the estate did
not mandate a finding that the liquidation order was an interlocutory judgment
which was therefore not entitled to full faith and credit.
Further, the fact that a receiver is entitled to prosecute claims of the insolvent
estate in foreign jurisdictions does not also require the receiver to be subjected
to prosecution of claims against him in that foreign jurisdiction. The Texas
compulsory counterclaim statute did not require a contrary result; the
counterclaim requirement is a procedural rule which fosters judicial economy
by foreclosing piecemeal litigation. The order of the liquidation court which
requires all claims against the receiver to be brought in Vermont (or to be
heard in Texas by a Special Master appointed by the liquidator) also operated
to further judicial economy by ensuring that all claims against the insolvent
estate are prosecuted in one forum, enabling the receivership court to ensure
that all claimants are treated uniformly. The claims were ordered dismissed
without prejudice to prosecute them in Vermont.
Robbins v. Reliance Ins. Co., 102 S.W.3d 739 (Tex. App. 2001). The court of
appeals refused to honor an anti‐suit injunction issued by a state court in
Pennsylvania. Reliance Insurance Company (“Reliance”) was placed under an
order of receivership by a Pennsylvania court, and the court issued an order
staying litigation in this cause pending Reliance’s rehabilitation. In analyzing
whether to honor the Pennsylvania court’s order and stay the appeal, the court
of appeals recognized two possible theories upon which it could enforce the
order. First, the court examined whether the Pennsylvania court properly had
jurisdiction over the parties and subject matter of the immediate suit so as to
entitle its order to full faith and credit. Next, the court turned to whether the
Pennsylvania order substantially complied with relevant Texas Insurance Code
provisions relating to stays of pending suits against insurers placed under an
order of rehabilitation. Finding that the Pennsylvania court had neither
jurisdiction over the claims in its court nor had it complied with Texas law
governing the stay of suits against insurers placed under an order of

ehabilitation, the court of appeals held that it was contrary to Texas law and
public policy for a Texas state court to stay the pending case.
Rules of Civil Procedure in Proceedings
Third Circuit General Glass Industries Corp. v. Monsour Medical Foundation, 973 F.2d 197
(3rd Cir. 1992). Plaintiff, on behalf of its 300 workers, brought RICO, ERISA and
Commonwealth tort claims against the Company's employee health insurer in
liquidation (Keystone Medical Services and its successor, Monsour Medical
Foundation). The Third Circuit vacated so much of the District Court's order
dismissing plaintiff's claims that were broader than, or different from, those
asserted by the Pennsylvania Commissioner of Insurance in the
Commonwealth court action and declared that the Federal action be stayed
during the pendency of the liquidation proceedings. The retention of
jurisdiction by the District Court was hoped to avoid any applicable statute of
limitations defense.
Fifth Circuit
Meyner v. Punch, 838 F.2d 1407 (5th Cir. 1988). Once a foreign insurer was
order into liquidation, the Louisiana statute providing for service of process
upon foreign insurers by service upon Louisiana's Secretary of State could no
longer be applied to that insurer.
Alabama Alabama Ins. Guar. Ass'n v. Southern Alloy Corp., 782 So. 2d 203 (Ala. 2000).
Employer's claim for reimbursement from AIGA for payments it made to
employee should have been asserted as a counterclaim in the initial declaratoryjudgment
action. 782 So. 2d at 205 (citing Ala. R. Civ. P. 13(a)).
Alabama Workmen's Compensation Self‐Insurers Guaranty Association, Inc., v.
Arthur Wilson, 993 So. 2d 451 (Ala. Civ. App. 2006). A nonprofit corporation
created by the Alabama Legislature to create and fund an insolvency fund to
assure payment of workers' compensation claims due from self‐insuring
employers who became insolvent is statutorily entitled to “all defenses of” and
is “subrogated to all rights of [an] insolvent employer”. 993 So. 2d 452 (citing
Ala. Code 1975, § 25‐5‐255(1)).
Banks v. Debellis, No. CA 97‐1129‐P‐C, 1998 U.S. Dist. LEXIS 9632 (S.D. Ala.
April 24, 1998). Policyholder was not deprived of due process of law because
Alabama Department of Insurance sought rehabilitation of insurer,
notwithstanding that such petition may have delayed the collection of her
judgment.
California
Abraugh v. Gillespie, 203 Cal. App. 3d 462, 250 Cal. Rptr. 21 (1988). A claim
against an insolvent insurer is not a civil action subject to the Code of Civil
Procedure but rather a special proceeding governed by the comprehensive
statutory scheme set out in the Insurance Code. The provisions of the Code of
Civil Procedure relating to pleadings in civil actions are inapplicable unless
there is a statutory directive to the contrary.
Carpenter v. Pacific Mutual Life Ins. Co. of California, 10 Cal.2d 307, 74 P.2d 761
(1938); cert. denied, 305 U.S. 562; rehearing denied, 305 U.S. 675. The
California Supreme Court concluded that insurance liquidation proceedings
were special proceedings to which the Code of Civil Procedure did not apply.
Thus, no findings of fact required under the Code of Civil Procedure were
needed unless the liquidation statute so provided.

McConnell v. All‐Coverage Insurance Exchange Auto and Fire, 229 Cal. App. 2d
735, 40 Cal. Rptr. 587 (1964). Since liquidation proceedings under the California
insurance code were considered special proceedings, no finding of fact was
necessary to an award of attorneys' fees.
Connecticut Connecticut Life and Health Insurance Guaranty Association v. Jackson, 173
Conn. 352, 377 A.2d 1099 (1977). The court ruled that the guaranty association
must exhaust its administrative remedies with the insurance commissioner in a
dispute with the commissioner over the interpretation of a provision in the
guaranty fund law before it could bring an action for a declaratory judgment in
the courts.
Florida Fla. Dep't. Fin. Serv. v. Tampa Serv. Co. Inc., 884 So. 2d 252 (Fla. 1st DCA 2004).
Receiver's response to the request for admissions under Florida Rules of Civil
Procedure was untimely; thus, the matters in the request are properly deemed
admitted. 884 So. 2d at 253.
Law Offices of David J. Stern, P.A. and David J. Stern v. Skor ReIns. Corp., 354 F.
Supp. 2d 1338 (S.D. Fla. 2005). District Court would not consider reinsurance
agreement between reinsurer and insolvent insurer that issued professional
liability insurance policies to insureds, on reinsurer's motion to dismiss for failure
to state a claim insureds’ action against it alleging claims for breach of contract
and tortious interference, where reinsurance agreement was not attached to
complaint, and insureds were seeking recovery for reinsurer's alleged breach of
liability policies, not reinsurance agreement. 354 F. Supp. 2d at 1342.
Party is not indispensable where complete relief can be granted in an action
with the present parties and where the law provides that liability between an
agent and an undisclosed principal is alternative. In Florida, when an agent deals
with a second party for a principal who is not disclosed the second party may
hold liable either the agent or the principal. 354 F. Supp. 2d at 1344‐45.
Peter v. State (In re the Receivership of Guarantee Sec. Life Ins. Co.), 678 So.
2d 828 (Fla. Dist. Ct. App. 1996). Receivership court granted permission to
insolvent insurer’s affiliates to pursue foreclosure action for benefit of the
receivership. The defendants sought discovery from the receiver, which was
denied by the receivership court. The appellate court reversed, holding that
a receiver is subject to discovery in civil actions collateral to the receivership.
U.S. Fire Ins. Co. v. Freedom Village of Sun City Center, Case No. 8:04‐cv‐2783‐T‐
23TBM, 2006 WL 1046946 (M.D. Fla. April 19, 2006). To be entitled to intervene
under Rule 24(a)(2), a party must demonstrate that: (1) its application to
intervene is timely; (2) it has an interest relating to the property or transaction
which is the subject of the action; (3) it is so situated that disposition of the
action, as a practical matter, may impede or impair his ability to protect that
interest; and (4) its interest is represented inadequately by the existing parties
to the suit. Purely economic interests in a suit are insufficient to trigger
entitlement to intervene under the rules. 2006 WL 1046946 at 3. Permissive
intervention under Rule 24(b)(2) is appropriate where the applicant's claim or
defense and the main action have a question of law or fact in common and the
intervention will not unduly delay or prejudice the adjudication of the rights of
the original parties. 2006 WL 1046946 at 3.
Georgia
In re Henry Graben, individually and as personal representative of the estate of
Una J. Graben, deceased v. A& B Transport, Inc., No. 1060310, 2007 WL 4554466
(Ala. Dec. 28, 2007). Where a party seeking relief from a final judgment fails to

allege and prove the grounds justifying that relief, the trial court exceeds its
discretion by granting the motion.2007 WL 4554466 at 7 (citing Fed. R. Civ. P.
60(b)(6) (2007)).
O’Neal v. Oxendine, 237 Ga. App. 171, 514 S.E.2d 908 (1999). The receiver of
an insolvent health maintenance organization sought approval of a plan of
rehabilitation under which solvent health maintenance organization would
assume all policies and policyholder liabilities in exchange for transfer of
most of insolvent health maintenance organization’s assets. A judgment
holder moved to intervene and moved for discovery. The trial court denied
both motions, citing the urgency of the proposed transaction. The appellate
court affirmed, holding that the allowance of discovery in rehabilitation
proceedings is discretionary and that the denial of discovery in this case was
not an abuse of discretion. The Court also found that the judgment holder
was not harmed by the denial of intervention, because he was allowed to
participate fully in the hearing on the plan.
Illinois In re American Reserve Corp., 1990 U.S. Dist. LEXIS 15762 (N.D. Ill. Dec. 5, 1990).
The trustee in bankruptcy of the holding company of an insolvent insurer sued
the insurer's public accountants for fraud, breach of contract, civil conspiracy,
and RICO violations, and sued certain former officers and directors of insurer for
RICO violations, fraud, and negligence. The Illinois Liquidator of the insolvent
insurer brought similar claims against one of the accounting firms and other
defendants. The trustee sought to consolidate discovery in the trustee's actions
with the Liquidator's actions. The court ruled that the cases were incompatible
for discovery consolidation. The legal theories in the cases were incompatible,
as the trustee charged the defendants who were directors and officers with
negligence and breach of fiduciary duty, and charged the accounting firms with
concealing the insurer's impaired financial condition from the directors. The
Liquidator's cases proceeded on the theory that insurer's officers and directors
conspired with the accountants to conceal the insurer's insolvency from state
insurance regulators. The court also refused to modify a protective order that
the magistrate issued to preserve the accountant privilege. The privilege
belongs to the accountant and may be applied against a client, and the privilege
was correctly asserted and not waived.
In re American Reserve Corp., 1991 U.S. Dist. LEXIS 5425 (N.D. Ill. April 24,
1991). The trustee in bankruptcy for an insurance holding company planned
on using experts at trial, but did not disclose who the experts were to the
defendant. The magistrate judge granted the defendant's motion for
sanctions, and barred the trustee from using any experts. The court held
that discovery sanctions are dispositive pre‐trial matters subject to de novo
review. The court ruled that sanctions were not warranted, as the trustee
did not totally fail to respond to defendant's interrogatories. In cases where
such a total failure is lacking, the magistrate may impose sanctions only if a
party disobeys a court order compelling discovery.
Safety‐Kleen Corp. v. Canadian Universal Ins. Co., 258 Ill. App. 3d 298, 631
N.E.2d 475 (Ill. App. Ct. 1994). The receiver of a Canadian company, with
assets in Rhode Island, sought to vacate a $1 million default judgment
entered against defendant six months prior to the receiver's appointment.
The court found reasonable excuse for the corporation's delay in
responding: Canadian law prohibited participation in litigation without the
supreme court's permission; its previous counsel withdrew representation
without notification, thus prejudicing the defendant from responding timely;
and the receiver responded within six months of taking responsibility for the

company. The court also found that the Canadian Winding Up Act does not
offend Illinois public policy, as both seek to conserve the assets of insolvent
insurers and to promote equal treatment of claimants.
Schacht v. Baccala & Shoop Ins. Serv., 1993 U.S. Dist. LEXIS 16093 (N.D. Ill.
Nov. 10, 1991). Where a Rehabilitator asserts civil RICO violations, it is the
injury that the plaintiff sustains, not the racketeering activity, that triggers
the statute of limitations. A determination of when the Rehabilitator or
Centaur sustained its injury, or when it knew or reasonably should have
known of its injury is a question of fact and therefore, is not dispositive at a
motion to dismiss. To invoke the protections of equitable tolling, the
plaintiff must show that it exercised "due diligence" in discovering the
essential information bearing on its claim.
Tribune Co. v. Swiss Reinsurance. Am. Corp., 2003 WL 22282465 (N.D. Ill. Sept.
30, 2003). Company filed breach of contract action against allegedly nominal
reinsurer after insurer entered liquidation. Under a principal‐agent relationship
theory, company claimed that contracts between insurer and reinsurer where
assumption agreements rather than reinsurance. Reinsurer moved to dismiss
action based on insurer’s liquidator’s failure to join under Fed. R. Civ. P. 19.
Under company’s theory, the court found that complete relief could be
according between the parties to the suit because such a principal would be
jointly and severally liable to the third‐party company. Additionally, the court
found that liquidator’s decision to forgo intervention indicated a lack of need
to join the liquidator. The court concluded that if company could show that
reinsurer was the true obligor to it, liquidator will have no reason to bring suit,
precluding risk of reoccurring or inconsistent obligations.
Kentucky Minor v. Stephens, 898 S.W.2d 71 (Ky. 1995). The Supreme Court of
Kentucky concluded that the trial court’s primary role is a supervisory one,
and the standard of review of a rehabilitator’s actions is abuse of discretion.
Missouri Robertson v. Manufacturing Lumberman's Underwriter, 346 Mo. 1103, 145
S.W.2d 134 (1941). In an appeal by attorneys who had been removed as
representatives for the liquidator of a Missouri reciprocal exchange, the
liquidator challenged the appellate rights of the attorneys, who had been
awarded $3,500 in legal fees on a petition requesting $50,000. The court
rejected the liquidator's theory that the attorneys were not permitted to
appeal since the statute provides a right of appeal in liquidation cases, and
further, that the appellate court could review the petition for attorney's fees
de novo.
New Jersey
New York
Chandler v. Omnicare/HMO, Inc., 756 F. Supp. 187 (D.N.J. 1990). The New
Jersey District Court dismissed (1) an action brought by a terminated employee
against the former employer's insolvent health insurer (Omnicare/The HMO,
Inc.) for continuation of health insurance coverage and damages; and (2) a
cross‐claim by the former employer against the insurer in rehabilitation on
Burford abstention grounds. The court found that New Jersey has a complex
and thorough regulatory scheme to rehabilitate insolvent insurers which can
best be accomplished without interference from outside courts that would
simultaneously dissipate the insolvent insurer's assets.
Ario v. U.S. Mgmt., Inc., No. 05CV3486SLT RML, 2007 WL 3047094 (E.D.N.Y.
Oct. 17, 2007), reconsid. denied, 2007 WL 3047094 (E.D.N.Y. Oct. 17, 2007). In
the liquidator’s action to recover insurance premiums allegedly owed to the
insurance companies and after pre‐motion discovery, the court denied the

defendants’ motion for reconsideration of a letter request for a pre‐motion
conference as improper under Local Rule 6.3 and Fed. R. Civ. P. 59(e) and
60(b).
Asseng v. Arbacas, 695 N.Y.S.2d 506 (Sup. Ct. 1999). The court denied a motion
to enter judgment following settlement of an automobile accidence claim, and
held that settlements involving insolvent insurers are exempt from the prompt
payment rule of CPLR 5003‐a due to delays inherent in the liquidation process.
Curiale v. Phoenix Gen. Ins. Co. of Greece, S.A., No. 83 Civ. 4687 (CSH), 1991 U.S.
Dist. LEXIS 15493 (S.D.N.Y. October 28, 1991). In an action by the Liquidator of
Ideal Mutual Insurance Company to recover monies allegedly due from
Phoenix General Insurance Company under reinsurance treaties, the Liquidator
moved for a protective order to withhold from discovery several audit reports
concerning Ideal's managing general agent. In denying the motion, the court
found that the Superintendent arranged for the audit within a few days after
his appointment as liquidator and concluded that the audit was undertaken
principally, if not exclusively, to permit the Liquidator to carry out his statutory
duty to marshal the company's assets. Accordingly, the audit reports were not
created for the sole or principal purpose of assisting litigation and were not
protected by the work‐product rule.
In re New York Title & Mortgage Co., 156 Misc. 186, 281 N.Y.S. 715 (1935). The
court held the required full hearing in the insurance code regarding an
application for an order of liquidation did not obligate the insurance
commissioner to establish the allegations of the petition by proof of complying
with the rules of evidence applicable to trials with regard to matters already
admitted.
In re Reliance Group Holdings, Inc., No. 00CV‐4653(TPG), 2003 WL 22741396
(S.D.N.Y. Nov. 19, 2003). In a securities class action against an insolvent insurer
and certain officers and directors, the parties entered into a Memorandum of
Understanding (MOU) regarding a proposed settlement. On the same date, the
insurer was placed in rehabilitation and the rehabilitator filed an emergency
petition for preservation of the insurer’s assets. The court granted the plaintiffs’
motion for joinder, under Fed. R. Civ. P. 20(a), of the defendant, a Lloyds
syndicate, in order to enforce the MOU and resolve issues of ownership of
insurance policies and obligations to fund the settlement, where the
rehabilitator’s emergency petition in federal court in Pennsylvania was in limbo.
Serio v. Surge Resources, Inc., No. 04 CIV. 8424 (RCC), 2006 WL 559460
(S.D.N.Y. Mar. 7, 2006). In the rehabilitator’s action for breach of an agreement
regarding final premium audit under workers compensation insurance policies,
the court denied a motion to dismiss the complaint on limitations grounds.
Applying conflicts of law analysis, the court held that New York had a greater
interest in the case than New Hampshire, the domicile of the defendant firm,
because the rehabilitator in attempting to salvage two insolvent insurers has a
strong interest in the dispute’s outcome. New York’s six year limitations period
for breach of contract applied.
North Carolina
North Carolina, ex rel. Long v. Alexander & Alexander Services, Inc., 711 F. Supp.
257 (E.D.N.C. 1989). In an action commenced by the North Carolina
Commissioner of Insurance, in his representative capacity as the rehabilitator
of Beacon Insurance Co., certain of the defendants' counterclaims which
sought to recover against the Commissioner and his deputy individually for
actions taken beyond the scope of their statutory authority were

impermissible because they were not asserted against "opposing parties"
within the meaning of Rule 13 of the Federal Rules of Civil Procedure.
Furthermore, to the extent these counterclaims sought to recover against the
State of North Carolina for the conduct of the Commissioner and his deputy,
such counterclaims were barred by sovereign immunity and the Eleventh
Amendment to the U.S. Constitution. However, the North Carolina
Commissioner of Insurance, in his representative capacity as the rehabilitator
of Beacon, is subject to those defenses which could be raised against Beacon,
and could not have dismissed those counterclaims of the defendants which
could have properly been brought against Beacon.
Ohio
Benjamin v. Credit Gen. Ins. Co., 2005 Ohio 1450 (Ohio Ct. App. 2005). Liquidator
claimed the liquidation court erred by ruling that the reinsurer’s prior federal
court actions against the liquidator did not violate the provisions in the
liquidation orders. The court found that the reinsurer’s filing of a federal show
cause motion against the liquidator violated the plain terms of the liquidation
orders and the Insurers Supervision, Rehabilitation, and Liquidation Act, Ohio
Revised Code Chapter 3903. That chapter specifically prohibits commencing,
maintaining, or further prosecuting an action against the liquidator of the
insolvent insurer’s estate. In addition, the reinsurer’s federal court actions were
contrary to the legislature’s grant of exclusive jurisdiction to the Franklin County
Court of Common Pleas as the forum for hearing claims and proceedings
relating to the insolvent insurer’s liquidation estate.
Benjamin v. Ernst & Young, LLP , 855 N.E.2d 128, 167 Ohio App. 3d 350, 358
(Ohio Ct. App. 2006). In response to Superintendent’s action, defendants
asserted affirmative defenses and counterclaims and sought to transfer the
matter to the Ohio Court of Claims. The Superintendent sought dismissal of the
counterclaims and to strike the defenses. The trial court granted the
Superintendent’s motion and remanded the entire action to the common pleas
court. On appeal, the court initially noted that defendants had standing to argue
the denial of relief under the attorneys’ motions, as the potential res judicata
effect of the rulings would have an adverse effect on the firm. As the
counterclaims were asserted against the Superintendent in her capacity as a
regulator, which was a separate entity from the Superintendent as liquidator,
the claims could not stand pursuant to Ohio Revised Code Sections 3903.04 and
3903.14. Pursuant to Ohio Revised Code § 3903.04(A), the Superintendent as
regulator could not have brought the complaint.
Boedeker v. Rogers, 140 Ohio App. 3d 11 (Ohio Ct. App. 2000). Judgment
denying Liquidator’s motion for an order of substitution was reviewable by
the Court of Appeals. The judgment conclusively denied a provisional remedy to
the Liquidator for which no meaningful relief could be provided if review were
delayed until the close of all proceedings and was thus reviewable
under Ohio Revised Code § 2505.02(B)(4). It also may have been reviewable as
an order affecting a substantial right made in a special proceeding under Ohio
Revised Code § 2505.02(B)(2).
Fabe v. Columbus Ins. Co., 68 Ohio App.3d 226 (1990). The court held that an
order staying action by the Superintendent of Insurance seeking to liquidate
insolvent insurer's claim against reinsurers, pending binding arbitration
pursuant to insurer's written agreement, was final appealable order under
either of the following rationale: (1) liquidation was "special proceeding" and
order affected "substantial right" of superintendent as liquidator; and (2) order
required entire case and all issues to be submitted to arbitration, effectively

granting specific performance of arbitration agreement and terminating
judicial action. Ohio Revised Code § 2505.02.
Fabe v. Farm & Ranch Life Ins., No. 88AP‐1027, 1989 Ohio App. LEXIS 3748
(Ohio Ct. App. Sept. 26, 1989). In Farm & Ranch Life Ins., plaintiff was
appointed as the Ohio ancillary receiver of the insolvent insurance company.
Plaintiff brought an action to recover for the benefit of the receivership estate
certain sums of money allegedly owed the insolvent insurance company.
Defendant counterclaimed alleging primarily an illegal seizure of funds. The
court held that since plaintiff was named in his official capacity as the
Superintendent of Insurance in the counterclaim, the relief requested was
against the state. Consequently, the counterclaim involved a civil suit for
money damages against the state and the Court of Claims had original,
exclusive jurisdiction. Dismissal of the counterclaim was therefore proper
pursuant to Civ. R. 12(B)(6) for lack of subject matter jurisdiction.
Ratchford v. Proprietors’ Insurance Company, 103 Ohio App. 3d 192, 658
N.E.2d 1127 (Franklin Cty. 1995). A liquidation court’s determination on a
disallowed claim is an appealable order under Ohio Code provision R.C.
2505.02. The court explained that a decision made by the liquidation court
affects a “substantial right made in a special proceeding”, thus granting the
plaintiff the right to appeal.
Pennsylvania
Brainard v. Foster, Civil Action No. 91‐5308‐5318, 1992 U.S. Dist. LEXIS 3196 (E.D.
Pa. 1992). The Pennsylvania District Court's Memorandum and Order dismissed
without prejudice a suit brought by agents of an unlicensed insurance
company, American Independent Business Alliance Group ("AIBA"), in
liquidation to enjoin the Commonwealth's Insurance Commissioner and the
Department of Insurance from issuing a letter to other agents that threatened
revocation of the agent's license, the return of any commissions earned on the
placement of policies on AIBA's behalf and damages. Under Pennsylvania law,
agents are personally liable for such unlicensed insurance sales which are
considered "unlawful" regardless of whether they are received inadvertently.
The court dismissed the action and allowed the issuance of the letter because
it entitled agents to due process prior to license revocation and retrieval by the
Commissioner.
Foster v. Berwind Corp. Civil Action No. 90‐0857, 1991 U.S. Dist LEXIS 1988 (E.D.
Pa. 2/13/91). Pennsylvania District Court applied Pennsylvania choice of law
rules and Pennsylvania law to govern an action brought by the Pennsylvania
Commissioner of Insurance to pierce the corporate veil of a defunct Bermuda
subsidiary (Norad) and hold the defendant liable for reinsurance loss claims of
the insolvent Mutual Fire, Marine & Inland Island Co. The court held that
Pennsylvania's interest in investigating the claims of its domiciliaries against its
own corporations outweighed Bermuda's interest in regulating its reinsurance
industry where the subsidiary is "exempt" because it does not "do business".
Texas Bard v. Charles R. Myers Ins. Agency, 839 S.W.2d 791 (Tex. 1992), reversing 811
S.W.2d 251 (Tex. App.‐‐San Antonio 1991). Receiver of insolvent Vermont
insurer sued insurance agents pursuant to correspondent's agreement for
payment of earned premiums. Defendants filed compulsory counterclaims,
which resulted in a jury award for defendants on the counterclaim. Receiver
claimed the Vermont liquidation order, which included injunctions against
maintaining counterclaims or other actions against the receiver in any court
other than the Vermont liquidation court, should have been enforced in the
Texas court under principles of full faith and credit and/or comity. Reversing a

contrary appellate court judgment, the Texas Supreme Court agreed. The
court found the liquidation order sufficiently final to be entitled to full faith and
credit. The fact that the receivership court retained jurisdiction to discharge
the receiver and enter further orders with respect to assets of the estate did
not mandate a finding that the liquidation order was an interlocutory judgment
which was therefore not entitled to full faith and credit.
Further, the fact that a receiver is entitled to prosecute claims of the insolvent
estate in foreign jurisdictions does not also require the receiver to be subjected
to prosecution of claims against him in that foreign jurisdiction. The Texas
compulsory counterclaim statute did not require a contrary result; the
counterclaim requirement is a procedural rule which fosters judicial economy
by foreclosing piecemeal litigation. The order of the liquidation court which
requires all claims against the receiver to be brought in Vermont (or to be
heard in Texas by a Special Master appointed by the liquidator) also operated
to further judicial economy by ensuring that all claims against the insolvent
estate are prosecuted in one forum, enabling the receivership court to ensure
that all claimants are treated uniformly. The claims were ordered dismissed
without prejudice to prosecute them in Vermont.
Durish v. Newberry, 800 S.W.2d 610 (Tex. App.‐‐Houston [14th Dist.] 1990).
Receiver appealed an adverse judgment alleging that the venue provision in
the insurance code was exclusive and asserting that the trial court erred in
refusing to transfer the case to the county in which the receivership
proceeding was pending. The court agreed, reversed the judgment against the
receiver and remanded with orders to transfer, finding that the more specific
insurance statutes controlled over any conflicting venue provisions in the
worker's compensation laws.
Wisconsin
In re Blumer, 2008 WI App 160, 758 N.W.2d 224, 2008 WL 4243928 (Wis. Ct.
App.) (Table Decision). Under Wis. Stat. § 601.465(3), the Office of
Commissioner of Insurance may refuse to disclose certain information obtained
or provided by the Office under certain conditions from designated entities,
including the NAIC and the insurance commissioners of other states. Section
601.465(3) does not apply where an agent of the Office, in his or her capacity as
agents of NAIC and not of the Office, obtains information from another state’s
commissioner. As such, a Wisconsin deputy commissioner’s request for
information from the Pennsylvania Insurance Commissioner on NAIC letterhead,
describing himself as chair of a NAIC subgroup, seeking documents to further
the subgroup’s task, and directing the response to a NAIC address, did not fall
under § 601.465(3).
Retroactive Application
Eighth Circuit Honeywell, et al. v. Minnesota Life and Health Ins. Guar. Ass’n., 110 F.3d 547
(8 th Cir. 1997). Honeywell invested in guaranteed investment contracts for
its pension / retirement plans. The contracts were issued by Executive Life
Ins. Co. (ELIC). The plan trustee was a Minnesota resident, and under the
prior statute, that residency qualified all plan participants for contract
coverage when ELIC became insolvent in 1991, regardless of each plan
member’s residency. In 1992, Minnesota amended the guaranty act to
retroactively exclude nonresident participant of covered contract plans like
Honeywell’s. Honeywell filed for a declaratory judgment and won.
Minnesota Life and Health (MLHIGA) then appealed to the Supreme Court,
who answered two certified questions regarding the action. The trial court
then vacated its earlier opinion and ruled in favor of MLHIGA. On

Honeywell’s appeal, the Circuit Court initially affirmed the new trial ruling in
Honeywell, Inc., et al. v. Minnesota Life and Health Ins. Guar. Ass’n., 86 F.3d
766 (8 th Cir. 1996).
In the appeal reviewed here, the Court granted review en banc. The Court
found that the retroactive application Honeywell challenged was
constitutional. It was justified by rational legislative purpose: regulating the
insurance industry and fixing a drafting defect in the earlier version of the
statute that could have left many state residents without coverage.
Furthermore, the Court found that Honeywell had no contractual right to the
property or right to compensation for its property. The rights involved were
statutory, not contractual. The Court affirmed its earlier holding.
Honeywell’s Motion for Reconsideration before the District Court was
denied.
Alabama
Delaware
Florida
Louisiana
Hilgeman v. State ex rel. Payne, 374 So.2d 1327 (Ala. 1979). Where claim filed in
a receivership proceeding was contingent upon a case pending in federal
court. Any possible liability of the insolvent insurer in that federal case would
arise from acts committed prior to January 1, 1982. Noting the liquidation law
bars contingent and unliquidated claims in liquidation proceedings, the court
held that such provisions did not apply in this case because insurance code
preserves rights accruing before January 1, 1982.
State v. National Automobile Ins. Co., 290 A.2d 675 (Del. Ch. 1972). Automobile
driver and passengers of the car filed claims against the other driver's insurer,
which was in receivership in Delaware. The claimants had already obtained
judgments in Ohio and were trying to enforce them in Delaware. The receiver
argued that the insurance code barred recovery against the insurer. The court
held, however, that recovery was not barred because the law did not become
effective until eight years after the appointment of the receiver, and nothing in
the law called for retroactive application.
Springer v. Colburn, 162 So.2d 513 (1964). The court held that the provision in
the Florida insurance code barring a proceeding in the nature of a garnishment,
attachment, or execution would be given prospective effect only. The sheriff's
deed of sale of Florida real estate in satisfaction of a claim against a Michigan
insurer in liquidation on a policy entered into before passage of the Florida
statute would not be set aside because no Florida ancillary receiver had been
appointed. To set aside the deed would constitute unconstitutional
impairment of contract, since plaintiff would have inadequate substitute for
remedies available in Florida at time insurance contract was entered into.
Hopkins v. Howard, 930 So. 2d 999 (La. Ct. App. 2006). The issue addressed
by the court of appeals was whether the undefined term of “affiliate,” in the
1999 version of the net worth exclusion to the definition of “covered claims”
in the guaranty association statute, includes a parent corporation.
Reasoning that the net worth exclusion employs an accounting concept of
consolidated net worth, the court of appeals held that if, for accounting
purposes, a parent and its subsidiary are considered to be a single economic
unit, then two entities are affiliates for purposes of the net worth exclusion
of the guaranty association statute.
S. Silica of La., Inc. v. La. Ins. Guar. Ass’n, 979 So. 2d 460 (La. 2008). The state
supreme court explained that the exposure theory for mass torts, and its pro
rata component, applied to guaranty association coverage of the Louisiana
Insurance Guaranty Association (“LIGA”). LIGA argued that a claimant must

exhaust the pro rata shares of solvent insurers before LIGA would be obligated
to assume responsibility for the pro rata share of the exposure attributed to the
insolvent insurer of Southern Silica (“Reliance”). LIGA relied on LSA‐R.S. 22:1386
stating, “Any person having a claim against an insurer under any provision in an
insurance policy other than a policy of an insolvent insurer which is also a
covered claim, shall be required first to exhaust his rights under such policy. . . .”
The supreme court held that, under the exposure theory, the solvent insurers
would only be liable for their pro rata shares of coverage for the years that they
provided insurance to the tortfeasor. At the same time, LIGA would be
responsible for the pro rata share of Southern Silica’s exposure for the years
that the insolvent insurer (“Reliance”) provided coverage to Southern Silica.
Maryland Maryland Insurance Guaranty Association v. Muhl, 671, September Term, 1985,
slip op. (Md. Ct. Spec. Appeals, February 10, 1986). The court held that
retroactive effect should be given to the section of the liquidation statute
which grants a priority to claims of Maryland's guaranty fund because to do so
created no basic unfairness or manifest injustice and the remedial nature of the
statute supported a finding of retroactivity.
Oklahoma
State ex rel. Crawford v. Guardian Life Ins. Co. of Am., 1997 Okla. 10, 954 P.2d
1235 (1998). A statute eliminating reinsurer’s right to offset obligation to pay
claims against right to receive premiums where reinsurance agreement did
not truly transfer risk could not be applied retroactively so as to deprive
reinsurer of contractual right of offset under reinsurance agreement made
before effective date of amendment with respect to policies bought before
passage of amended statute. However, this ruling was subject to the
requirements that the policy owners continued to pay premiums after
effective date and the transactions giving rise to claims arose after passage.
Welch v. Union Mut’l Life. Ins. Co. of Providence, 1989 Okla. 117, 776 P.2d 847
(1989). An amendment to the Property and Casualty Insurance Guaranty
Association Act exempting uninsured motorist coverage from exhaustion
requirement for bringing claim against Guaranty Association did not apply to
an accident that occurred before the amendment was passed.
Rhode Island
Langdeau v. Naragansett Ins. Co., 96 R.I. 276, 191 A.2d 28 (1963). The court held
that the insurance liquidation provisions enacted after the decision in this case
were procedural in nature and should be applied retroactively if doing so
would not impair the obligations to the insurance company's policyholders.
Transferring the contents of a liquidated special trust fund held by the General
Treasurer to the receiver would not impair the vested rights of policyholders or
beneficiaries since the receiver would take the funds subject to and be
impressed with a trust.
Texas Tapiador v. North American Lloyds of Texas, 778 S.W.2d 207 (Tex. Civ. App. ‐‐
Houston [1st Dist.]1989). After appeal was filed, insurance carrier was declared
insolvent. Appellants sought to add the receiver as a party on appeal, and
receiver resisted claiming that the court lacked jurisdiction over him until such
time as an administrative claim had been filed and rejected. The court held
that the receiver was properly added as a party on appeal, noting that the
administrative claim provision of the insurance code applies to claims which
arise after the insolvency and not to lawsuits which are pending at the time of
insolvency. Similarly, the provision which allows the receiver a one year period
after his appointment to appear in a lawsuit is applicable to suits begun at the
trial level, not on appeal. A contrary holding would cause unreasonable delays
in resolving suits which are pending prior to the appointment of the receiver.

Applicability of the McCarran‐Ferguson Act
Supreme Court
United States v. Fabe, 508 U.S. 491 (1993). The United States Supreme Court
addressed the issue of whether the federal priority statute, 31 U.S.C. §3713,
which accorded first priority to the United States with respect to a bankrupt
debtor’s obligations, pre‐empted Ohio’s priority statute Ohio Rev. Code
§3903.42, which conferred only fifth priority to the United States in
proceedings to liquidate an insolvent insurance company. The Court
explained that generally a state statute that conflicts with a federal statute
would be pre‐empted, but that under the McCarran‐Ferguson Act, 15 U.S.C.
§1012, a state statute, if enacted for the purpose of regulating the business
of insurance, will not be pre‐empted by a conflicting federal statute, unless
that federal law specifically regulates the business of insurance. The Court
stated that McCarran‐Ferguson was intended to further Congress’ objective
of granting the States broad regulatory authority over the business of
insurance.
The District Court had granted the United States summary judgment relying
upon the three prong test set forth in Union Labor Life Ins. Co. v. Pireno, 458
U.S. 119 (1982). ((1) whether the practice has the effect of transferring or
spreading a policyholder’s risk; (2) whether the practice is an integral part of
the policy relationship between the insurer and the insured; and (3) whether
the practice is limited to entities within the insurance industry.) The Sixth
Circuit reversed.
The Supreme Court concluded that Pireno did not suggest that the business
of insurance was confined entirely to the writing of insurance contracts, as
opposed to their performance. The Court noted that cases such as Pireno
and Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979) held
only that “ancillary activities” that did not affect the performance of the
insurance contract or enforcement of contractual obligations did not enjoy
exemption as laws regulating the “business of insurance”. The Court stated
that actual performance of an insurance contract did fall within the
“business of insurance”. The Court explained that the broad category of
laws enacted “for the purpose of regulating the business of insurance”
consisted of laws that possessed the “end, intention, or aim” of adjusting,
managing, or controlling the business of insurance.
The Court found that the Ohio priority statute was generally designed to
carry out the enforcement of insurance contracts by ensuring the payment
of policyholders’ claims despite the insurance company’s bankruptcy. The
Court held that to the extent that the Ohio priority statute protected
policyholders, it was a law enacted for the purpose of regulating the
business of insurance, but to the extent that it was designed to further the
interests of other creditors, it was not a law enacted for the purpose of
regulating the business of insurance. Thus, the Court concluded that Ohio
may afford priority over claims of the United States to the insurance claims
of policyholders and to the costs and expenses of administering the
liquidation, but other categories are not free from federal pre‐emption
under the McCarran‐Ferguson Act.
First Circuit
Garcia v. Island Program Designer, Inc., 3 F.2d 57 (1 st Cir. 1993). Garcia v. Island
Program Designer, Inc., 875 F. Supp. 940 (D. Puerto Rico 1994). In a
liquidation proceeding involving a Puerto Rican insurance company, the IRS

asserted a priority despite the fact that it missed the claims filing deadline.
The First Circuit, in reversing the District Court, held that Fabe requires an
analysis of the individual provisions of the liquidation statutes to determine
whether or not each provision in question "regulates policyholders", as
opposed to all of the insurer's creditors. The Court held that the claims filing
deadline provided only an "indirect, speculative" benefit to policyholders, no
different from the protection afforded to all creditors. Thus the McCarran‐
Ferguson Act did not apply and the federal statute was not preempted.
On remand, the District Court decided that health services providers of the
insolvent HMO were not sufficiently like policyholders such that their priority
status constituted the "business of insurance". As a result, federal
preemption applied and the claim by the IRS took priority over the health
services providers. In addition, the Court held that the HMO's statutory
deposit was a general asset of the estate to which the IRS had priority.
Ruthardt v. United States, 303 F.3d 375 (1 st Cir. 2002), aff’g 164 F. Supp. 2d 232 (D.
Mass. 2001), cert. denied, Bowler v. United States, 538 U.S. 1031 (2003). The
Liquidator of an insurer sought to resolve two issues with the United States
concerning the interaction of state insurer liquidation priority statutes, the
federal priority statute and the McCarran‐Ferguson Act. First, the United States
sought priority for its claims over guaranty funds. The Court held that guaranty
fund claims had priority over those of the United States because guaranty funds
assure prompt payment to policyholders, and thus constitute a mechanism to
protect policyholders that is in accordance with “the logic and spirit of Fabe.”
Second, the United States argued that it was not bound by the claims bar date
in the liquidation proceeding, relying on the First Circuit’s prior decision in Garcia
v. Island Program Designer, Inc., 4 F.3d 57 (1 st Cir. 1993). The Court held that
Garcia correctly applied Fabe because a claim bar date for United States’ claims
does not affect policyholders, who have priority over the United States in any
event. However, the Court also stated that such a result is “simply terrible
public policy” that may warrant legislative action.
United States v. Rhode Island Insurer's Insolvency Fund, 80 F.3d 616 (1996),
affirming 892 F. Supp. 370 (1995). The Court affirmed the District Court's
decision that the Medicare Secondary‐Payer Act, which requires payment by
other insurance before Medicare payments, preempts the Rhode Island
statute purporting to shift primary insurance coverage from the guaranty
fund to Medicare. The Court held that the Medicare statute "specifically
related[s] to the business of insurance", and thus met the test under the
McCarran‐Ferguson Act to make reverse preemption inapplicable.
Second Circuit
Law Enforcement Ins. Co., Ltd. v. Corcoran, 807 F.2d 38 (2nd Cir. 1986), cert.
denied, 481 U.S. 1017 (1987). The court held that abstention from jurisdiction
by the district court was warranted under the Burford doctrine given New
York's complex administrative and judicial system for regulating and liquidating
domestic insurance companies, the expertise of the Superintendent, the
necessity of marshalling the claims and assets, and the express federal policy
of non‐interference in insurance matters embodied in the McCarran‐Ferguson
Act. It asserted that federal court intervention would only impair the
comprehensive state plan for regulating the rehabilitation and liquidation of
insurers.
Levy v. Lewis, 635 F.2d 960 (2nd Cir. 1980). The court held that in the McCarran
Act, Congress mandated that regulation of the insurance industry be left to the
states. Thus, the federal policy should be noninterference in insurance

matters, including the institution and implementation of liquidation
proceedings.
Stephens v. National Distillers and Chemical Corp., 69 F. 3d 1226 (2d Cir.
1995). This case analyses the Foreign Sovereign Immunities Act (FSIA) and
McCarran‐Ferguson in the context of pre‐answer security. The U. S. District
Court for the Southern District of New York applied the FSIA and exempted
foreign retrocessionaires from the New York pre‐answer security
requirement. The Liquidator for Delta America Re brought this action to
recover balances due from National Distillers and retrocessionaires of Delta.
When the case was transferred to New York, the Liquidator demanded that
the retrocessionaires post security to cover any potential judgment as
provided under New York Insurance Law Section 1213(c). The Second Circuit,
affirming the District Court, held that: the security requirement was a
prohibited attachment as to an insurance company that was a branch of a
foreign government under the Foreign Sovereign Immunities Act ("FSIA”);
and the McCarran‐Ferguson Act did not preclude application of the FSIA.
Third Circuit
Suter v. Munich Reins. Co., 223 F.3d 150 (3d Cir. 2000). The liquidator of an
insolvent insurance company brought a state‐court action against an alien
reinsurer to recover on reinsurance treaties. The reinsurer removed to case
to federal court pursuant to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (the “Convention”). The Third
Circuit held that the McCarran‐Ferguson Act did not operate in such a
manner that the New Jersey Liquidation Act would reverse preempt the
removal provisions of the Convention. The mere fact that policyholders of
the insolvent insurer could receive less money if no coverage existed under
the reinsurance agreement did not impair the operation of any provision of
Liquidation Act.
Fourth Circuit Gordon v. U.S. Dept. of the Treasury, 668 F. Supp. 483 (D. Md. 1987), aff'd 846
F.2d 272 (4th Cir. 1988). The liquidation of an insolvent insurance company and
the prioritizing of claims to be paid do not constitute the "business of
insurance" as that term is used in the McCarran‐Ferguson Act. Therefore, the
federal statute giving the United States absolute priority in collecting money
due from an insolvent debtor was upheld over the State insurance scheme, in
which the Government's claims would have fallen within the fourth category of
priority.
North Carolina v. United States, 139 F.3d 892, 1998 WL 178374 (4 th Cir. (N.C.)).
Northwestern Security Life Insurance Company, which specialized in life,
health, and accident insurance, failed after rehabilitation efforts proved
unsuccessful. On May 8, 1990, Northwestern was placed into liquidation
under the control of the North Carolina Insurance Commissioner. The
federal priority statute required the Commissioner to pay the federal tax
claims of the United States first. After the Supreme Court held, in U.S. Dept.
of Treasury v. Fabe, 508 U.S. 491 (1993), that under the McCarran‐Ferguson
Act, 15 U.S.C. § 1012, state insurance insolvency statutes are not preempted
by the federal priority statute to the extent that the state statutes afford a
higher priority to policyholder claims and claims for administrative expenses
than to claims of the United States, the commissioner filed an amended tax
return for 1990 and 1991. The Internal Revenue Service claimed that federal
income taxes accrued during liquidation were entitled to first priority status
as administrative expenses under North Carolina General Statute § 58‐30‐
220(l).

The question presented was whether federal taxes are costs of
administration under the priority structure of the North Carolina Insurance
Insolvency Statute. The court held that taxes accrued before liquidation
cannot be considered administrative expenses because they accrued long
before an estate was being administered. The taxes accrued after liquidation
are administrative expenses. For tax purposes, the earned income from
insurance premiums is spread over the life of the policy, thus, income taxed
subsequent to the year the premium is actually paid is still real income. The
income taxes accrued in 1990 and 1991, for premiums already paid to
Northwestern, constituted administrative expenses because there was a
liquidation order at the time of the accrual. Therefore, the court granted
summary judgment for the United States, holding that under the North
Carolina Statute when taxes accrued after the court entered a liquidation
order, those taxes should be considered administrative expenses entitled to
first priority.
Fifth Circuit
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). An insurance broker brought an action to
recover from insolvent insurer unearned premiums paid by the broker on
cancelled policies. New England International Surety of America (NEISA)
was placed in liquidation and under the control of the Commissioner of
Insurance. The policies placed by the broker were canceled resulting in the
loss of premiums. The broker refunded the premiums to his clients and
brought action after acquiring their rights as subrogee. The broker’s action
was dismissed from federal court due to the Burford doctrine. The court
reasoned that the existence of administrative procedures in the state
precluded the federal action. The court concluded that the allegations
should be resolved in the state liquidation proceeding.
Miller v. National Fidelity Life Ins. Co., 588 F.2d 185 (5th Cir. 1979). The court
held that the McCarran Act did not preclude application of the Federal
Arbitration Act. The court found that the test under McCarran is not whether
the state has enacted statutes regulating the business of insurance, but
whether such state statutes will be invalidated, impaired or superseded by
application of federal law.
Munich American Reinsurance Company; NAC Reinsurance Corporation v.
John P. Crawford, as Receiver of Employers National Insurance Corporation,
(5 th Cir. 6/2/98) 141 Fed. 3 rd 585; 1998 U.S. App. LEXIS 11366 The Fifth Circuit
affirmed a district court finding that the Federal Arbitration Act was reverse
pre‐empted by Oklahoma law under the McCarran Ferguson Act and the
dismissal of the petition to compel arbitration. The case arose out of a
dispute over salvage proceeds obtained subsequent to the payment of a loss
arising under a reinsurance agreement between Employers National
Insurance Corporation (ENIC) and Munich American Reinsurance Company
(“Munich”) and NAC Reinsurance Corporation (“NAC”). Prior to the
recovery of the salvage proceeds, ENIC was placed into liquidation.
Pursuant to the liquidation order, ENIC’s attorneys remitted the proceeds to
the Liquidator. Munich and NAC disputed the Liquidator’s claim to the funds
and sought to compel arbitration by filing a petition in federal district court.
Crawford responded by filing a motion in state court to enjoin the arbitration
pursuant to the injunction in the state court Liquidation Order. When the
state court determined that Munich and NAC’s petition violated the
Liquidation Order, the federal district court dismissed the arbitration
proceeding, asserting Burford abstention.

Sixth Circuit
AmSouth Bank v. Dale, 386 F.3d 763 (6th Cir. 2004). The underlying coercive
action was a state court suit by the receivers, various state insurance
commissioners, to recover funds embezzled from a number of insurance
companies. The receivers claimed the banks were negligent in not discovering
the embezzler’s fraud. The banks sought a declaratory judgment in federal
court saying that they were not liable to the receivers. The district court
enjoined the receivers from pursuing their state coercive action further and the
receivers appealed. The Sixth Circuit declined to find McCarran‐Ferguson
reverse preemption because an action to evade liability in a threatened
common‐law coercive action by the insurance companies had only an
attenuated connection to the regulation of insurance. However, the court
noted that (1) the declaratory judgments would serve no useful purpose and (2)
that the banks filed the declaratory actions not to resolve liability issues but
instead to gain procedural advantage. Because of these two factors, the
appellate court held that jurisdiction over these declaratory actions should not
have been exercised and the district court’s decision to the contrary was an
abuse of discretion.
Fabe v. United States Department of Treasury, 939 F.2d 341 (6th Cir. 1991), cert.
granted, 112 S. Ct. 1934 (May 18, 1992). This is an appeal of a district court
decision (Fabe v. U.S. Department of the Treasury, No. C‐2‐88‐778, 1990 U.S.
Dist. LEXIS 17761 (S.D. Ohio 1990)) which held that the Ohio insurance
liquidation priority scheme regulates only the business of insurance companies
and not the "business of insurance" within the meaning of the McCarran‐
Ferguson Act and therefore the claims of the United States are to be granted
priority. The appeals court found that the state liquidation priority scheme is
exempt from federal preemption as a regulation of the "business of insurance"
within the McCarran‐Ferguson Act. In so holding, the appeals court applied the
three‐prong test set out in Union Labor Life Insurance Company v. Pireno, 458
U.S. 119 (1982).
Eighth Circuit Murff v. Professional Medical Insurance Co., et al., 97 F.3d 289 (8 th Cir. 1996).
Plaintiff filed a discrimination suit against ProMed under the federal Age
Discrimination in Employment Act (“ADEA”) and the Missouri Human Rights
Act shortly before ProMed was placed in liquidation. The state receivership
court entered an injunction prohibiting any proceedings against the
insolvent insurer. The U.S. District Court dismissed Plaintiff’s claim finding
that the McCarran‐Ferguson Act precluded jurisdiction due to the exclusive
nature of state jurisdiction in insurance company insolvencies. The appellate
court reversed and remanded for further proceedings ruling that
enforcement of the ADEA was “entirely compatible with the state’s
regulation of insurance law.” The court went on to state that the McCarran‐
Ferguson Act “does not translate into state preemption of federal
jurisdiction or void every federal statute under which a plaintiff may sue an
insolvent insurer in federal court, but merely counsels that a federal court
consider the propriety of abstaining from or staying the federal action.”
Ninth Circuit Hawthorne Sav. F.S.B. v. Reliance Ins. Co., 421 F.3d 835 (9th Cir. 2005).
Hawthorne Savings sued Reliance Insurance in California state court under an
insurance contract claim. Reliance removed the suit to federal court on diversity
and was subsequently placed in rehabilitation and then liquidation in
Pennsylvania. Reliance argued the district court could not exercise jurisdiction
once the liquidation proceedings began based on reverse pre‐emption under
McCarran Ferguson or should abstain under the Burford doctrine. The Ninth
Circuit noted that the case was a case of first impression in the Ninth Circuit, but
had been addressed in the Forth Circuit in Gross v. Weingarten, 217 F.3d 208 (4th

Cir. 2000). The Ninth Circuit adopted the holding of the Gross court and
explained the McCarran‐Ferguson Act restricts authority of federal regulation of
insurance, but it does not modify diversity jurisdiction of the federal courts and
does not divest federal courts of the right to apply state law regarding the
regulation of insurers in diversity proceedings. The Court also rejected the
Burford abstention argument noting that because the litigation involved
resolution of issues of California law with respect to the liability of Reliance to
Hawthorne, and not issues related to the liquidation proceeding itself,
abstention was not appropriate. The court also noted that Pennsylvania
retained exclusive jurisdiction over Reliance’s assets and the contract did not
implicate the insolvency proceedings. Finally, the court also concluded that the
stay of litigation provision contained in the Liquidation Order was not entitled to
Full Faith and Credit because the Pennsylvania Court that issued the order did
not have personal jurisdiction over Hawthorne and the Liquidation was not a
final “judgment” entitled to full faith and credit.
State of Idaho ex rel. Soward v. United States, 858 F.2d 445 (9th Cir. 1988).
The court determined that an Idaho statute establishing priority among
creditors of insolvent insurance companies is not a law regulating the
"business of insurance" within the contemplation of the McCarran Act, since
such insurers are no longer conducting insurance business. Therefore, the
Federal Insolvency Statute controls and the United States would be entitled to
receive full payment of the insurer's obligations prior to satisfaction of the
obligations of other creditors.
Tenth Circuit Davister Corp. v. United Republic Life Ins. Co., 152 F.3d 1277 (10th Cir. 1998),
cert. denied, 119 S. Ct. 1112 (1999). Seller of stock to insurer prior to its
insolvency brought action against insurer and Utah’s Insurance
Commissioner to compel arbitration of dispute over real property that was
part of the sale. The Court of Appeals held that under the McCarran‐
Ferguson Act, Utah’s statutory stay of proceedings against insurer in
liquidation trumped the Federal Arbitration Act. Therefore, arbitration was
not compelled.
Hart v. Orion Ins. Co., 453 F.2d 1358 (10th Cir. 1971). The court held that the
McCarran Act did not bar application of the Federal Arbitration Act, and that
the arbitration provisions of the policy in question were enforceable.
Strong v. W. United Life Assurance Co. (In re Tri‐Valley Distrib.), BAP No. UT‐05‐
119, BAP No. UT‐06‐048, 2006 Bankr. LEXIS 3252 (B.A.P. 10th Cir. 2006). The
receiver for an insolvent insurance company and a bankruptcy examiner
entered an agreement regarding the sale of certain assets claimed to be
property of the estates being administered by the receiver and bankruptcy
examiner, respectively. The agreement provided that the funds from the sale of
the subject properties would be held in escrow pending a negotiated resolution
of the dispute as to ownership, or pending a final order of the United States
Bankruptcy Court for the District of Utah. Ultimately, the bankruptcy examiner
filed an adversarial proceeding claiming that the properties at issue were
fraudulently transferred to the insolvent insurance company. The receiver
asserted that the bankruptcy court had no jurisdiction due to the reverse
preemption provisions of the McCarran‐Ferguson Act, or alternatively, due to
the permissive abstention powers under federal law. The court first held that
the McCarran‐Ferguson Act did not apply, because the bankruptcy court’s
jurisdiction does not invalidate, impair, or supersede the state insolvency law.
The court reasoned that to deny the court jurisdiction in this case on the basis of
the McCarran‐Ferguson Act would remove federal jurisdiction from every claim

involving an insolvent insurer. Moreover, the receiver agreed to submit to the
jurisdiction of the bankruptcy court in the agreement with the bankruptcy
examiner related to the disposition and sale of the subject receivership
property. After denying the receiver’s challenge to jurisdiction on the basis of
McCarran‐Ferguson, the court denied the receiver’s alternative request that the
bankruptcy court abstain from hearing the bankruptcy examiner’s petition for
adversarial proceeding. The court reasoned that the abstention was within the
sound discretion of the lower court and would not be overturned on appeal.
Van Riper v. Corr. Med. Servs., 44 Fed. Appx. 445 (10th Cir. 2002). Defendant
physicians moved to abate an appeal of summary judgment ruling in their favor
at the trial court level based on said defendants’ liability insurer being declared
insolvent and entering liquidation. The defendants argued that the
Commonwealth Court of Pennsylvania order staying all proceedings in which
the insolvent liability insurer has a duty to defend was entitled to full faith and
credit by the federal appellate court. The Tenth Circuit disagreed noting that
the insurer was not a party to the appeal, and if it were, the state court was
without power to enjoin an action in federal court. The appellate court
explained that the proceeding at issue was not an in rem action implicating the
jurisdiction of the receivership court, but rather was an in personam action with
regard to the defendant insureds. The Tenth Circuit noted that the appellants
did not ask the court to consider whether it should defer to the subject state
liquidation statutes in light of the McCarran‐Ferguson Act.
Arkansas
Baldwin‐United Corp. v. Garner, 283 Ark. 385, 678 S.W.2d 754 (1984). The
insurance commissioner, as receiver of three insolvent insurance companies
owned by one corporation, proposed a rehabilitation plan which was approved
by the court. The parent corporation appealed the plan's provisions that: (i)
the rehabilitation court had exclusive jurisdiction over the assets of the
companies, and (ii) the rehabilitation court would refuse to honor a judgment
obtained in any other forum. In affirming the lower court's decision, the
Supreme Court of Arkansas announced that nothing contained in the
McCarran‐Ferguson Act or the Bankruptcy Act prohibits a state from
determining the rights of an insurance company's creditors. Furthermore, the
appellate court added, the lower court properly ordered that all claims to the
companies' assets be adjudicated in the rehabilitation court.
California Wagner v. Amwest Ins. Group, 285 B.R. 447 (Bankr. C.D. Cal. 2002). The
Nebraska liquidator brought an action for declaratory relief as to the court’s
jurisdiction and rights to a tax refund under a tax allocation agreement between
an insurance holding company and its subsidiary. Citing the McCarran‐Ferguson
Act, a California bankruptcy court held it was reverse preempted from
interpreting the agreement because interpretation would be directly related to
“the business of insurance.”
Colorado Phillips v. Lincoln Nat. Health & Cas. Ins. Co., 774 F. Supp. 1297 (D. Colo. 1991).
The liquidation of an insolvent insurance company is not the "business of
insurance" as that term is used in the McCarran‐Ferguson Act. An arbitration
clause contained in a reinsurance contract is not barred by the McCarran
Ferguson Act as an impairment to Colorado's regulation of the business of
insurance.
In re First Assured Warranty Corp., 383 B.R. 502. (Bankr. D. Colo. 2007). To
determine whether an entity is the substantial equivalent of an insurance
company, courts compare the powers conferred upon or withheld from the

entity with those conferred or withheld from entities excluded under 11 U.S.C.S.
§ 109(b)(2). A court must decide whether the entity: 1) is extensively regulated
by the state, 2) has extensive statutory procedures for liquidation, and 3)
conducts business in a public or quasi‐public fashion.
Illinois Boozell v. United States, 979 F. Supp. 670 (N.D. Ill. 1997). The Illinois
Insurance Commissioner as Liquidator of Reserve Insurance Company
brought a complaint against the United States, seeking a declaratory
judgment that the general federal priority statute interfered with the
Commissioner's administration of the insolvent insurer's assets. The United
States, which sought to recover on seven non‐contingent claims from the
insolvent insurer's estate, counterclaimed that the Illinois state priority
statute was preempted by the federal priority statute. The Illinois statute
gave the claims of the federal government sixth priority, while the federal
statute gave the federal government first priority. The court held that the
Illinois liquidation statute survived federal preemption pursuant to the
McCarran‐Ferguson Act, because the priorities of the Illinois statute were for
the purpose of regulating the insurance business, and were designed to
protect policyholders of an insolvent insurer. In so ruling, the court relied
heavily on the Supreme Court's opinion in Dept. of the Treasury v. Fabe, and
interpreted that case broadly.
Kansas
Hartung v. Sebelius, 40 F. Supp. 2d 1257 (D. Kan. 1999). Applying the abstention
and comity principles of the McCarran‐Ferguson Act and the Burford doctrine,
the court dismissed a case in which rehabilitators of an Idaho insurance
company filed a motion for declaratory judgment in federal court against
liquidators of a Kansas insurance company. Because the Kansas insurance
company entered into liquidation proceedings in state court, the court decided
dismissal was appropriate where the issues would likely be resolved during the
state liquidation proceedings, and where disposition of the claims by a federal
court would usurp state control over liquidation proceedings.
Sebelius v. Universe Life Ins. Co., No. 98‐4114‐RDR, 1999 U.S. Dist. LEXIS 2284 (D.
Kan. Feb. 9, 1999). Applying the principles of abstention under the McCarran‐
Ferguson Act and the Burford doctrine, the court remanded to state court a
case in which an insurance commissioner and a deputy rehabilitator brought an
action in their capacities as rehabilitators for an insolvent insurer. The insolvent
insurer sought to avoid, as alleged preferences, certain transfers of assets to a
now insolvent insurance company. The case originally was removed to federal
court based on federal question jurisdiction and diversity of citizenship, but
upon motion to remand, was sent back to state court to avoid usurping control
from the state where liquidation proceedings were pending.
Universe Life Ins. Co. v. Centennial Life Ins. Co., 35 F. Supp. 2d 1297 (D. Kan.
1999). Finding that exercise of federal jurisdiction would be disruptive to state
liquidation proceedings of an insolvent insurer, the court found that abstention
under Burford principles was proper. The court found, however, that a stay of
proceedings rather than a dismissal was appropriate for a garnishment action
brought before the federal court as this would retain plaintiff’s right to litigate
its claim in the federal forum should the state court fail to adjudicate the claim.
This would ensure plaintiff’s claim would not become time‐barred should
jurisdiction be lacking in the state court.
Louisiana
Avery v. Schmidt, 1995 WL 562302 (E.D. La.). In a civil RICO action filed by
creditors of Physicians National Risk Retention Group, a medical malpractice
insurer, against the Commissioner as Liquidator of PNRRG and certain

individuals alleged to have defrauded the creditors. The Defendants filed
motions to dismiss under FRCP Rule 12(b) 6 asserting the applicability of
McCarran‐ Ferguson and Burford abstention. The Court determined that
while RICO does not specifically relate to the business of insurance, the
application of RICO would “invalidate, impair or supersede” those state laws
enacted to regulate the business of insurance in the State of Louisiana.
Furthermore, the Court determined that Burford Abstention is also
appropriate. As such, the Court granted the motions to dismiss without
prejudice so that the action could be refiled in state court.
Missouri Ainsworth v. Allstate Insurance Company, 634 F. Supp. 52 (W.D. Mo. 1985).
The receiver of two insolvent insurance carriers sought to set aside the
mandatory arbitration provisions contained in reinsurance contracts between
the companies and the reinsurer. In upholding the enforceability of the
arbitration clauses, the United States District Court for the Western District of
Missouri held: (i) the Federal Arbitration Act (the "FAA") favors the arbitration
of disputes; (ii) if a contract involving interstate commerce contains an
arbitration clause, it is enforceable under the FAA regardless of contrary state
laws; and (iii) the McCarran‐Ferguson Act is no bar to the enforceability of
arbitration clauses. The Court ordered a stay of all judicial proceedings
pending completion of the arbitration process by the receiver and the
reinsurer.
New York
Bernstein for and on Behalf of Commissioner of Banking and Insurance of the
State of Vermont v. Centaur Ins. Co., 606 F. Supp. 98 (D.C. N.Y. 1984). The
court held that New York law does not preclude arbitration when an insurer is
in rehabilitation, and that the McCarran Act also did not exempt the insurer
from the Federal Arbitration Act.
Corcoran v. Ardra Ins. Co. Ltd., N.Y.L.J., Aug. 15, 1988, at 24, col. 3 (N.Y. Sup. Ct.
1988). The court declined to follow a Fourth Circuit decision which held that
the liquidation of an insolvent insurance company does not constitute the
"business of insurance' as that term is used in the McCarran‐Ferguson Act.
Instead, it denied a motion to compel arbitration under the Federal Arbitration
Act.
Corcoran v. Doug Ruedlinger, Inc., Index No. 5349‐87, slip op. (N.Y. Sup. Ct.
Aug. 21, 1987). The court denied defendant's motion to compel arbitration and
found that, pursuant to the McCarran‐Ferguson Act, the Federal Arbitration
Act does not preempt the New York Insurance Law.
FCC v. Republic National Ins. Co., 378 F. Supp. 430 (S.D. N.Y. 1974). The court
denied a motion by the FCC to appoint a federal receiver over an insurance
company, where the insurance company had already been put under the
"supervision" of the Texas insurance commissioner. "Supervision" was a Texas
statutory remedy used in less serious cases of insolvency where receivership
was considered too drastic. The court held that the Texas supervision
proceedings were sufficiently related to the insurer's status as a reliable insurer
to come within the McCarran‐Ferguson Act's protection and that the
appointment of a federal receiver may involve action to impair or supersede
the Texas regulatory procedure.
In re Agway, Inc., 357 B.R. 195 (Bankr. N.D.N.Y. 2006). An insurer in liquidation
filed a proof of claim against a debtor’s Chapter 11 estate. The court held that
the bankruptcy court’s core jurisdiction was not reverse‐preempted under the
McCarran‐Ferguson Act by Pennsylvania insurance statutes providing that the

Pennsylvania court had exclusive jurisdiction to adjudicate claims against
insolvent insurers; state statutes specifically authorize the liquidator to institute
timely action in other jurisdictions to collect on debts and claims due to the
insurer, therefore the court declined to abstain from hearing the bankruptcy
trustee’s motion to expunge the insurer’s unsecured claim.
In re Liquidation of Union Indem. Ins. Co. of N.Y., 137 Misc.2d 575, 521 N.Y.S.2d
617 (N.Y. Sup. Ct. 1987). In denying reinsurers' motion directing the State
Superintendent of Insurance to proceed to arbitration, the court held that a
state statute which sets forth procedures for liquidation and dissolution of
insurance companies and grants the liquidation court exclusive jurisdiction of
all claims concerning the insolvent insurer constitutes "state law regulating the
business of insurance" within the meaning of the McCarran‐Ferguson Act and
therefore was not superseded by the Federal Arbitration Act.
In re Petitions of Jukka Laitasalo and Ossi Sokka, as Joint Administrators of
Kansa General International Insurance Company, Ltd. and Kansa Reinsurance
Company Ltd., Debtors in Foreign Proceedings, 193 B.R. 187 (S.D.N.Y. 1996).
This case addresses several issues relating to injunctions issued by the
United States Bankruptcy Court in ancillary proceedings commenced by the
Administrators of two insolvent Finnish insurance companies (the Kansa
Companies). Liquidation proceedings had been commenced in Finland
against the Kansa Companies under the Finnish Bankruptcy Code. The
Pennsylvania Insurance Commissioner, as Rehabilitator of Mutual Fire,
Marine and Inland Insurance Company, moved to dismiss the petitions on
the ground that the ancillary proceedings improperly superseded state
insurance regulatory statutes, in violation of the McCarran Ferguson Act.
The Commissioner was seeking to enforce, on behalf of Mutual Fire, a $6
million claim against the Kansa Companies in New York State Supreme
Court. She argued that the injunctions granted in the proceedings pursuant
to 11 U.S.C. § 304 were in violation of the reverse preemption granted to
state statutes regulating the business of insurance under the McCarran‐
Ferguson Act. Alternatively, the Commissioner asked the Bankruptcy Court
to abstain under the Burford doctrine that mandates federal court
abstention to avoid interference with state laws codifying specialized
regulatory schemes. The Commissioner also sought to enforce the preanswer
security requirement under New York Insurance Law § 1213.
Citing inter alia S.E.C. v. National Securities, Inc., 393 U.S. 453, 21 L. Ed. 2d
668, 89 S. Ct. 564 (1969) and In Re Rubin, 160 Bankr. 269 (Bankr. S.D.N.Y.
1993), the court concluded that it could retain jurisdiction and that
McCarran‐Ferguson is not violated by the granting of an ancillary petition
under 11 U.S.C. § 304. The court observed that a primary goal of ancillary
proceedings is to preserve assets of an insolvent company and to prevent
multiple proceedings against the insolvent company in jurisdictions where
assets are located. According to the court, a significant factor was the
failure of the New York Superintendent of Insurance to appear, although
served with notice of the proceedings. Thus, the Pennsylvania
Commissioner was placed in the position of arguing for enforcement of the
New York regulatory scheme for insurer insolvency when the New York
Superintendent had declined to seek such enforcement. The Court
therefore concluded that the Pennsylvania Commissioner was acting not as
an insurance regulator, but as a creditor seeking to upgrade her status from
unsecured to secured through the mechanism of the New York pre‐answer
security statute. The Court described Insurance Law § 1213 as primarily a
long‐arm statute that should not be used in a bankruptcy proceeding to

allow one creditor to obtain a preference over similarly situated creditors.
The Court did not enjoin the Pennsylvania Commissioner from continuing
with the action against the Kansa Companies in New York Supreme Court
provided that there would be no requirement for the posting of pre‐answer
security. The court observed that permitting litigation of the Pennsylvania
Commissioner’s claims in New York, a “convenient forum”, gave her a
substantial advantage over her other option of litigating in Finland, the
option favored by the New York courts (citing In re Rubin, supra and G.C.
Murphy Company v. Reserve Insurance Company, 54 N.Y. 2d 69, 444 N.Y.S.
2d 592, 429 N.E. 2d 111 (1981)).
In prior proceedings in this case, the court had granted a limited preliminary
injunction that permitted certain pending actions to proceed to judgment,
but not to enforcement. Before resolving the Commissioner’s motion to
dismiss the petitions the Court analyzed the Finnish bankruptcy procedures,
determined that they are designed to maximize the value of the estate of
the debtor, and granted comity. Upon reaching that conclusion, the court
denied the Pennsylvania Commissioner’s motion to dismiss the ancillary
petitions and granted the preliminary injunctions staying actions against the
Kansa Companies.
Ohio Reins. Corp. v. Pacific Reins. Management Corp., No. 85 Civ. 1412 (S.D. N.Y.
Feb. 23, 1989). In a class action reinsurance suit against, among others, an
insolvent insurer, the court opined that the McCarran‐Ferguson Act and the
pending liquidation proceedings of the insolvent insurers mandated that the
court abstain from exercising jurisdiction. The court added that a declaratory
judgment in the case at bar might contravene a determination of the
liquidation court concerning these reinsurance agreements.
Reliance Ins. Co. v. Six Star, Inc., No. 01CIV.2165 (LTS) (MHD), 2002 WL 342623
(S.D.N.Y. Mar. 5, 2002). The federal district court had no jurisdiction to review or
overturn state court orders staying or enjoining actions involving the insurer in
liquidation. Based on the McCarran‐Ferguson Act, and in light of state court
orders specifically enjoining claims against the insolvent insurer other than
through the state liquidation process, the federal court maintained this
declaratory judgment action on the suspense calendar.
Serio v. Black, Davis & Shue Agency, Inc., No. 05 CIV. 15 (MHD), 2005 WL
2560390 (S.D.N.Y. Oct. 11, 2005). Citing both the McCarran‐Ferguson Act and
Burford abstention, the federal district court granted the liquidator’s motion to
stay adjudication of the defendant agency’s counterclaims alleging setoff, even
though the liquidator had filed suit in federal court to recover premiums from
the agency. The court cited the need for orderly and uniform liquidation and
rehabilitation proceedings in the state forum.
Washburn v. Corcoran, 643 F. Supp. 554 (S.D. N.Y. 1986). The court held that
the McCarran‐Ferguson Act barred application of the Federal Arbitration Act.
Consequently, the New York liquidator is not required to arbitrate the
reinsurance contract dispute between it and the Illinois rehabilitator, pursuant
to a reinsurance agreement containing an arbitration clause.
Ohio
Covington v. Sun Life of Canada Holdings, Inc., 2000 U.S. Dist. LEXIS 20902 (S.D.
Ohio May 17, 2000). Liquidator sued defendant insurance companies in state
court to recover allegedly preferential and fraudulent transfers under Ohio
Revised Code Sections 3903.26 and 3903.28. The insurers removed the action
on the basis of diversity jurisdiction, and the liquidator sought a remand. The

liquidator argued that Ohio’s statutory scheme for dissolution of insolvent
insurance companies vested exclusive jurisdiction in the state court, and that by
virtue of the McCarran‐Ferguson Act, reverse preempted the federal removal
statute. The insurers claimed that the jurisdictional provisions did not fall within
the reverse preemption principles of the McCarran‐Ferguson Act because they
were not related to the regulation of the insurance industry and were not an
integral part of the relationship between insurer and insured. The court found
that because the Ohio statutes were enacted for the purpose of regulating the
business of insurance, federal statutory authority governing the removal of the
action operated to invalidate, impair, or supersede Ohio laws. Thus, the court
remanded the liquidator’s claims to state court.
Duryee, Liquidator of the American Druggists’ Insurance Company v. U.S.
Department of the Treasury, 6 F. Supp. 2d 700 (S.D. Ohio 1995). The court
addressed the issue of whether the valid portions of Ohio Code section
3903.42 may be severed from the provisions held preempted by the
Supreme Court of the United States in United States v. Fabe, 508 U.S. 491
(1993) under the McCarran‐Ferguson Act. The court stated that to
determine severability, the court must first, look at legislative intent and
second, the act must be capable of separation. Under the Geiger test, the
court analyzed whether the remaining provisions could stand by themselves
and concluded that they could not. The court determined that the
unconstitutional provision was so connected with the general scope of the
whole statute, thus making it impossible to give effect to the apparent
intention of the legislature. The court furthered that the insertion of words
or terms would not save the remaining provisions, concluding that the
preempted provisions of section 3903.42 were not severable making the
statute invalid in its entirety.
Hudson v. Supreme Enter., Inc., 2007 U.S. Dist. LEXIS 58280 (S.D. Ohio 2007).
The State Superintendent of Insurance, acting as liquidator of an insurance
company, sought to recover unpaid deductibles. The defendant‐insureds
removed the case to federal court, whereupon the liquidator filed a motion to
remand. The motion to remand was granted based on the McCarran‐Ferguson
Act (allowing reverse preemption in certain situations), and the Ohio
legislature’s grant of exclusive jurisdiction to the Franklin County Court of
Common Pleas over insurance liquidation proceedings.
Oklahoma
Puerto Rico
United States ex rel. Vaughn v. Okla. Prop. & Cas. Ins. Guar. Ass’n, No. CIV‐04‐
1278‐M, 2006 U.S. Dist. LEXIS 57593 (W.D. Okla. Aug. 15, 2006). The court held
that pursuant to the McCarran‐Ferguson Act, 15 U.S.C.S. § 1012, the Oklahoma
Property and Casualty Insurance Guaranty Association Act, OKLA. STAT. tit. 36, §
2001, et seq., preempted the False Claims Act, 31 U.S.C.S. § 3729(a)(1), (2), (3).
The case involved a personal injury claimant asserting violations of the False
Claims Act by the Oklahoma Property and Casualty Insurance Guaranty
Association (“Guaranty Association”) who had stepped into the shoes of an
insolvent insurer. The court held that application of penalties under the False
Claims Act against the Guaranty Association would violate the immunity
provision of the Guaranty Act, and frustrate the purpose of the Act.
Garcia v. Island Program Designer, Inc., 791 F. Supp. 338 (D.P.R. 1992) IRS
claimed priority status in insolvency proceedings against Puerto Rico insurer.
IRS was not accorded priority under Puerto Rico's liquidation priority statute.
Court held that Puerto Rico's liquidation priority statute is not preempted by
the federal super‐priority statute, 31 U.S.C. § 3713, because liquidation
proceedings are part of the "business of insurance" within the meaning of the

McCarran‐Ferguson Act, and federal super‐priority statute has not been
amended under McCarran‐Ferguson to explicitly establish federal dominance
with respect to priorities as established under state liquidation statutes.
In Re Advanced Cellular Systems, 235 B.R. 713 (1999). A bankruptcy debtor
requested that the bankruptcy court issue a turnover order against a Puerto
Rico insurer in liquidation. The liquidator argued that the state court
supervising the simultaneous liquidation proceeding had exclusive
jurisdiction over issues relating to the insurer. The bankruptcy court
dismissed the motion on the grounds that the McCarran‐Ferguson Act
reverse preempted the federal bankruptcy proceeding . Applying Fabe and
Garcia, the bankruptcy court determined that the provision of the Puerto
Rico insurance insolvency law requiring exclusive jurisdiction in the
liquidation proceeding protected policyholders by (i) allowing for the orderly
adjudication of claims, (ii) avoiding waste of the insurer's assets, and (iii)
eliminating the risk of conflicting rulings and unequal treatment of claimants.
Rhode Island
Kachanis v. United States, 844 F. Supp. 877 (1994). In a declaratory judgment
action where the United States sought to recover from the guaranty fund
amounts paid to an injured federal employee, the Court held that the
McCarran‐Ferguson Act reverse preempted the Federal Employees
Compensation Act ["FECA"] in favor of the Rhode Island Insurers' Insolvency
Act ["RIIIA"]. The Court found that FECA did not specifically relate to the
business of insurance, but that RIIIA was enacted for the purpose of carrying
out the benefits of insurance policies for the protection of policyholders.
Tennessee Flowers v. Tennessee Coordinated Care Network, 2005 Tenn. App. LEXIS 114
(Tenn. Ct. App. 2005). The McCarran‐Ferguson Act applied to give a Tennessee
state court jurisdiction over a case involving a bankrupt insurer. Three factors
led the court to this conclusion: (1) the federal Bankruptcy Code has general
application; (2) Tennessee state law includes a statute regulating the business of
insurance; and (3) proceeding in bankruptcy court would impair Tennessee’s
state regulatory scheme by requiring the liquidator to pursue his or her claims in
more than one forum. Therefore, the McCarran‐Ferguson Act required the case
to be heard in state court.
Texas
Utah
Langdeau v. United States, 363 S.W.2d 327 (Tex. Civ. App. 1962). The court held
that provisions in the insurance code granting priority to wage claims of
employees over claims of the United States for taxes due and interest was not
the business of insurance, for which regulation was reserved to the states
under the McCarran‐Ferguson Act.
Old Standard Life Ins. Co. in Rehab. v. Duckhunt Family Ltd. P’ship, No. 2:05‐CV‐
00536 PGC, 2006 U.S. Dist. LEXIS 36781 (D. Utah June 2, 2006). Receiver of
insolvent insurance company sought an order to determine the validity and
priority of certain trust deeds. Defendant filed an answer and counterclaim
alleging various causes of action against the insolvent insurance company. The
receiver sought to dismiss, stay, or remand the claims of Duckhunt on the basis
of the McCarran‐Ferguson Act, the Younger and Burford abstention doctrines,
and the absolute immunity from suit provided by the state receivership order.
The court denied the receiver’s motion. The McCarran‐Ferguson Act, the
Younger and Burford abstention doctrines, and the receivership order do not
prevent the application of federal jurisdiction where the receiver has availed
itself of the federal forum and the defendant’s counterclaims were filed in
response thereto.

Vermont
Costle v. Fremont Indemnity Co., 839 F. Supp 265 (D. Vermont 1993) In an
action by the Vermont Commissioner as Liquidator of Ambassador Insurance
Company, the Liquidator sought a remand to state court under the Burford
abstention doctrine. The District Court found that a reinsurance collection
matter does not present a difficult or novel question of state law and
declined to abstain. The court granted, however, Fremont’s motion to stay
the action on the ground that the reinsurance contract contained an
arbitration clause. As Liquidator, the Commissioner stands in the shoes of
the company in liquidation and is bound by an arbitration provision under
the reinsurance contract in collecting reinsurance. Finally, the Court found
that the Liquidator’s power, under Vermont Law, to collect reinsurance is
not the regulation of the business of insurance under the McCarran‐
Ferguson Act, because it does not involve the relationship between the
insurer and its insureds. Therefore, the Federal Arbitration Act, relied on by
Fremont to compel arbitration, was not pre‐empted by McCarran‐Ferguson.
The court did a comparison of Vermont and New York Law and determined
that unlike New York, Vermont law did not vest exclusive jurisdiction for
reinsurance collections in the liquidation court.
West Virginia West Virginia v. Blue Cross Blue Shield, 203 W.Va. 690, 510 S.E.2d 764 (1998).
The United States appealed to the Supreme Court of Appeals of West
Virginia to decide whether the receiver liquidating the estate of Blue Cross
and Blue Shield of West Virginia improperly applied state law and classified
its late‐filed proofs of claim in Class VII for purposes of distributing the
liquidated estate.
The court held that the West Virginia priority scheme for late‐filed claims,
W.Va. Code §§ 33‐24‐27(g) (1996 & Supp. 1998) and 33‐24‐37(b) (1990) (Repl.
Vol. 1996), does not exceed state power. The state may impose a limitation
date on federal claims against an insolvent insurance company or health
service corporation when that date merely subordinates the priority of the
late‐filed federal claims rather than causing them to be absolutely
invalidated.
Further, the court held that the McCarran‐Ferguson Act, 15 U.S.C. §§ 1011 et
seq., W.Va. Code § 33‐24‐27, reverse preempts the federal priority statute
entitling the United States to first payment of claims against an insolvent
debtor. The state statute protects policyholders by assuring that claims will
be handled in a timely and orderly fashion and by reducing the
administrative costs of liquidation. Therefore, the classification assigned by
the receiver to the late‐filed claims of the United States was correct.
Arbitration in Liquidation Proceedings
Second Circuit
Commercial Union Ins. Co. v. Lines, 378 F.3d 204 (2d Cir. 2004), on remand to
Nos. 02 Civ. 0573 (TPG), 03 Civ. 7376 (TPG), 2008 WL 2234634 (S.D.N.Y. May 30,
2008). The Second Circuit partially vacated an arbitration award denying a
reinsurer’s rescission claim, and also denied the liquidator’s cross‐motion to
confirm the award, where arbitrators found that the insolvent insurer
deceptively redomesticated to Bermuda so that liquidation proceedings could
be conducted in Bermuda rather than Massachusetts. On remand, and after
hearing evidence, the district court enforced the arbitration award and allowed
arbitration to proceed, finding no evidence that the Massachusetts Insurance
Commissioner would have acted differently from the Joint Liquidators in

Bermuda. Therefore there was no prejudice to the reinsurer as a result of
redomestication.
Corcoran v. Ardra Ins. Co., Ltd., 657 F. Supp. 1223 (S.D.N.Y. 1987), appeal
dismissed, 842 F.2d 31 (2d Cir. 1988). The court held that although the
construction of the United Nations Convention on Recognition and
Enforcement of Foreign Arbitral Awards is initially a question of federal law, it
did not bar Burford abstention in a dispute between the New York
Superintendent of Insurance and a reinsurer where the nature of the potential
impact of a federal court ruling on liquidation proceedings in the New York
State insurance industry supported a Burford abstention in a dispute between
a Bermuda reinsurer and the New York Superintendent of Insurance, as
liquidator of an insolvent New York insurer.
Stephens v. American International Insurance Company, 66 F. 3d 41 (2d Cir.
1995). The U.S. District Court for the Southern District of New York, directed
the Kentucky Liquidator of Delta America Re Insurance Company to arbitrate
with its reinsurers who had ceded business to Delta. The Second Circuit
Court of Appeals reversed, agreeing with Kentucky that its liquidation
statute was for the purpose of regulating insurance and could not be
preempted by the Federal Arbitration Act (FAA). The District Court had
agreed with reinsurers that the state liquidation act was not designed to
protect policyholders and therefore was not exempt from preemption by
the FAA. The dispute centered on whether the reinsurers could set off
premiums owed them against amounts they owed Delta. Kentucky law bars
arbitration in a liquidation proceeding. The issue at stake here is whether
the prohibition against arbitration, in and of itself, protects policyholders.
Since the Liquidation Act regulates the performance of insurance contracts,
it is part of the regulation of insurance. The “bargained for” right to
arbitrate is not a protection for policyholders. Under the discussion and
analysis of the regulation of insurance set forth in Department of Treasury v.
Fabe (508 U.S. 491, 113 S. Ct. 2202, 124 L. Ed . 2d 449), the FAA does not
preempt state liquidation statutes.
Third Circuit
Suter v. Munich Reins. Co., 223 F.3d 150 (3d Cir. 2000). The liquidator of an
insolvent insurance company brought a state‐court action against an alien
reinsurer to recover on reinsurance treaties. The reinsurer removed to case
to federal court pursuant to the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (the “Convention”). The liquidator
moved for remand, arguing that the service of suit clause in the reinsurance
agreement waived the reinsurer’s right to remove. The District Court
granted the liquidator’s motion, but the Court of Appeals reversed, holding
that the right to remove a case under the Convention cannot be waived in
the absence of clear and unambiguous language requiring such a waiver.
Because the service of suit clause was ambiguous, it did not clearly and
unambiguously waive the reinsurer’s right to remove the case.
Fifth Circuit Munich American Reinsurance Company; NAC Reinsurance Corporation v.
John P. Crawford, as Receiver of Employers National Insurance Corporation,
(5 th Cir. 6/2/98) 141 Fed. 3 rd 585; 1998 U.S. App. LEXIS 11366 The Fifth Circuit
affirmed a district court finding that the Federal Arbitration Act was reverse
pre‐empted by Oklahoma law under the McCarran Ferguson Act and the
dismissal of the petition to compel arbitration. The case arose out of a
dispute over salvage proceeds obtained subsequent to the payment of a loss
arising under a reinsurance agreement between Employers National
Insurance Corporation (ENIC) and Munich American Reinsurance Company

(“Munich”) and NAC Reinsurance Corporation (“NAC”). Prior to the
recovery of the salvage proceeds, ENIC was placed into liquidation.
Pursuant to the liquidation order, ENIC’s attorneys remitted the proceeds to
the Liquidator. Munich and NAC disputed the Liquidator’s claim to the funds
and sought to compel arbitration by filing a petition in federal district court.
Crawford responded by filing a motion in state court to enjoin the arbitration
pursuant to the injunction in the state court Liquidation Order. When the
state court determined that Munich and NAC’s petition violated the
Liquidation Order, the federal district court dismissed the arbitration
proceeding, asserting Burford abstention.
Seventh Circuit
Ninth Circuit
Selcke v. New Eng. Ins. Co., 995 F.2d 688 (7th Cir. 1993). The Rehabilitator of
an insolvent insurer, Centaur, sued defendant NERCO for breach of four
reinsurance contracts. While NERCO admitted owing Centaur most of the $4
million claimed by the Rehabilitator, NERCO claimed that Centaur owed it
more than $33 million under other reinsurance contracts. NERCO thus
argued that it should be entitled to set off the $4 million it owed Centaur
against the money Centaur owed it. Because the reinsurance contracts
contained arbitration clauses, NERCO moved for a stay pending arbitration
of the setoff issue. The district judge refused to order arbitration, reasoning
that the right to setoff is statutory, and thus not a dispute over the
contract's interpretation. The Seventh Circuit, reversed, finding that
statutory rights to setoff (like all statutory contractual rights) become
implied contractual terms, that the contract did not remove these terms
from the scope of the arbitrability clause, and that the setoff claim shall be
resolved by an arbitration panel.
Bennett v. Liberty National Fire Insurance Company, 968 F.2d 969 (9th Cir.
1992). After the liquidator of an insolvent Montana insurance company sued a
quota‐share reinsurer and a management company to collect reinsurance
payable, the defendants removed the case to federal court and moved to
compel arbitration. The trial court compelled arbitration as to one of seven
causes of action alleged in the complaint, but abstained under the Colorado
River and Burford doctrines from ordering arbitration as to the remaining
claims, which it ruled involved matters of important state interest. The Ninth
Circuit reversed, holding that where the rights sought to be enforced by a
liquidator derive primarily from the insolvent insurer's contracts rather than
from Montana's insolvency statute, the liquidator was bound by the preliquidation
agreements to arbitrate. The court noted that the liquidator had
presented no evidence that enforcing the arbitration clauses would disrupt the
orderly liquidation of the insolvent insurer or that the Montana Insurance Code
prohibits arbitration of disputes involving insolvent insurers.
Quackenbush v. Allstate Ins. Co., 121 F.3d 1372 (9th Cir. 1997). The Ninth
Circuit held that arbitration clauses in the insolvent insurer’s reinsurance
contracts required arbitration of disputes. The court found no evidence that
the parties intended to exclude post‐insolvency disputes from the scope of
the arbitration clauses. The court further found that the McCarran‐Ferguson
Act does not preclude arbitration under the Federal Arbitration Act where
state law does not prohibit arbitration of disputes involving an insolvent
insurer. In determining whether to compel arbitration under the Federal
Arbitration Act, a district court is required to determine only whether there
was a valid arbitration agreement between the parties.
Tenth Circuit
Capitol Life Ins. Co. v. Gallagher, 47 F.3d 1178 (10th Cir. 1995). Capitol Life
Insurance Company applied for an order compelling the commissioner of the

Florida Department of Insurance (FDOI), as receiver for an insolvent insurer,
to arbitrate a class action suit. The Florida class action involved a dispute
between Capitol and its annuitants who were not bound by the arbitration
agreement. The Commissioner’s appearance as a representative for the
annuitants did not implicate his separate and distinct role as receiver for the
insolvent insurer. Therefore, arbitration was not compelled.
Davister Corp. v. United Republic Life Ins. Co., 152 F.3d 1277 (10th Cir. 1998),
cert. denied, 119 S. Ct. 1112 (1999). Seller of stock to insurer prior to its
insolvency brought action against insurer and Utah’s Insurance
Commissioner to compel arbitration of dispute over real property that was
part of the sale. The Court of Appeals held that under the McCarran‐
Ferguson Act, Utah’s statutory stay of proceedings against insurer in
liquidation trumped the Federal Arbitration Act. Therefore, arbitration was
not compelled.
California Garamendi v. Charles Cottonwood Capital Corp., 1992 U.S. Dist. LEXIS 11678
(C.D. Cal. 1992). The court held that the California Commissioner of Insurance,
as liquidator of an insolvent insurance company, was bound by the arbitration
provision in an agreement signed by an agent of the insurer with a securities
broker. The court rejected the Commissioner's arguments that the liquidator
was a new party not bound by the insurer's agreement to arbitrate and that
the state court's order enjoining all persons from "instituting any action at law
or suit in equity, including but not limited to matters in arbitration ." did not
prohibit the defendant, in a suit commenced by the liquidator, from invoking
its right to arbitrate.
In re Golden Eagle Co, No. A094144, 2002 Cal. App. Unpub. LEXIS 10830 (Ct. App.
Nov. 22, 2002). In a proceedings relating to a claim for bad faith, the court held
the insolvent insurer was bound by an arbitration award arising from a
declaratory relief action commenced by the insolvent insurer through its claims
administrator prior to its insolvency.
Colorado Phillips v. Lincoln Nat. Health & Cas. Ins. Co., 774 F. Supp. 1297 (D. Colo. 1991).
Arbitration will be enforced even if the dispute arose under an expired
agreement. The Federal Arbitration Act establishes a federal policy favoring
arbitration and requiring that courts rigorously enforce arbitration
agreements. The Act also leaves no place for the exercise of discretion by a
federal court.
Illinois In re Liquidation of Inter‐American Insurance Co. of Ill., 303 Ill. App. 3d 95,
707 N.E.2d 617 (1999). Reinsurance company entered into reinsurance
contracts with a now‐insolvent insurance provider. These contracts had
broad arbitration clauses. The fact that the parties submitted the issue of
whether the reinsurance contracts were executory to the court precluded
arbitration on that issue. However, the court held that the fact that the
reinsurance company litigated and lost one issue does not entail waiver of its
right to arbitrate other clearly distinct issues. The court noted that the
essential question in establishing waiver of a contractual right to arbitrate is
whether, based on the circumstances, the alleged defaulting party has acted
inconsistently with the right to arbitrate. The court also denied the
Liquidator's request that it require the arbitrators to set forth in writing the
reasons for their decision, reasoning that this would defeat the purpose of
the contractual right to arbitration.

Pine Top Ins. Co. v. Continental Reins. Corp., No. 88‐5402, (N.D. Ill. Oct. 5,
1988). The court denied defendant reinsured's motion to compel arbitration
where a dispute between a reinsurer's liquidator and reinsured concerned an
alleged voidable preference. The court ruled that although the agreement
between the parties stated that any dispute between the parties with respect
to interpretation of the agreement would be submitted to arbitration, a
dispute as to whether a transfer is a voidable preference is not a dispute
relating to the interpretation of the agreement and thus is not subject to the
arbitration clause.
Schacht v. Hartford Fire Ins. Co., 1991 U.S. Dist. LEXIS 12145 (N.D. Ill. Aug. 30,
1991). The Rehabilitator of an insolvent insurer, Centaur, sued several
companies, including the defendant, alleging fraudulent conspiracy,
concealment, and breach of duty in the formation and maintenance of a
reinsurance pool. Because the reinsurance contracts provided that "any
dispute arising out of" the contracts must be arbitrated, several defendants
moved to stay litigation pending arbitration. The Director argued that he
should be able to proceed with the non‐arbitrable claims against the
defendants who were not signatories on the reinsurance contracts.
Although the court agreed that several of plaintiff's claims against nonsignatory
defendants did not implicate the arbitration clause, the court
nonetheless ordered a stay of litigation on all claims, pending the completion
of arbitration, because most of the non‐arbitrable claims involved the same
general facts as the claims which were subject to arbitration. The court
ruled that to hold otherwise would lead to potentially inconsistent outcomes
and inefficient use of judicial resources.
Schacht v. Hartford Fire Ins. Co., 1991 U.S. Dist. LEXIS 16430 (N.D. Ill. Nov. 6,
1993). The court held that a parent insurance company was entitled to
arbitrate claims against it where its subsidiary was a signatory to an
arbitration clause in a reinsurance contract with the plaintiff despite the fact
that the parent had no agreement to arbitrate. Arbitration is appropriate
where claims against the subsidiary and its nonsignatory parent are identical,
where the results of the arbitration would impact conclusively on the parent
and where the claims stem from the relationships created by the reinsurance
contract. Moreover, the court held that all discovery should be stayed
where arbitrable and nonarbitrable claims are intertwined to avoid
unnecessary confusion and potential inconsistent outcomes.
Selcke v. New England Ins. Co., No. 92‐C‐5599 (N.D. Ill. Oct. 27, 1992).
Rehabilitator sued insurance company for breach of contract arising out of
amounts allegedly due under three reinsurance contracts. Defendant reinsurer
moved for stay pending arbitration, based on contractual provision for
arbitration "should an irreconcilable difference of opinion arise as to the
interpretation of" the agreement. Court denied stay, despite federal policy
favoring arbitration, on the ground that reinsurer, which attached letter to
motion apparently conceding liability and asserting set‐off as an affirmative
defense, failed to show that dispute involved a contractual interpretation
issue.
Missouri Ainsworth v. Allstate Insurance Company, 634 F. Supp. 52 (W.D. Mo. 1985).
The receiver of two insolvent insurance carriers sought to set aside the
mandatory arbitration provisions contained in reinsurance contracts between
the companies and the reinsurer. In upholding the enforceability of the
arbitration clauses, the United States District Court for the Western District of
Missouri held: (i) the Federal Arbitration Act (the "FAA") favors the arbitration

of disputes; (ii) if a contract involving interstate commerce contains an
arbitration clause, it is enforceable under the FAA regardless of contrary state
laws; and (iii) the McCarran‐Ferguson Act is no bar to the enforceability of
arbitration clauses. The Court ordered a stay of all judicial proceedings
pending completion of the arbitration process by the receiver and the
reinsurer.
Nebraska
State ex. rel. Wagner v. Kay, 15 Neb. App. 85, 722 N.W.2d 348 (2006). The
director of insurance, as liquidator of the insurance company, filed suit against
the former directors and officers of the company for breach of certain fiduciary
obligations. One of the former directors and officers brought a motion to
compel arbitration pursuant to arbitration clauses in employment and
separation agreements. The Court of Appeals of Nebraska found that when a
liquidator is appointed by a court order, such a liquidator is not automatically
bound by the reappointment contractual obligations of the insurer, such as
agreements to arbitrate. Nebraska law grants the liquidator broad statutory
powers. Accordingly, the liquidator was not seeking to enforce the two
agreements, but instead disavowing them pursuant to his express powers.
Thus, the Court of Appeals held that the arbitration clauses in insurer’s
severance and separation agreements with former officer were not binding on
the liquidator.
New York Corcoran v. AIG Multi‐Line Syndicate, Inc., 143 Misc. 2d 62, 539 N.Y.S.2d 630
(Supreme Court, New York County 1989), rev'd, 167 A.D.2d 332, 562 N.Y.S.2d
933 (1990). On appeal to the Appellate Division, First Department, the Court
unanimously reversed the holding of the lower court, basing its decision on
Corcoran v. Ardra Ins. Co., 156 A.D.2d 70, 553 N.Y.S.2d 695 (1st Dep't 1990). The
Court below had held that because the McCarran‐Ferguson Act vests the
states with the power to regulate the business of insurance, the Federal
Arbitration Act ("FAA") has no effect in cases where the liquidation provisions
of the state Insurance Law are implicated. However, the Appellate Division
reversed the finding of the Court below that the Liquidator was compelled to
arbitrate under the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards.
Corcoran v. AIG, Multi‐Line Syndicate, Inc., No. 4835‐85 (N.Y. Sup. Ct. Mar. 6,
1989) (LEXIS, Insrlw library, NY file). The court held that the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, which became
effective on December 29, 1970, is the "supreme law of the land" and thus
would take precedence over the New York statutory scheme concerning the
liquidation of insurance companies and vesting exclusive jurisdiction of a
liquidation proceeding in the New York Supreme Court. Consequently, the
reinsurance dispute satisfies the requirements of the Convention and is
arbitrable. The court, however, indicated that as supervisor of the liquidation
proceedings it would retain jurisdiction with respect to the award rendered in
the arbitration.
Corcoran v. Ardra Ins. Co. Ltd., 77 N.Y.2d 225, 566 N.Y.S.2d 575, 567 N.E.2d 969
(1990), cert. denied, 111 S. Ct. 2260 (1991). The Liquidator of Nassau Insurance
Company was not required to arbitrate claims against a foreign insurer arising
out of three international reinsurance agreements, even though the
agreements contained arbitration clauses. Ardra argued that the Convention
on the Recognition and Enforcement of Arbitral Awards preempted the
McCarran‐Ferguson Act and state insurance law and required the Liquidator to
arbitrate its dispute with Ardra. The Court, noting that the Convention's
requirement of arbitration is subject to exception where it is "inoperative or

incapable of being performed," found that the Liquidator was without
statutory authority to engage in arbitration. Therefore, since the arbitration
clauses in this case were "incapable of being performed" and the claims were
not "capable of settlement by arbitration," the requirements of the
Convention were not in force.
Corcoran v. Ardra Ins. Co. Ltd., N.Y.L.J., Aug. 15, 1988, at 24, col. 3 (N.Y. Sup. Ct.
1988). The court declined to follow a Fourth Circuit decision which held that
the liquidation of an insolvent insurance company does not constitute the
"business of insurance" as that term is used in the McCarran‐Ferguson Act.
Instead, it denied a motion to compel arbitration under the Federal Arbitration
Act.
Corcoran v. Doug Ruedlinger, Inc., Index No. 5349‐87, slip op. (N.Y. Sup. Ct.
Aug. 21, 1987). The court denied defendant's motion to compel arbitration and
found that, pursuant to the McCarran‐Ferguson Act, the Federal Arbitration
Act does not preempt the New York Insurance Law.
Ideal Mut. Ins. Co. v. Phoenix Greek Gen. Ins. Co., No. 83 Civ. 4687 (S.D.N.Y.
Dec. 8, 1987) (LEXIS, Genfed library, Courts file). The court rescinded a
previous order directing arbitration of a reinsurance dispute because the
ceding company subsequently was placed in liquidation. It stated an insurer
placed in liquidation or its liquidator is not compelled to arbitrate claims.
In re Allcity Ins. Co. v. Kondak, 66 A.D.2d 531 (N.Y. App. Div. 1979). The court
followed Knickerbocker, and denied a motion to order an insurance company
that had been placed into rehabilitation to arbitrate uninsured motorists
claims, and instead ordered that all disputes be resolved in the rehabilitation
proceedings.
In re Application for an Order Staying Arbitration by the General Accident Fire
& Life Assurance Corporation, No. 24632, slip op. (N.Y. A.D. Dec. 3, 1985). One
court's order staying any action or proceeding from being brought against an
insolvent insurer undergoing liquidation, prevents another court from properly
adding the insolvent insurer as an additional respondent. The provisions in the
insurance code regarding the liquidation of insurance companies are exclusive
in their operation and furnish a complete procedure for the protection of the
rights of all parties interested.
In re Liquidation of Union Indem. Ins. Co. of N.Y., 137 Misc.2d 575, 521 N.Y.S.2d
617 (N.Y. Sup. Ct. 1987). In denying reinsurers' motion directing the State
Superintendent of Insurance to proceed to arbitration, the court held that a
state statute which sets forth procedures for liquidation and dissolution of
insurance companies and grants the liquidation court exclusive jurisdiction of
all claims concerning the insolvent insurer constitutes "state law regulating the
business of insurance" within the meaning of the McCarran‐Ferguson Act and
therefore was not superseded by the Federal Arbitration Act.
In Re Petitions of Jukka Laitasalo and Ossi Sokka, as Joint Administrators of
Kansa General International Insurance Company Ltd. and Kansa Reinsurance
Company Ltd., 196 B.R. 913 (S.D.N.Y. 1996). In this ancillary proceeding
brought pursuant to 11 U.S.C. § 304 (Bankruptcy Code), Continental Casualty
Company moved to compel an insolvent Finnish insurance company to
participate in the arbitration of a dispute concerning a letter of credit posted
in the arbitration by the insolvent company, Kansa General International
Insurance Company Ltd. The arbitration, to resolve a dispute arising from a

einsurance agreement between Continental and Kansa Re, the other
insolvent company involved in this proceeding, had been commenced prior
to the issuance of an injunction in the ancillary proceeding prohibiting
actions, proceedings and arbitrations against the insolvent foreign
companies. Continental withdrew its objection to the injunction upon the
court’s order that the arbitration could continue. Kansa General agreed that
the arbitration could continue. Although the arbitration was between
Continental and Kansa Re, Kansa General had posted the letter of credit that
the arbitrators had directed Kansa Re to post as security for a possible
award in favor of Continental. Shortly after the injunction was issued, the
arbitrators awarded Continental an amount in excess of the letter of credit
that Kansa General had posted. Kansa General opposed Continental’s
motion to compel Kansa General to participate in the arbitration on the
ground that Kansa Re, and not Kansa General was the party to the
arbitration.
After a detailed examination of the relationship between Kansa Re and
Kansa General, including the fact that they filed for bankruptcy at the same
hour of the same day, the court decided that Kansa General could be
compelled to participate in the arbitration, even though it was not a
signatory to the arbitration agreement. The court observed that the posting
of the letter of credit by Kansa General manifested its intent to arbitrate
disputes under the reinsurance agreement with Continental, and ruled that it
would be unjust for a party to arbitrate a dispute and to then avoid the
arbitration agreement after losing the arbitration proceeding. In granting
Continental’s motion to compel Kansa General to participate in the
arbitration, the court stressed that Kansa General had originally agreed to
permit the arbitration to go forward and that Continental had withdrawn its
opposition to an injunction in exchange for being permitted to proceed with
the arbitration.
Knickerbocker Agency, Inc. v. Holz, 4 A.D.2d 71, 162 N.Y.S.2d 822 (1957),
affirmed, 4 N.Y.2d 245, 173 N.Y.S.2d 602, 149 N.E.2d 885. The insurance code
vests exclusive jurisdiction over all claims against an insolvent insurer in one
count. This prevails over a claimant's contractual right to arbitration. The
court was not moved by the fact that arbitration was sought as a defense and
not to establish a claim. The court also found unpersuasive the fact that the
claimant instituted arbitration proceedings after the insurance commissioner
and commenced an action against the claimant, which was separate from the
liquidation proceedings.
Reliance Ins. Co. v. First Class Coverage, Inc., No. 15 CIV. 2269 (NRB), 2005 WL
2276877 (S.D.N.Y. Sept. 14, 2005). The court granted the liquidator’s petition to
compel arbitration in an action by the insolvent insurer for alleged breach of a
program manager agreement. The agreement contained an arbitration clause
encompassing the dispute, and the court rejected the defendant program
manager’s argument that the insolvent insurer failed to comply with notice
requirements in the arbitration clause.
Universal Marine Ins. Co. Ltd. v. Beacon Ins. Co. and Cherokee Ins. Co., 592 F.
Supp. 948 (1984) on appeal from the W.D. North Carolina, District Ct. No. St‐C‐
83‐328. The parties, including a primary insurer, reinsurer and retrocessionaire,
began plans to develop a consolidated arbitration agreement, but the
reinsurer was placed in receivership, and the court stayed all actions against
the insolvent reinsurer. The primary insurer obtained a temporary restraining
order restricting the reinsurer and its receiver from interfering with the

completion of the plan of arbitration. The issue is now before the Fourth
Circuit.
Vesta Fire Ins. Corp. v. New Cap Reins. Corp., 244 B.R. 209 (Bankr. S.D.N.Y.
2000). Before insolvency of a reinsurer, the reinsured demanded arbitration as
provided in the reinsurance agreement to recover reinsurance proceeds.
Subsequently, an administrator was appointed and a stay was entered under
Australian law. The creditor filed a petition in bankruptcy court. The contractual
right to arbitrate did not preclude the bankruptcy court from deferring to the
Australian insolvency proceeding. The Bankruptcy Code, rather than the
Federal Arbitration Act governed, and the fact that arbitration was already
underway did not require an exception to the foreign injunction.
Washburn v. Corcoran, 643 F. Supp. 554 (S.D. N.Y. 1986). The court held that
the McCarran‐Ferguson Act barred application of the Federal Arbitration Act.
Consequently, the New York liquidator is not required to arbitrate the
reinsurance contract dispute between it and the Illinois rehabilitator, pursuant
to a reinsurance agreement containing an arbitration clause.
Ohio Benjamin v. Pipoly, 800 N.E.2d 50, 155 Ohio App. 3d 171 (Ohio Ct. App. 2003),
Compelling arbitration against the will of the liquidator interferes with the
liquidator’s powers. To compel arbitration would adversely affect the
insolvent insurer’s assets. The importance of the liquidation process trumps
any presumption in favor of arbitration. The Court held that absent express
statutory authorization for private arbitration to proceed despite the lack of
assent to the same on the part of the liquidator, the public policy of Ohio law
(expressed throughout Ohio Revised Code Chapter 3903) defeats the
attitude that courts should favor arbitration.
Covington v. American Chambers Life Ins. Co., 150 Ohio App. 3d 119 (Ohio Ct.
App. 2002). The Court reversed a trial court order which enforced an arbitration
clause against the liquidator of an insolvent insurance company. The Court
interpreted Fabe v. Columbus Ins. Co., 68 Ohio App. 3d 226 (1990) overruled by
Benjamin v. Pipoly, 155 Ohio App.3d 171 (Ohio Ct. App. 2003), to stand for the
proposition that enforcement of an arbitration provision is not mandatory if it
would affect the priority of claims or adversely affect a party to the liquidation
proceeding.
Fabe v. Columbus Ins. Co., 68 Ohio App. 3d 226 (1990), overruled by Benjamin
v. Pipoly, 800 N.E.2d 50, 155 Ohio App. 3d 171 (Ohio Ct. App. 2003). The court
held that the Superintendent of Insurance, as liquidator of insolvent insurance
company, was bound by binding arbitration provision in agreement between
insolvent insurer and reinsurers from whom Superintendent was attempting to
recover amounts allegedly owed; enforcement of arbitration provision did not
usurp trial court's exclusive jurisdiction over liquidation proceedings or
interfere with liquidator's statutory powers.
Hudson v. John Hancock Fin. Services, 2007 Ohio 6997 (Ohio Ct. App. 2007). The
Court affirmed the Pipoly decision stating that liquidators cannot be forced to
arbitrate. The Court also expanded the Pipoly decision, holding that the
liquidation of insurance companies under state law does not fall under the
Federal Arbitration Act due to “reverse preemption” by the Ohio Liquidation
Act. The Court also noted that Pipoly should be applied in instances where the
liquidator is attempting to obtain benefits under a reinsurance agreement while
repudiating an arbitration clause that conflicts with the purposes and policies of
the Legislation Act.

Louisiana
Republic of Texas Savings Association v. First Republic Life Insurance
Company, 417 So.2d 1251 (La. App. 1st Cir. 1982). Plaintiff savings and loan
brought suit against the rehabilitator of insolvent insurer seeking to foreclose
on mortgage. Defenses of estoppel and equitable relief based on
misrepresentations allegedly made by the carrier prior to its insolvency were
held not to apply to the rehabilitator, who, because of his statutory duties to
protect creditors, policyholders, and the insurer, does not stand precisely in
the shoes of the insolvent carrier. After reviewing Louisiana negotiable
instruments law and the Uniform Commercial Code as adopted in Louisiana,
the court applied a "subjective good faith" test to determine whether the
plaintiff note holder was a holder in due course of the note. Finding that
plaintiff was in good faith, the court granted the requested relief and denied
the injunction requested by the rehabilitator.
Dropdown
Seventh Circuit
Eighth Circuit
Premcor USA, Inc. v. American Home Assurance Co., 400 F.3d523 (7th Cir.
2005) – Employer brought suit against umbrella insurer, seeking declaration
that such insurer must drop down, after commercial general liability insurer
became insolvent and could not indemnifying employer against otherwise
covered defense costs. While the umbrella liability policy provided for
coverage in excess of the “amount recoverable” under the underlying
insurance, the primary insurance provided an unlimited duty to defend. Where
umbrella policy expressly covered employer’s costs only in excess of
underlying insurance regardless of underlying insurers’ insolvency or insured’s
ability to collect, umbrella insurer was not required to drop down. Additionally,
umbrella insurer was not required to indemnify employer for costs in excess of
underlying insurance based on umbrella policy’s express language.
Interco Incorporated v. National Surety Corporation, 900 F.2d 1264, 8th Cir.
(1990). Insured brought declaratory judgment action to determine the liability
of second and third‐tier excess liability carriers when Mission, the first‐tier
excess carrier, became insolvent. The trial court granted summary judgment in
favor of the insurers. The Eighth Circuit affirmed holding that excess policies
were unambiguous in precluding drop down coverage when the first‐tier
excess liability carrier became insolvent. Construing the policies otherwise
would make the excess insurers guarantors of Mission's solvency.
Waste Mgmt. Minn., Inc. v. Transcontinental Ins. Co., 502 F.3d 769 (8th Cir.
2007). The primary insurer for a truck company was insolvent. The issue before
the court was whether an excess insurer of the truck company was obligated to
“drop down” and assume the responsibility of the insolvent primary insurer.
Minnesota does not required excess insurers to insure the full loss when the
primary insurer is insolvent. Thus, the excess insurer’s “no drop down”
provision would be enforced according to its terms under Minnesota law. The
validity of the provision; however, did not invalidate a settlement payment by
the excess insurer. It is not a violation of the “no drop down” provision to settle
a potential drop‐down exposure.
Ninth Circuit Republic Western Ins. Co. v. C.V. Starr & Co., No. 92‐15493, 1993 WL 326445
(9th Cir. Aug. 26, 1993). The Ninth Circuit held that the language of an excess
insurance policy did not require the excess carrier to drop down to fill the
coverage gap left by an insolvent underlying insurer. The court determined
that Reserve Ins. Co. v. Pisciotta, 640 P.2d 764 (Cal. 1982), requires only that
ambiguity in the policy language be resolved in favor of the insured, not that

the policy make specific provision for the insolvency of an underlying carrier.
In so holding, the court distinguished the language of the policy at issue
from the policies addressed in Pisciotta and Coca Cola Bottling Co. v.
Columbia Cas. Ins. Co., 11 Cal. App. 4th 1176 (Ct. App. 1993).
Tenth Circuit
Alaska
California
Aramark Leisure Servs. v. Kendrick, 523 F.3d 1169 (10th Cir. 2008). Following a
boating accident in a rented boat, the renter sued the rental company and its
insurer, Albany Insurance Company (“Albany”), for damages. Albany argued
that its policy did not extend coverage to Plaintiff due to an “escape clause,”
which provided that Albany “escaped” liability for the accident if the insured
had other primary coverage. Albany directed Plaintiff to seek primary coverage
from the personal liability policy with Shelby Insurance Company (“Shelby”)
which was also carried by the insured. During the litigation, Shelby entered
receivership and the Utah Property and Casualty Insurance Guaranty
Association (“UPCIGA”), becoming potentially liable, entered the litigation.
UPCIGA argued that the Utah Insurance Guaranty Act required that Albany’s
coverage be exhausted before turning to UPCIGA for recovery. Reversing the
trial court, the Tenth Circuit held that the UPCIGA was liable for primary
coverage just as Shelby would have been in the absence of receivership. The
escape clause in the Albany policy is implicated because of the existence of the
Shelby policy. Stepping into the shoes of the insolvent insured, UPCIGA had all
the rights, duties, and obligations of Shelby, and therefore, became the sole
primary insured as a result of the very existence of the Shelby policy. Albany, in
this circumstance, did not “drop down” as a result of the plain language of the
Albany and Shelby contracts – including the escape clause – and therefore, the
only primary coverage belonged to Shelby, leaving no other policy to be
exhausted prior to turning to UPCIGA for recovery.
Grace v. Insurance Co. of N. Am., 944 P.2d 460 (Alaska 1997). The court held
that notwithstanding the insolvency of the primary and first layer excess
carriers, the second layer excess liability insurer had no duty to provide drop
down coverage absent policy language to the contrary. The excess insurer
would only be liable for amounts in excess of the liability limits of the
underlying policies and not for amounts in excess of sums actually paid by
those policies.
Coca Cola Bottling Co. v. Columbia Cas. Ins. Co., 11 Cal. App. 4th 1176 (Ct. App.
1993). The court held that an excess carrier was required to drop down to
cover the gap in coverage created by the insolvency of an underlying carrier
because the excess policy was "following form." The court determined that
except for the amount of premium and policy limits, the terms and
conditions of the excess policy were the same as the terms and conditions of
the underlying umbrella policy, which stated that it was excess of the
"amount recoverable" under the primary policy. Relying on Reserve Ins. Co.
v. Pisciotta, 640 P.2d 764 (Cal. 1982), the court found that pursuant to such
language, the excess insurer expressly assumed the risk of the underlying
insurer's insolvency.
Wells Fargo Bank v. California Ins. Guarantee Assn., 38 Cal. App. 4th 936 (Ct.
App. 1995). The court found that a third level excess policy, which was
following form, incorporated a provision contained in the second level policy
requiring that the underlying policy be exhausted solely by payment of
losses. Such language unambiguously precluded an obligation on the part of
the third level excess insurer to drop down upon the insolvency of the
second level insurer.

Connecticut
England v. Reliance Ins. Co., No. CV020079606S, 2004 WL 425139 (Conn. Super.
Feb. 24, 2004). An umbrella insurer was not required to step into the shoes of
the underlying insurer to provide coverage in the event of the underlying
insurer’s insolvency, where the umbrella policy provided that liability attaches
only when loss exceeds the amount specified in the underlying policy and the
policy contained a drop down exclusion stating that insolvency of the
underlying insurer did not increase the umbrella insurer’s liability.
Enviro Express, Inc. v. AIU Ins. Co., 901 A.2d 666 (Conn. 2006). Payments made
to an injured third party pursuant to an uninsured motorist insurance policy
would be treated as payment the insured tortfeasor was legally obligated to
make for purposes of determining whether the retained limit of the tortfeasor’s
umbrella insurance policy was met following insolvency and liquidation of the
tortfeasor’s primary insurer. Despite inclusion of a drop down exclusion in the
umbrella policy, the policy was ambiguous regarding which payments counted
toward the umbrella policy’s retained limit.
Delaware
Louisiana
In re Integrated Health Services, Inc. v. Integrated Health Services, Inc. v. Ace
Indemnity Ins. Co., 375 B.R. 730 (D. Del. 2007). An excess insurer contended that
the exhaustion of all underlying policies through actual cash payments was an
absolute condition precedent to its obligations to pay under its own excess
policies. It further argued that since the underlying insurer, Reliance, was
declared insolvent it had no obligation to make payments to the plaintiff. The
excess insurer also argued that forcing it to pay, even though the underlying
insurer never actually paid its portion, was forcing the excess insurer to “drop
down” and cover unpaid portions of the underlying insurer. The court found this
argument unpersuasive because the excess insurer would only have to pay the
portion owed in its own layer of coverage and not the underlying insolvent
insurer’s portion. The court held that although Reliance was unable to pay its
claims as a result of its insolvency, Reliance’s failure to exhaust its claims
through the actual payment of them did not effect the responsibility of the
excess insurer to have to pay its own layer of coverage.
Huggins v. Gerry Lane Enters. Inc., 950 So. 2d 750 (La. Ct. App. 2006). Plaintiff
filed suit against defendant and its insolvent insurer. The insolvent insurer had
provided a $1 million liability insurance policy. Defendant and Louisiana
Insurance Guaranty Association (“LIGA”) filed an answer and a third‐party
demand against excess of loss insurer alleging that the excess insurer’s $10
million commercial umbrella policy should drop down to provide coverage for
the first $1 million in liability unavailable due to the liability insurer’s insolvency.
The court of appeals rejected defendant’s and LIGA’s argument for “drop
down” because the language of the excess of loss policy specifically provided
that no drop down would occur if there was underlying coverage for the first $1
million. Therefore, the excess of loss policy, which coverage began at $1 million,
would not be reached until the net loss to defendant exceeded $1 million. In
sum, the excess of loss policy was intended to drop down to provide coverage
for an underlying insolvent insurer.
Mississippi Caldwell Freight Lines, Inc. v. Lumberman’s Mut. Cas. Co., Inc., 947 So. 2d 948
(Miss. 2007). The Supreme Court of Mississippi addressed the issue of whether
the insured’s catastrophe policy “dropped down” to cover the primary insurer’s
insolvency, or whether the North Carolina Insurance Guaranty Association was
obligated to pay the statutory maximum amount in the event that liability of the
insured was established. The court, applying North Carolina law, found that the
plain language of the catastrophe policy provides that the catastrophe insurer
was only liable in excess of $1 million. Moreover, the “loss payable” clause of

the catastrophe policy prevents “drop down” where the language provides that
the catastrophe insurer is only liable for the “amount in excess of sums actually
payable under the terms of the ‘underlying insurance.’” A secondary aspect of
the catastrophe policy providing for umbrella coverage in the event that there is
no other insurance applicable did nothing to “drop down” the catastrophe
policy to primary coverage. The applicable limit of insurance was never reached
in the catastrophe policy, so no duty to defend arose. In sum, the language of
the catastrophe policy controls whether or not the policy will drop down in the
event of the primary insurer’s insolvency.
Nat’l Union Fire Ins. Co. v. Miss. Ins. Guar. Ass’n, 990 So. 2d 174 (Miss. 2008). The
U.S. Court of Appeals for the Fifth Circuit certified a question to the Supreme
Court of Mississippi of whether a solvent insurer’s coverage containing an
“other insurance” clause must be exhausted under Mississippi law prior to
initiation of the statutory coverage of the Mississippi Insurance Guaranty
Association where the “other [primary] insurance” is provided by an insurance
company that has become insolvent. The state supreme court described this
clause as providing primary insurance in excess of any other primary insurance
coverage. The court held that coverage under a solvent carrier’s insurance
policy containing an “other insurance” clause must be exhausted prior to
Mississippi Insurance Guaranty Association (“MIGA”) assuming its statutory
obligation to pay.
New York Pereira v. Nat’l Union Fire Ins. Co., No. 04 CIV. 1134 (LTS), 2006 WL 1982789
(S.D.N.Y. July 12, 2006) The district court denied a motion to dismiss filed by an
insurer which provided the third excess layer of coverage. The insurer providing
the first excess layer was declared insolvent. The court held that to interpret
policy language as requiring that underlying insurance had to be exhausted by
actual collection would work a hardship to the insureds.
North Carolina
North Carolina Insurance Guaranty Association v. Century Indemnity
Company, 115 N.C. App. 175, 444 S.E.2d 464 (1994). The North Carolina
Insurance Guaranty Association filed complaint against excess liability
insurer and sought recovery of $200,000 it paid in settlement of an insured’s
claim after the primary insurer became insolvent. Excess liability insurer filed
answer and counterclaim and sought to recover $100,000 of the $200,000 it
paid as part of the same settlement. The court concluded that a commercial
umbrella insurance policy did not require excess liability insurer to “drop
down” and provide primary coverage after primary insurer became
insolvent. The court reasoned that “amount recoverable” as used in
umbrella policy provision establishing liability for the ultimate net loss in
excess of the amount recoverable under underlying insurance, meant the
amount of underlying insurance as it was written, not the amount actually
recoverable and collectible from the primary insurer. The court reasoned
further that loss was not payable by excess liability insurer under commercial
umbrella insurance policy unless the limit of the underlying insurance was
exhausted by payment, coming either from the insured or from the insured’s
underlying carrier. The court also noted that primary insurer’s insolvency did
not constitute “occurrence” subjecting excess liability insurer to liability
under commercial umbrella insurance policy.
The court also concluded that absent statutory prohibition, excess liability
insurer under commercial umbrella insurance policy would be entitled to
recover $100,000 from the North Carolina Insurance Guaranty Association
under the doctrine of equitable subrogation. The court reasoned that excess
liability insurer acted in good faith in paying $200,000 to insured as part of

settlement after primary insurer became insolvent and after primary insurer
became insolvent and after the North Carolina Insurance Guaranty
Association erroneously claimed that the excess liability insurer had to “drop
down” and provide primary coverage, and the North Carolina Insurance
Guaranty Association had already paid $200,000 of the $300,000 statutory
cap as part of the same settlement.
Ohio Essad v. Cincinnati Cas. Co., 2002 Ohio 2002 (Ohio Ct. App. 2002). Excess
insurance policies do not “drop down” and act as primary insurance policies
when the primary insurer becomes insolvent as a matter of policy. In the
absence of a contractual provision to do so, an excess insurance policy will not
drop down.
Wurth v. Ideal Mut. Ins. Co., 34 Ohio App. 3d 325 (Ohio Ct. App. 1987). The
insurance company failed to pay a claim due to insolvency. The Court held that
“drop down” liability should not be judicially imposed on Ohio excess insurance
providers as a matter of public policy. However, the inclusion of specific policy
language manifesting an agreement by the excess insurer to “drop down” and
become the primary insurer, due to the insolvency of the primary insurer, may
be expressly written into an excess liability policy. Further, “drop down” liability
may in a proper case be imposed due to an insurance policy ambiguity. Finally,
the Court noted that pursuant to Ohio Revised Code Chapter 3955, once all
other applicable insurance is exhausted, the Ohio Insurance Guaranty
Association (OIGA) is only liable for the same claims as the insolvent insurer
would have been, and then only up to the insolvent insurer’s policy limits.
Virginia
Atkinson Dredging Company v. St. Paul Fire & Marine Insurance Company,
836 F. Supp. 341 (1993). Atkinson Dredging brought a declaratory judgment
action to determine the liability of excess carriers when the primary carrier
has become insolvent. Atkinson claimed the policy required the excess
carrier to “drop down” and cover the losses not paid by the primary insurers
or, alternatively, that the excess policy was ambiguous and should be
interpreted in the light most favorable to the insured. The court granted
summary judgment in favor of the insurers holding that the excess policy
was unambiguous in precluding “drop down” coverage when the primary
carrier becomes insolvent.
Summary Proceedings
Powers and Duties of the Insurance Commissioner
Third Circuit
University of Maryland v. Peat Marwick & Co., 923 F.2d 265 (3rd Cir. 1991). The
Third Circuit vacated an Order dismissing the policy holders' Amended
Complaint and remanded to the Pennsylvania District Court an action brought
against the independent auditor (Peat Marwick) of insolvent Mutual Fire,
Marine and Inland Insurance Company, holding that Burford and Colorado
River abstention doctrines did not apply to bar the Federal action because (1) it
did not appear that the Commonwealth court would have jurisdiction over the
policyholder(s)' claims in the insolvency estate but rather a third party (Peat
Marwick); (2) the policyholder(s)' claims were distinct from those brought by
the Commissioner of Insurance on behalf of the insolvent insurer in the
Commonwealth court action; and (3) the action was at law, not in equity, and

sought only money damages. 3 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Ninth Circuit
Eleventh Circuit
California
Credit Managers Ass'n v. Kennesaw Life & Acc. Ins., 809 F.2d 617 (9th Cir.
1987). A receiver appointed by the Commissioner of Corporations was allowed
to enforce the liquidation provisions of the California Insurance Code. The
Knox‐Keene Act (Cal. Health and Safety Code §1392(a)) authorizes the
Commissioner of Corporations to sue for the appointment of a receiver in the
case of a violation of the Act. The insolvent employer association, which
offered a variety of benefits to its members including medical care benefits for
their employees, was held to be partly an insurer and partly a health care
service plan under the Knox‐Keene Act. The court held that since the
Insurance Commissioner acquiesced in the receiver's appointment, the
Insurance Commissioner authorized such receiver to enforce the liquidation
provisions of the Insurance Code. California law does not conform to the
Uniform Insurers Liquidation Act, which appears to give the Insurance
Commissioner exclusive authority to serve as receiver of an insolvent insurer.
Donna Lee Williams, Ins. Commissioner of the State of Delaware, Receiver of
National Heritage Life Ins. Company in liquidation, v. Solomon Obstfeld et al.,
314 F. 3d 1270 (11th Cir. 2002). Commissioner may file appropriate civil
proceedings to recover losses. Powers include asserting state law claims for
fraud, aiding and abetting fraud, aiding and abetting breach of fiduciary duty,
conversion, aiding and abetting conversion, and fraudulent conveyance as well
the ability to appeal adverse decisions. 314 F. 3d at 1272‐73, 1275.
Financial Indemnity Company v. Superior Court In and For Los Angeles County,
45 Cal.2d 395, 289 P.2d 233 (1955). The California Supreme Court wrote that to
allow a court to delay conservatorship (supervision) while it determined the
motives of the commissioner would as effectively defeat the primary purpose
of the drastic remedy provided by insurance code as to postpone the
conservatorship while the existence or nonexistence of the hazardous
condition was judicially established.
State v. Altus Finance, 36 Cal. 4th 1284 (Ct. App. 2005). The California Supreme
Court answered two certified questions from the Ninth Circuit as to whether the
California Attorney General could bring a false claims and Unfair Competition
Law action against assets of insolvent insurer and whether the assets were
state funds under the California False Claims Act. The court held the exclusive
authority of Insurance Commissioner to protect beneficiaries of insolvent
insurer precludes the Attorney General from seeking restitution and that the
funds were not state funds under the terms of the California False Claims Act.
Colorado
Alias Smith & Jones, Inc. v. Barnes, 695 P.2d 302 (Colo. App. 1984). The court
held that interinsurance exchanges are subject to the same statutes and
regulations as other insurance companies. Therefore, the Commissioner's
discretion in making decisions about the licensing of an insurance exchange is
the same as making licensing decisions about any other insurer. The court also
held that the high level of discretion allowed a Commissioner in determining
whether to renew an insurer's or exchange's license warrants extending
official immunity to the Commissioner's decisions with respect to the licensing
of an insurer or exchange.
3 On remand, the Pennsylvania District Court dismissed plaintiff's case based on a statute of
limitations and lack of causation grounds. 1991 U.S. District LEXIS 13561 (9/25/91).

Balzano v. Bluewater, 823 P.2d 1365 (Colo. 1992). Insurance commissioners
have the general power to supervise reinsurance contracts in the public
interest, including the power to disallow reinsurance contracts containing
setoff provisions.
Connecticut Connecticut Life and Health Insurance Guaranty Association v. Jackson, 173
Conn. 352, 377 A.2d 1099 (1977). The court ruled that the guaranty association
must exhaust its administrative remedies with the insurance commissioner in a
dispute with the commissioner over the interpretation of a provision in the
guaranty fund law before it could bring an action for a declaratory judgment in
the courts.
Veteran’s Memorial Medical Center et al. v. Connecticut Insurance Guaranty
Association, 1996 Conn. Super LEXIS 2763 (Superior Court of Connecticut,
Judicial District of New Haven, at Meriden). This declaratory judgment action
addresses the issue of the statutory obligation of the Connecticut Insurance
Guaranty Association (CIGA). Ideal Mutual Insurance Company issued a
Comprehensive Hospital Liability Policy to the plaintiff Veteran’s Memorial
Medical Center (VMMC). VMMC purchased an Excess Blanket Catastrophe
Liability Policy from Pacific Employer’s Insurance Company for the same
coverage period as the Ideal Mutual policy. A medical malpractice claim was
made against VMMC. Before the claim could be resolved, Ideal Mutual
became insolvent. After a settlement of the claim was reached, Pacific
Employer’s decided that it would not make any payment until the first
$500,000 of the settlement was paid. The insolvency of Ideal Mutual,
however, made unavailable the $500,000 that Ideal Mutual would have paid
if it had not become insolvent. VMMC and Pacific Employer’s paid the
claimant a total of $350,000 to the claimant as a good faith settlement and
preserved their rights to proceed against CIGA by an action seeking a
declaration of their respective rights. CIGA argued that Pacific Employer’s
was required to “drop down” and fill the void created by the Ideal Mutual
insolvency before CIGA would be obligated to step in.
The Court first ruled that Pacific Employer’s had the right, as it did here, to
seek a declaratory judgment of its rights vis‐à‐vis CIGA, and found that a
party other than an insured is permitted to make a claim against CIGA. After
analyzing out‐of‐state decisions for guidance, the court concluded that CIGA
stands in Ideal’s shoes and the excess insurer was not required to drop down
unless the policy specifically provided for drop down coverage. The Pacific
Employer’s policy did not contain such a coverage provision. The court
noted that it has long been held that an excess insurer such as Pacific
Employer’s may make settlement and may later seek to recover up to the
limits of the primary policy. Citing cases from other jurisdictions, the court
found that an excess carrier should not be punished for participating in a
good faith settlement of a claim and should not be saddled with a loss
resulting from a primary carrier’s insolvency. The court awarded a
declaratory judgment to VMMC and to Pacific Employer’s to the effect that
CIGA was obligated to reimburse them for Ideal Mutual’s share of the
settlement paid to the claimant.
Delaware
Remco Ins. Co. v. State Ins. Dept., 519 A.2d 633 (Del. 1986). The Delaware
Insurance Code enables the Insurance Commissioner to act quickly, without
the delay and expense involved in petitioning the Court of Chancery, when the
Commissioner determines, after a hearing, that the insurer has engaged in any
act which would subject it to formal delinquency proceedings or when the

Commissioner has reasonable grounds to believe that irreparable harm to the
insurer or policyholders may occur unless he acts immediately. In addition, the
Commissioner is not required to exhaust summary remedies to seek and
secure a court‐ordered receivership or other formal remedies available
through the court order. However, the granting of receivership is an extreme
remedy which should not be used unless other less drastic remedies are shown
to be inadequate. If the Commissioner chooses not to pursue any of the
summary remedies, or seeks to move from a summary remedy to a full courtordered
receivership, he must show that the more limited statutory remedies
would be inadequate to address the insurer's problem.
Florida
Fla. Orthopedics, Inc. v. American Ins. Co., 896 So.2d 1 (Fla. 3d DCA 2004). The
Florida Insurance Code provides criminal penalties for violations of, which are to
be enforced by the Department of Insurance. The code also provides a civil
remedy for violations of certain sections, but proscribes civil remedy for a
misrepresentation. 896 So.2d at 5 (citing § 626.901, Fla. Stat. (1997)).
Kentucky Minor v. Stephens, 898 S.W.2d 71 (Ky. 1995). The Supreme Court of
Kentucky concluded that when the Commissioner of Insurance proceeded to
rehabilitate/liquidate a life insurance company, that it was an aspect of the
states police power. This power, however, was not boundless. The court
explained that the test which a court must use to judge a plan of
rehabilitation/liquidation is reflected in Carpenter v. Pacific Mutual Life
Insurance Co. California, 10 Cal.2d 307, 74 P.2d 761 (Cal. 1937). If the plan
appears to be satisfactory, the court should defer to the executive judgment
of the Commissioner and approve the plan. Under KRS 304.33‐160(2), the
Commissioner is granted broad discretion and has full powers to deal with
the property and business of the insurer. The Commissioner, as a creature of
statute, has the right to propose a plan of reorganization and reinsurance.
The burden of proof is upon those contesting the Commissioner’s actions.
Louisiana
Mississippi
Brown v. Associated Insurance Consultants, Inc. v. Physicians Medical
Indemnity Association, Inc., v. Leme Reinsurance Limited, 951451 (La. App. 1
Cir. 4/4/96) 672 So.2d 324. The insurance commissioner brought a
proceeding to rehabilitate several insurers including Lloyd’s (Partnership).
The commissioner was serving as liquidator for another single business
enterprise that had an outstanding claim against Lloyd’s (Partnership). By
motion to the trial court, Defendants asserted that an ad hoc rehabilitator
should be appointed. The Trial Court refused to rule on the motion as moot
due to previously established cut off dates. The appellate court reviewed
this decision and ruled that the trial court has the power to control the
proceedings.
Sanders v. Neely, 197 Miss. 66, 19 So.2d 424 (1944). The court held that there
was no inconsistency between the right of a stockholder to inspect the books
and records of the company and the rights conferred on the insurance
commissioner by the insurance code. The commissioner does not examine the
company for information for the stockholder but to determine the company's
financial soundness. This examination takes place periodically, whenever the
commissioner deems it prudent or upon the request of five stockholders, or
five others pecuniarily interested in the company, who submit an affidavit with
their reasons for believing the company is unsound. The court pointed out
that the stockholder cannot make an affidavit of unsoundness without access
to the facts of unsoundness. The powers given to the commissioner to
suspend the licenses of insolvent companies, of those failing to comply with
the law or of those hazardous to the policyholders or public and to request

court appointment of a receiver are to protect the interests of policyholders,
creditors and the public, not the stockholders. The court stated that the
statutes were not intended to deal with the relation between a company and
its stockholders or to require the commissioner to deal with the internal affairs
of a company unless it was unsound.
Missouri
New Jersey
State ex rel. ISC Financial Corp. v. Kidder, 684 S.W.2d 910 (1985). The
receivership court ordered the Director of Insurance, as receiver of an
insolvent carrier, to file a final settlement statement and discharge petition in
an on‐going liquidation proceeding. The same order substituted a trustee for
the receiver, and imposed upon the trustee the same duties that the receiver
was performing prior to his discharge. In reversing the receivership court, the
Missouri Court of Appeals held that the State of Missouri had established a
"self‐contained and exclusive statutory scheme" for the liquidation of an
insurance company and that the scheme "makes no provision for the
appointment of a trustee to take over the duties of the director of insurance
acting as receiver." 684 S.W.2d at 913.
Fortunato v. New Jersey Life Ins., 254 N.J. Super. 420 (App. Div. 1991). The
Appellate Division held that the Chancery Division should not have denied the
Commissioner's request for an order directing him to rehabilitate New Jersey
Life Insurance Company. The Chancery judge had refused to grant the request
for rehabilitation because there were issues of fact concerning the existence of
insolvency, including the issue of whether a reinsurance agreement had been
repudiated. The reinsurance issue was scheduled for arbitration at a later date.
While the Uniform Insurers Liquidation Act [N.J.S.A. 17B:32‐2, before
amendment by P.L.1992, c. 65] gives the Superior Court original jurisdiction
over the Commissioner's petition, it does not require a full hearing before the
court issues orders. The Commissioner's determination that further business
by the insurer would be hazardous was a finding of fact, an informed
prediction, and was neither arbitrary nor unreasonable. Because the insurer
failed to demonstrate to the contrary, the Commissioner's determination was
sufficient to grant the rehabilitation order.
New York
Fortunato v. The Israel Reinsurance Co., Ltd., No. 92 Civ. 3995 (JSM), 1992 U.S.
Dist. LEXIS 11015 (S.D.N.Y July 28, 1992). The district court granted the motion
of the Liquidator of Integrity Insurance Company for an order confirming the
attachment of a trust fund created by Israel Reinsurance Company which
contained a letter of credit as its principal asset.
North Carolina State ex rel. Long v. ILA Corporation, 1999 WL 183842 (N.C. App. 1999).
Commissioner of Insurance of the State of North Carolina, pursuant to his
statutory powers as liquidator of an insolvent insurer, filed a complaint on
behalf of policyholders and creditors against the chief executive officer of
the insurer and insurer’s parent corporation for breach of fiduciary duties
and negligent mismanagement. The Superior Court entered judgment for
the Commissioner and defendant appealed. The appellate court affirmed
the lower court’s decision.
First, even though the complaint alleged suit as liquidator on behalf of
creditors and policyholders, the Commissioner of Insurance sued the
director and chief executive officer of insurer, and, thus, the Commissioner
had power and standing to assert insurer’s claims for breach of fiduciary
duties to and negligent mismanagement of insurer. Second, claims by the
Commissioner of Insurance as liquidator allegedly on behalf of creditors and

policyholders were brought against the director and chief executive officer
of the insolvent insurer on behalf of estate of insolvent insurer and were
thus protected by statute extending unexpired statute of limitations and
permitting liquidator to sue on behalf of the estate within two years after
liquidation order. Therefore, the three‐year statutes of limitation applicable
to claims arising out of and after loans by insurer less than three years
before liquidation order did not bar suit filed within two years of
appointment. Third, conclusion that insurer’s collateral for loans on which
borrower defaulted was less than the minimum value approved by the
boards of directors of insurer and parent corporation was supported by
evidence, including an appraiser’s testimony. Fourth, defendant’s actions
did not fall under the business judgment rule because director was a leading
participant in a plan to benefit himself and his interests at the expense of the
insurer. Fifth, evidence, showing that defendant, although seeking and
receiving advice on corporate decisions, ignored advice that was contrary to
his efforts to maintain insurer as a going concern, supported the trial court’s
conclusion that defendant breached his fiduciary duties and that his actions
were not made in reliance on the advice of professionals. Finally, evidence
that director and chief executive officer of insurer and its parent corporation
permitted parent corporation to utilize insurer’s funds to pay the parent
corporation’s debts guarantied by director, failed to pay dividends to
insurer’s borrower thereby causing default, and held limited partnership
units until value to insurer diminished supported the trial court’s conclusion
that director and chief executive officer of insurer and its parent corporation
proximately caused insurer’s insolvency.
Ohio
Benjamin v. Sawicz, 159 Ohio App. 3d 265 (Ohio Ct. App. 2004). Pursuant to
Ohio Revised Code Chapter 3903, the superintendent of insurance is authorized
to institute actions to rehabilitate or liquidate insurance companies. Specifically,
Ohio Revised Code § 3903.12 states that the superintendent of insurance “may
file a complaint in the court of common pleas for an order authorizing him to
rehabilitate a domestic insurer or an alien insurer domiciled in the state on the
basis of various enumerated grounds. Further, as the rehabilitator, the
superintendent is authorized to “take such actions as he considers necessary or
appropriate to reform and revitalize the insurer.” Ohio Rev. Code § 3903.14(B).
In instances where it appears there has been criminal or tortious conduct, the
rehabilitator may pursue “all appropriate legal remedies on behalf of the
insurer.” Ohio Rev. Code § 3903.14(C). Finally, in situations where the
superintendent believes that the rehabilitation of the insurer “would
substantially increase the risk of loss to creditors, policyholders, or the public, or
would be futile, the superintendent may file a motion in the court of common
pleas for an order of liquidation.” Ohio Rev. Code § 3903.16. In this case, the
superintendent, acting as the insurance company’s liquidator, claimed it was
improper to make her provide discovery in her role as superintendent. The
Court held that the superintendent controlled, through the insurance
department, knowledge vital to the action, so she had to disclose all relevant
and material information, whether as regulator or liquidator.
Fabe, Superintendent of Insurance v. Prompt Finance, Inc., 69 Ohio St.3d
268, 631 N.E.2d 614 (1994). The Supreme Court of Ohio held that to protect
the interests of policyholders, creditors, claimants, and the public generally,
the Superintendent of Insurance has the authority to issue an order placing
an insurer under supervision and may require an insurer to obtain approval
from the Superintendent prior to the transfer of any of the insurer’s
property.

Superintendent of Ins. of the State of N.Y. v. Baker & Hostetler, 668 F. Supp.
1054 (N.D. Ohio 1987). The court held that notwithstanding law firm's
attorney's lien, a law firm for an insurer in liquidation is required, under both
New York and Ohio law, to deliver to the New York Superintendent of
Insurance all records, accounts or books of the insolvent insurer in its
possession. The court added that if the law firm was found to have a security
interest in the records, books and accounts it would be treated as a secured
creditor under New York law.
Pennsylvania
First National Bank of Maryland v. Commonwealth of Pennsylvania, 107 Pa.
Commonwealth 441, 528 A.2d 696 (1987). First National Bank of Maryland
petitioned the court to compel the Insurance Commissioner to issue a
summary order suspending and/or supervising the business of U.S. Mortgage
Insurance Company. The court held that mandamus cannot be invoked to
direct the exercise of judgment or discretion in a particular way, but is available
only to compel a tribunal or administrative agency to act when it has been
"sitting on its hands". The Commissioner is empowered to order supervision
or suspend the business of an insurer when he has "reasonable cause to
believe that an insurer has engaged in any act, practice or transaction that
would subject it to formal delinquency proceedings." Overall, the
Commissioner has discretion to act as he feels it best to protect the interest of
the insurer and policyholders.
First National Bank of Maryland v. Commonwealth of Pennsylvania, 102 Pa.
Commonwealth 474, 518 A.2d 871 (1986). The First National Bank of Maryland
moved for a writ of preemptory mandamus to compel the Insurance
Commissioner to issue a summary order suspending the business of U.S.
Mortgage Insurance Co., take possession of the insurer's assets and halt the
payment of claims by the insurer. The court held that mandamus would only
lie to compel official performance of a ministerial act or a mandatory duty
where there is a clear legal right in the plaintiff, a corresponding duty in the
defendant, and a lack of any other adequate remedy at law. The court denied
the bank's motion concluding that the Commissioner acted within his
discretionary authority and took appropriate actions, including having his
deputy meet with U.S. Mortgage which agreed to stop writing new business
and to reduce its staff.
Koken v. Legion Ins. Co., 831 A.2d 1196 (Pa. Commw. Ct. 2003). The
Commissioner of Insurance (“Commissioner”) was acting as the rehabilitator of
an insolvent property and casualty insurer. The Commissioner filed a petition to
convert rehabilitation into liquidation and the shareholders intervened. The
insurer had cash flow problems, but still reported policyholder surplus in excess
of liabilities indicating it would have enough assets to pay all obligations. The
court noted that a commissioner, acting as a rehabilitator, does not trump a
companies board of directors in every aspect. Instead, a rehabilitator only has
power to supersede the board when such action is needed to correct the
insurer’s condition. The power includes exercising the insurers’ boards’ powers,
but a rehabilitator can not amend insurers’ bylaws to confer on his or herself
adequate authority to consent to an insurers’ liquidation.
Texas
Eckert v. Montemayor, No. 03‐04‐00507‐CV, 2005 Tex. App. LEXIS 2376 (Tex.
App. Mar. 31, 2005). The court held that a staff attorney for the Texas
Department of Insurance met her burden in establishing the affirmative defense
of official immunity. The staff attorney was given official immunity, because she
was performing a discretionary function and acting in good faith when drafting

a supervision‐release order for an insurance company even though she did not
comply with procedural rights granted in the supervision order.
Summary Seizure ‐ Constitutionality
California
Garamendi v. Superior Nat'l Ins. Co., No. B172394, 2005 Cal. App. Unpub. LEXIS
9806 (Ct. App. Oct. 26, 2005). The court rejected a claim for a constitutional
violation arising from the seizure of insolvent insurer’s companies and the
ejection of the claimant, an officer of the insolvent insurer. The court explained
that ejection as an officer was not a seizure under the federal constitution.
Moreover, claimant lacked standing to assert a claim for seizure of property
belonging to the insolvent company.
Maloney v. American Independent Medical and Health Association, 119 Cal.
App. 2d 319, 259 P.2d 503 (1953). The court rejected the contention that
summary seizure provisions violated the constitutional guarantees against
search and seizure.
Connecticut Connecticut Life and Health Insurance Guaranty Association v. Jackson, 173
Conn. 352, 377 A.2d 1099 (1977). The court ruled that the guaranty association
must exhaust its administrative remedies with the insurance commissioner in a
dispute with the commissioner over the interpretation of a provision in the
guaranty fund law before it could bring an action for a declaratory judgment in
the courts.
Louisiana Green v. Champion Insurance Company, 577 So.2d 249 (La. App. 1st Cir. 1991),
writ den'd, 580 So.2d 668 (La. 1991). Champion Insurance Company was
declared insolvent and the Insurance Commissioner was appointed liquidator.
Faced with criminal charges relating to Champion, the Commissioner moved to
recuse himself as liquidator, and a liquidator ad hoc was appointed. The
liquidator ad hoc sued twelve individual defendants, all officers and
stockholders of Champion or its various affiliates, and nine corporate
defendants related to Champion, including holding companies, a premium
finance company and managing general agent corporations. The trial court
found that all of the corporate defendants had been operated as a "single
business enterprise," and issued an order declaring that the assets of the
defendant corporations were assets of Champion to be distributed in the
liquidation proceeding. He further issued an injunction restraining the
defendants from using or otherwise disposing of those assets without a prior
hearing.
In response to a challenge that the appointment of the ad hoc liquidator was
an unconstitutional exercise of powers reserved to the executive branch, the
appellate court held that the Louisiana statutory scheme merely expresses a
non‐mandatory preference for the appointment of the Commissioner of
Insurance as liquidator, and the trial judge had authority to appoint a liquidator
ad hoc of his own choosing. The court affirmed the finding that the corporate
defendants had been operated as a "single business enterprise" and
delineated the factors to be considered in reaching such a determination. The
court concluded that once the judicial determination was made that the
entities were in fact a "single business enterprise," the liquidator was vested
with the defendants' assets by operation of law, and no further actions, such
as writs of seizure, were necessary to bring those assets into the liquidation
proceeding. The court rejected the claim that the liquidator was thereby
regulating non‐insurer corporations, finding the order was simply in

furtherance of the liquidator's duty to marshal the assets that are properly
included in the liquidation. The court squarely held that the insurance code
which authorizes the issuance of an injunction restraining, inter alia, "all other
persons from transacting any insurance business or disposing of its property,"
is intentionally broad to ensure that the jurisdiction of the liquidation court
extends to persons or entities such as defendants, who may have access,
control, or possession of the insurer's assets. Finally, the court held that it was
not required to stay the civil action pending the outcome of the criminal
proceedings filed against various individuals, because to do so would prejudice
the liquidator's civil remedy against those persons.
Formal Proceedings
Formal Proceedings ‐ In General
Second Circuit
Eighth Circuit
Corcoran v. American Plan Corp., 886 F.2d 16 (2d Cir. 1989). The Liquidator of
American Fidelity Fire Insurance Company and American Consumer Insurance
Company commenced an action against the companies' former parent,
American Plan Corporation, alleging that through acts of mail fraud, the parent
looted millions of dollars from the insurers and concealed the theft in violation
of RICO. The District Court dismissed on the grounds that the Superintendent
did not adequately plead the predicate acts of mail fraud necessary to sustain
the RICO claims. The Second Circuit affirmed, noting that the Superintendent
did not allege any injury to the insolvent insurers' policyholders arising from
the alleged mail fraud. Since the only alleged injuries were to the
Superintendent as regulator, the Second Circuit held that the pleading
requirements of RICO were not met.
Motlow v. Southern Holding & Securities Corporation, 95 F.2d 721 (8th Cir.
1938), cert. denied, 305 U.S. 609. The provisions concerning liquidation of
insolvent insurance companies were intended to provide an efficient and
comprehensive manner of winding up a corporation's affairs for the benefit of
all creditors.
California Carpenter v. Pacific Mutual Life Ins. Co. of California, 10 Cal.2d 307, 74 P.2d 761
(1938), cert. denied, 305 U.S. 562, rehearing denied, 305 U.S. 675. The
California Supreme Court affirmed a proposed rehabilitation plan and stated
that the business of insurance was affected with a public interest and that the
state had an interest in the liquidation or reorganization of such businesses
such that if an insurance company got into financial difficulty, remedies must
be available. Although one remedy was liquidation, the public had a grave and
important interest in preserving the business if at all possible. As such,
liquidation was a last resort. Other remedies included a conservatorship in
which the insurance commissioner can attempt to remove the causes of
difficulties.
Delaware
Remco Ins. Co. v. State Ins. Dept., 519 A.2d 633 (Del. 1986). The Delaware
Insurance Code enables the Insurance Commissioner to act quickly, without
the delay and expense involved in petitioning the Court of Chancery, when the
Commissioner determines, after a hearing, that the insurer has engaged in any
act which would subject it to formal delinquency proceedings or when the
Commissioner has reasonable grounds to believe that irreparable harm to the
insurer or policyholders may occur unless he acts immediately. In addition, the
Commissioner is not required to exhaust summary remedies to seek and

secure a court‐ordered receivership or other formal remedies available
through the court order. However, the granting of receivership is an extreme
remedy which should not be used unless other less drastic remedies are shown
to be inadequate. If the Commissioner chooses not to pursue any of the
summary remedies, or seeks to move from a summary remedy to a full courtordered
receivership, he must show that the more limited statutory remedies
would be inadequate to address the insurer's problem.
Hawaii
Illinois
Villagonza v. Hawaii Ins. Guaranty Assn., 772 P.2d 1193, 70 Haw. 406 (1989). The
Hawaii Supreme Court held that the Hawaii Insurance Guaranty Association
(HIGA) was not obligated to pay the claims of an insolvent California insurer
which transacted insurance in Hawaii only on a surplus line basis. The court
analyzed the provisions of the guaranty association act and concluded that it
applied only to insurers licensed in Hawaii.
In re Liquidation of Legion Indemnity Corp., 2007 WL 942356 (Ill. App. Ct. Mar.
29 2007) – Two insurers are in privity for purpose of res judicata where they
contract to report a single cession statement as a single entity to reinsurer.
Larson v. Pacific Mut. Life Ins. Co. of California, 373 Ill. 614 (1940), cert denied 61
S. Ct. 137, 311 U.S. 698, 85 L. Ed. 452. Illinois policyholders of a California
insurance company were bound by a California court order declaring the
company insolvent and adopting a plan of rehabilitation and reinsurance.
Policyholders' claims of violation of the due process, equal protection and
contract clauses of the Federal Constitution were defeated under the doctrine
of class representation.
Indiana Gibralter Mutual Insurance Company v. Hoosier Insurance Company, 486
N.E.2d (Ind. App. 1985). Indiana Code §27‐9‐2‐3, guarding the confidentiality of
all documents, files and papers which concern or are part of the record of an
insurance company delinquency proceeding, does not impliedly eliminate the
defense of truth to a libel action between two insurance companies.
New Jersey
Matter of Mutual Benefit Life Insurance Co., 258 N.J. Super. 356 (App. Div.
1992). The purpose of the Uniform Insurers' Liquidation Act at N.J.S.A. 17B:32‐1
et seq. [amended pursuant to P.L. 1992, c.65, approved July 28, 1992] is to
provide for a uniform, orderly and equitable method of making and processing
claims against financially troubled insurers, to provide for fair procedures for
rehabilitating the business of such insurers and, if necessary, distributing their
assets. The Act should be interpreted to provide the broadest protection to
the public, claimants and beneficiaries consistent with the Act's purposes.
New York Corcoran v. Antigua and Barbuda Permanent Mission, No. 89 Civ. 0047, 1990
U.S. Dist. Lexis 3936 (S.D.N.Y. Apr. 10, 1990). The Liquidator of Union
Indemnity Insurance Company brought an action for specific performance of
an indemnity agreement against Antigua's Permanent Representative to the
United Nations. Antigua moved to dismiss under the Foreign Sovereign
Immunities Act on the grounds that its representative's actions were made in
his individual, not official, capacity. The Court held that there were issues of
fact concerning the representative's apparent agency authority to bind
Antigua. Antigua conceded that if the representative had had authority,
Antigua would have waived its sovereign immunity under the commercial
activity exception to the FSIA. The Court therefore denied the motion to
dismiss, and ordered the parties to proceed with discovery on the agency
issue.

Corcoran v. Ardra Ins. Co., Ltd., 176 A.D.2d 508, 574 N.Y.S.2d 702 (1st Dep't
1991). There is no statutory or common law requirement prohibiting counsel
for the Liquidator of Nassau Insurance Company from also representing the
Liquidator in other civil actions against the same defendant.
In re Concord Casualty & Surety Co., 163 Misc. 596, 297 N.Y.S. 583 (1937),
affirmed, 254 A.D. 721, 4 N.Y.S.2d 1004. The statute governing remedies
against insurers in liquidation must be construed consistently with the section
covering remedies against solvent insurers.
In re Liquidation of Midland Ins. Co., 861 N.Y.S. 2d 922 (Sup. Ct. 2008). The
liquidator argued that application of New York law to every claim in the
liquidation would be efficient and cost effective because the law of other states
would not need to be researched and applied. The Court found that the
application of any particular state law would undermine the purpose of UILA by
causing havoc instead of promoting coordination of liquidation proceedings.
Thus, where previously‐denied claims presented a choice of law issue, the
liquidator was required to apply the “grouping of contacts” approach set forth
in the Restatement (Second), Conflict of Laws and determine whether denial of
policyholder claims was appropriate.
In re Liquidation of Midland Ins. Co., No. 4294/1986 2007 WL 2362567 (N.Y. Sup.
Ct. Jan. 30, 2007 ). In a liquidation proceeding, a reinsurer argued that claims
processing by the Liquidator of the insolvent insurer had not complied with
terms of the reinsurer’s reinsurance agreement with the insolvent insurer, and
moved to disqualify outside counsel retained by the liquidator to provide legal
services regarding the liquidation on conflict of interest grounds. The court
denied the motion to disqualify, as the reinsurer failed to show that counsel had
in its previous representation of the reinsurer received specific confidential
information related to the liquidation proceedings.
Morgan v. American Risk Management, Inc., No. 89 Civ. 2999 (JSM), 1990 U.S.
Dist. LEXIS 9037 (S.D.N.Y. July 20, 1990). Defendants, reinsurers of a cedent
insurance company in liquidation, contended that the pre‐answer security
requirement of section 1213(c)(1) of the New York Insurance Law did not apply
to reinsurers. The Court disagreed, noting that section 1101(b)(2)(G) of the
New York Insurance Law expressly makes section 1213 applicable to reinsurers.
The Court further declared that the retrocessionaires were responsible to post
a bond for an amount proportionate to their share of the cedent's losses minus
the amount of money that the liquidator had already drawn down from letters
of credit that the reinsurers had posted.
Stephen v. American Home Assurance Company, 91 Civ. 2898 (JSM) (KAR), 89
Civ. 2999 (JSM) (KAR), 91 Civ. 2901 (JSM) (KAR), 91 Civ. 6245 (JSM) (KAR) 1993
U.S. Dist. LEXIS 843 (S.D.N.Y. Jan. 27, 1993). The District Court for the Southern
District of New York considered motions in four matters arising out of the
liquidation of Delta America Re Insurance Company in Kentucky. The New
York federal court ruled that the remedy of fraud and the defense of rescission
for fraudulent inducement "are not rendered unavailable as a matter of New
York law by the mere fact of insolvency proceedings."
In addition to denying several cross‐motions for summary judgment due to the
existence of genuine issues of material fact, the Court dismissed third‐party
claims sounding in negligence against Kentucky insurance department officials.
The Court's ruling was based on its determination that, under Kentucky law,

no liability exists for any acts taken by state employees working in a quasilegislative
or quasi‐judicial capacity.
Ohio Morris v. Investment Life Ins. Co. of America, 6 Ohio St.2d 185, 217 N.E.2d 202
(1966). The provisions for the insurance conservatorship procedure did not
supplant the court's former equitable powers and therefore, in an appropriate
conservatorship proceeding, the court may permit intervention by a materially
interested party, as statute did not preclude, as a matter of law, the remedy of
intervention. It is not an abuse of discretion to grant only a limited
intervention rather than permitting preliminary intervention by a shareholder
in the insurance conservatorship proceeding, and in any event, no prejudice
resulted when court dismissed the shareholder as a party but gave such
shareholder the right to be heard in support or opposition of any plan, where
the shareholder conceded that the shareholder's interests and those of
conservator had substantially merged and become identical.
Texas
Berkel v. Tex. Prop. & Cas. Ins. Guar. Ass’n, 92 S.W.3d 584 (Tex. App. 2002). The
court of appeals rejected the argument presented by the Texas Property and
Casualty Insurance Guaranty Association (“TPCIGA”) that a claim for attorney
fees could not be a “covered claim” as a matter of law in Texas. TPCIGA relied
on TEX. INS. CODE ANN. art. 21.28‐C, § 5(8), which provides that a “covered claim”
does not include attorney fees, expenses, or any pre‐judgment or postjudgment
interest that accrues subsequent to the determination that an insurer
is an impaired insurer. The court held that the provisions of TEX. INS. CODE ANN.
art. 21.28‐C, § 5(8) create a framework upon which a receiver may make
decisions about which claims were covered and at what amounts and did not
suggest an express prohibition to all claims for attorney fees. The receiver had
previously approved the plaintiff’s claim for attorney fees as a “covered claim,”
and at no time had that decision been challenged in the receivership
proceeding. The court held that the receiver’s decision that the Plaintiff’s
attorney fees were a “covered claim” became final as a matter of law when the
decision went unchallenged and the time for judicial review of the decision had
expired.
Utah Utah Farm Bureau Ins. Co. v. Utah Ins. Guar. Assoc., 564 P.2d 751 (Utah 1977).
Insurer brought declaratory judgment action against legislatively created
nonprofit, unincorporated association challenging the constitutionality of
Insurance Guaranty Association Act. The Supreme Court held that (1) the Act
was not a special Act in violation of constitutional provisions; (2)
classification in the Act that allowed certain insurers to be deferred or
exempt from assessments was not arbitrary and unreasonable or denial of
equal protection of the law; (3) the Act did not lead to arbitrary and
inequitable treatment of insurers due to improper delegation of authority
with ambiguous standards; and (4) the Act did not improperly delegate
legislative authority to the insurance commissioner.
Washington Washington Life & Disability Ins. Guaranty Assn. v. Adams, et al., 734 P.2d 932,
47 Wash. App. 213 (1987). The Washington Court of Appeals affirmed a
summary judgment against all shareholders of an insolvent insurer for
"superadded liability." Under Washington law, shareholders of insurance
companies are individually and personally liable for their pro rata share of all
debts of the corporation. The Washington Life Guaranty Association and the
Washington Commissioner filed suit to impose liability on the shareholders of
an insolvent insurer. The court determined that the provisions providing for
"superadded liability" were constitutional.

Formal Proceedings ‐ Constitutionality
U.S. Supreme
Alabama
Arkansas
California
Neblett v. Carpenter, 305 U.S. 297, (1938). The appellants argued that the
rehabilitation procedure under the California insurance code unconstitutionally
deprived policyholders of their property without due process of law or
impaired the obligation of their contracts. The appellants also argued that the
code unconstitutionally delegated legislative functions to the insurance
commissioner. The U.S. Supreme Court concluded that the latter was a
question of state law and the decision of the state's highest court bound the
Supreme Court on that matter.
Banks v. Debellis, No. CA 97‐1129‐P‐C, 1998 U.S. Dist. LEXIS 9632 (S.D. Ala.
April 24, 1998). Policyholder was not deprived of due process of law because
Alabama Department of Insurance sought rehabilitation of insurer,
notwithstanding that such petition may have delayed the collection of her
judgment.
Fewell v. Pickens, 344 Ark. 368, 39 S.W.3d 447 (2001). The Arkansas Insurance
Department agreed to a forbearance of receivership in exchange for deposits
and promissory notes by the parent company and individual owner to cure a
capital surplus deficiency, as well as consent to immediate commencement of
receivership proceedings, the entry of an order granting receivership, and
waiver of prior notice to the entry of such an order. Upon breach of the
agreement, the Insurance Commissioner filed a petition for appointment of
receiver and injunctive relief. The Arkansas Supreme court upheld the circuit
court’s findings of breach of the forbearance agreement. The court further held
that the statutory requirements of a show cause order and full hearing under §
23‐68‐104 of the Uniform Act did not control because the parent company and
individual owner had waived their rights under the statute, and that the
immediate entry of receivership order with permanent injunction did not violate
due process protections. The court also found that the receivership circuit court
had proper subject matter jurisdiction to issue an injunction because § 23‐68‐103
of the Uniform Act invests original jurisdiction over delinquency proceedings in
the Circuit Court of Pulaski County, and § 23‐68‐105 specifically endows the
circuit court with the authority to issue injunctions.
Caminetti v. Pacific Mutual Life Ins. Co. of California, 22 Cal. 2d 344, 139 P.2d
908 (1943), cert. denied, 32 U.S. 802. The plaintiffs contended that the
insurance commissioner's transfer of the stock of the insolvent insurer to five
persons named as voting trustees was invalid. The court concluded that the
commissioner's powers under the code were not an invalid delegation of
legislative power for lack of standards by which the commissioner was to be
guided in determining when to set up a voting trust. The court also concluded
that the section did not violate constitutional inhibitions against impairment of
contract and taking of property without due process if the voting trust
provided a reasonable means for promoting management continuity and
policy uniformity in the company. Lastly, the court concluded that this did not
constitute a legislative encroachment upon the powers of the judiciary.
Caminetti v. State Mutual Life Ins. Co., 52 Cal. App. 2d 321, 126 P.2d 165 (1942).
The commissioner's authority to act as a receiver of an insurer was found to be
constitutional.
Florida
Snyder v. Douglas, 647 So. 2d 275 (Fla. Dist. Ct. App. 1994). The Court upheld
the constitutionality of Florida’s statutory provision requiring a six month

stay of any proceeding in which an insolvent insurer is obligated to defend a
party.
Kentucky
Kentucky Central Life Insurance Company v. Stephens, 897 S.W.2d 583 (Ky.
1995). In this case the trial court had approved the sale of the assets of
Kentucky Central Life Ins. Co. and ordered its liquidation over the objection
of its Board of Directors. On appeal, the Supreme Court of Kentucky
declared that due process does not always require a trial or strict application
of evidentiary rules, especially under special statutory proceedings. The
court held that the shareholders’ substantive or procedural due process
rights had not been violated in that they were granted extensive access to
information, had hired experts, and had fully participated in the hearings.
Although the Insurance Commissioner’s plan of rehabilitation affected the
shareholders’ property rights, the court concluded that it did not do so
arbitrarily. In keeping with the reasoning that a state in exercising its police
powers may reasonably interfere with contractual relations and commercial
freedoms of private parties, the court held that the Commissioner’s plan,
which included an infusion of capital from outside investors and an
assumption reinsurance agreement which would provide that a viable
insurer receive some company assets in return for the assumption of primary
liability for the policies, was within the powers afforded to the Commissioner
and did not violate the shareholders’ due process.
Minor v. Stephens, 898 S.W.2d 71 (Ky. 1995). The Supreme Court of
Kentucky held that the due process clause did not restrict the state’s
reasonable exercise of its police power in furtherance of the public interest,
even though such laws may interfere with contractual relations and
commercial freedoms of private parties. The nonvoting shareholders argued
that the trial court erred when denying their motion for the appointment of
an official committee to protect their interests. They claimed to have not
been informed as to the progress of the case by the companies board of
directors, which is permitted by statute to resist liquidation. The court
stated that it was not enough that the Commissioner’s plan affected
shareholder property rights, but instead, the shareholders must show that it
did so arbitrarily. A court, when determining if the process was adequate,
must consider the private interests affected, the governmental interests
affected, and the fairness and reliability of the existing procedures and
probable value of additional safeguards.
Illinois People ex rel. Palmer v. National Bankers Ins. Co. of Lincoln, 369 Ill. 605, 17
N.E.2d 579 (1938). The Illinois Supreme Court upheld the liquidation provisions
of the new 1937 insurance code, which was substantially a reenactment of the
1925 law, which itself had been held to be valid and constitutional.
Ward v. Farwell, 97 Ill. 593 (1881). The constitutionality of the 1874 liquidation
article was upheld against challenges of (1) impairment of contract, (2) that the
standard of "hazardous to the policyholders, creditors and public" was
indefinite, (3) that the act is ex post facto as respects "financial conditions"
occurring before 1874, (4) the lack of trial by jury, which was not appropriate
for the statutory legal action in the nature of an equitable remedy, and (5) a
lack of due process since a full hearing is provided although stockholders are
not typically necessary parties to the procedure.
Iowa
Hager v. Doubletree, No. 88‐581 (S. Ct. Iowa, May 17, 1989) (WESTLAW, IA‐CS,
52259). The insurance commissioner, as liquidator of an insolvent carrier, sued
several nonresident defendants to recover unpaid premiums. The defendants

argued that the statute conferring personal jurisdiction on the court was
unconstitutional. In upholding the statute and reciting the minimum contracts
that the defendants had with the State of Iowa, the Supreme Court of Iowa
reasoned: "This situation is a little like a marriage: While it was [the in‐state
company] who proposed, the [out‐of‐state company] accepted, and the
resulting relationship makes it relatively insignificant which party started it all."
Missouri State ex rel. Missouri State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174
(1932). The court upheld the constitutionality of the liquidation provisions of
the insurance code, and the insurance commissioner's authority to initiate such
proceedings.
New York
Attorney‐General v. North America Life Ins. Co., 82 N.Y. 172 (1887). The New
York court of appeals found that an insurance company was not
unconstitutionally deprived of its property without due process, as the
insurance code gave the insurance company the right to be heard before the
state courts.
In the Matter of the Application of the Attorney‐General of the State of New
York v. The North America Life Ins. Co., 82 N.Y. 172 (1880). The court held that
the provisions of the insurance code which allow for "arresting the business of
a company, when its further prosecution will be injurious to the public interest"
and permit the appointment of a receiver do not deprive persons of their
property without due process of law.
Oklahoma Cockrell v. Grimes, 740 P.2d 746 (1987). The insurance commissioner, as
receiver of an insolvent carrier, was sued by an agent to secure payment of
commissions on renewal premiums for policies issued by the insolvent carrier.
In ordering payment of the commissions, the Court of Appeals of Oklahoma
opined that the language of the agent's contract with the carrier provided the
agent with a vested right to the commission portion of the premium collected
by the receiver. The court noted that, "protection of the policyholders of an
insolvent insurer may not be done at the expense of the vested property rights
of another private citizen." 740 P.2d at 749.
Authority to Initiate Proceedings
Seventh Circuit
Cook v. Illinois Banker's Life Ass'n., 46 F.2d 782 (U.S.C.C.A. Ill. 1931), cert. denied
52 S. Ct. 12, 284 U.S. 627, 76 L. Ed. 534. Policyholders of a life association sought
injunctive relief against an insurance association and insurance company and
requested the court to appoint a receiver and set aside the reinsurance
contract between the association and the insurance company. The court
stated that such relief could only be granted to "... the Attorney General on his
own motion or ... by the Auditor of Public Accounts..." and thus held that the
policyholders had no right to maintain the action.
Cullam v. Traders' Ins. Co., 163 F. 45 (7th Cir. 1908). Illinois statute authorizing
voluntary dissolution of insurance company upon application of majority of
shareholders is constitutional.
Daniel v. Layton, 75 F.2d 135 (7th Cir. 1935), cert. denied, 295 U.S. 753 (1935).
Claimants were held not to be entitled to have property sold and affairs of
company liquidated and thereby frustrate the reinsurance plan and defeat
rights of policyholders, whose claims were about fifty times as great as those
of claimants.

Fields v. Fidelity General Ins. Co., 454 F.2d 682 (7th Cir. 1971). Ordinarily, once an
insurer has been ordered into statutory liquidation, shareholders may not bring
a derivative action on behalf of the insurer without first making demand on the
insurance commissioner as liquidator or petitioning the state court supervising
the liquidation estate for an order authorizing the shareholders to proceed.
Tenth Circuit
Alabama
Arkansas
Colorado
Inland Empire Ins. Co. v. Freed, 239 F.2d 289 (10th Cir. 1956). The Court of
Appeals held that a federally appointed receiver was proper where, as here,
the hopelessly insolvent insurance company had to be liquidated and was
doing business in 21 states and the states of its domicile and principal place of
doing business had conceded their inability to rehabilitate or liquidate for the
best interests of the company, its creditors, policyholders and stockholders.
Also important to the court's decision was the fact that only six states involved
had adopted the Uniform Insurers Liquidation Act and the only alternative to a
federal receiver was independent receivership proceedings in each state for
the liquidation of the company and distribution of its assets. Under the above
outlined special circumstances, the appointment of a federal receiver was
therefore necessary and proper.
American Benefit Life Ins. Co. v. Ussery, 373 So.2d 824 (Ala. 1979). When the
Attorney General, on behalf of state of Alabama and purportedly on behalf of
the insurance commissioner, appealed final order of rehabilitation court
establishing assets and liabilities of an insolvent insurer, the court held that
where commissioner had not authorized the appeal, the Attorney General
would not be permitted to intervene. The legislature intended the insurance
commissioner to exercise sole judgment as to the conduct of the delinquency
proceedings, and when acting as receiver, his primary obligations are to the
policyholders, the court, and the creditors of the insolvent insurance company.
Bullion v. Pope, 96 S.W.2d (1936). The Arkansas Supreme Court upheld the
lower court's vacation of an order appointing a receiver on a petition filed by
an insolvent insurer's stockholders when a second receiver had been
appointed on the petition of the Arkansas Attorney General after a
certification from the Arkansas insurance commissioner of the insurer's
insolvency.
Mosley v. Indus. Claim Appeals Office, 119 P.3d 576 (Colo. App. 2005). The
Colorado Insurance Guaranty Association (CIGA) is immune from liability of any
kind for any action taken by CIGA in the performance of its powers and duties,
including the handling of claims.
Connecticut Connecticut Life and Health Insurance Guaranty Association v. Jackson, 173
Conn. 352, 377 A.2d 1099 (1977). The court ruled that the guaranty association
must exhaust its administrative remedies with the insurance commissioner in a
dispute with the commissioner over the interpretation of a provision in the
guaranty fund law before it could bring an action for a declaratory judgment in
the courts.
Illinois The Chicago Mutual Life Indemnity Association v. Hunt, 127 Ill. 257, 20 N.E. 55
(1889). The court held that the Illinois Attorney General has power to proceed
against an Illinois mutual benefit association even though the Auditor of Public
Accounts has not specifically provided the Attorney General with findings and
conclusions. A proceeding brought by the Attorney General to dissolve a
mutual benefit association is not a criminal proceeding, but is a civil proceeding

of a special statutory character to dissolve the association and distribute the
assets to the creditors.
Dale v. Hancock County Mutual Life Ass'n, 282 Ill. App. 70 , affirmed, 363 Ill. 222,
2 N.E.2d 96 (1935). Members of a life association brought an action against its
officers and directors to enjoin them from carrying out the adoption of a new
constitution and by‐laws changing the association from an assessment benefit
society to a legal reserve system. The court held that the liquidation provisions
of the Illinois insurance code providing that certain actions against an Illinois
insurance company shall be made only by the insurance commissioner did not
apply to a controversy between the individual members and the association or
its officers to prevent the accomplishment of an act contrary to the
constitution and bylaws of the association.
Frontier Investment Corp. v. Belleville National Savings Bank, 119 Ill. App. 2d 2,
254 N.E.2d 295 (1969). A purchaser of the outstanding stock of an insolvent
insurer filed suit for the appointment of a receiver, charging the directors with
mismanagement, and asking for removal of four directors, election of new
directors, and the issuance of the stock of the company to the plaintiff. The
court held that the purchaser was not precluded from maintaining such action
by the insurance code section that limits actions for appointment of receivers
upon application of the insurance commissioner. The court reasoned that the
appointment of a receiver in such a case does not involve an area where the
commissioner has exclusive jurisdiction, as the injunction seeks only to enforce
compliance with fiduciary obligations already imposed by law upon the
directors of the insurance company. Further, the court noted that the
injunction granted was an interlocutory order, and appealable, and noted the
failure of the directors to appeal that order.
Hamilton v. Safeway Ins. Co., 104 Ill. App. 3d 353, 432 N.E.2d 996 (1982).
Plaintiffs were those entitled to uninsured motorists benefits under insurance
policies issued by the insolvent insurer, and they filed an action for injunction
against improper claims practices and for appointment of a receiver and an
order of liquidation or rehabilitation. The court held they failed to state a cause
of action because the Illinois insurance code provides that appointment of a
receiver or liquidator may be done only upon the complaint of the insurance
commissioner. Such relief is unavailable to plaintiffs because the legislature,
had it intended to grant a private right of action for injunctive relief, would
have explicitly done so.
People v. Niehaus, 356 Ill. 104, 190 N.E. 349 (1934). The court held that under
the insurance liquidation law a court of equity has no power to appoint a
receiver for such a company, as th