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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 the statute expressly provides that such
appointment shall be made by the insurance commissioner and the court is
bound to recognize and accept the receiver so appointed. Further, the court
held that such provision is not void on constitutional grounds as delegating
judicial powers to an executive officer, nor is the liquidating receiver a judicial
officer. Rather the liquidator is merely an executive or administrative officer
subject to the supervising court's jurisdiction.
People ex rel. Barber v. Hargreaves, 303 Ill. App. 387, 25 N.E.2d 416 (1940).
When the State's Attorney initiated proceedings against 1,900 individuals for
allegedly transacting an insurance business without authority as an alien
Lloyd's, the court disallowed the proceedings, holding that the authority to
determine statutory compliance by an insurance company pursuant to the

Illinois insurance code is vested in the Illinois Insurance Director and not in the
courts.
People ex rel. Benefit Association of Railway Employees v. Miner, 387 Ill. 393,
56 N.E.2d 353 (1944). The members of a mutual benefit association sued its
officers and directors for alleged wrongful acts. The court found the lawsuit
constituted an interference with the business of the insurance company and,
thus, such action could only be brought on behalf of the insurance
commissioner on the petition of the Illinois Attorney General. If the insurance
commissioner fails to file such a petition, the members' remedy is a writ of
mandamus against the commissioner.
Ross v. Knapp, Stout & Co., 77 Ill. App. 424, (1898), appeal dismissed, 181 Ill.
392, 55 N.E. 127. The court held that the statute authorizing the State Auditor
to institute the proceeding against the insolvent insurer forecloses a judgment
creditor of the insurer from initiating proceedings or requiring the auditor to
do so.
Indiana State ex rel. Mid‐West Ins. Co. v. Niblack, 235 Ind. 616, 137 N.E. 2d 34 (1956).
The insolvent insurer's petition to strike the appointment of a receiver, in an
action filed by a judgment creditor against one of its insureds, was moot
because such appointment had already been dismissed by another court. (See
State ex rel. Mid‐West Ins. Co. v. Superior Court of Marion County, supra.)
State ex rel. Mid‐West Ins. Co. v. Superior Court of Marion County, 231 Ind. 94,
106 N.E. 2d 924 (1952). In rejecting a petition by a claimant against an insured
of an insolvent insurer, the court noted that claimant was not a judgment
creditor of the insolvent insurer, and further, only the Indiana Insurance
Department is permitted to seek the appointment of a receiver for an
insolvent insurance company. The Department intervened in the proceeding
alleging that the insurer was insolvent and seeking the appointment of a
rehabilitator. However, the court rejected the Department's petition because
it was filed in the wrong court and the wrong proceeding since intervention
was not the appropriate mechanism for securing the appointment of a
rehabilitator.
Kansas
Kentucky
Wright v. Federal Reserve Life Ins. Co., 131 Kan. 601, 293 P. 945 (1930), cert.
denied, 283 U.S. 851. Stockholders asked the court to appoint a receiver on the
basis that the company was grossly mismanaged and that its liabilities
exceeded its assets. The court held that the insurance commissioner had
preliminary jurisdiction to deal with a domestic life insurance company that is
financially impaired due to mismanagement, and so long as the commissioner
does not abuse discretion or neglect official duties, neither stockholders, the
trial court, nor the appellate court may supersede the commissioner's
authority or interfere with the official supervision and regulation of the
commissioner.
Breckinridge v. Kentucky Central Life & Accident Ins. Co., 206 Ky. 244, 267 S.W.
178 (1924). The court held that an individual stockholder may not maintain
action to liquidate insurer, as the commissioner of insurance is vested by
statute with exclusive right.
Metropolitan Fire Ins. Co. v. Middendorf, 171 Ky. 771, 188 S.W. 790 (1916). The
minority stockholders of insolvent insurance company, which had never
received license from insurance department nor conducted any insurance
business, petitioned court to appoint a receiver, and the court held that,

although statutes gave insurance department exclusive right to liquidate
insurer, the court had jurisdiction to appoint receiver in this instance.
Woodson v. American Life & Accident Ins. Co., 254 Ky. 224, 71 S.W.2d 447
(1934). The court held that minority shareholders could not maintain action to
liquidate insurer, where it was not shown that insurance commissioner had
been requested to act, refused to act, or had permitted the shareholders to
act. The insurance code vests the exclusive right to liquidate an insurer in the
commissioner.
Louisiana Brown v. Magnolia Fire and Casualty Insurance Company, 93 0341 (La. App. 1
Cir. 11/10/94), 646 So.2d 428. In seeking rehabilitation or liquidation,
Insurance Commissioner is not required to complete each statutory
guideline for financial examination of insurer’s books and records prior to
seeking relief. An order for rehabilitation or liquidation may be sought based
on preliminary findings that insurer is financially unstable. In making the
determination to seek rehabilitation or liquidation, the Insurance
Commissioner can properly rely on actuarial opinions other than those
submitted in accordance with statutory guidelines, which require the insurer
to include an actuarial opinion that reserves are proper in its annual financial
statement. Assuming actuaries are inadmissible for determining insurer’s
solvency, as per La. R.S. 22:732.2, an order of rehabilitation stands if it was
sought and determined that continued business of the insurer would be
hazardous to its policyholders, creditors or the public.
Brown v. Pelican State Mutual Insurance Company, 93 0340 (La. App. 1 Cir.
11/10/94), 646 So.2d 423). The court held that a financial examination of an
insurer was not a prerequisite to seeking an Order of Rehabilitation. The
provisions of La. R.S. 22: 733 set forth the various reasons for which an
insurer may be placed into rehabilitation. As such, these provisions may take
precedence over the statutory appeal process utilized to finalize an
examination report if the Commissioner determines that there are other
grounds to seek an Order of Rehabilitation.
Massachusetts In the Matter of Electric Mutual Liability Insurance Company, Ltd. (No. 1)
["EMLICO 1"], 426 Mass. 362 (1998);
Commissioner of Ins. v. Electric Mutual Liability Insurance Company
["EMLICO 2"], 429 Mass. 795 (1999).
In EMLICO 1, the Court directed dismissal of the petition by the
Massachusetts Commissioner of Insurance to be appointed as U.S. receiver
of the foreign insurer, Electric Mutual Liability Insurance Company, Ltd., an
insurance company formerly domiciled in Massachusetts and subsequently
redomesticated to Bermuda. The Court held that the petition was legally
insufficient where the insurer's transfer of domicile from Massachusetts to
Bermuda was unauthorized under Massachusetts redomestication statutes,
and therefore, Electric Mutual Liability Insurance Company never ceased to
be a Massachusetts insurer.
In EMLICO 2, the Court affirmed the denial of the Commissioner’s petition
for appointment as the permanent receiver of the Massachusetts company,
Electric Mutual Liability Insurance Company. The Court held that the single
justice did not abuse his discretion in denying such appointment.

Michigan Daniel v. Citizens' Mutual Fire Ins. Co. of Jackson, 149 Mich. 626, 113 N.W. 17
(1907). Where an attorney of creditors of a mutual insurance company
procured the resignation of the liquidator receiver and the consent of a third
party to act as such, and induced the commissioner of insurance to petition for
the third party's appointment, and the attorney acted for the third person as
receiver, and there was no understanding that the third person should do
anything to favor the creditors, it was held not to warrant the setting aside of
the orders accepting the resignation and appointment of the third person
upon an action of the company's stockholder.
Gauss v. Central West Casualty Co., 266 Mich. 159 253 N.W. 252 (1934). The
court held that although judgment creditors of an insolvent insurer were
entitled to intervene in a suit by the insurance commissioner to take over the
company's assets, such intervention must be in subordination to the
commissioner's petition and order thereon.
Minnesota
Mississippi
Missouri
State v. Educational Endowment Ass'n of Minneapolis, 49 Minn. 158, 51 N.W.
908 (1892). The Attorney General brought suit against an insolvent insurance
company, and the company argued that the statutory procedures, which
required a report from the insurance commissioner to the Attorney General to
the effect that the insurance company should not transact business, were not
followed. The court held that the procedures outlined in insurance insolvency
statute were not the exclusive method for proceeding against an insolvent
insurance company. The court held that an insolvent insurance company may
be proceeded against under general corporate laws which allow the district
court to enjoin a company from exercising any corporate rights on complaint
of the Attorney General, or on the complaint of any creditor or stockholder.
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.
Ainsworth v. Old Security Life Ins. Co., 685 S.W.2d 583 (Mo. App. 1985). In
denying the sole shareholder's application to intervene in receivership of an
insolvent insurance company, the court noted the shareholders of an insolvent
insurer do not have the right to notice and the right to participate in every
matter coming before the receiver or the liquidation court. Further, the
intervention statute in Missouri based on the statutory language was
construed to not allow intervention under the circumstances. It was noted
that the shareholder had been designated an "interested party" and in fact
was receiving notices of all proceedings and had been allowed in every

instance to offer comments with respect to particular matters pending on the
receivership.
Angoff v. American Financial Security Life Insurance Company, 869 S.W.2d
90 (Mo. App. 1993). An insurer appealed an Order of Rehabilitation. The
Court of Appeals affirmed the trial court's order of rehabilitation and upheld
the decision that the insurer was operating in hazardous condition. The
Court held that the Director of the Department of Insurance did not abuse
his discretion in placing the insurer into rehabilitation proceedings and that
the director has discretion as to what remedial action to take under the
insolvency statutes. The Court upheld the trial court's findings that AFSLIC
was operating in hazardous conditions, in part, because of its reliance on
reserve credits from a Lloyd's treaty and AFSLIC's methodology for
computing the reinsurance reserve credits.
State ex enf. McKittrick ex rel. Maloney v. Fidelity Assurance Association, 352
Mo. 725, 179 S.W.2d (1944). In rejecting the Missouri insurance commissioner's
petition for intervention in an action involving an insolvent West Virginia
insurance company, the court noted that the Missouri insurance code did not
require that only the Missouri commissioner should institute a suit for
appointment as receiver of a foreign insurance company, particularly, when
the assets that were deposited by the foreign insurance company were assets
under the control of Missouri and were used as security for annuity contracts.
State of Missouri ex rel. ISC Financial Corporation v. Kidder, 684 S.W.2d 910
(Mo. App. 1985). The sole shareholder of an insolvent insurance company
sought a writ of prohibition against the trial court to prevent closing of the
receivership estate. The appellate court ruled that the closing of the
receivership was premature as of the pendency of a number of unresolved
matters, even though the estate held in excess of $17,000,000 of assets over
its liabilities. Further, the appointment of a trustee was improper since only
the Missouri insurance commissioner can conduct the affairs of the
receivership under the supervision of the court. Finally, the law providing for
the closing of the estate five years after it is "dissolved" does not apply to the
order of liquidation but is designed to terminate the entire proceeding
following the dissolution of the insolvent.
State ex rel. Missouri State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174
(1932). In rejecting the authority of a court to appoint a receiver for an
insolvent insurance company, the court upheld the constitutionality of the 1929
Missouri insurance code provisions dealing with liquidation and the power of
the Missouri insurance commissioner to request the appointment of a receiver.
As a result, the shareholder suit against the company and management should
be properly dismissed.
Nebraska
In re Director of Insurance, 141 Neb. 488, 3 N.W.2d 922 (1942). The Nebraska
Supreme Court determined that the Iowa court had power to appoint a
receiver for an insolvent insurer where the action was filed by the Attorney
General, acting for the Auditor of Public Accounts, for the purpose of
dissolving the corporation and distributing its effects. The court noted,
though, that the power of the Attorney General to bring an action for
dissolution of an insolvent insurance company and the distribution of its
effects must be conferred by statute, and, in the absence thereof, such a
proceeding would not be within the jurisdiction of the court; and that after
such decree is rendered, if under the circumstances of the case the court in its
discretion believes that the object of the action would be better served by the

appointment of a receiver to wind up the affairs of the insurance company
than by permitting the business to be closed by the managers or directors of
the insolvent corporation as trustees authorized by the statute, it was within
the court's power to appoint a receiver.
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.
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.
Smith v. Monmouth Title & Mortgage Guaranty Co., 110 N.J. Eq. 117, 159 A. 509
(1932). It was held that the statutory circumstances under which the courts
may enjoin an insurance company from exercising franchises and appoint a
liquidator are jurisdictional. The court is without such jurisdiction absent an
application of the banking and insurance commissioner when they have not
declined to act.
New York In re Lawyers Title & Guaranty Co., 145 Misc. 776 (1938). The insurance
commissioner did not institute a reorganization proceeding but rather
expressly assented to the jurisdiction of the court. The validity of the
proceeding was therefore not affected.
Matter of Knickerbocker Life Ins. Co., 199 A.D. 503, 191 N.Y.S. 780 (1922). On
the application of the administrator of the estate of a beneficiary of a policy,
the court refused to appoint a receiver of the assets and property of an
insolvent life insurance company in the possession of the insurance
commissioner. If the claimant was entitled to receive any portion of the fund
in the commissioner's possession, the claimant could apply to the
commissioner or the court and obtain speedy relief.
People v. Norwegian Underwriters, 139 Misc. 70, 247 N.Y.S. 707 (1931). The
court held that the attorney‐general could not interfere in the affairs of the
corporation. The power to revoke a certificate lies with the insurance
commissioner. The only complaint made was that the corporation was

inactive. However, it had carried on an extensive insurance business and paid
its losses.
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.
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 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.
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 of 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.
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".
Foster v. Westmoreland Casualty co., 115 Pa. Commonwealth 393, 540 A.2d 347
(1988). The Insurance Commissioner's petition requesting that an insurer be
placed into involuntary dissolution and liquidated was sufficiently specific in
that it alleged insolvency and hazardous financial condition as general grounds
for liquidation, set forth specific results of an investigation conducted by an

independent actuarial firm, and alleged improper actions of key officers of the
insurer. The Commissioner can directly petition the court for a liquidation
order. Appropriate administrative notice and hearing are provided where the
Commissioner requests a judicial declaration of insolvency in conjunction with
a pending liquidation proceeding.
South Dakota Crew State ex rel. Dirks v. Capital Sec. Life Ins. Co. of Sioux Falls, 84 S.D. 595,
174 N.W.2d 212 (1970). The stockholders of an insolvent insurer sought reversal
of an order of liquidation on the grounds that the jurisdiction of the
commissioner of insurance over the affairs of an insurance company
terminates when the insurance company ceases to be an insurer. During
rehabilitation proceedings, the commissioner transferred all of the insurer's
policies to another insurer. The commissioner then secured a liquidation order.
The South Dakota Supreme Court held the liquidation order was proper
because the supervisory authority of the commissioner continued after the
insurance business was transferred. The court also noted that an insurance
company remains ineligible for reorganization under Chapter X of the
Bankruptcy Act notwithstanding that it has ceased to function in respect of its
primary purpose.
Texas
Day v. State, 489 S.W.2d 368 (Tex. Civ. App. 1972), writ ref. n.r.e. The Attorney
General brought a proceeding seeking cancellation of insurer's charter and
certificate of authority, injunctions against corporate assets being diverted,
and appointment of receivers, and the insurer appealed the granting of a
temporary injunction to that effect on the ground that the state had a prior
unexhausted legal remedy in that Board of Insurance had a prior pending
action concerning the same subject matter. The court held that Attorney
General has statutory authorization under the Texas Civil Statutes to proceed
independently of insurance commissioner's powers under the insurance code.
Lumbermen's Ins. Corp. v. State, 364 S.W.2d 429 (Tex. Civ. App. 1963) writ ref.
n.r.e. The Attorney General of the state may act on behalf of Board of
Insurance and initiate proceedings to obtain appointment of receiver for an
insolvent insurer.
Op. Att'y. Gen. 0‐3910 (Tex. 1941). A court‐appointed receiver for insurance
company may be removed upon motion of interested party, supported by
competent evidence as to the desirability and necessity of the change, and the
court may appoint the statutory liquidator of the Board of Insurance or any
other person as receiver.
State v. Teachers Annuity Life Ins. Co., 149 S.W.2d 318 (Tex. Civ. App. 1941) writ
ref. When the Attorney General instituted a suit without the authority of the
Board of Insurance Commissioners to void the charter of an insurance
company, the question was raised regarding the Attorney General's authority
to act on his own initiative. Under the Constitution of the State of Texas, Art.
IV, Sec. 22, the duties of the Attorney General include seeking judicial forfeiture
of charters when sufficient cause exists, unless otherwise expressly directed
by law. While the regulatory power and control of insurance companies and
the business of insurance in general is vested in the Board of Insurance
Commissioners, such language does not expressly give the Commissioners the
sole authority over the forfeiture of the corporate charters. Thus, the court
found the Attorney General acted properly.
Wisconsin
In re Oshkosh Mutual Fire Ins. Co., 77 Wis. 366, 46 N.W. 441 (1890). Following
the granting of a voluntary petition to wind‐up an insolvent company by the

creditors and stockholders, the Attorney General, on information of the
insurance commissioner, applied for the appointment of a receiver. In denying
the Attorney General's petition for the appointment of receiver, the court held
that the pending action would accomplish all that was sought by the Attorney
General and that the court has jurisdiction to enjoin an insolvent insurance
company and to appoint a receiver upon the petition of creditors and
stockholders of an insolvent insurance company.
Exclusive Remedy
Fifth Circuit
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). Insurance broker brought action as subrogee
against insolvent insurer and its president and chairman of the board to
recover unearned premiums paid after insolvency. Citing the McCarran‐
Ferguson Act, 15 U.S.C. § 1011, the court affirmed an administrative stay
pending resolution of all proceedings in the state liquidation court on the
grounds of Burford abstention. Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098
(1943). The action against the president and chairman of the board individually
for mismanagement and undercapitalization was also properly stayed,
because the derivative claim involved the same assets which the Commissioner
was required to collect and distribute in the liquidation proceeding. Pursuit of
those claims in federal court would "usurp" Louisiana's control over the
liquidation proceeding, permit plaintiff to obtain an unfair advantage over
other claimants, and "encroach" into the Commissioner's exclusive power as
liquidator.
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.
Tenth Circuit 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.
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.
Colorado
Florida
Kentucky
Atlantic and Pacific Ins. Co. v. Barnes, 666 P.2d 163 (Colo. App. 1983). The
commissioner of insurance appealed from the trial court's judgment that,
contrary to the commissioner's ruling, the insurer was not impaired. The court
held that it was error for the trial court to place the burden of proof on the
commissioner and that the evidence, weighing equally for both sides,
supported the entering of judgment in favor of the commissioner.
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.
Grimes v. Central Life Ins. Co., 172 Ky. 18, 188 S.W. 901 (1916). The court held
that the statutory method provided for winding up the affairs of an insolvent
insurer is exclusive of the common law right of stockholders and creditors to
bring proceedings for a receiver, where the statutory remedy is adequate to
protect their rights.
Ohio Valley Fire & Marine Ins. Co. v. Wash., 205 Ky. 819, 266 S.W. 921 (1924).
Method provided by insurance code for winding‐up affairs of insolvent insurer
is exclusive. An insolvent insurer cannot voluntarily liquidate and assign its
assets and liabilities to another insurer for the benefit of its creditors.
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
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
Medallion Ins. Co. v. Wantenbee, 568 S.W.2d 599 (Mo. App. 1978). The
dismissal of agents' counterclaims against an insolvent insurer was affirmed by
the court on the ground that the exclusive statutory remedy for the agents to
pursue their claim was in the liquidation proceeding.
State ex rel. ISC Financial Corp. v. Kidder, 684 S.W. 2d 910 (Mo. App. 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.
State ex rel. St. Louis Mutual Life Ins. Co. v. Mulloy, 330 Mo. 951, 52 S.W.2d 469
(1932). A policyholder was held not able to challenge the legality of the
formation of a mutual life insurance company which was permitted to engage
in both stock and mutual business under a reorganization plan approved by
the Missouri Attorney General. In noting that the Missouri insurance code
provided the exclusive mechanism for the supervision and regulation of
insurance companies, the court noted the policyholders should have made a
demand on the Missouri insurance commissioner rather than pursue this
remedy. Therefore, the trial court judge had no authority to hear or rule on the
petition.
Montana Bennet v. Glacier General Assurance Company, 748 P.2d 464 (Mont. 1987).
Borrowers who deposited funds with an assurance company in exchange for
financial guarantees, moved to intervene in the liquidation proceedings of the
assurance company, to assert their claims for return of the funds. The
Montana Supreme Court held that the liquidation act barred the borrowers
from intervening. The Court held that the intervenors' petitions in District
Court constituted actions against the insurer or Liquidator within the meaning
of Montana statutory law. The Court relied on the statutory language which
provided that "no action at law or equity may be brought against the insurer or
liquidator" once liquidation is ordered. Further, the Court held that the
intervenors attempted to shortcut the liquidation process, contrary to the
liquidation act, and therefore the Court affirmed the District Court's dismissal
of the petitions for return of the funds.
New Jersey
Superintendent of Ins. of New York as Liquidator of Union Indemnity Ins. Co. of
N.Y. v. Intern. Equip. Leasing, Inc., 247 N.J. Super. 119 (App. Div. 1991), cert.

den'd, 126 N.J. 389 (1991). The court held that where an ancillary receiver had
not been appointed, claims and counterclaims asserted by an insured against
an out‐of‐state liquidator of an insolvent insurer could not be brought in a state
other than the state in which the liquidation proceeding was instituted.
Following a liquidation order, the court maintains continuing jurisdiction over
the liquidation proceedings. If the estate was required to defend lawsuits after
the liquidation order was entered, the assets of the estate would not be
protected and claims would not be paid equitably.
New York Andre v. Beha, 211 A.D. 380, 208 N.Y.S. 65, affirmed, 240 N.Y. 605, 148 N.E. 524
(1925). Where a Russian insurance company had been dissolved by the Soviet
government, whether legally or illegally, and had ceased to do business within
New York and only two of its directors were known to be in existence, the
remedy for the protection of the corporation and its shareholders, in so far as
its assets in this state were concerned, was either under the general
corporation law, providing for the appointment of a receiver to preserve the
assets of a defunct or insolvent corporation, or under the insurance code, and
a foreign minority stockholder could not in an equity action have the funds in
the state ordered turned over to the stockholder's keeping.
Corcoran v. Frank B. Hall & Co., 149 A.D.2d 165 (1st Dep't 1989). Frank B. Hall
was the corporate parent and sole shareholder of Union Indemnity Insurance
Company. When Union Indemnity was placed into liquidation, the Liquidator
brought suit against Frank B. Hall and others alleging that Union was operated
as a "loss leader" for the benefit of other companies in the Hall Group, that this
practice ultimately resulted in Union Indemnity insolvency, and that this
insolvency was purposely concealed. Several state guaranty funds and
reinsureds also filed actions against Frank B. Hall. These additional plaintiffs
moved to dismiss the Liquidator's action, but the New York Supreme Court for
New York County stayed the additional plaintiff's actions and permitted only
the Superintendent to go forward. The Appellate Division, First Department
affirmed, finding that all of the causes of action asserted in the Liquidator's
complaint did in fact belong to Union Indemnity, and that the Liquidator had
paramount and exclusive standing to assert claims on behalf of Union
Indemnity, its policyholders and creditors.
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.
In re Application for an Order Staying Arbitration, No. 24632, slip op. (N.Y. App.
Div., 1st Dept. December 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.
Matter of All City Ins. Co., 66 A.D.2d 531, 413 N.Y.S.2d 929 (1979), motion
dismissed, 48 N.Y.2d 629, 421 N.Y.S.2d 192, 396 N.E.2d 474. The right of
claimants to arbitration under an uninsured motorist endorsement was

preempted by the statutory scheme outlining a claims procedure for
rehabilitation of an insolvent insurer.
Reed v. Squire Co., Inc., 217 A.D. 494, 217 N.Y.S. 92 (1926). In the event that it is
impossible to proceed in voluntary liquidation proceedings without the
appointment of a receiver, then the only remedy is an application under the
insurance code for the insurance commissioner to take possession of the
assets and to proceed with liquidation.
Wisconsin
In the Matter of the Ancillary Liquidation of Integrity Ins. Co., A.O. Smith
Corp. v. Wis. Ins. Sec. Fund, 217 Wis. 2d 252, 580 N.W.2d 348 (Wis. Ct. App.
1998). Integrity insured A.O. Smith, and was declared insolvent in New
Jersey, where a court issued an order for its liquidation. Years after the bar
date for all claims and the effective date of Wisconsin's "Net Worth" statute
(which limited payments from the fund for those insureds with a "net
worth" greater than $10 million to the extent that the aggregate of the
insured’s claims excess 10% of the insured’s net worth ‐‐ thus effectively
creating a deductible for companies with a net worth greater than $10
million), A.O. Smith filed claims with the Wisconsin Insurance Security Fund
("WISF"), identifying four third party actions that had been filed against A.O.
Smith after the bar dates and effective dates. The fund denied A.O. Smith's
claims, and A.O. Smith claimed the fund retroactively applied the "net
worth" statute, thereby depriving A.O. Smith of vested statutory rights. The
court held that the any claims by the insured, A.O. Smith, against Integrity,
and thus the WISF, did not arise until a suit has been initiated against A.O.
Smith. The court also held that the WISF is only obligated to assume those
contractual duties which the statute directs it to assume. The court
alternatively noted that retroactive application of a statute is permissible if
the application is remedial and does not disturb contracts or vested rights.
Because the purpose of the Wisconsin Insurance Security Fund and the net
worth law is remedial, the insured did not acquire any vested statutory rights
that are beyond the power of the legislature to alter.
Faber v. Musser, 207 Wis. 2d 132, 557 N.W.2d 808 (Wis. 1997). In a case where
a physician's insurer became insolvent and liquidated, the court held that the
physician's sole recourse for loss of liability insurance was through the
Wisconsin Insurance Security Fund ("WISF"). The court held that the
legislature distinguished between market failure causing deficits in health
care provider liability coverage, and insurer insolvency and liquidation
causing deficits in liability coverage. The legislature created the WISF to deal
with the latter situation. The physician was not entitled to retroactive
replacement coverage under the Wisconsin Health Care Liability Insurance
Plan, which the legislature created to deal with the situation where the
insurance market fails to offer the liability coverage a physician is required by
statute to carry, even though the physician would be responsible for a
$100,000 gap in coverage resulting from the application of the WISF.
Right to Intervene
Seventh Circuit
Cullom v. Traders Ins. Co., 163 F. 45 (7th Cir. 1908). Plaintiff and other general
agents of insolvent insurance company (resulting from the San Francisco
earthquake of 1906), challenged the appointment of a receiver with a view to
secure a right to the insolvent company's unearned premium reserve on the
theory that the agents, in paying unearned premium claims on behalf of the
company, were entitled to a priority claim to this "trust fund". The court held

constitutional the statute under which dissolution was authorized and the
general agents' petition for intervention was rejected.
Ninth Circuit Low v. Altus Fin. S.A., 44 F. App'x. 282 (9th Cir. 2002). When evaluating
timeliness of the intervention, the court must look to the time the intervener
knew or should have known its interest were not being adequately
represented.
California
Connecticut
Florida
Hawaii
Illinois
Garamendi v. Golden Eagle Ins. Co., 113 Cal. App. 4th 861 (Ct. App. 2003). An
insurer may intervene in a litigation brought against the insured to protect the
insurer’s interests, when the insured’s corporate status has been suspended
preventing the insured from defending itself. Failure to intervene may result in
the insurer being sued directly for personal injury under Cal. Ins. Code § 11580.
U.S. v. One 1995 Turbo Commander Aircraft Model 114TC, No. 3: 99‐CV‐2590
(EBB); 3:99‐CV‐2590 (EBB), 2000 WL 1838334 (D. Conn. Oct. 31, 2000). On
objections filed by the receivers of several insolvent insurers to the proposed
intervention by two life insurance companies in a seizure action initiated by the
receivers, the federal district court in Connecticut ruled that the insurance
companies would not be permitted to intervene as claimants either permissively
or as of right, because they did not have a significantly protectable interest in
the seized assets. The receivers were the appropriate parties to pursue these
actions to recover monies liquidated out of seizures.
Hartnett v. Southern American Fire Insurance Co., 495 So.2d 902 (Fla. Dist. Ct.
App. 1986). Pursuant to Chapter 631 of the Florida statutes, shareholders of an
insolvent insurer are not "interested persons" entitled to appear at a
receivership hearing.
Metcalf v. Investors Equity Life Ins. Co. of Hawaii, Ltd., 910 P.2d 110 (Haw.
1996), cert. denied, 518 U.S. 1018 (1996). The court held that a shareholder
of an insolvent insurer lacked standing to oppose a petition to liquidate the
insurer. State statutes governing the rehabilitation and liquidation of an
insurer are designed to protect the interests of insureds, claimants,
creditors, and the public generally, with minimum interference with the
normal prerogatives of the owners and managers of insurers.
Evans v. Illinois Surety Company, 201 Ill. App. 578 (1916) (Abstract). The Illinois
Attorney General was allowed to intervene in liquidation proceedings to
challenge appointment of the equity receiver despite the fact that he was not
a necessary party entitled to notice. However, the court rejected the Attorney
General's effort to reverse the appointment of the receiver since such
appointment was necessary.
People ex rel. Baylor v. Bell Mutual Casualty Co., 2 Ill. App. 3d 17, 276 N.E.2d 113
(1971), affirmed, 54 Ill.2d 433. The court held that an order authorizing the
liquidator to take all steps necessary to enforce collection of assessments
against policyholders was final and conclusive as to parties and to amount and
cannot be collaterally attacked by policyholder in an action by liquidator to
collect amount assessed. However, where policyholders were not represented
in liquidation proceedings except by liquidator and had no opportunity to
contest levy of assessment or amount thereof, the policyholders were entitled
to intervene in the liquidation proceedings, as such intervention is not
inconsistent with liquidation article of the Illinois insurance code, which does
not preclude intervention to expedite litigation by disposing of the entire
controversy in one action.

Rheinberger v. Security Life Ins. Co. of America, 4 F. Supp. 824 (N.D. Ill. 1933),
appeal dismissed, 72 F.2d 147 (1933). After a receiver was appointed for an
insolvent insurer, and approval of the receivership court was obtained for a
contract with another insurer, policyholders were prevented from intervening
for the purpose of attacking the court's approval of receivership. Further,
although it is the duty of the court to inquire into allegations by plaintiff that
amendments to the reinsurance contract were secured by or constitute fraud
or deceit upon the court, the court found no basis for such allegations.
Indiana State ex rel. Mid‐West Ins. Co. v. Superior Court of Marion County, 231 Ind. 94,
106 N.E.2d 924 (1952). In rejecting a petition by a claimant against an insured of
an insolvent insurer, the court noted that claimant was not a judgment creditor
of the insolvent insurer, and further, only the Indiana Insurance Department is
permitted to seek the appointment of a receiver for an insolvent insurance
company. The Department intervened in the proceeding alleging that the
insurer was insolvent and seeking the appointment of a rehabilitator.
However, the court rejected the Department's petition because it had been
incorrectly filed in the wrong court and the wrong proceeding since
intervention was not the appropriate mechanism for securing the appointment
of a rehabilitator.
Michigan
Attorney General ex rel. Commissioner of Insurance v. Lapeer Farmers Mutual
Fire Ins. Ass'n., 300 Mich. 320, 1 N.W.2d 557 (1942). The trial court did not
abuse its discretion in denying the petition of objecting members and creditors
to intervene in a receivership proceeding against an insolvent insurer, brought
by Attorney General on the relation of the insurance commissioner, for the
purpose of opposing the final accounting of a former receiver and for
directions to successor receiver thereon, where it did not appear that any
useful purpose would be served by permitting the intervention and it appeared
the petition to intervene was but one of many dilatory steps being taken to
delay the proceeding. It was error in failing to give members formal notice of
particular proceedings in receivership, since where members had opportunity
to contest and did contest the various stages of the proceeding, no prejudice
could be shown.
Gauss, State Commissioner of Insurance v. Central West Casualty Company,
266 Mich. 159, 253 N.W. 252 (1934). The Supreme Court of Michigan, reversing
the trial court, permitted the creditors of an insolvent insurance company to
intervene in a suit by the commissioner of insurance to take possession of the
property and assets of the company and conduct its business until the further
order of the court. The court held, however, that such intervention must be in
subordination to the commissioner's petition and order thereon.
Trosper v. Ingham Circuit Judge, 293 Mich. 438, 292 N.W. 360 (1940). The court
held that the circuit judge did not abuse his discretion by refusing a
policyholder's leave to intervene in the liquidation proceedings of the insolvent
insurance company. The policyholder is only one of several thousand
policyholders and the common interest of all policyholders is best represented
by the commissioner of insurance who was appointed receiver of the
company. The policyholder, not having an independent right of action, and not
being a party by right of entry, was properly denied leave to intervene.
Whitehorn v. Ingham Circuit Judge, 281 Mich. 10, 274 N.W. 691 (1937). The
plaintiff, a policyholder of the insolvent insurance company, was not permitted
to intervene in a state court proceeding as no useful purpose would be served.

The circuit judge's denial of plaintiff's petition was affirmed since plaintiff was
one of only 13 dissenters of the reinsurance agreement, acquiesced in by over
30,000 policyholders, whereby the reinsurance agreement dealt with the
property and assets of the insolvent company under the order of a federal
court and with the approval of the commissioner of insurance without
widespread confusion or hardship to the many thousands of individuals
involved.
Missouri
Ainsworth v. Old Security Life Ins. Co., 694 S.W.2d 838 (Mo. App. 1985). A sole
stockholder which was entitled to receive all of the assets, upon final
distribution, of an insolvent carrier sought leave to intervene in a proceeding
involving payment of fees for the receiver's attorney. The Missouri Court of
Appeals granted the motion on the grounds that the petitioner had an
immediate and direct economic interest in the matter, whereas the receiver
was only a stakeholder. The Court found that: "[T]he receiver has a variety of
interests to serve, and really has no economic interest in the outcome of the
case. He may do his duty in defending against [the claim], and yet come short
of the kind of single‐purposed defense that may be expected from [the sole
stockholder]." 694 S.W.2d at 841.
In re Liquidation of Prof’l Med. Co. and Prof’l Mut. Ins. Co. Risk Retention
Group, 92 S.W.2d 775 (Mo. 2003) (en banc). A medical malpractice insurer and
stock property casualty insurer were declared insolvent and receivership
proceedings were initiated. Various doctors moved to intervene in the
proceeding to pursue a shareholder derivative action and requested the
appointment of trustees, which was denied. The Supreme Court reversed the
district court’s decision by holding that the doctors were entitled to intervene
as a matter of right to pursue derivative action by and on behalf of the various
medical malpractice insurers whose doctors, as members, had an interest in
property that was the subject of the proceeding. The court further reasoned
that the doctors’ ability to protect their interests was impeded as they had no
legal right to assert their claim other than by means of intervention and
receiver was inadequately representing the doctors’ interests. Lastly, the
Supreme Court directed the district court to fashion an appropriate procedure
for any potential conflicts of interest that might arise with respect to the
receiver’s role to ensure that he adequately protects each party’s interest.
In re Transit Casualty Co., 43 S.W.3d 293 (Mo. 2001) (en banc). In a rehabilitation
case brought by the Director of Insurance against an insolvent insurance
company, the Pulitzer Publishing Company intervened for the sole purpose of
unsealing court records relating to the salary and bonuses of the special deputy
receiver. The trial court denied Pulitzer’s request, and Pulitzer appealed. The
Supreme Court of Missouri reversed and remanded, holding that the
receivership court’s order was an appealable “final judgment,” and that “case
records are presumptively open to public inspection and copying absent a
compelling justification for their closure.”
Montana Bennet v. Glacier General Assurance Company, 748 P.2d 464 (Mont. 1987).
Borrowers who deposited funds with an assurance company in exchange for
financial guarantees, moved to intervene in the liquidation proceedings of the
assurance company, to assert their claims for return of the funds. The
Montana Supreme Court held that the liquidation act barred the borrowers
from intervening. The Court held that the intervenors' petitions in District
Court constituted actions against the insurer or Liquidator within the meaning
of Montana statutory law. The Court relied on the statutory language which
provided that "no action at law or equity may be brought against the insurer or

liquidator" once liquidation is ordered. Further, the Court held that the
intervenors attempted to shortcut the liquidation process, contrary to the
liquidation act, and therefore the Court affirmed the District Court's dismissal
of the petitions for return of the funds.
New York
North Carolina
Ohio
Oklahoma
Pennsylvania
De Carlo v. Brye, 42 Misc.2d 667, 248 N.Y.S.2d 667 (1964). Where all of the
parties in the actions conceded that the fund, which was the subject matter of
the litigation, was one subject to supervision by the insurance commissioner
and that the fund should be liquidated, the commissioner's application for
permission to intervene would be granted and the commissioner would be
directed to prepare and enter an order of liquidation, and then all of the
actions would be dismissed.
State of North Carolina v. Interstate Casualty Insurance Co., et al., 417 S.E.2d
296 (N.C. App. 1992). An insurance company guaranteed warranty contracts of
a corporation. The State later advised the corporation and the insurance
company that their acts and practices related to the contracts constituted an
unfair and deceptive trade practice. Settlement agreements were entered into
between contract purchasers, the corporation and the insurance company.
Upon failure of the corporation to comply with the terms of the settlement
agreements, a class action was filed against it. Thereafter, the State instituted
a liquidation proceeding against the insurance company. The plaintiffs in the
class action filed a class proof of claim and a Motion to Intervene in the
liquidation proceeding. The court held that the plaintiffs were not entitled to
intervene as of right as their interests were protected by the filing of the proof
of claim and would be adequately represented by the liquidator.
Jump v. Manchester Ins. and Indem. Co., Nos. 91AP‐492, 91AP‐510, 1991 Ohio
App. LEXIS 5382 (Ohio Ct. App. Nov. 5, 1991). The court held that the trial court
abused its discretion in denying two insureds' motions to intervene into the
liquidation proceedings of an insolvent insurer. At a status hearing, held prior
to the filing of the motions to intervene and attended by all the relevant
parties, the trial court agreed to allow the two insureds to intervene and later
issued an order stating the same.
Okla. ex rel. Crawford v. Am. Standard Life & Accident Ins. Co., 37 P.3d 971 (Okla.
Civ. App. 2001). The court held general creditors of an insolvent insurance
company did not have standing to intervene in the liquidation proceeding
because general creditors do not have a direct interest in any particular asset of
the receivership estate. The court explained that OKLA. STAT. tit. 12, § 2024 (1991)
did not confer an unconditional right to intervene, and the Oklahoma Uniform
Insurers Liquidation Act (“OUILA”) was the controlling statute.
Chow v. Rosen, 571 Pa. 369, 812 A.2d 587 (Pa. 2002). Plaintiff sued several
doctors for medical malpractice. The appellant paid medical benefits on behalf
of the plaintiff for the treatment of his injuries, thereby giving it a subrogation
interest on any recoveries. The defendant’s primary insurer was placed in
liquidation and the Pennsylvania Property and Casualty Insurance Guaranty
Association (“PPCIGA”) assumed the obligation of paying the covered claims of
the defendant. The plaintiff and defendant entered into a settlement
agreement that specifically contemplated an offset against settlement
proceeds of medical benefits paid by the appellant, a subrogee health insurance
provider. The court held that the appellant was not entitled to intervene to
assert its subrogation interest in the medical malpractice action. It reasoned
that ordinarily the appellant would have a right to intervene, but the non‐

duplication provision of the PPCIGA Act barred it from recovery against the
plaintiff.
Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 366 Pa. 149,
76 A.2d 867 (1950). Policyholders of a mutual insurance company are
"interested parties" in a proceeding to dissolve the company because the
proceeding may impose liability on them. Therefore, the court may permit
them to intervene. Following a dissolution decree, the company's funds were
in the statutory liquidator's possession and, therefore, under the court's direct
supervision.
Texas
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.
Interpleader
Seventh Circuit
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, in dictum, 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.
Ninth Circuit State of Idaho ex rel. Soward v. United States Internal Revenue Service, 858
F.2d 445 (9th Cir. 1988). The State of Idaho brought an interpleader action on
behalf of the director of the Idaho Department of Insurance to challenge the
priority of the Internal Revenue Service's claim against insurers in liquidation.
The United States District Court of the District of Idaho found that the Idaho
priority statute was not superseded by the federal priority of government
claims statute, because the Idaho statute was enacted for the purpose of
regulating the business of insurance. On appeal, the court reversed and found
that the Idaho statute did not regulate the business of insurance within the

meaning of the McCarran‐Ferguson Act, but instead was primarily addressed
to the relationship between debtor and creditor. Therefore, the Court held
that the priority of the federal government's claim against the insolvent
insurers would be determined by the federal insolvency statute and not the
Idaho priority statute.
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 70 (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 Corp. v. Corcoran, 1992 U.S. Dist. LEXIS 13272 (N.D. Ill. Sept.
4, 1992). The Liquidator moved to dismiss the interpleader action, arguing
that the court lacked jurisdiction because the case had become moot once
the interpleader bond was released. In denying this motion to dismiss, the
court held that as a matter of the law of the case, the defendant could not
advance such an argument again as the Seventh Circuit had already rejected
this argument. Furthermore, the court held that interpleader jurisdiction is
determined at the time the suit is filed and subsequent events do not alter
jurisdiction once properly acquired. Thus, the fact that the interpleader bond
had been released was irrelevant to the court's jurisdiction in the case.

New York National Union Fire Ins. Co. of Pittsburgh, Pa. v. Ambassador Group, Inc., 691 F.
Supp. 618 (E.D. N.Y. 1988). The court, in dicta, explained that in a statutory
interpleader action to resolve multiple claims asserted against the officers and
directors of an insolvent insurer, New York's Superintendent of Insurance, an
indispensable party, was properly joined in the action even though an Order of
Liquidation had been issued prohibiting all persons from initiating any action
against the insolvent insurer or the Superintendent.
Pennsylvania Crozer‐Chester Medical Ctr. v. Gerald J. Sullivan & Assocs., Inc., No. 86‐4890,
1989 U.S. Dist. LEXIS 13577 (E.D. Pa. Nov. 14, 1989). Insured and its
comprehensive liability insurance carrier and liquidator of insolvent directors,
officers and trustees insurance carrier filed cross‐motions for summary
judgment to recover interpleaded settlement funds paid to the court by
underwriter of directors, officers and trustees coverage. The court determined
that New York law controlled the dispute and that the relationship between
the insolvent directors, officers and trustees insurance carrier and the
underwriter was one of reinsurance. The court then pointed out that "[i]t is
well established by both statute and case law that the proceeds of reinsurance
policies are paid to the liquidation estate following the insolvency of a ceding
company." Accordingly, since the insured and its comprehensive liability
insurance carrier offered no proof that the settlement agreement was a
novation intended to supersede the original reinsurance arrangement, the
court concluded the liquidator was entitled to the interpleaded settlement
proceeds. The court granted the liquidator's motion for summary judgment.
Puerto Rico
Karon Bus. Forms, Inc. v. Skandia Ins. Co. Ltd., 80 F.R.D. 501 (D. Puerto Rico
1978). Karon Business Forms, Inc. was insured under a fire insurance policy
issued by Commonwealth Insurance Company. Commonwealth was in the
midst of liquidation proceedings at the time. That policy had been endorsed by
Skandia Insurance Co., Ltd. as guarantor, conditioned on Commonwealth
obtaining an agreement that any payments made pursuant to the
endorsement be proportioned among the reinsurers, including Skandia. That
condition was never fulfilled. Karon made a claim against Commonwealth
under the policy. When Commonwealth could not pay, Karon turned to
Skandia as guarantor. Skandia sought to implead Commonwealth's reinsurers
in order to require them to pay their respective shares of Karon's claim. The
Court held that even though Commonwealth, if solvent, would have been able
to claim reinsurance proceeds from the co‐reinsurers, Skandia's claim (based
on breach of a condition precedent) was too tenuous to justify an impleader
against the reinsurers, since Commonwealth's possible liability to Skandia is
entirely distinct from the reinsurer's liability to Commonwealth. By paying
Karon, Skandia stepped into the insured's shoes as a creditor of
Commonwealth, not into Commonwealth's shoes as a creditor of the
reinsurers. Skandia was allowed to implead and to seek recovery from the
Receiver of Commonwealth.
Court Orders of Rehabilitation or Liquidation ‐ In General
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. 4 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
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.
Fewell v. Pickens, 346 Ark. 246, 57 S.W.3d 144 (2001). Insurance Commissioner
sought liquidation of an insurance company, and the parent company and
shareholder opposed. The Arkansas Supreme court held that the statutory
requirements that the Commissioner must apply for an order to show cause and
the trial court must conduct a full hearing on that application only apply to the
commencement of delinquency proceedings; and that the trial court was not
required to issue a show‐cause order before holding a hearing on the Insurance
Commissioner's petition for liquidation.
Harkey v. Wood, 421 S.W.2d 340 (Ark. 1967). In rejecting the Arkansas
insurance commissioner's petition for a mandamus against a judge of the
circuit court, the Arkansas Supreme Court held that the denial or granting of a
petition for liquidation can only occur after a full hearing. Since it did not
appear that the hearing had yet been concluded at the trial court level, the
commissioner could not force the trial court judge to make a decision.
Mendel v. Garner, 283 Ark. 473, 678 S.W.2d 759 (1984). Policyholders of an
insolvent carrier appealed a provision in the rehabilitation plan that cut off
their rights to surrender their policies for the cash surrender value. In
upholding the plan, the Supreme Court of Arkansas held: "The rehabilitation of
4 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).

insurance companies pursuant to state insolvency statutes does not impair the
obligation of contracts." 678 S.W.2d at 761.
Connecticut In re Conn. Sur. Co., No. CV‐02‐0814173‐5 (Conn. Super. Ct. June 24, 2008),
reported in 20‐4 Mealey’s Litig. Rep. Ins. Insolv. 16 (2008). The court granted the
liquidator’s motion to close liquidation proceedings, and ordered claimants with
administrative claims to submit requests for payment before the liquidator
wound up affairs. Any entities that accepted distributions are presumed to
have discharged or released the insolvent insurer, its affiliates and the
liquidator. The court retained jurisdiction to hear disputed claims.
Kentucky
Health Maint. Org. Ass’n v. Nichols, 964 F. Supp. 230 (E.D. Ky. 1997). The court
denied the Commissioner’s motion to disqualify plaintiffs’ counsel on conflict of
interest grounds. The Commissioner of the Department of Insurance, as
liquidator in a different case, retained the firm for various matters related to
liquidation of a self‐funded multiple employer welfare arrangement. The firm
later represented HMO Association in an action in which the Department of
Insurance worked with the adverse party and in which the firm subpoenaed
Department staff. There was no conflict of interest because the Commissioner
did not have an attorney‐client relationship with the firm because he had
retained the firm to represent him as liquidator, a non‐governmental function
distinct from his governmental functions with the Department. Additionally,
while both actions involved ERISA matters, there was no substantial relation
between the matters because each involved a different area of ERISA law.
Finally, the court found that confidential information that the liquidator
exchanged with the firm would have no bearing on the present action.
Kentucky Central Life Insurance Company v. Stephens, 897 S.W.2d 583 (Ky.
1995). The Supreme Court of Kentucky stated that KRS 304.33‐040, which
protected the interests of the insureds, creditors, and the public, gave
exclusive jurisdiction to the Franklin Circuit Court and provided that the court
could issue any order, process, or judgment necessary to carry out the
statute’s provisions. The court explained that it was up to the court, not the
legislature, to take any non arbitrary action or make any non‐arbitrary
determination which is necessary to implement court orders or rules. The
court concluded that the trial court had authority to permit discovery to be
conducted in an expedited manner, given that time is important in
insolvency matters.
Massachusetts
Michigan
Missouri
Christian Mutual Life Ins. Co. v. Monarch Life Ins. Co., 2001 U.S. Dist. Lexis 981 (D.
Mass. 2001). The mere fact that a defendant insurer is in a rehabilitation
proceeding does not justify requiring the insurer, who successfully moved to
stay the proceeding, to post collateral pending arbitration between the plaintiff
and another party.
Gauss v. American Ins. Co., 290 Mich. 33, 287 N.W. 368 (1939). The court
affirmed an order of liquidation against the defenses that (1) the commissioner
failed to grant a hearing to the insurance company before filing a report on the
examination, as such statutory requirement is discretionary rather than
mandatory, and (2) that it was improper for the commissioner to pursue
receivership and liquidation alternatively in the same petition since the
statutory scheme provides that both may be pursued in the same proceeding.
Melahn v. Continental Sec. Life Ins. Company, 793 S.W. 2d 425 (Mo. App.
1990). The Missouri insolvency statutes are held to prevail over Missouri
Supreme Court rules. The Missouri statute specifying time to appeal from a

judgment of dissolution of an insurance company is a specific statute, which
prevails over general appellate rules and statutes.
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.
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.
In re Realty Title Ins. Co., 126 N.J. Eq. 523, 10 A.2d 264 (1940). The validity and
conclusiveness of court orders in a liquidation proceeding may not be
collaterally attacked or impeached where none of the parties in interest had
appealed from those orders or sought reversal or modification.
New York
Holy v. M. L. Nathanson & Co., 5 Misc.2d 266, 159 N.Y.S.2d 785 (1957) affirmed,
4 A.D.2d 858, 167 N.Y.S.2d 412. A liquidation proceeding under the insurance
code does not function as a barrier preventing the collection of the dissolved
company's assets.
In re Application of James P. Corcoran, for an Order to take possession, First
New York Syndicate Corp., 171 A.D.2d 431, 567 N.Y.S.2d 13 (1st Dep't 1991). The
Appellate Division ordered dismissal of the petition of the Superintendent of
Insurance to liquidate respondent on the ground of financial insolvency and/or
impairment. The Superintendent contended that, as a member of the New
York Insurance Exchange ("the Exchange"), the First New York Syndicate
Corporation was required to maintain a minimum policyholder surplus of $2.2
million and that the Syndicate had failed to maintain it. However, the
Syndicate complied with an interim order that permitted the Syndicate to
execute certain commutation agreements which would restore it to a positive
net worth position so that it would be capable to continue as an on‐going
company to do insurance and/or reinsurance business. The Court concluded
that since the Syndicate complied with the requirements of the interim order
and had withdrawn from the Exchange, liquidation was not required and the
petition to liquidate should be dismissed.

Matter of Morgan, 277 N.Y. 203, 14 N.E.2d 39 (1938). An order of rehabilitation
suspends the functions of the company in rehabilitation except insofar as the
insurance commissioner chooses to act in its place, and as such the contractual
obligations of the company were terminated or became dormant. Therefore,
the mortgage company's right to retain one‐half of one percent of interest
collected from the mortgagor as compensation for its guaranty was duly
terminated under the order of rehabilitation.
Matter of New York Title & Mortgage Co., 153 Misc. 537, 275 N.Y.S. 353 (1934).
The court held that an order of rehabilitation does not amount to an
anticipatory breach of a company's obligations. To hold otherwise would
defeat the purpose of rehabilitation which is to restore the company to a
healthy condition enabling it to meet its obligations.
Ohio
Fabe, Superintendent of Insurance v. Prompt Finance, Inc., 69 Ohio St.3d
268, 631 N.E.2d 614 (Ohio 1994). This suit grows out of the insolvency of the
Oil & Gas Insurance Co. (“OGICO”). Due to the dealings between OGICO and
a number of closely related entities, the Superintendent of Insurance, while
OGICO was in supervision, prohibited the transfer of certain property. The
trial court issued an Order enforcing the Superintendent’s dictate. On
appeal, the Supreme Court of Ohio concluded that pursuant to the Insurers
Supervision, Rehabilitation and Liquidation Act, a court of common pleas has
the authority to issue a ruling which is “necessary and proper” to enforce an
order of the Superintendent of Insurance. Ohio Revised Code § 3903.09(I).
Pennsylvania Commonwealth v. Pension Mutual Life Ins. Co., 20 Dauph. 51, 45 C.C. 216, 26
Dist. 1007 (1917). Stockholders of a life insurance company have no
independent right, apart from the corporation, to object to a court order
dissolving the company and directing the distribution of its assets.
Kaiser v. Stewart, 1997 U.S. Dist. LEXIS 12788 (E.D. Pa. 1997). The Federal Court
held that the Commissioner Insurance did not have standing to pursue RICO
claims against directors of an insolvent insurer where the Commissioner
brought the suit on behalf of creditors, policyholders, shareholders and
members of the insolvent insurers. The Court reasoned that these persons
were not "direct victims" and consequently did not have a claim under RICO.
Rather, had the Commissioner sued on behalf of the two insurers themselves,
the only direct victims, standing would have been implicit. On reconsideration,
however, the Court ordered that the Commissioner could file an amended
complaint including certain of the RICO counts and sue on behalf of the
insolvent insurers.
United States v. Stewart, 1998 U.S. Dist. LEXIS 12006 (E.D. Pa. 1998). Where the
directors of insolvent insurer sought indemnification for costs of defense
pursuant to an indemnification agreement between them and the insurer, the
Federal Court declared that contract in violation of the Insurance Department
Act and the public policy of the Commonwealth, and therefore void. The Order
of Supervision of the insurers provided that no disbursement greater than
$10,000.00 could be made without prior approval of the Insurance Department.
Despite the single disbursements being less than $10,000.00, the total amount
was substantially greater, and therefore, according to the Court, in direct
contravention of that Order.
South Carolina Insurance Commission v. New South Life Ins. Co., 270 S.C. 612, 244 S.E.2d 289
(1978), on remand, 272 S.C. 438, 248 S.E.2d 591 (1978). The court held that an
order of rehabilitation which vests Chief Insurance Commissioner with title to

the property, contracts, and rights of action of insurer is exclusive, and
Insurance Commissioner has no authority to issue a cease and desist order.
Tennessee
Sizemore v. United Physician Insurance Risk Retention Group, 1997 Tenn.
App. LEXIS 253. A policyholder’s claim was denied by the Receiver of an
insurance company because of a late filing. The Special Master, after
conducting a hearing, concluded that the failure to timely file the claim was
due to excusable neglect, and that the claim should be accepted. The
Chancellor held that the Master’s recommendation could not be followed as
the court did not have authority under the Insurance Rehabilitation and
Liquidation Act to excuse late filings. The Court of Appeals of Tennessee
concluded that the Chancellor’s holding was in error. The court explained
that while the liquidation statute assigned the Chancery Court a specified
role in liquidation proceedings, it did not limit the traditional equitable
powers of the court.
Texas Empire Life Ins. Company of America v. Moody, 584 S.W.2d 855 (Tex. 1979)
The principal asset of the insurer was part interest in the life estate interest of
its former principal stockholder held in a trust. Because the insurer could not
treat the life estate interest as an asset under accounting principles, the
stockholder applied for life insurance and named the insurer the owner and
beneficiary of the life insurance. The insurer was placed in receivership and the
domiciliary receiver and the Texas ancillary receiver assigned the trust asset
and the proceeds from the life insurance policies, but not ownership or
beneficiary status, to a reinsurer in return for the reinsurer's assumption of the
outstanding policies of the insolvent insurer. The trial court found that the
receiver had an insurable interest in the life of the principal stockholder and
had the authority to assign the right to proceeds under the insurance code,
and that the reinsurer also had an insurable interest in the stockholder's life to
the extent of the asset value of the life estate. The Texas Supreme Court
affirmed.
Utah
Vermont
Washington
In re Rehabilitation of American Investors Assurance Co., 521 P.2d 560 (Utah
1974). The commissioner of insurance has the authority to propose and the
court has the authority to approve a rehabilitation plan for a financially
troubled insurance company, including a plan transferring the company’s
business to a new corporation under the direction of the insurance
commissioner.
McAlister v. Vt. Prop. and Cas. Ins. Guar. Ass’n, 908 A.2d 455 (Vt. 2006). The
Vermont Property and Casualty Insurance Guaranty Association was required to
provide defense and indemnity of a medical malpractice claim filed after a
Pennsylvania court order of liquidation but before the final date set for filing
claims with the liquidator. The Guaranty Association Act was not ambiguous;
the phrase “order of liquidation” was triggered by the order of liquidation
issued by the Pennsylvania state court that declared the insurer insolvent and
directed liquidation.
Smith v. Hopkins, 10 Wash. 77, 38 P. 854 (1894). The court held that it was
immaterial that the proceedings for the appointment of a receiver were
prosecuted in the name of the insurance commissioner rather than in the name
of the state.
Court Orders of Rehabilitation or Liquidation ‐ Burden of Proof

Alabama
Arizona
California
Moody v. State ex rel. Payne, 344 So.2d 160 (Ala. 1977). In rejecting insolvent
insurer's motion to introduce evidence to establish its solvency, the court ruled
that the record contained ample evidence upon which the trial court could
have determined that rehabilitation was no longer viable and that reinsurance
was necessary to prevent the loss of all policyholder benefits. Thus, the trial
court did not abuse its discretion in ordering liquidation and approving the
reinsurance treaty.
State v. Aliana Hispano‐Americana, 60 Ariz. 1, 130 P.2d 910 (1942). The Arizona
Supreme Court's central holding was that it was not sufficient for the insurance
commissioner to show merely that any or all of the particular grounds set forth
in the insurance code relating to liquidation had been satisfied. It must also
have appeared that under the existing circumstances it was better for the
policyholders, creditors, stockholders and the general public that the affairs of
the defendant were administered under receivership by the state rather than
that the defendant continue its own affairs under such terms and conditions as
may be imposed by the court. The Arizona Supreme Court further held that
the trial court had not abused its discretion in finding that, notwithstanding the
many derelictions in duty of defendant's previous management, its present
management should be given an opportunity to demonstrate that it could
restore the impaired financial condition better than a receiver.
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 denied the
appellant's application for leave to produce additional evidence. In dicta, the
court stated that the primary purpose of the provision which gave the
insurance commissioner title to an insurer's assets was to prevent dissipation
of the assets of the company after the insurance commissioner had
determined that a hazardous condition existed. According to the court, the
only requirement for judicial action upon the application of the commissioner
was the commissioner's determination that a hazardous condition existed
which jeopardized the future of the company.
Rhode Island Ins. Co. v. Downey, 95 Cal. App.2d 220, 212 P.2d 965 (1950). In
order for an insurance company to have the appointment of a receiver
vacated, the company must prove that the insurance commissioner abused its
discretion and acted arbitrarily. A prime consideration in determining whether
action of insurance commissioner is procuring appointment as receiver was
arbitrary, was whether such appointment was for the protection of
policyholders and the public.
Colorado
Florida
Atlantic and Pacific Ins. Co. v. Barnes, 666 P.2d 163 (Colo. App. 1983). The
commissioner of insurance appealed from the trial court's judgment that
contrary to the commissioner's ruling, the insurer was not impaired. The court
held that it was error for the trial court to place the burden of proof on the
commissioner and that the evidence, weighing equally for both sides,
supported the entering of judgment in favor of the commissioner.
In Re Southland Insurance Co., 535 So.2d 648 (Fla. Dist. Ct. App. 1988). The
Florida Department of Insurance, as receiver for an insolvent insurer for the
purpose of rehabilitation, must produce some evidence of compliance with its
duties under the Florida Statute in order to convert the rehabilitation into a
liquidation proceeding. Consequently, evidence of either the department's
attempts to rehabilitate or the futility of rehabilitation efforts must be
presented.

New Jersey
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 Application of Bohlinger, 199 Misc. 941, 106 N.Y.S.2d 953 (1951), affirmed, 280
A.D. 517, 113 N.Y.S.2d 755, affirmed 305 N.Y. 258, 112 N.E.2d 280, cert. denied,
346 U.S. 857, rehearing denied, 346 U.S. 913. Where it was determined that a
fraternal benefit society was affiliated with the Communist Party and that the
party's influence could not be eradicated by removing some or all of the
leaders of the society, the court held that the insurance commissioner was not
required to apply for an order of rehabilitation before seeking its dissolution.
The court further held that the commissioner did not have to wait for a
conviction of the society for subversive activities before proceeding to have
the society dissolved.
Application of People, by Dineen, 194 Misc. 999, 86 N.Y.S.2d 733 (1949). An
order liquidating the insurance business of a fraternal organization is
warranted where the organization is divided into three groups, where one
group with 384 members had a bank balance of $409.46, anther group with
330 members had a bank balance of $28.97, and a third group with 734
members had a bank balance of $846.88, thus maintaining insufficient
reserves.
In re International Workers, 280 A.D. 517, 114 N.Y.S.2d 755 (1952), affirmed, 305
N.Y. 258, 112 N.E.2d 280 cert. denied, 346 U.S. 857, rehearing denied, 74 346
U.S. 913. The court held that consideration must be given to the moral risk
which is a component of financial hazard when determining whether to
dissolve a fraternal benefit society and whether its continued transactions
posed a significant hazard to its policyholders, creditors or the public.
Matter of Globe and Rutgers Fire Ins. Co., 149 Misc. 18, 266 N.Y.S. 603 (1933).
The court's decision on the insurance commissioner's application for an order
of liquidation was withheld to afford a reasonable opportunity for
demonstration of the success of a plan of reorganization under an earlier order
of rehabilitation.
Matter of New York Title & Mortgage Co., 156 Misc. 186, 281 N.Y.S. 715 (1935).
Only the strongest showing to the contrary could justify the court's refusal to
follow the recommendations of the insurance commissioner for an order of
liquidation of a title and mortgage company in rehabilitation, where the
commissioner determined liquidation was necessary and desirable.

Schenek v. Citizens Casualty Co., 66 Misc.2d 811, 322 N.Y.S.2d 483 (1971). The
court found that evidence submitted by the insurance commissioner
supported the petition to terminate rehabilitation proceedings and liquidate
the insurance company and established that every effort had been made to
rehabilitate the company. The court also found that the insurer had failed to
improve its impaired capital status or infuse any capital whatsoever and
therefore it would have been futile to continue the rehabilitation or continue
the company's operations which would have been hazardous to policyholders,
stockholders and the public.
Stewart v. Citizens Casualty Company of New York, 61 Misc.2d 809, 306
N.Y.S.2d 973 (1969), reversed on other grounds, 34 A.D.2d 525, 308 N.Y.S.2d
513, affirmed, 27 N.Y.2d 685, 314 N.Y.S.2d 7, 262 N.E.2d 215, cert. denied, 401
U.S. 910. The insurance commissioner must prove allegations supporting a
petition for an order of rehabilitation and there is no presumption made that
the condition of insolvency is continuing once the commissioner proceeds for
the order to rehabilitate.
Stewart v. Citizens Casualty Co. of New York, 23 N.Y.2d 407, 297 N.Y.S.2d 115,
244 N.E.2d 690 (1968), remanded, 61 Misc.2d 809, 306 N.Y.S.2d 973. The court
concluded that a violation of the insurance code must be proved before the
insurance commissioner could intervene and rehabilitate the insurer. Where
the insurer failed to establish that it was solvent the commissioner had the
authority to rehabilitate the company absent proof to the contrary.
Pennsylvania Commissioner ex rel. Maxwell v. Safeguard Mutual Ins. Co., 91 Dauph. 305
(1969), rehearing, 92 Dauph. 307 (1970). Pennsylvania law strongly implies that
a petition to order dissolution of an insurance company may only be supported
by a showing of "hazardous condition." In a proceeding to dissolve an
insurance company, the proofs of the insurance commissioner must be clear,
direct, and convincing and only those inferences that are unmistakable and
inevitable will be allowed. Where evidence established that an insurance
company was not willfully violating the insurance laws and that the company's
further transaction of business would not be hazardous to its policyholders,
the commissioner's petition to liquidate was denied and the company's
petition to vacate his suspension order was allowed. The commissioner of
insurance is not authorized by statute to suspend a mutual insurance company
on the ground that its claims practices are not in the best interests of
policyholders and claimants. Moreover, a showing that an insurance company
is engaged in an unlawful operation by virtue of a technical violation of the law,
without more, is not a sufficient basis for a court to order dissolution and
liquidation of the company.
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). In seeking an order requiring the insurance company to show
cause why its business should not be closed, the department of insurance has
the burden of proving the insurer to be insolvent and/or in a hazardous
condition. If the department meets that burden, the insurer must show a
subsequent change in condition which revived the company's financial health.
Sheppard v. Old Heritage Mutual Ins. Co., 492 Pa. 581, 425 A.2d 304, (1980).
The court in a liquidation proceeding is not required to take judicial notice of
the insurance company's annual financial statement for the following calendar
year. Where an insurance company was found insolvent because its admitted
assets were not greater than its liabilities, it could not rehabilitate itself, as an

alternative to being liquidated, where it did not establish that a subsequent
change in condition had resurrected it. The company bears the burden of
showing that rehabilitation is feasible.
Grounds for Rehabilitation or Liquidation
California Caminetti v. State Mutual Life Ins. Co., 52 Cal. App.2d 321, 126 P.2d 165 (1942).
The court held that the lower court had jurisdiction to make an ex parte order
vesting title to the assets of a mutual life insurance company in the insurance
commissioner, where payment of a monthly salary to company's officer out of
the company's funds was hazardous to the company and its policyholders, and
the commissioner was not estopped from taking over an insolvent company
because the previous commissioner knew of the company's practices but
failed to take over the company.
Florida
Illinois
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 rates were not given in exchange for
borrowed money, the reinsurer did not need the Florida Department’s
approval before issuing the surplus notes.
People v. Acme Plate Glass Mutual Ins. Co., 292 Ill. App. 275, 10 N.E.2d 988 (Ill.
App. 1935). While the court agreed that the insurer had obtained sufficient
releases of claims to render it solvent, the company was not permitted to
resume business because of misrepresentation and mismanagement.
People v. Progressive General Ins. Co., 85 Ill. App.2d 427, 229 N.E.2d 350 (Ill.
App. 1967). Although the insurer alleged that rehabilitation is only appropriate
where there is financial irregularity, the court held that the insurance code
provides grounds warranting rehabilitation where the company's further
transaction of business would be hazardous to policyholders, creditors, or
public, that the company has violated its charter or any law of the state, or that
the company is found to be in such condition that it could not meet the
requirements for organization and authorization as required by law.
Reiter v. Illinois National Casualty Co., 328 Ill. App. 234, 65 N.E.2d 830, rev'd 397
Ill. 141, 73 N.E.2d 412, cert. denied, 332 U.S. 791, (1946). The insurance
department's examination of a company found that although the company
settled its claims promptly and equitably, it had paid the adjuster $17,465.50 in
excess of the amount due and the company failed to produce certain securities

disclosed in its annual statement. As a result, the insurance commissioner
acted to conserve the income and assets of the company for the benefit of its
policyholders. However, the court held that neither the Emergency Act nor the
insurance code provided the insurance commissioner with the authority
claimed. Although the code allows the insurance commissioner to apply to the
court for a receivership order, the commissioner did not properly do so here.
Further, the court noted that the penalties prescribed by statute for violation
of any rules or regulations regarding the transaction of the insurance business
were limited to instances where the company violated such rules while
conducting its business through its officers and agents. The order placing a
receiver in charge of the assets and business of the company could not have
contained a rule for the regulation of the business of that company.
Indiana
Department of Insurance of Indiana v. Indiana Travelers Assurance
Corporation, 115 Ind. App. 285, 58 N.E.2d 761 (1945) transferred, 223 Ind. 37, 57
N.E.2d 625. In upholding the denial of the Indiana Insurance Department's
petition for an appointment of a conservator to rehabilitate an insurer, the
court noted that the evidence showed that the insurer indulged in irregular
and forbidden practices. Nevertheless, the extraordinary relief sought lies in
the discretion of the trial court and absent a showing of plain abuse of power
by the trial court and prejudice to the complaining body, the Appellate Court
would not interfere.
Hoosier National Life Ins. Co. v. Gary Electric Company, 214 Ind. 597, 17 N.E.2d
85 (1938). The court refused to appoint a receiver upon a petition by
policyholders. The court relied on Indiana statute that directed such petition
to be filed by either the Attorney General or the auditor of the state. The court
further held that even if no statutory standard existed, they would uphold the
rejection of the petition for the appointment of a receiver because the
complaint was based on information and belief and was therefore insufficient
to authorize such appointment. An allegation that assets might be removed
from the jurisdiction if notice were to be given was not a sufficient reason for
the lack of notice when a temporary restraining order would have been ample
relief.
Kansas State ex rel. Beck v. Bank Savings Life Ins. Co., 142 Kan. 899, 52 P.2d 639 (1935).
The court held that an order appointing a receiver for an insurance company
and for winding up its affairs was warranted where the amount of insurance
enforced had been reduced nearly one‐half, securities on deposit with state
treasurer for reserves and capital stock were inadequate, officers of company
were repeatedly seeking to withdraw some of the best securities of the
company and exchange them for those of a lesser value, and there was
repeated opposition by the company and its officers to efforts of the
commissioner of insurance to get the company in sound financial condition.
Kentucky
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.

Maryland Security Financial Ins. Co. v. Insurance Commissioner, 231 Md. 571, 192 A.2d 571,
102 A.2d 95 (1963). The court found that a lower court had properly exercised
jurisdiction over the property and business of an insurer and appointed a
receiver to liquidate the company. The grounds for liquidation in the law which
the court applied were that the insurer's assets were not sufficient for carrying
a business, it was not in compliance with provisions of the insurance code, and
its business was being fraudulently conducted. The evidence which supported
the court's holding included the fact that the insurer refused to establish
reserves after repeated demands by the insurance commissioner, that it had
used forms not approved by the commissioner, that it had engaged in rate
discrimination, and that it had paid salaries to officers six months in advance
while the company was financially weak.
Massachusetts Bowler v. Arthur Andersen, 20 Mass. L. Rep. 85; 2005 Mass. Super. LEXIS 529
(Mass. Super. Ct. 2005). In determining the financial condition of a company for
purposes of regulatory action, the Commissioner could not reasonably rely on
an allegedly negligent audit opinion after the date the auditors withdrew their
opinion. The Receiver sought damages on the theory of deepening insolvency
for the residual market’s increased claim caused by the delay in bringing the
receivership as a result of the audit opinion, but the Court held that the claims
by the residual market were the result of the insurer’s issuance of auto policies
during the delay, not a result of the issuance of the audit opinion.
Missouri
Angoff v. American Financial Security Life Insurance Company, 891 S.W. 2d
833 (Mo. App. 1994). The receivership court denied the motion of insurer's
directors to terminate the rehabilitation of an insurer and the directors
appealed. The insurer's directors had admitted in opening statement that
they continued to rely on reinsurance reserve credits which the court had
previously found evidenced its hazardous condition, in order to argue that
the insurer was solvent. The trial court directed its verdict based on this
admission. The Court of Appeals affirmed because a directed verdict is
appropriate if the admission demonstrates that plaintiff is not entitled to
recover as a matter of law. The insurer's directors also claimed that AFSLIC
was no longer in hazardous condition because it was not writing new
business and could pay all current and future claims. The Court of Appeals
held that rehabilitation was an appropriate remedy if the insurer was in such
condition that the further transaction of business would be hazardous. It did
not matter whether or not AFSLIC was writing new business.
Angoff v. Casualty Indemnity Exchange, et al., 963 S.W. 2d 258 (Mo. App.
1997). On review of the decision by state Director of Department of
Insurance to seek liquidation of Reciprocal Insurance Exchange, trial court
could overturn Director’s decision and terminate rehabilitation. The trial
court is not merely a "rubber stamp" for the Director. The Court of Appeals
affirmed the trial court's decision finding that the Director's asserted
grounds for liquidation were not proved under the applicable statute.
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.
Relfe v. Commercial Ins. Co., 5 Mo. App. 173 (1878) affirmed, Williams v.
Commercial Insurance, 75 Mo. 388 (1882). In upholding the right of the
Missouri insurance commissioner to proceed for the dissolution of a Missouri

insurance company, the court held that the purported assignment of the
insolvent insurer's assets just prior to the petition did not remove the
commissioner's regulatory authority over it even though stockholders of the
company may have assented to the transfer.
Nebraska
New Jersey
State ex rel. Neff v. Christian Brotherhood of America Burial Ass'n, 184 N.W.2d
643, 186 Neb. 525 (1971). The insurance commissioner secured an order of
liquidation against a burial association after repeal of its enabling legislation.
The Nebraska Supreme Court stated that whenever a domestic insurance
company is determined to be in such condition that further business
transactions by it would be hazardous to its policyholders, creditors,
stockholders, or the public, the court may order liquidation of the company.
The court stated that it was within the police power of the state to subject the
insurance business to reasonable regulation regardless of the repeal of the
enabling legislation.
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 Application of Bohlinger, 199 Misc. 941, 106 N.Y.S.2d 953 (1951), affirmed, 280
A.D. 517, 113 N.Y.S.2d 755 (1952), affirmed, 305 N.Y. 258, 112 N.E.2d 280 (1953),
certiorari denied, 346 U.S. 857, rehearing denied, 346 U.S. 857. The court held
that the insurance commissioner is authorized to rehabilitate or liquidate an
insurance company, whether solvent or insolvent, if it was found that its
management, internal organization, practices or personnel was hazardous to
its policyholders. "Hazardous" was broadly defined to include anything which
would adversely affect the insureds. Further, the court stated that the
commissioner did not have to wait for a conviction of any purported illegality,
but could act to dissolve a corporation on the mere likelihood of illegality or
potential hazard. The commissioner found the company mixed the business of
insurance with politics and was controlled by the Communist Party.
In re International Workers, 280 A.D. 517, 113 N.Y.S.2d 755 (1952), affirmed, 305
N.Y. 258, 112 N.E.2d 280 certiorari denied, 346 U.S. 857, rehearing denied, 346
U.S. 913. The court acted appropriately in ordering a fraternal benefit society
liquidated and dissolved where the society's officers were agents of the
Communist Party and Soviet Russia and exceeded powers conferred by the
society's charter, did activities which were not for the benefit of its members
or beneficiaries and were hazardous to its policyholders, creditors and the
public, notwithstanding the society's sound actuarial basis.

In re Lawyers Mortgage Co., 293 N.Y. 159, 56 N.E.2d 305 (1944). The insurance
commissioner as the liquidator of a delinquent insurer could sell the property
of the insurer subject to court approval. However, the court could not compel
such action, even though it could veto the planned disposal of the delinquent's
assets. The court found that under the reorganization plan, the commissioner
was not required to apply to the court for an order approving disposition of
non‐liquid assets to the reorganization managers of the insurer.
In re New York Title & Mortgage Co., 156 Misc. 186, 281 N.Y.S. 715, (1935). The
court held that in application for the liquidation of a title and mortgage
company would not have been denied even if the order of liquidation would
have detrimental effects upon the realty market since the court had to enforce
the law as it stood. The company had comparatively few assets which were
available for sale, but the insurance commissioner could extend the sale of
assets over a reasonable period of time. The company's poor financial
condition was a matter of common knowledge for two years.
Ohio
McManamon v. Ohio Dep’t of Ins., 2008 Ohio 6958 (Ohio Ct. App. 2008). Ohio
Revised Code § 3903.17 sets forth three grounds on which the Ohio Department
of Insurance may seek a liquidation order: (1) any of the grounds for
rehabilitation set forth in Ohio Revised Code § 3903.12; (2) the insurer is
insolvent; or (3) the insurer’s condition is such that continuing to transact
business would be hazardous to its policyholders, its creditors, or the public.
The statutory scheme establishes an adversary procedure whereby the insurer
can challenge the motion or complaint for liquidation and requires the court
considering the liquidation order to allow the insurer’s directors to take
reasonably necessary steps to defend against the motion.
State ex rel. Hagelbarger v. New York Life Ins. Co., 43 Ohio App. 447 (1907).
The petition to oust a foreign insurance company from doing business in Ohio
and to appoint trustees to wind up its unfinished business in Ohio was
dismissed, where it was not shown that the company was not operating under
a currently effective certificate of authority, and in any event, the prohibition
against transacting business in this state upon revocation of the certificate of
authority would not extend to the winding up of business already undertaken.
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.
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".
Foster v. Westmoreland Casualty Co., 115 Pa. Commonwealth 393, 540 A.2d 347
(1988). The Insurance Commissioner's petition requesting an insurer be placed
into involuntary dissolution and liquidated was sufficiently specific in that it
alleged insolvency and hazardous financial condition as general grounds for
liquidation, set forth specific results of an investigation conducted by an
independent actuarial firm, and alleged improper actions of key officers of the
insurer. The Commissioner can directly petition the court for a liquidation
order. Appropriate administrative notice and hearing are provided where the
Commissioner requests a judicial declaration of insolvency in conjunction with
a pending liquidation proceeding.
Vermont
In re Ambassador Insurance Co., Inc., 147 Vt. 344, 515 A.2d 1074 (1986). The
Vermont Supreme Court held that the lower court properly exercised its broad
discretion in interpreting the liquidation statute when it required the
liquidation of the insurer upon a finding of statutory insolvency. Furthermore,
the lower court properly used statutory accounting principles instead of, inter
alia, liquidated value accounting principles in evaluating the financial condition
of the insurance company and determining the insurer's potential for
rehabilitation.
Washington Kueckelhan v. Federal Old Line Ins. Co., 69 Wash.2d 392, 418 P.2d 443 (1966).
The court concluded that continuation of the insurer's existing investment
policies rendered its operation hazardous to the policyholders, its creditors and
to the public. Even though the insurer was solvent in the ordinary business
sense, (that it had not defaulted on claims and had annual premium payment
income substantially in excess of death claims), the court on appeal upheld the
lower court's order of rehabilitation. The court found that there was no
requirement that the insurance commissioner wait until disaster strikes or until
an insurance company is insolvent before he/she is empowered to act to
protect the policyholders and the public. The court concluded that where an
insurance company conducts its business and investment policies in such a
manner as to project more than a slight risk of loss to the policyholders, its
creditors and/or the public, this is hazardous as the word is used in the
insurance code and the commissioner is authorized to take appropriate steps
to eliminate that risk of loss.
McConaughy v. Juvenal, 73 Wash. 166, 131 P. 851 (1913). The insurance
commissioner had demanded that in order to continue selling insurance, the
insurer had to give some security, which was given with the personal notes of
some of the officers of the company deposited with the commissioner. The
court found that these notes were made without consideration, they were
never assets of the company, and should have been returned to their makers.
The court found that the notes never resulted in any benefit to the company
nor did they have the effect of being a security for continued business. No
insurance was ever written because of or on the faith of these notes. Because
of this the court held that the insurance commissioner had no authority to
permit a continuation of the business on such security.
Notice and Hearing

Massachusetts
New Jersey
In re: The Liquidation of American Mut. Liab. Ins. Co., 440 Mass. 796 (2004). A
claimant who bought occurrence‐based general liability policies from the
insolvent insurer more than the ten years prior to the liquidation did not receive
notice of the insurer’s liquidation. The claimant filed its claim ten years after the
bar date, and after its claim was denied, sought an extension of the bar date.
The Court resolved three issues. First, the Court determined that the
“policyholders” who were required under a Massachusetts statute to receive
notice of the appointment of a receiver were only those policyholders with
in‐force policies at the time of the liquidation, and not all policyholders who had
been issued “occurrence” policies by the insurer. The legislative history
demonstrated that the statute had been enacted to permit policyholders to
obtain replacement coverage for events occurring after the receiver’s
appointment, and requiring notice to all holders of occurrence‐based policies
would have been impractical. Second, the Court declined to extend the claims
bar date because such a remedy is unrelated to the purpose of the notice.
Third, the Court found that the claimant was not a “known creditor” who,
under another statute, was entitled to receive notice of the hearing on a
liquidation petition. The Court, noting that the statute refers to both creditors
and policyholders, held that a “policyholder” cannot be a “creditor” until the
policyholder files a claim with the insurer. The claimant also asserted that the
insurer should have known from other sources it would be a “known creditor”
and should therefore have received notice, but the Court refused to require
notice based on the “subjective predictions of the insurer’s employees.”
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 Conway v. Landlord‐Taxpayers' Assoc. Inc., (1929) 134 Misc. 533, 236 N.Y.S. 292
(1929). An application to liquidate a membership corporation pursuant to the
insurance code was granted where the corporation was insolvent and doing an
insurance business in violation of its charter and the law. The fact that there
had been no hearing pursuant to the insurance code was no bar to the
application for liquidation.
Stewart v. Citizens Casualty Company of New York, 23 N.Y.2d 407, 297 N.Y.S.2d
115, 244 N.E.2d 690 (1968), on remand, 61 Misc.2d 809, 306 N.Y.S.2d 973.
Under the insurance code, the term "full hearing" meant judicial proceedings
where evidence is received and weighed by the trier of facts. Accordingly, the
insurer was found to be denied a full hearing where it was prevented from
introducing any evidence on the issue of solvency and denied due process.
Moreover, the law did not intend that such hearing would be a summary
proceeding.

Pennsylvania
Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 62 Dauph.
366, (1952), affirmed, 373 Pa. 105, 95 A.2d 664, (1952), cert. denied, Haines v.
Pennsylvania, 346 U.S. 852, rehearing denied, 346 U.S. 917 (1953). An insurance
company was found to have waived its technical rights to notice and hearing
where its officers had admitted the company was in a hazardous condition and
had requested that the insurance commissioner take over its affairs, where the
company's counsel has waived issuance of a notice in a proceeding before the
Attorney General and had consented to a court order to deliver the company's
property to the commissioner. In this case the court was justified in ordering
the commissioner to take over the company's property for liquidation.
Foster v. Westmoreland Casualty co., 115 Pa. Commonwealth 393, 540 A.2d 347
(1988). The Insurance Commissioner's petition requesting an insurer be placed
into involuntary dissolution and liquidated was sufficiently specific in that it
alleged insolvency and hazardous financial condition as general grounds for
liquidation, set forth specific results of an investigation conducted by an
independent actuarial firm, and alleged improper actions of key officers of the
insurer. The Commissioner can directly petition the court for a liquidation
order. Appropriate administrative notice and hearing are provided where the
Commissioner requests a judicial declaration of insolvency in conjunction with
a pending liquidation proceeding.
Texas
Washington American Life Ins. Co. v. State, 545 S.W.2d 291 (Tex. Civ. App.
1977). Two companies which appealed the original ex parte peremptory
orders placing them in ancillary receivership by filing answers and presenting
evidence at a hearing were found to have waived any defects in the orders.
The court held that the decision to appoint a receiver is in the sound discretion
of the court and the trial court did not abuse its discretion in appointing a
receiver or setting the amount of supersede as bonds.
Powers and Duties of the Rehabilitator or Liquidator ‐ Constitutionality
Seventh Circuit
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 70 (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.
Florida
Kentucky
Southeastern Staffing, Inc. v. Florida Dep’t of Ins., 728 So. 2d 248 (Fla. Dist.
Ct. App. 1998) (certified question to Florida Supreme Court pending). The
Florida Department of Insurance as receiver of an insolvent workers'
compensation fund could assess fund members for workers' compensation
claims, awards and administrative expenses of the receivership. Such
assessment was authorized by statute and was not an impermissible taking
of private property.
Guidice v. Koetters, 2005 U.S. Dist. LEXIS 14084 (W.D. Ky. 2005). Discharged
employee who claimed a right to severance pay did not show that
rehabilitator’s termination of her employment without severance pay violated
procedural due process. The court found that a pre‐deprivation hearing would
not lessen the risk that a rehabilitator would act in an unauthorized manner to
deprive the employee of her severance benefit. State law provided an adequate
post‐deprivation remedy because nothing in the statutory scheme prevented
the employee from bringing an action for breach of contract. The fact that a
state law might have limited her ability to recover did not matter because a
state’s choosing to limit recoveries by some creditors is not a violation of
procedural due process. Because the remaining claims were uniquely state law
in nature, the court refused to retain jurisdiction.
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. ALIC Corporation, 595 So.2d 797 (La. App. 2 Cir. 1992). When the
rehabilitation of an insurer is ordered, the Commissioner of Insurance is
vested by operation by law with title to all property, contracts, and rights of
action of the insurer. A liquidation order was entered against American
Independence Life Insurance Company (AILIC) and the Louisiana
Commissioner of Insurance was appointed as the receiver of AILIC. The
Missouri state court also issued an order of liquidation against AILIC and
appointed the Missouri Commissioner of Insurance as receiver. A action was
later filed by the Attorney General of Louisiana and the Commissioner of
Securities of Louisiana against AILIC. The insurance commissioners
intervened in the suit. The court dismissed AILIC and its company ILIC, as
well as the two receivers from the proceeding. The court determined that all
claims against the companies must be raised in the receivership proceedings.
Massachusetts
New Hampshire
In the Matter of the Liquidation of American Mut. Liab. Ins. Co., 417 Mass.
724 (1994). The single justice supervising the liquidation of an insolvent
insurer certified questions to the full bench after guaranty funds objected to
a proposed settlement of a claim brought by the insurer's receiver of against
its auditor. The Court held: (i) the receiver has exclusive authority to assert
claims by the insolvent insurer, as well as claims common to all policyholders
and other creditors; (ii) the standard of judicial review applicable to
proposed settlements by or against the insurer is a "fair and reasonable"
standard, taking into account the factors usually considered in settling
lawsuits; and (iii) guaranty funds and settling parties may have an
opportunity to comment on the settlement.
Gonya v. Commissioner, NH Ins. Dept., 153 N.H 521 (2006). A third party claimant
sought to declare unconstitutional the statute requiring the third party claimant
to release the insured as part of its proof of claim in the insurer’s liquidation.
The Court held that the statute did not violate the doctrine of unconstitutional
conditions or the equal protection clause of the state constitution. In each case,
the statute met the required standard because it reasonably related to the
Legislature’s goal of fairly apportioning unavoidable loss. The Court also held

that the notice of the statutory release on the proof of claim form was sufficient
to satisfy due process requirements.
New Jersey Booream v. Washington Casualty Ins. Co., 110 N.J. Eq. 164, 159 A. 519 (1932).
The law relating to insolvent insurance companies and providing for their
liquidation was held not unconstitutional as vesting the commissioner of
banking and insurance with judicial powers or as depriving creditors and
stockholders of property without due process.
New York
Pennsylvania
Dinallo v. DiNapoli, 846 N.Y.S.2d 593 (Ct. App. 2007). The Comptroller of the
State of New York was not authorized under the constitution or statutory
provisions to audit the Liquidation Bureau of the State Insurance Department.
The Liquidation Bureau is not a “state agency,” nor is the liquidator a “state
officer” within the State Finance Law provisions allowing the Comptroller to
conduct audits of “money of the State” and “money under its control.”
Although the Insurance Superintendent holds legal title to the assets, of
insolvent insurers, the insurers retain equitable title to the assets, and in
distributing assets the Superintendent acts as liquidator rather than in a public
capacity as regulator or supervisor.
Grode v. Mutual Fire, Marine and Inland Ins. Co., No. 91‐1179, 1991 U.S. Dist.
LEXIS 16850 (E.D. Pa. Nov. 14, 1991). Pennsylvania Insurance Commissioner,
acting as rehabilitator of an insurance company, filed complaint on behalf of
the policyholders against the reinsurer and reinsurer's parent companies. The
defendants moved to dismiss the complaint on the ground that the
rehabilitator lacked standing to pursue claims belonging solely to the individual
creditors of the insurance company. The district court denied the motion. The
court concluded that Pennsylvania law does not limit the powers of the
rehabilitator to those of receivership. The court based its conclusion on
Pennsylvania case law granting the rehabilitator authority to litigate claims on
behalf of policyholders and creditors.
Washington Kueckelhan v. Federal Old Line Ins. Co., 69 Wash.2d 392, 418 P.2d 443 (1966).
The insolvent insurer challenged the constitutionality of the insurance
commissioner's authority to initiate the rehabilitation and contended that the
insurance code violated that section of the state constitution which vests the
legislative authority of the state in the legislature. The court held (a) that the
insurance industry bears such a relation to the public welfare as to render
persons and businesses engaged in it subject to regulation under the state's
police power and that since the legislature cannot be expected to constantly
supervise the industry, it may delegate this power to the insurance
commissioner, (b) the state, on behalf of the public, acquires a vital interest in
the financial well‐being of an insurance company and may in its insurance code,
provide for the protection of policyholders, creditors and the general public
through rehabilitation. The legislature may thus constitutionally enact a
statute providing for rehabilitation through the insurance commissioner but
the extent to which his power may be exercised must be determined from the
legislation and, where so provided, be supervised by the courts, and (c) the
precise steps the commissioner must take in any given rehabilitation cannot be
spelled out with any degree of specificity. He/she may not however, act with
unbridled discretion as the insurance code is full of insurer management
standards and guidelines and the commissioner is also subject to the court's
review relative to his/her compliance and/or abuse of discretion. Therein lines
the guarantee of the appellant's substantive and procedural safeguards and
standards.

Powers and Duties of the Rehabilitator or Liquidator
U.S. Supreme
Second Circuit
Third Circuit
Relf v. Rundle, 103 U.S. 222 (1879). The Louisiana policyholders of an insolvent
insurer instituted a proceeding in Louisiana for the appointment of a receiver,
and five days later, the Missouri insurance commissioner instituted
proceedings against the same insurer and was appointed liquidator. The
liquidator intervened in the Louisiana state court proceedings and filed a
petition for removal to the federal court. The U.S. Supreme Court, in
upholding the Missouri liquidator's right to remove the case to federal court,
reviewed the legal standing of the Missouri liquidator noting that the liquidator
(1) is not an officer of a Missouri state court but is a statutory receiver entitled
to hold and dispose of all of the assets of an insolvent insurance company for
the benefit of insureds; and (2) is the statutory successor of the insolvent
company; (3) is an officer of the state and represents the state in insolvency or
performing its public duties in winding up the affairs of an insolvent company;
(4) has authority from statute and not from a decree of the court; (5) is a
trustee of an express trust; and (6) every Louisiana policyholder and creditor is
charged with the knowledge that the insurer would be dissolved under
Missouri laws and the Missouri commissioner appointed liquidator.
Corcoran v. Ardra Ins. Co., Ltd., 842 F.2d 31 (2d 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.
Fidelity & Deposit Co. of Maryland v. Hunt, 107 F.2d 42 (3rd Cir. 1939). The
insurance commissioner liquidating an insurance company is required to
liquidate, as an asset, a claim for alleged embezzlement against the company's
president and to maintain a lien on the stock of the president.
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. 5 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Fifth Circuit
Wilson v. Alliance Life Ins. Co., 108 F.2d 150 (5th Cir. 1939). This was an action
by the receiver of an Illinois insurance company against certain Texas residents
to enforce a contract to assume an obligation of third parties and to foreclose
a deed of trust on land in Texas which secured the obligation. The lender
transferred its rights to the insurer shortly after the transaction. Subsequently,
the borrower sold the land and transferred its obligation and deed to the
defendant in the present action. After the insurance company was put into
liquidation, the receiver sought to foreclose on the land against the defendant.
The receiver was entitled to bring the action against the grantee/defendant.
The foreclosure was upheld.
Seventh Circuit Eakin v. Continental Illinois Nat'l Bank and Trust Co., 875 F.2d 114 (7th Cir. 1989).
Bank, which had issued standby letter of credit to bonding company as
beneficiary, refused to make payment to bonding company, which had been
taken over by Indiana Insurance Commissioner as liquidator. Bank claimed: (1)
that the bonding company ceased to exist upon entering liquidation; (2) that
the Liquidator had not agreed to be personally liable for the debt; and (3) that
bank was entitled to certain other promises as specified in the letter. The
Seventh Circuit affirmed the district court holding (1) that under Indiana law,
the bonding company and its Liquidator are one, with the Liquidator vested
with "title to all property, contracts, and rights of action of the insurer;" (2)
that, because bank was not entitled to the personal guaranty of the bonding
company's managers, it was not entitled to Liquidator's personal guaranty;
and (3) that Liquidator's signature was adequate to secure promises to which
bank was entitled.
Keehn v. Excess Ins. Co. of America, 129 F.2d 503 (7th Cir. 1942). In a suit by the
receiver to recover upon a reinsurance contract, the court held that the
receiver was barred from an action against the reinsurer because the insolvent
insurer failed to give notice of loss in accordance with the reinsurance contract,
and a receiver acquires no greater rights than those had by the insolvent
company.
Schacht v. Brown, 711 F.2d 1343 (7th Cir. 1983), cert. denied, Arthur Anderson &
Co. v. Schacht, 104 S. Ct. 508 and 104 S. Ct. 509 (1983). The insurance
commissioner, as statutory liquidator of an insolvent company, had standing to
maintain civil action under Racketeer Influenced and Corrupt Organization Act
against officers and directors of parent corporation, who allegedly fraudulently
continued the insurer in business past its point of insolvency and looted the
insurer of its most profitable and least risky business thus aggravating the
insolvency.
Eighth Circuit Ainsworth v. General Reinsurance Corp., 751 F.2d 962 (8th Cir. 1985). A
reinsurer sought to reduce its obligation to the estate of an insolvent carrier by
making a settlement directly with the insured and without allowing the
receiver to participate in the settlement negotiations. In disallowing the
practice, the United States Court of Appeals for the Eighth Circuit found that
5 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 insolvency clause of a reinsurance agreement provided that all proceeds of
reinsurance vested in the receiver of an insolvent ceding carrier and are
considered an asset of the insolvent estate. The reinsurer could not "reduce its
obligation by taking advantage of the willingness of the insured and the
insured's obligee to take less because of the insolvency." 751 F.2d at 965.
Hentschel v. Fidelity and Deposit Company of Maryland, 87 F.2d 833 (8th Cir.
1937). An insurer in the process of a voluntary dissolution reinsured all of its
business with another insurer and appointed a liquidating trustee. The
defendant surety company challenged the liquidating trustee's right to
maintain an action on a surety bond. The court held that the Missouri
insurance commissioner had no interest in the dissolution of the insurer since
its policyholders had been properly protected pursuant to the reinsurance
agreement and the only remaining interested parties were the creditors and
stockholders, which did not constitute a matter of public concern. The court
specifically noted that the Missouri commissioner had concluded that no public
interest made it necessary to administer the remaining assets of the
corporation.
Lakin, et al. v. Prudential Sec., Inc., 348 F.3d 704 (8th Cir. 2003). Receivers of
various insolvent insurance companies sued a federally chartered savings bank
in Missouri state court alleging negligence, breach of contract, and breach of
fiduciary duties. After the case was removed to federal court, defendant moved
to dismiss, which was granted, and the court denied the receiver’s motion for
jurisdictional discovery. On appeal, the Eighth Circuit affirmed in part and
reversed in part, holding that plaintiffs’ allegations were insufficient to establish
specific personal jurisdiction over the defendants. However, the court also
found that plaintiffs could likely establish general personal jurisdiction if they
were permitted to take such jurisdictional discovery, and further held the
assertion of jurisdiction over defendants would comport with due process.
Motlow v. Southern Holding & Securities Corporation, 95 F.2d 721 (8th Cir.
1938), cert. denied, 305 U.S. 609. By an order of liquidation of a New York
court, title to a cause of action for setting aside fraudulent transfers by an
insolvent insurance company was vested in the insurance commissioner as the
statutory successor of the insurance company for purposes of liquidation. The
commissioner is subject to the direction, supervision and control of the court
entering the liquidation order over the insolvent insurer's estate.
Ninth Circuit
Eleventh Circuit
Alabama
Watson v. Garamendi, 262 F. App’x. 805 (9th Cir. 2008). Policyholders brought
action to compel commissioner to distribute estate assets under an
enhancement agreement. The Ninth Circuit held Cal. Ins. Code § 1037(f)
precluded the action for lack of standing.
Hunt v. American Bank & Trust of Baton Rouge, L.A., 606 F. Supp. 1348 (N.D.
Ala. 1985) aff'd, 783 F.2d 1011 (11th Cir. 1986). The court of appeals affirmed the
district court's decision that the receiver's suit for securities law violations,
fraud and RICO were time barred under statutes of limitations. The standard
applied in discovery of alleged activities is due diligence and the court found
that in this case the receiver had information available in the insurance
department's files more than two years before the complaint was filed.
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.
The Home Ins. Co. v. Montgomery County Comm'n, 902 So. 2d 677 (Ala. 2004).
Rehabilitator, liquidator or receiver may bring civil action against debtor for
breach of contract and bad‐faith failure to pay a claim, has the power to settle
the claim, and the right to seek enforcement of the settlement. See 902 So. 2d
at 678. However, Alabama has adopted the UILA, which requires the receiver to
seek enforcement of its settlement with in reciprocal state. 902 So. 2d at 679.
Arizona Arizona Corporation Commission v. California Ins. Co., 28 Ariz. 128, 236 P. 460
(1925). The Arizona Supreme Court held that the insurance commissioner, as
receiver, could not object to the validity of the notes and mortgage of assets
as ultra vires, because the company's indebtedness was already greater than
permitted by its charter. The court stated that the state corporation
commission simply stepped into the shoes of the insolvent insurer, and had no
better or different right or title to the property than the corporation had.
Thus, the commissioner had no greater right to interpose an objection to the
validity of the notes and mortgage than would the company itself. The court
was also persuaded by the fact that the members of the commission were fully
advised as to all details of the transaction and consented thereto.
In re Diamond Benefits Life Ins. Co., 907 P.2d 63 (Ariz. 1995). The court held
that the Special Deputy Receiver of an insolvent insurer was not subject to
the statute of limitations, pursuant to an Arizona law that exempts the state
and political subdivisions from statutes of limitations. Thus, an action for
conversion brought by the Special Deputy Receiver could go forward even
though it exceeded the two year statute of limitations period. The court
found that the state, not the insolvent insurer, was the real party in interest
in the conversion proceeding because the state would be liable to pay
policyholders out of the Insurance Guaranty Fund in the event the insurer
was unable to satisfy claims against it.
Pioneer Annuity Life Ins. Co. v. Rich, 880 P.2d 682 (Ariz. Ct. App. 1994).
Receiver of an insolvent insurance company brought an action against a
shareholder pursuant to the Arizona constitution which makes shareholders
of banking or insurance corporations liable for corporate debts to the extent
of the par value of their stock, in addition to the amount invested in the
shares. (Such a provision is often referred to as a "double liability provision"
because the shareholders may lose twice the amount of their original
investment.) The court held that the receiver stands not only in the shoes of
the corporation, but also in the shoes of bona fide creditors of the
corporation. Accordingly, the receiver could enforce the constitutional
rights of creditors on their behalf by pursuing a cause of action against the
insurer's sole shareholder.
California
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.

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 denied the
appellant's application for leave to produce additional evidence. In dicta, the
court stated that the primary purpose of the provision which gave the
insurance commissioner title to an insurer's assets was to prevent dissipation
of the assets of the company after the insurance commissioner had
determined that a hazardous condition existed. According to the court, the
only requirement for judicial action upon the application of the commissioner
was the commissioner's determination that a hazardous condition existed
which jeopardized the future of the company.
Garamendi v. Golden Eagle Ins. Co., 128 Cal. App. 4th 452 (Ct. App. 2005). The
Insurance Code vests the commissioner with the responsibility for acting as
both “receiver or trustee” for the insolvent insurer and as the adjudicator of
claims. The commissioner has no statutory obligation to provide a formal
hearing when determining claims.
Garris v. Carpenter, 33 Cal. App.2d 649, 92 P.2d 688 (1939). The court stated
that the duties of the insurance commissioner as receiver and liquidator
included the duty to administer the affairs of the insolvent company for the
benefit of not only the general creditors, but also of the policyholders and the
public generally. Dicta in the case supported the proposition that the
insurance commissioner acts as an officer of the state in performing these
duties.
In re Executive Life Ins. Co., 32 Cal. App. 4th 344 (Ct. App. 1995). Appellate
court upheld lower court's approval of plan of rehabilitation, finding, inter
alia, that the Insurance Commissioner had discretion to settle disputes
among claimants with respect to the priority of claims.
In re Golden Eagle Ins. Co. Nos. A094163, A094166, 2002 WL 1999757 (Cal. Ct.
App. Sept. 9, 2002). Deputy trustee had conditionally approved a settlement
with an unsuccessful bidder. The Commissioner approved a different liquidating
trust agreement. The Court held the Insurance Commissioner, as trustee, is
authorized to reach a decision contrary to the deputy trustees without showing
abuse of discretion on the part of the deputy trustee.
People v. King, 66 Cal.2d 633, 58 Cal. Rptr. 571, 427 P.2d 171 (1967). The court
concluded that under the facts the insurance commissioner granted and
committed the state to immunity for the defendants in exchange for their
compelled testimony. The question on appeal was whether the state could
withhold immunity because the commissioner exceeded his/her authority
under the statute to compel witnesses.
Rhode Island Ins. Co. v. Downey, 95 Cal. App.2d 220, 212 P.2d 965 (1949). The
insurance commissioner cannot eliminate any individual connected with an
insurance company for personal reasons, but the commissioner can require
that any individual abandon conduct which has caused serious loss to the
company.
State of California v. Altus Finance, 36 Cal. 4th 1284 (2005). The court held the
exclusive authority of the Insurance Commissioner to protect beneficiaries of
insolvent insurer precludes the Attorney General from seeking restitution under
the Unfair Competition Law.

Texas Commerce Bank v. Garamendi, 28 Cal. App. 4th 1234 (Ct. App. 1994).
As prevailing parties in a declaratory judgment action challenging the
Commissioner's failure to designate their priority status as that of
policyholders, the appellants were entitled to an award of attorney fees and
costs as provided for in their investment contracts with the insurance
company. The Insurance Commissioner, as conservator of the insolvent
insurer, was not acting as a public official, but rather was standing in the
shoes of the insurer, when he determined that the appellants were not
policyholders and defended that position in the declaratory judgment action.
Colorado Phillips v. Lincoln Nat. Health & Cas. Ins. Co., 774 F. Supp. 1297 (D. Colo. 1991).
The Receiver of an insolvent health maintenance organization stands in the
shoes of the organization.
Connecticut Reider v. Arthur Andersen, LLP, 784 A.2d 464 (Conn. Super. 2001). In the
liquidator’s action against the defendant accounting firm alleging
misrepresentation of the value of accounts receivable owed to the insurer by
the insurer’s sole‐shareholder controlled corporation, the court held that the
Commissioner as liquidator had standing to assert the claims on behalf of
creditors and policyholders. The claims alleged did not belong individually to
creditors and policyholders, but instead involved allegations of wrongful
conduct that diminished the estate’s solvency. Also, it was proper to base the
liquidator’s claims of harm to the estate on allegations that the defendant
accounting firm misled the Commissioner concerning the financial condition of
the insurer.
Reliance Ins. Co. v. Ransom, No. CV0308296115, 2004 WL 3090643 (Conn. Super.
Nov. 29, 2004). The court granted a motion for summary judgment, holding
that a subrogation action brought by an insolvent insurer was untimely. The
Connecticut statute allowing the liquidator to file actions on behalf of the
insurer’s estate within two years of the liquidation order only applies only to
suits brought by the liquidator rather than to suits brought by the insolvent
insurer itself.
Delaware In the Matter of Tara Life Ins. Co. of America, No. 7135, slip op. (Del. Ch. Dec. 19,
1983). The question presented was whether the receiver and the court had the
power to direct the transfer of the outstanding stock of a Delaware insurance
company from it sole shareholder of record to another, where such action was
required to rehabilitate the insurance business of the insurer and to protect its
policyholders from loss from the impairment or insolvency of the corporation.
The sole shareholder was a Pennsylvania corporation, which was in
receivership in Pennsylvania. The Pennsylvania receiver objected, saying the
Delaware receiver had no power to sell the Pennsylvania corporation's interest
nor could the Delaware court so order without the Pennsylvania receiver's
consent. The Delaware court denied the objection and signed the order as
submitted by the Delaware receiver.
District of Columbia
Eastern Indem. Co. of Md. v. Content, 543 A.2d 361 (D.C. App. 1988). Eastern
Indemnity, now insolvent, had previously loaned funds to a leasing company in
order to purchase an airplane. The airplane crashed and the insurer of the
plane refused to compensate either the leasing company or Eastern for the
loss. The two companies then sought reimbursement from the estate of the
negligent pilot of the plane. The estate moved to dismiss the claim, because it
was not made within the 60‐day time limit imposed by the D.C. Code, and was
thus barred. The Court held that the claimants, Eastern's Receiver and
Bankruptcy Trustee, were not entitled to relief from the time requirements,

ecause they had constructive notice of the disallowances. The claimants
could have and should have acted earlier.
Florida
Betty Jones v. Florida Ins. Guaranty Association, Inc., 908 So. 2d 435 (Fla.
2005). FIGA can be held responsible for breaching its duties imposed by
statute and flowing from the contract of the insolvent insurer, including the
statutory duty to be deemed the insolvent insurer in the defense of covered
claims.908 So.2d 445. The FIGA Act obligates FIGA to the extent of covered
claims for that amount which is in excess of $100 but less than $300,000.
The $300,000 liability cap becomes applicable only if FIGA's obligation would
otherwise exceed that amount. In all other cases, liability is generally limited
to the amount for which the insurer would have otherwise been responsible
under the policy. FIGA is liable for any post‐judgment interest accruing on
any judgments. 908 So.2d 454 (citations omitted).
Chase Bank of Texas Nat. Ass'n v. Fla. Dep't. of Ins., 860 So. 2d 472 (Fla. 1st DCA
2003). Receiver can make a claim on behalf of a third party in the course of the
liquidation proceeding. 860 So. 2d at 477.
Fla. Dep't. Fin. Serv. v. Midwest Merger Mgmt., LLC, No. 4:07cv207‐SPM/WCS,
2008 WL 3259045 (N.D. Fla. Aug. 6, 2008). Garnishment of accounts, service of a
Writ of Execution to commence levy proceedings on personal property. 2008
WL 3259045 at 1. To recover contended assets, the Department, in its capacity
as administrator, receiver, or similar capacity, may pursue any actions for
damages or other recoveries on behalf of the insurer's estate and the insurer's
policyholders, creditors, and other claimants. Id. (citing § 631.3915, Fla. Stat.
(n.d.)) There is no requirement for the civil action to take place in the
receivership court. Id. at 3. (citations omitted).
Fla. Dep't. Fin. Serv. v. MJ Versaggi Trust, 952 So. 2d 583 (Fla. 2d DCA 2007).
When Worker's Compensation Insurer becomes insolvent and is in receivership,
the Department, as receiver, can notify a debtor that additional policy premiums
are due for the purposes of workers' compensation coverage.
Florida Ins. Guaranty Association v. All the Way with Bill Vernay, Inc., 864 So. 2d
1126 (Fla. 2d DCA 2003). Where an insurer erroneously begins to carry out these
duties, and the insured, as required, relies upon the insurer to the insured's
detriment, the insurer should not be able to deny the coverage which it earlier
acknowledged. It is the fact that the insured has been prejudiced that estops
the insurer from denying the indemnity obligation of the insurance policy. 890
So.2d 1172 (citing Doe v. Allstate Ins. Co., 653 So.2d 371, 374 (Fla.1995)).
In re Allen, 217 B.R. 945 (Bankr. M.D. Fla. 1998). The receiver for an insolvent
insurer obtained a judgment against Allen. Allen filed bankruptcy, and his
discharge was denied because he had failed to account for assets.
Notwithstanding the denial of his discharge, Allen sought to avoid the lien of
the judgment on property that he had claimed as exempt. The bankruptcy
court agreed with Allen, holding that a debtor in bankruptcy may avoid a lien
on exempt property regardless of the nature of the underlying debt. See
also In re Clark, 217 B.R. 943 (Bankr. M.D. Fla. 1998).
In Re Receivership of Syndicate Two, Inc., 538 So.2d 945 (Fla. Dist. Ct. App.
1989). Pursuant to statute, the appointed receiver of an insolvent insurer had
title to all property, including documents of the insurer and a law firm retaining
documents of the insurer, claiming they were subject to an attorney's retaining
lien, was required to deliver the documents to the receiver. The validity of the

law firm's lien and its rights under the lien, however, were not determined or
compromised by the transfer.
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). By order of the receivership
court, the Florida Department of Financial Services ("DFS") is authorized to
liquidate the assets.
Super Transport, Inc. v. Florida Dep't. of Ins., 799 So. 2d 286 (Fla. 1st DCA 2001).
Section 631.321(1) authorizes the Receiver to include in the assessment the costs
of collection. 799 So. 2d at 290 (citations omitted). Section 631.141(6) provides
for the Receiver's employment of attorneys in delinquency proceedings, to be
compensated from the assets of the insolvent insurer, subject to the approval
of the court. 799 So. 2d at 290.
Georgia
Lester v. Wright, 147 Ga. 242, 93 S.E. 408 (1917). The court held that the
insurance commissioner is in possession of a company and in charge of its
assets for purposes of liquidation, the commissioner has the discretion and
power to enter into contracts to reinsure all of the company's business in
another company.
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.
Hawaii Four Star Ins. Agency, Inc. v. Hawaiian Elec. Industries, Inc., 974 P.2d 1017
(Haw. 1999). The Insurance Commissioner, as liquidator or rehabilitator of
an insolvent insurer, has exclusive standing to assert all claims on behalf of
the insurer and its creditors. Thus, private, independent insurance agents
had no standing to bring a claim against the insurers' parent company to
recover commissions owed by the defunct insurers or their parent.
Illinois Clark v. Cannon Steel Erection Co., 359 Ill.App.3d 739, 835 N.E.2d 394 (2005).
Director of Insurance as liquidator of group self‐insured workers’
compensation fund brought action against insured to recover unpaid
assessments. Insured argued Director lacked the statutory authority to do so
under 215 Ill. Comp. Stat. 5/207.1, which provides that “[u]pon entry of an order
of liquidation any provision in the policies of a company providing for a
contingent liability of the policyholders shall become void,” because it bars any
assessments after the entry of a liquidation order. Court found that the
assessments were not contingent liabilities because the assessment
obligations were not part of the insurance policy, but rather part of the
separate contractual pooling agreement. Under order of liquidation, Director
took place of the insolvent company and had authority to act on its behalf as
Director.
In re Rehabilitation of Centaur Ins. Co., 158 Ill. 2d 166, 632 N.E.2d 1015 (1994).
The Director of Insurance, as Rehabilitator an insolvent insurance company,
which is the subsidiary of a solvent parent company, may not bring an alter
ego action against the parent and its own shareholders. The Director
assumes only the rights of the corporation that could be asserted in its own
name. Alter ego suits may proceed only when the subsidiary is a sham, and
courts pierce the corporate veil only to redress harms to third parties dealing
with the corporation ‐‐ not for harms to the corporation itself. Moreover,

Illinois law does not provide the Director with creditor status to assert
creditors' claims. Finally, in this context, the alter ego cause of action is
unnecessary, for the Director can bring a breach of fiduciary duty claim,
which involves the same assertion of parent‐shareholder misbehavior.
Cadillac Ins. Co. v. American Nat'l Bank, 1991 U.S. Dist. LEXIS 3238 (N.D. Ill.
Mar. 19, 1991). The case concerned the ownership of five Certificates of
Deposits ("CDs") totaling $4 million. Four were held in the name of Cadillac
Insurance Co. ("Cadillac"), and one was held in the name of United Fire
Insurance Co. ("Fire"), a wholly owned subsidiary of United Diversified Corp.
("Diversified"). The Illinois Director of Insurance ("Director") was the
Conservator of Diversified, the Liquidator of Fire, and Ancillary Receiver of
Cadillac in Illinois. The Director sought to intervene in the case because Fire
and Diversified made separate claims to the CDs. Both Cadillac and the
majority shareholder of Diversified, Towers Diversified Corp. ("Towers"),
pointed out potential ethical dilemmas facing the Director due to his
positions as Ancillary Receiver, Conservator, and Liquidator, and given the
allegedly divergent interests of Fire and Diversified. Towers sought to
intervene as well, and sought to have the Director removed from the suit.
Cadillac moved for summary judgment declaring it the owner of four CDs
totaling $3.5 million, which the Director disputed. The Director moved for
summary judgment declaring Fire the owner of the one CD worth $500,000.
Both Cadillac and the Director moved for summary judgment against
Towers, asserting it lacked standing to pursue Diversified interests. The
court declined all motions for summary judgment. The court held there was
a factual dispute concerning the ownership of the CDs, and that there was a
factual dispute over whether there was a conflict of interest for the Director.
Cadillac Ins. Co. v. American Nat'l Bank, 1991 U.S. Dist. LEXIS 17383 (N.D. Ill.
Dec. 2, 1991). The court denied the Michigan Commission of Insurance's
motion for a protective order seeking to bar discovery of documents held by
the Michigan Commissioner. In support of its motion, the Michigan
Commissioner cited a Michigan statute protecting examination reports held
by the Insurance Department from public inspection. The court, citing
Seattle Times v. Rhinehart, 467 U.S. 20 (1984), held that production of
documents in civil litigation did not constitute "public inspection," and thus
the statute did not preclude discovery of the documents. Although the
Michigan Commissioner also argued that it should not have to produce
documents as if it were an original party to the dispute, the court rejected
this effort to distinguish between identities of the insolvent insurance
company and the Commissioner. The court held that because the
Commissioner was the Liquidator for the insolvent insurer Cadillac, the
Commissioner stood in the shoes of Cadillac and could not assert that
Cadillac still maintained some separate identity. The Michigan Commissioner
also sought to limit the questioning of witnesses at depositions. The court
denied that motion, as the Michigan statute did not exempt witnesses from
giving relevant testimony on matters of which they had knowledge, and
because parties should not be precluded from inquiring into areas that may
lead to the discovery of permissible evidence.
Evans v. Illinois Surety Co., 220 Ill. App. 199 (Ill. App. 1920). affirmed, 298 Ill. 101,
131 N.E. 262 (1921). The receiver could not terminate the contracts of the
insolvent company as of the date of appointment, without the consent or
acquiescence of the other party to the contract. The receiver's mere
appointment does not terminate the contracts of the insolvent insurer nor

does insolvency of a company, even if established, discharge the company
from its liabilities then existent or which may thereafter accrue.
People ex rel. Barrett v. Bank of Peoria, 295 Ill. App. 543, 15 N.E.2d 333 (Ill. App.
1938). The court held that the receiver stands in place of insolvent insurer and
is clothed with no greater powers than those represented by the company, as
of the date of the order directing the liquidation.
People ex rel. Baylor v. Multi‐State Inter‐Insurance Exchange, 12 Ill. App.3d
1058, 299 N.E.2d 482 (Ill. App. 1973). The liquidator of insurance reciprocal
exchange had power to fix compensation for collector of assessments from
policyholders, but the liquidator's determination was subject to supervisory
power of court. Further, awarding quantum merit to collector was not
contrary to statute providing that compensation is to be "fixed" by the
liquidator.
People ex rel. Shapo v. Agora Syndicate, Inc., 323 Ill.App.3d 543, 752 N.E.2d 1186
(2001) – Director of Insurance brought liquidation action against insurance
syndicate. Based on custodial accounts held in compliance with 215 Ill. Comp.
Stat. 5/107.27 and 107.26(b), syndicate was insolvent on a cash flow basis.
Syndicate argued that adherence to the sections’ requirements precluding a
finding of insolvency. Because funds in custodial accounts that were not readily
accessible to syndicate, syndicate was insolvent. Where Director finds that
insurer is insolvent, the Director has the discretion under the express language
of § 192(4) to request an order of liquidation, rather than seek rehabilitation.
People v. Chicago Lloyds, 391 Ill. 492, 63 N.E.2d 479 (1945), reversed, Morris v.
Jones, 329 U.S. 545, rehearing denied, 330 U.S. 854. A liquidator appointed in
liquidation proceedings under the Insurance Code takes title to all assets of the
insolvent insurance company wherever situated and such title must be
recognized in all states. A judgment obtained in another state subsequent to
appointment of Director of Insurance as liquidator cannot be enforced against
the liquidator under the full faith and credit clause.
People v. Peoria Life Ins. Co., 357 Ill. 486, 192 N.E. 420 (1934). The Illinois
Supreme Court held that under the 1925 Insurance Liquidation Act the
insolvent insurance company was vested in the receiver appointed by the
Director of Insurance and to enable the receiver to perform that duty, the
statutory receiver was vested with title to all of the property of the insolvent
company. The administration of the company was subject to the supervision
of the court.
People v. Peoria Life Ins. co., 376 Ill. 517, 34 N.E.2d 829 (1941). At the moment
the decree for liquidation is entered, the title to all of the property of an
insolvent insurer passes to the liquidator by virtue of the insurance liquidation
law, and from that moment, the insurer is without corporate power.
Reiter v. Illinois National Casualty Co., 328 Ill. App. 234, 65 N.E.2d 830, rev'd 397
Ill. 141, 73 N.E.2d 412, cert. denied, 332 U.S. 791, (1946). The insurance
department's examination of a company found that although the company
settled its claims promptly and equitably, it had paid the adjuster $17,465.50 in
excess of the amount due and the company failed to produce certain securities
disclosed in its annual statement. As a result, the insurance commissioner
acted to conserve the income and assets of the company for the benefit of its
policyholders. However, the court held that neither the Emergency Act nor the
insurance code provided the insurance commissioner with the authority

claimed. Although the code allows the insurance commissioner to apply to the
court for a receivership order, the commissioner did not properly do so here.
Further, the court noted that the penalties prescribed by statute for violation
of any rules or regulations regarding transaction of the insurance business
were limited to instances where the company violated such rules while
conducting its business through its officers and agents. The order placing a
receiver in charge of the assets and business of the company could not have
contained a rule for the regulation of the business of that company.
Republic Life Ins. Co. v. Swigert, 135 Ill. 150, 25 N.E. 680 (1894). In upholding the
constitutionality of the liquidation law, the court noted that a receiver
appointed under the statute will have no greater powers that the insolvent
company represented in winding up its affairs and that the receiver does not
represent its creditors or shareholders, although the receiver can litigate on
behalf of the insolvent company for the benefit of the shareholders and
creditors. The powers of a receiver can be enlarged by legislative enactment,
but generally, the receiver is a mere administrator of the estate or custodian
of the property.
Selcke v. Hartford Fire Ins. Co., No. 1‐91‐3757 (Ill. App. Ct., 1st Dist., November 5,
1992). Insurance company sought declaration that Rehabilitator of insolvent
reinsurer did not have standing to pursue insurance company creditor's claims
against insolvent reinsurer's parent. Appellate Court held that Rehabilitator
was not generally empowered to assert creditors' claims against parent, on
the grounds that, under express language of Illinois Insurance Code,
rehabilitator's authority is limited to "property, contracts, and rights of action
of the company" existing upon entry of rehabilitation or liquidation order, and
that the statute was consistent with common law of receiverships. Court held
that Rehabilitator lacked standing to pursue creditor's alter ego claims against
insolvent reinsurer's parent on the grounds that, under alter ego doctrine,
third parties and not a subsidiary may pierce corporate veil to reach the
corporate parent. Court also held that Rehabilitator lacked standing to pursue
creditor's fraud claims against parent, on ground that by requiring reliance,
such claims are presumptively personal.
Indiana Bennett v. Indiana Life and Health Insurance Guaranty Association, 688
N.E.2d 171 (Ind. Ct. App. 1997). Two pension plan trustees purchased
guaranteed investment contracts from Executive Life Insurance Company,
which was later declared insolvent. The plan trustees sought coverage
under the Indiana Life and Health Insurance Guaranty Act. The Insurance
Commissioner rejected the Indiana Life and Health Insurance Guaranty
Association’s argument that Executive’s obligations were solely to the
trustees, and not to the plan participants, and ordered the Association to
cover, up to the statutory limit, all plan participants who resided in Indiana.
Although the trial court reversed the Commissioner’s order, the appellate
court reversed the trial court, and agreed that the Association owed a duty
to make payments to all resident plan participants. In addition, the appellate
court reversed the trial court’s ruling that the Commissioner’s order was
preempted by ERISA, since the Commissioner’s order was directed towards
the regulation of insurance.
Hatcher v. Haupert, 655 N.E.2d 1229 (Ind. Ct. App. 1995). The trustee of a
retirement plan sued the Indiana Insurance Commissioner for failing to place
into liquidation at an earlier date a life insurance company which had sold an
annuity contract to the plan. The court held that the Commissioner’s
decisions regarding whether and when to place an insurance company in

liquidation is an integral part of his regulation of the insurance industry, and
that such decisions fall within the Commissioner’s wide discretion.
Accordingly, the court held that the Commissioner was immune from liability
under the Indiana Tort Claims Act.
Howard v. Whitman, 29 Ind. 557 (1868). A policyholder of an insolvent
insurance company challenged the power of the receiver to collect on a
premium note on the basis that the officers of the company had
misappropriated funds from a previous 26% assessment and thus the new 20%
assessment issued by the receiver was improper because the receiver lacked
the power to order the assessment. The court, in upholding the power of the
receiver for the assessment, noted that the statutory requirements were
satisfied since the company was in "imminent danger of insolvency" and
further it was reasonable and proper and within the discretion of the trial court
to appoint a receiver for such a company.
Stuyvesant Insurance Company v. United Public Insurance Company, 139 Ind.
App. 533, 218 N.E.2d 379 (1966). In an action between two insurance
companies, one of which was in liquidation, the court granted leave to the
Insurance Commissioner, acting as liquidator, to file a late appellate brief, in
spite of strict prohibition against late filing, due to the level of public interest
and importance of the case.
Kentucky
Glogower v. Miller, 2002 Ky. App. LEXIS 2338 (Ky. Ct. App. 2002). Although the
liquidator has certain broad statutory powers, these powers only arise when the
case involves distribution of the insurer’s assets to creditors. When the
liquidator acts as plaintiff to recover money owed to the insolvent insurer, the
liquidator has only the same rights and obligations as the insolvent insurer and is
subject to the same defenses.
Kentucky Central Life Insurance Company v. Stephens, 898 S.W.2d 83 (Ky.
1995). The Supreme Court of Kentucky concluded that the Insurance
Commissioner, as rehabilitator, has the responsibility to manage the affairs
of the insurer. The court explained that this responsibility included having all
the powers of the directors, officers, and managers, whose authority shall
be suspended, except as they are redelegated by the rehabilitator . The
rehabilitator shall also have the full power to direct and manage, hire and
discharge employees subject to any contract rights they may have, to deal
with the property and business of the insurer, and the authority to sell assets
involved in group sales.
Moren v. Ohio Valley Fire & Marine Ins. Co.'s Receiver, 224 Ky. 643, 6 S.W.2d
1091 (1928). The court found that, since the receiver is subject to the direction
of the court that appointed the receiver, the receiver does not have the
authority to enter into contracts not essential to preserve the property of the
insolvent insurer. The case involved the receiver's contract with an agent to
refund unearned premiums and secure new policies for insolvent insurer's
policyholders.
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.
Ray v. First National Bank of Louisville, 111 Ky. 377, 63 S.W. 762 (1901). Where
insurance company had participated in the fraud complained of, the court
found that the receiver of the insurance company could not maintain action,
since receiver of insolvent company has no better rights to bring an action than
the insolvent company had.
Stephens v. Park Broadcasting of Kentucky, Inc., 913 S.W.2d 330 (Ky. Ct. App.
1996). The Court of Appeals of Kentucky, in considering whether a
rehabilitator was subject to provisions of the Open Record Act, concluded
that Kentucky’s Insurance Code legally distinguished the position of
rehabilitator and that of Commissioner. The court maintained that the
Commissioner was responsible for the organizational aspects of the
rehabilitation process, but that once a rehabilitator was appointed, the
rehabilitator alone had the power to take necessary actions in reforming the
insurer. The court concluded that the rehabilitator was not considered a
“public agency” as required by the Open Record Act, thereby making that
Act inapplicable. The court stated that the rehabilitator was performing a
traditionally non‐governmental function for the primary purpose of
protecting insureds and creditors. In determining that the rehabilitator was
not a public agency, the court explained that based on the fact that the
funds for rehabilitation were not part of the insurance departments general
budget; assets were maintained separately; employees of Kentucky Central
Insurance Company were not placed on the state payroll; neither the
rehabilitator, nor Kentucky Central Insurance Company enjoyed sovereign
immunity; and the rehabilitator and insurer were not represented by the
attorney general; the rehabilitator was not a public agency.
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.
Green v. Louisiana Underwriters Insurance Company, 571 So.2d 610 (La. 1990).
Attorney General claimed that the statute authorizing his office to appoint
private attorneys in state matters was applicable in those instances in which
the Insurance Commissioner was acting in his capacity as liquidator,
conservator or rehabilitator of an insolvent insurance company. The
Commissioner claimed that the statute which authorized the employment of
attorneys by him in matters of insurer insolvency controlled. The court held
that the more specific insurance statute, although adopted prior to the
attorney general statute, controlled.
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.
Maryland
Massachusetts
Joyce v. Abrams, 178 Md. 535, 16 A.2d 296 (1940). In the liquidation of a mutual
casualty company, the court held that following the appointment of a receiver
to liquidate and wind up the affairs of the insolvent company, the directors of
the company were powerless to make valid assessments against members of
the company. Upon appointment, the receiver is vested with all corporate
powers. The court also held that the equity court having jurisdiction over the
insolvent company also had the power to make necessary assessments against
the members. The court further held that the assessment is a decree which
sets the rate of liability, but that the liability of each member assessed would
have to be established by the receiver before collecting the assessments.
Commissioner of Insurance v. Broad Street Mutual Casualty Ins. Co., 312 Mass.
261, 44 N.E.2d 683 (1945). The receiver of an insurance company is not subject

to the state's unemployment compensation act. The receiver is in "custody" of
the insurer, but is not an "employer" within the terms of act.
Commissioner of Insurance v. First National Bank of Boston, 352 Mass. 74, 223
N.E.2d 684 (1967). The court held that even after the insurance commissioner
is appointed receiver, the commissioner retains the investigatory powers
vested in the commissioner, even though the commissioner has no similar
investigatory powers as receiver. The fact that the insurance commissioner
had dual powers does not prevent the commissioner from using investigatory
powers which would be helpful as receiver.
Michigan
Gauss v. Central West Casualty Co., 289 Mich. 15, 286 N.W. 139 (1939). In a suit
for the appointment of a receiver, where order authorized the receiver to
accept a bid for the purchase of stock of the corporation to which the assets of
insurance company had been transferred, and where order was entered over
the objections of less than 10% of the creditors authorizing the receiver to
accept a bid of $440,000 for such stock, which stock was appraised $569,867,
the order was held not to be an abuse of discretion as to constitute reversible
error, even if sale was ill‐advised from a business standpoint, in absence of
evidence of fraud, overreaching, or gross inadequacy of price.
Insurance Commission of Michigan v. Arcilio, 221 Mich. App. 54, 561 N.W.2d
412 (Mich. Ct. App. 1997). After the Commissioner of Insurance obtained an
order of rehabilitation for Confederation Life Ins. Co. (“CLIC”) which gave
him total control over all the company’s assets, three individuals filed three
class actions against CLIC’s former directors and officers and several
unrelated entities. The trial court issued an injunction enjoining anyone
besides the Commissioner from pursuing litigation against CIC’s former or
present officers or directors and others, subject to certain exceptions. On
appeal, the Court of Appeals of Michigan concluded that §8114 must be
liberally construed authorizing the Rehabilitator to pursue causes of action
on behalf of all policyholders, whether they be tortious or criminal conduct,
or breach of contractual or fiduciary obligations. The court held that claims
based on injuries common to all policyholders must be maintained solely by
the rehabilitator in his representative capacity for their collective benefit.
The court exempted from this injunction only a possible federal securities
claim.
Toy v. Lapeer Farmers' Mutual Fire Ins. Ass'n., 318 Mich. 60, 27 N.W.2d 345
(1947). The decree providing for termination of receivership of an insurance
association by the transfer of assets to creditors' trustees for distribution
instead of providing for public sale of assets of receivership after notice, was
authorized under the statutory powers of the insurance commissioner and
discretionary powers of the court since the plan did not constitute an
abandonment of the statutory duties of the commissioner.
Minnesota
Missouri
Frank J. Delmont Agency v. Graff, 55 F.R.D. 266 (D. Minn. 1972). The court
granted the receiver of an insolvent insurer the right to intervene in a class
action filed by the insolvent insurer's former insurance agents against an
accountant to recover for alleged negligence in an audit. The court noted that
the receiver was entitled to intervene since the receiver claimed exclusive
rights to the assets, and had instituted a proceeding in the Minnesota state
courts against the same accountants.
Ainsworth v. Old Security Life Ins. Co., 694 S.W.2d 838 (Mo. App. 1985). A sole
stockholder which was entitled to receive all of the assets, upon final

distribution, of an insolvent carrier sought leave to intervene in a proceeding
involving payment of fees for the receiver's attorney. The Missouri Court of
Appeals granted the motion on the grounds that the petitioner had an
immediate and direct economic interest in the matter, whereas the receiver
was only a stakeholder. The Court found that: "[T]he receiver has a variety of
interests to serve, and really has no economic interest in the outcome of the
case. He may do his duty in defending against [the claim], and yet come short
of the kind of single‐purposed defense that may be expected from [the sole
stockholder]." 694 S.W.2d at 841.
Alexander v. Relfe, 9 Mo. App. 133 (1880). The receiver appointed of an
insolvent insurer sued the receiver of the reinsurer which had reinsured and
assumed all of its business. In rejecting the receiver's action, the court noted
that an equity receiver was a mere custodian of property and cannot sue for
damages for corporate waste in its own name. Only the stockholders and
policyholders of the insolvent insurer were in a position to pursue such a claim.
Claber v. O'Malley, 90 S.W.2d 396 (Mo. 1936). An insured of the insolvent
insurer brought an action to recover on an accident policy. In affirming the
recovery to the insured, the Missouri Supreme Court noted that the Missouri
insurance commissioner, as liquidator, was a state officer, but that it did not
necessarily follow that jurisdiction resided in the Supreme Court because such
officer must be a real party in interest in an official capacity in order to be
within the jurisdictional meaning of the Missouri constitution. In finding
jurisdiction, the court upheld the award on the policy.
Jump v. Pioneer Bank and Trust Company, 433 F. Supp. 38 (E.D. Mo. 1977). The
receiver of an insolvent insurance company, which owned 87% of the
outstanding stock of a bank, brought an action against the bank, seeking a
declaration that the receiver was entitled to vote and exercise all the
ownership rights of the bank stock held by the insurance company, and
seeking to enjoin the bank from denying the receiver any rights incident to the
insurance company's ownership of the bank stock. As against the bank's
contention that the receiver's failure to procure registration of a stock transfer
in the bank's transfer books prior to the attempted exercise of the voting
rights, the court enjoined the bank from denying the receiver the rights of a
shareholder of the bank stock, as the same court appointing the receiver of
the company by appropriate order also authorized the receiver to vote the
shares of the corporate stock under the receiver's control, pursuant to the
Ohio laws granting a receiver such authority. However, receiver's prayer for
costs and attorneys fees was denied absent statutory authorization.
Lucas v. Manufacturing Lumberman's Underwriters, 349 Mo. 835, 163 S.W.2d
750 (1942). The new Missouri insurance commissioner filed charges against the
prior insurance commissioner and secured a judgment of $85,264.44. In
reversing this award, the Missouri Supreme Court noted that the Missouri
commissioner had the authority during rehabilitation to preserve the status
quo while awaiting the decision of various questions of jurisdiction pending
before the state and federal courts concerning the reciprocal exchange, and
this included the expending of funds for the purpose of reinsuring and
maintaining as much as possible the status quo of the exchange. The
insurance commissioner is vested with much discretion in conducting and
managing the affairs of insurance companies under the commissioner's
control.

State ex rel. ISC Financial Corp. v. Kidder, 684 S.W.2d 910 (Mo. App. 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.
Nebraska State ex rel. Good v. National Old Line Life Ins. Co., 261 N.W. 902, 129 Neb. 473
(1935). The controversy herein arose over the discharge by the receiver of the
attorney on the advice of the governor. The trial court ordered the attorney
reinstated. The Nebraska Supreme Court affirmed, and concluded that the
insurance commissioner had been appointed receiver of insurance companies
under the section of the statute providing for judicial receivership. The court
stated that where a liquidation of an insurance company is conducted in a
court of equity pursuant to law, the proceeding is judicial and not executive. In
the instant case, the department of insurance is an arm of the court, and as
such, is subject to the orders of the court and not to the governor or the
legislature.
Witzenburg v. State, 299 N.W. 53, 140 Neb. 171 (1941). The court held that the
insurance department's contract holding agents harmless from liability for
actions in connection with the administration of an insurance company was
void and beyond the power of the insurance department.
New Hampshire
New Jersey
In Re: The Liquidation of The Home Ins. Co., 154 N.H. 472 (2006). Where an
insolvent insurer had assumed business from a group of ceding insurers and
retroceded the same business to another reinsurer, the Court approved the
Liquidator’s agreement with the ceding insurers to pay a portion of reinsurance
recovered on allowed claims to the ceding insurers, who otherwise would not
prosecute claims as Class V claims were not expected to receive any
distribution. The Court held that the Liquidator is authorized to enter such an
agreement where the result is a net benefit to the estate. The payments to the
ceding insurers are administrative costs because they are pursuant to a postliquidation
agreement designed to collect assets that otherwise would be lost,
not “distributions” to lower class creditors. The Court affirmed the lower
court’s findings that the Class I payments were “necessary” and that the
agreement was fair and reasonable.
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.
Clifford v. Concord Ins. Co., 114 N.J. Super. 168, 275 A.2d 454 (Ch. 1971),
affirmed, 114 N.J. Super. 495, 277 A.2d 400. The insurance commissioner does
not have the power to approve a plan of liquidation in all cases. Specifically,

the commissioner may not approve a plan in conjunction with the creation of a
new insurance company where only some, not all, the liabilities would be
assumed in return for the transfer of assets which would otherwise be
available for sale. The plan would eliminate claims of an important group of
creditors and, because of the proposed transfer of assets, would leave them in
a worse position for realizing anything than they would have had without the
plan. The state's treasurer must assert claims to which the treasurer would be
subrogated if they would be adjusted or eliminated by a plan to reorganize an
insurance company.
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.
In the Matter of the Liquidation of Integrity Ins. Co., 165 N.J. 75 (2000).
Reinsurers of insolvent company sought discovery of the Insurance
Commissioner's intra‐agency documents analyzing and evaluating a Final
Dividend Plan, which was devised to bring the estate to early closure. The
Commissioner contended that discovery was barred by the deliberative
process privilege. The Supreme Court recognized the privilege, but held that
the Insurance Commissioner, acting as the liquidator of an insolvent insurer,
could not invoke it. The Court explained that the Commissioner functions in
a hybrid status, part public and part private, when he or she oversees the
liquidation of an insolvent insurer. Therefore, no purely public interest exists
that would merit application of the privilege to withhold discovery. The
Supreme Court remanded the case to the trial court to conduct an in camera
hearing and balance confidentiality against the need for disclosure.
In Re the Liquidation of Integrity Ins. Co., 299 N.J. Super. 677 (Ch. Div. 1996). In
this matter, the Commissioner of the New Jersey Department of Banking and
Insurance, as Liquidator of the insolvent Integrity Insurance Company, moved to
establish procedures for court approval of a final plan for the distribution of
Integrity's assets. As part of that motion, the New Jersey Chancery Division held
that the Commissioner, as Liquidator, had the authority to estimate the net
present value of incurred, but not yet known or reported, losses and the
insurer's pending case reserves on behalf of future claimants and allow such
contingent claims to participate in the final distribution of assets. The Court
reasoned that under both New Jersey's Liquidation Act and the Order of
Liquidation, the Commissioner, as Liquidator, was authorized to "do all acts
necessary or appropriate for the accomplishment of the liquidation of
Integrity." Further, the Court found the "overwhelming interests of the public,"
coupled with the "enormous amount of contingent losses currently
outstanding," were best served by the Court's exercising equitable power in

authorizing the Liquidator to properly present contingent claims to the Court on
behalf of future claimants.
Lane v. Bogert, 116 N.J. Eq. 454, 174 A. 217 (1934). The court held that if an
insurance company becomes insolvent, the receiver or trustees have authority
to sue such officers and directors for dereliction of their duties.
Lincoln Bus Co. v. Jersey Mutual Casualty Ins. Co., 112 N.J. Eq. 523, 10 N.J. Misc.
1114, 162 A. 915 (1932). Where the banking commissioner, having taken over
the affairs of an insolvent insurance company, defended suits against the
company without authorization to do so, the commissioner was not
chargeable with the expenses of the unauthorized suits. As a public official,
the commissioner was acting with due care and made an honest mistake in the
performance of these duties.
Matter of Integrity Insurance Co., 240 N.J. Super. 480 (App. Div. 1990). The
action involved a suit to recover damages from third parties such as the
insurer's accountant, auditor, directors and officers based on negligence,
fraud, breach of fiduciary duties and violations of statutes, such as antiracketeering
and consumer fraud statutes.
The court held that the liquidator could prosecute claims "on behalf of"
creditors, policyholders, and other beneficiaries of Integrity if the objective of
the suit was to increase the estate's assets to which the creditors,
policyholders and public may look for satisfaction of their debt. However, the
liquidator could not maintain a suit in a representative capacity to assert
personal claims which really belonged to individual creditors or policyholders.
As to the misrepresentation claim, the "doctrine of constructive notice"
asserted by defendants did not apply and thus if Integrity's officers and
directors were part of the fraudulent scheme to misrepresent the
corporation's financial condition, the estate was not charged with the
knowledge of the directors and officers.
Yellow Cab Ins. v. Bankers' Indemnity Ins. Co., 110 N.J.L. 546, 166 A. 186 (1933).
Where the insurance commissioner required the directors of an insurance
company undergoing voluntary dissolution to post a bond indemnifying the
commissioner and other interested persons against loss for improper payment
of dividends and the surrender of securities, such requirement was held as a
valid exercise of authority.
New York
Bohlinger v. Mayville Realty Co., 135 N.Y.S.2d 865 (1954), affirmed, 285 A.D.
1045, 141 N.Y.S.2d 509, appeal denied, 286 A.D. 832, 143 N.Y.S.2d 627. The
liquidator of an insurance company was entitled to enforce a contract between
the company and an agent.
Callon Petroleum Co. v. Superintendent of Ins., 863 N.Y.S.2d 92 (N.Y. App. Div.
2008). Although the court generally defers to the rehabilitator’s business
judgment, the rehabilitator of an insolvent surety acted arbitrarily and
capriciously by failing to negotiate, compromise, pay, or otherwise resolve an
obligation that the court previously determined was valid. The court ordered
the rehabilitator to take affirmative action with respect to the claim.
Consolidated Edison Co. of N.Y. v. Insurance Dept. of the State of N.Y., 140
Misc.2d 969, 532 N.Y.S.2d 186 (N.Y. Sup. Ct. 1988). In an Article 78 proceeding,
the court held that the Superintendent of Insurance, acting in his capacity as

liquidator, was specifically exempted from the Freedom of Information Law
("FOIL") and the State Insurance Department was not an "agency" under the
meaning of FOIL. However, documents filed by an insurer with the State
Insurance Department, acting in its regulatory capacity, were discoverable
under FOIL because the alleged confidentiality of the documents ended when
the insurer became insolvent.
Corcoran v. National Union Fire Ins. Co., 143 A.D.2d 309, 532 N.Y.S.2d 376 (N.Y.
App. Div. 1988). The court held that the New York Superintendent of
Insurance, when acting as the liquidator of an insurance company, acted in a
separate and distinct capacity from his role as a regulator of the insurance
industry. It added that the Superintendent operated the liquidated company
for the benefit of its creditors and policyholders as opposed to the benefit of
the general public. Furthermore, the court asserted that the Superintendent,
as liquidator, is subject only to the defenses which could be raised against the
liquidated insurance company if it were bringing suit, and any affirmative
defenses set out by the defendant insurance company which were directed
against the Superintendent as a regulator and public official were irrelevant in
an action brought by the Superintendent as the liquidator.
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, the
federal court had no jurisdiction.
Gallin v. Burdick, 152 Misc. 468, 273 N.Y.S. 456 (N.Y. Sup. Ct. 1934), affirmed, 241
A.D. 888, 271 N.Y.S. 1086, affirmed, 265 N.Y. 492, 193 N.E. 286. The court held
that the rights of the insurance commissioner to avoid certain voidable
transfers was not exclusive to the commissioner's capacity as liquidator. When
acting as a rehabilitator, the commissioner was in effect, a statutory receiver
and could bring an action against directors and stockholders for illegal
declarations of dividends and other unlawful diversions of corporate assets.
G. C. Murphy Co. v. Reserve Ins. Co., 74 A.D.2d 235, 427 N.Y.S.2d 800 (1980). It
was held that the trial court erred in not allowing a continuance to permit
proper service on the Illinois insurance commissioner as rehabilitator and
liquidator where the commissioner should have formally been served with all
the papers filed in a suit against a foreign insurance company in liquidation
proceedings in Illinois. The trial court should have granted the continuance
and allowed the liquidator opportunity to respond to a motion to join the
insurer's New York affiliate as a defendant in the action. However, since New
York and Illinois were reciprocal states, both having adopted the Uniform
Insurers Liquidation Act, New York should have recognized the Illinois
commissioner's right to seek a stay of proceedings against the insurer and to
take possession of the insurer's assets. Therefore, the action to recover
unearned premiums was stayed.
Hartigan v. Casualty Co. of America, 180 A.D. 193, 167 N.Y.S. 645 (1917). The
insurance code was not designed to circumscribe the power of the insurance
commissioner. It was a statute of enlargement.
In re Ancillary Receivership of Reliance Ins. Co., 837 N.Y.S.2d 640 (App. Div.
2003). The State Liquidation Bureau was acting within its broad power to

implement the statutory liquidation scheme by denying a settlement reached in
a claim against the insurer in receivership. The liquidator argued that the
settlement violated a stay of actions against the insurer.
In re Consolidated Mutual Ins. Co. (Levy v. Superintendent of Insurance), 154
A.D.2d 592, 546 N.Y.S.2d 420 (2d Dep't 1992), rev'd, 77 N.Y.2d 144, 565 N.Y.S.2d
434, 566 N.E.2d 633 (1990). New York's highest court reversed a finding below
that the Liquidator of Consolidated Mutual Insurance Company could
terminate the group life and health coverage of Consolidated's retired
employees. Although noting that the Employee Benefit Guidebook did not
unambiguously state whether Consolidated intended the benefits to be noncancellable,
extrinsic evidence in the form of letters and memoranda
demonstrated such an intent. The Court concluded that since the Liquidator is
governed by the contractual agreements of Consolidated, the Liquidator was
therefore not authorized to cancel the group benefits of Consolidated's
employees.
In re First Central Ins. Co., 791 N.Y.S.2d 123 (App. Div. 2005). Pursuant to statute,
the Superintendent of Insurance as liquidator is responsible to provide for the
economical liquidation of insolvent insurance companies through the agency of
a state department and to prevent waste of assets. The Superintendent failed
to show, however, a sufficient basis to disclaim coverage where the insolvent
insurer had expressly accepted an insured’s claim for coverage for lead paint
injuries.
In re Kinney, 257 A.D. 496, 14 N.Y.S.2d 11 (1939), certified questions answered
and affirmed, 281 N.Y. 840. 24 N.E.2d 494. The insurance commissioner derives
powers from the legislature. The commissioner acts as a "statutory receiver"
rather than an "officer of the court".
In re Lawyers Mortgage Co., 293 N.Y. 159, 56 N.E.2d 305 (1944). The insurance
commissioner as the liquidator of a delinquent insurer could sell the property
of the insurer subject to court approval. However, the court could not compel
such action, even though it could veto the planned disposal of the delinquent's
assets. The court found that under the reorganization plan the commissioner
was not required to apply to the court for an order approving disposition of
non‐liquid assets to the reorganization managers of the insurer.
In re Lawyers Mortgage Co., 169 Misc. 802, 9 N.Y.S.2d 127 (1938), affirmed, 256
A.D. 974, 11 N.Y.S.2d 280. The court held that the insurance commissioner had
the authority to sell the assets at a court‐approved fair price and did not risk an
allegation that the commissioner had surrendered the trust imposed on the
commissioner as liquidator. The consent of the commissioner was also
necessary for the company's proposed reorganization as it provided for the
sale of the company's assets. If the plan for reorganization did not involve
such a sale and called only for the introduction of new capital and
recapitalization, the commissioner's approval would not have been necessary
for the reorganization to proceed.
In re Lawyers Title & Guaranty Co., 254 A.D. 491, 5 N.Y.S.2d 484 (1938),
reargument denied, 9 N.Y.S.2d 126. The insurance commissioner has the
power to negotiate with interested parties, draw up a plan for the liquidation
of an insolvent company, and then submit the plan for court approval.
In re Lawyers Title & Guaranty Co., 165 Misc. 776, 1 N.Y.S.2d 137 (1938), reversed
on other grounds, 254 A.D. 491, 5 N.Y.S.2d 484, reargument denied, 9 N.Y.S.2d

126. The insurance commissioner may distribute assets, excluded from assets
to be sold, instead of cash in satisfaction of creditors' claims or may sell them
to creditors and stockholders or could partly sell or partly distribute them.
In re Lawyers Title & Guaranty Co., 164 Misc. 608, 299 N.Y.S. 704 (1937). The
insurance commissioner as liquidator is not limited to sales for cash in
disposing of assets, but the commissioner may extend credit for all or a portion
of the asset's purchase price as long as there is a definite obligation to pay the
unpaid portion of the purchase price. The court should look to the substance
of the obligation to determine whether there is a definite obligation to pay the
unpaid purchase price.
In re Lawyers Title & Guaranty Co., 164 Misc. 608, 299 N.Y.S. 704 (1937). The
court held that the insurance commissioner must give consideration to
competing offers claimed to be superior, as a factor in determining the
adequacy and fairness of other offers for assets of a title and guaranty
company in liquidation. Moreover, the commissioner is not justified in
accepting an inadequate offer and thereby sacrificing assets to put a stop to
alleged losses.
In re Liquidation of Midland Ins. Co., No. 41294/1986, 2008 WL 151786 (N.Y. Sup.
Ct. Jan. 14, 2008). The Insurance Superintendent holds office as Liquidator to
protect the interests of policyholders in liquidation proceedings, therefore there
is generally no need for policyholders to have a voice. But in this case, where
the reinsurer argued that the liquidator mishandled claims and under
exceptional circumstances, the court exercised discretion under New York
Insurance Law and UILA to allow policyholders to speak on their own behalf.
In re Manhattan Casualty Co., 75 Misc. 2d 357, 346 N.Y.S.2d 911 (1973); See also,
In Re New York Title & Mortgage Co., 170 Misc. 109, 9 N.Y.S.2d 994 (1939). The
judgment of the insurance commissioner is entitled to substantial weight for
the court's consideration of a proposed settlement of a suit brought by the
commissioner as the liquidator of an insolvent insurance company.
In re Midland Ins. Co., 147 Misc. 2d 78, 553 N.Y.S.2d 964 (Supreme Court, New
York County 1990), aff'd without opinion, 170 A.D.2d 272, 565 N.Y.S.2d 1011 (1st
Dep't 1991). The Liquidator of Midland Insurance Company moved to disaffirm
a Referee's report which nullified the Liquidator's denial of Security Fund
coverage for two policyholders of Midland. The Court declared that the
Superintendent's interpretation ‐‐ apparently even in his capacity as Liquidator
‐‐ was not subject to reversal unless it was irrational or unreasonable. Finding
the Liquidator's interpretation of the relevant statute to be logical, consistent
with the legislative intent and reasonable, the Court disaffirmed the Referee's
report. On appeal, New York's Appellate Division, First Department affirmed
without opinion.
In re New York Title & Mortgage Co., 171 Misc. 489, 13 N.Y.S.2d 214 (1939). The
court held that the insurance commissioner as liquidator could, with the
court's approval, offer the insolvent's assets for sale to assenting creditors
payable out of dividends which the creditors would have been entitled to in
the liquidation proceeding. In addition, representatives designated by the
court to act for the assenting creditors could be advanced expenses on the
security of the claims of the assenting creditors, subject to court approval.
In re New York Title & Mortgage Co., 170 Misc. 109, 9 N.Y.S.2d 994 (1939). The
insurance commissioner need only show that there is a reasonable possibility

that trust claimants will recover an amount considerably greater than that
proposed under the terms of a settlement to justify the compromise of trust
claims against an insolvent insurance company.
In re New York Title & Mortgage Co., Series C‐2, F‐1, B‐K, 257 A.D. 19, 11 N.Y.S.2d
828 (1939), motion denied, 257 A.D. 933, 12 N.Y.S.2d 853, reargument denied,
257 A.D. 822, 12 N.Y.S.2d 1021, appeals dismissed, 281 N.Y. 829, 24 N.E.2d 491.
Damage claims for misconduct on the part of a company in liquidation and its
officers were considered "doubtful claims" in a liquidation proceeding because
of questions as to their validity and amount. The "doubtful claims" were
within the power of the insurance commissioner to settle by agreement.
In re Serio, 769 N.Y.S.2d 530 (App. Div. Dept. 2003). The reinsurer sought from
the Insurance Superintendent as rehabilitator the return of funds which the
reinsurer alleged were wrongfully converted by the insolvent insurer. The
reinsurer prevailed and the court held that, by consenting to evidentiary hearing
and discovery, the Superintendent waived the argument that the court should
not have allowed the reinsurer to bring a separate action against the
Superintendent, outside the liquidation proceeding.
In Re Transit Casualty Co., 79 N.Y.2d 13, 580 N.Y.S.2d 140, 588 N.E.2d 38 (1992),
cert. denied, 113 S. Ct. 199 (1992). An insured's right to notice prior to
cancellation of a fire insurance policy was not extinguished when the company
was placed in liquidation, even though all of the company's policies were
cancelled on a specified date pursuant to the liquidation order of a Missouri
court. The New York Court of Appeals found that the Liquidator was required
to perform the insurer's contractual obligation to give notice to the insured of
the impending cancellation as required by the policy.
Klein v. New York Title & Mortgage Co., 155 Misc. 513, 279 N.Y.S. 931 (1935).
The court held that the insurance commissioner as rehabilitator of a title and
mortgage company, was liable as a statutory receiver with respect to personal
injuries sustained by a tenant of the property under rehabilitation. A statutory
receiver is inherently liable in actions upon either passive or active negligence.
Matter of Globe and Rutgers Fire Ins. Co., 149 Misc. 18, 266 N.Y.S. 613 (1933).
Where a court order allowing the insurance commissioner to sell substantial
amounts of securities of a fire insurance company in the process of
rehabilitation would be the equivalent of liquidating the company, that order
will be denied. However, the commissioner may apply for permission to sell
limited amounts of the company's securities from time to time.
Matter of Lawyers Mortgage Company (8718 Ridge Blvd.), 284 N.Y. 371, 31
N.E.2d 492 (1940). The court held that as the rehabilitator and liquidator of a
mortgage company, the insurance commissioner was a statutory receiver of its
property.
Matter of Lawyers Title & Guaranty Co., 153 Misc. 168, 274 N.Y.S. 646 (1934).
The court concluded that the insurance commissioner, as rehabilitator, is liable
on lease only if the commissioner assumed the leasehold obligation or took
possession, occupancy or control of the premises. Thus, a leasehold is not
terminated by rehabilitation proceedings and the commissioner is liable only to
the extent of the nature of the commissioner's conduct with respect to the
lease.

Matter of Lawyers Westchester Mortgage & Title Co., 176 Misc. 435, 26
N.Y.S.2d 575 (1941), affirmed, 262 A.D. 878, 29 N.Y.S.2d 721, reversed on other
grounds, 288 N.Y. 40, 41 N.E.2d 449. The insurance commissioner acts in a dual
capacity as a receiver, either as a rehabilitator or a liquidator. As a
rehabilitator, the commissioner can take possession of the insurer's property
and conduct the business thereof, but has no more authority than the
company had. If the commissioner administers mortgage investments
guaranteed by the company as a rehabilitator, this is done in the interest of the
company rather than individual investors and therefore expenses cannot be
charged against dividends declared on claims founded on guaranteed
certificates. As a liquidator, the commissioner is vested with title to all the
property, contracts and rights of action of the company, but the commissioner
now must perform in the interests of the creditors as a class to preserve the
assets to be applied to satisfy their claims. However, as a receiver the
commissioner has the duty to conserve the property of the corporation and
administer it subject to the court's direction, except insofar as the legislature
had conferred discretionary power.
Matter of National Surety Co., 239 A.D. 490, 268 N.Y.S. 88 (1933), affirmed, 264
N.Y. 473, 191 N.E. 521. The court held that the insurance commissioner as
rehabilitator is vested with full authority to sell and transfer assets and has the
authority to conduct business using the assets of the company to support the
continuing operations of the insurance company. The court stated that though
the legislature had granted the commissioner power to liquidate or rehabilitate
companies, the extent to which such power could be exercised is tempered by
the supervision of the courts. However, the plan of rehabilitation or any
modification would not be set aside absent proof of abuse of the discretionary
power or gross inequities. The court further held that the commissioner has
the power to remove those responsible for creating the need for
rehabilitation, and to regulate salaries and other remuneration, and otherwise
safeguard the assets of the insurer.
Matter of People (Bond & Mortgage Guarantee Co.), 267 N.Y. 419, 196 N.E. 313
(1935). The court concluded that an agreement making the guarantee
company an irrevocable agent with the exclusive right to collect interest was
nothing more than an agreement to continue the agency for the life of the
policy. Therefore, where the bank was in the hands of the insurance
commission as rehabilitator, the rehabilitator could terminate the agency and
discharge the bank from further liability.
Matter of Title & Mortgage Guarantee Company of Buffalo, 149 Misc. 643, 269
N.Y.S. 16 (1933), affirmed, 264 N.Y. 69, 190 N.E. 153. A rehabilitator of a
mortgage guaranty company had absolute control, subject to court approval,
of all of the company's property whether deposited as a pledge or otherwise.
Therefore the rehabilitator had control over bonds and mortgages held as
collateral security for certificates of mortgage indebtedness. Prior temporary
relinquishment of possession of property by the company did not limit the
absolute right of the rehabilitator to take such property.
Mills v. Fla. Asset Fin. Corp., 818 N.Y.S.2d 333 (App. Div. 2006). On petition by
the liquidator and over a creditor’s objections, the court approved a proposed
agreement whereby the reinsurer would pay $45 million and forgive $145 million
of the insolvent insurer’s debt in exchange for reduction in the reinsurer’s
reinsurance obligation. The New York Legislature has granted the rehabilitator
plenary powers and broad discretion to manage affairs of an insolvent insurer,
and therefore the court would defer to the rehabilitator’s judgment absent a

showing that the rehabilitator’s actions were arbitrary, capricious or an abuse of
discretion.
National Bondholders Corporation v. Joyce, 276 N.Y. 92, 11 N.E.2d 552 (1938).
The insurance commissioner as the liquidator of an insolvent insurance
company is vested with all causes of action, including any causes of action
against former directors, which were previously vested in the insurance
company.
Pierre Associates Inc. v. Citizens Casualty Company of New York, 32 A.D.2d 495,
304 N.Y.S.2d 158 (1969). A landlord's cancellation of an insurance company's
lease on the grounds of its insolvency would not be binding on the insurance
commissioner in a proceeding to take possession of the property and
rehabilitate the company, because the commissioner was not a party to the
landlord's action seeking the lease's termination.
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. The court held that as the
rehabilitator of an insolvent guarantee company, the insurance commissioner
had to disaffirm the fraudulent sale of mortgages to the guarantee company,
tendering return of the mortgages upon the discovery of fraud.
Pink v. Title Guarantee & Trust Co., 164 Misc. 128, 298 N.Y.S. 544 (N.Y. Sup. Ct.
1937). The court held that the insurance commissioner as statutory receiver
did not have the power to waive or ratify ultra vires and illegal transfers to the
mortgage guarantee company of subordinate interests in first mortgages
owned by the corporation, which would preclude the commissioner from
obtaining a recession of the transfers.
Royal Bank and Trust Co. v. Superintendent of Insurance, 148 Misc. 2d 863, 562
N.Y.S.2d 347 (Supreme Court, New York County 1990), aff'd, 1992 N.Y. Slip Op.
5029 (N.Y. 1992). In a dispute involving the Liquidator of Union Indemnity
Insurance Company, the Court ruled that although the interpretation by the
Superintendent of the provisions of the Security Fund will be upheld unless
irrational or unreasonable, the Superintendent must be consistent in his interpretation
and application of the provisions of the Fund, or his position will be
deemed to be arbitrary and capricious and will be set aside. Finding that the
Superintendent's construction of a "covered risk" under the terms of the Fund
to be inconsistent with the Superintendent's earlier interpretations, the Court
set aside a determination of the Liquidator denying Security Fund coverage
with respect to investor bonds.
Serio v. Ardra Ins. Co., 761 N.Y.S.2d 1 (App. Div. 2003). The liquidator was not
equitably estopped from seeking to pierce the corporate veil in order to hold a
reinsurer and its principals liable for a reinsurance debt; a governmental agency
is not estopped from changing its position in the exercise of a governmental
function.
Serio v. Black, Davis & Shue Agency, Inc., No. 05 CIV. 15 (MHD), 2005 WL
2560390 (S.D.N.Y. Oct. 11, 2005). The Insurance Superintendent as rehabilitator
is “charged with marshaling assets, paying or compromising claims, and
otherwise overseeing the affairs of [the insolvent insurer] in an effort to either
put it back on its financial feet or determine that rehabilitation is not feasible
and that the company must be liquidated.” The court granted the
rehabilitator’s motion to stay the defendant’s counterclaims against the

insolvent insurer in the interest of not interfering with ongoing insurer
rehabilitation.
Serio v. Rhulen, 815 N.Y.S.2d 320 (App. Div. 2006). In the rehabilitator’s action
against certain directors and officers of the insolvent insurer for breach of
fiduciary duties and diversion of funds, the court ruled that the defendant had
preserved his statutory right to priority of deposition, and the rehabilitator’s
duties, protective statutory role as rehabilitator, and interest in proceeding in
the action did not divest the defendant of priority of deposition. The defendant
would be bound to use reasonable diligence in pursuing the rehabilitator’s
deposition and the court retained broad discretion to issue protective orders.
Superintendent of Insurance of State of New York v. Bankers Life & Casualty
Co., 401 F. Supp. 640 (D.C. N.Y. 1975). The insurance commissioner is entitled
to all the rights of a private litigant in the federal district courts when seeking
to enforce the claims of an insurance corporation in dissolution, and also has
powers to compound or sell all uncollectible or doubtful claims owed the
insolvent insurer, or to settle or discontinue those claims on terms which the
commissioner considers proper.
Van Schaick v. Stevens, 152 Misc. 163, 273 N.Y.S. 748 (1934). The court upheld
an action brought by the insurance commissioner as rehabilitator against the
directors of an insurance company, as in keeping with the statutory purpose of
restoring the company to its prior condition, where the action brought was for
an accounting as to the alleged wrongful acts and for repayment and
restoration of assets to the company which had been diverted, wasted and
misappropriated.
Van Schaick v. Title Guarantee & Trust Co., 252 A.D. 188, 297 N.Y.S. 827 (1937).
The insurance commissioner as a rehabilitator possesses the powers of a
statutory receiver, and can prosecute actions on behalf of creditors.
North Carolina Eastern Appraisal Services, Inc., v. State ex rel. Long, 118 N.C. App. 692, 457
S.E.2d 312 (1995). The court held that actions of Insurance Commissioner as
liquidator of insolvent insurer in obtaining temporary custody of claims files
of private appraiser for insurer, for use by guaranty association in handling
claims, did not constitute a “taking” of appraiser’s property, entitling
appraiser to just compensation under Federal and State constitutions.
Furthermore, the Court noted that under North Carolina law, Commissioner
of Insurance assumes identity of an insolvent insurer when he becomes a
receiver.
Pink v. Henby, 220 N.C. 667, 18 S.E.2d 127 (1942). As the statutory liquidator of
a surety company the New York insurance commissioner could sue in North
Carolina to recover attorney's fees paid pursuant to an application for a tax
abatement bond.
State ex rel. Ingram v. All American Assurance Co., 34 N.C. App. 517, 239 S.E.2d
474 (1977). The rehabilitation court has broad supervisory powers, and
therefore can award fees to insolvent insurer's counsel of record for services
rendered in insolvency proceeding, although statute does not specifically so
allow. The insurance commissioner has both discretionary and ministerial
powers under the statute.
State of North Carolina, ex rel. Long v. Cooper, 14 F. Supp. 2d 767 (E.D.N.C.
1996). North Carolina Commissioner of Insurance, as receiver of insolvent

insurer, sued former owner of insurer, who had allegedly stolen premiums,
and other individuals, under North Carolina Racketeer Influenced and
Corrupt Organizations Act. The court held that North Carolina Insurance
Commissioner, as receiver of insolvent insurer, had standing to sue former
president of insurer, under North Carolina’s Racketeer Influenced and
Corrupt Organizations Act (“RICO”), for allegedly stealing insurance
premiums. Furthermore, the court held that the Commissioner’s allegation
that the former president of insurer had stolen premiums sent by
policyholders, while leaving insurer obligated to pay claims, through scheme
which involved use of fraudulent mailing, embezzlement, and willful filing of
a false annual statement, stated claim for violation of North Carolina’s RICO.
The court also noted that a Commissioner “assumes the identity” of an
insolvent insurer when he becomes a receiver.
State ex rel. Long v. Petree Stockton, L.L.P., 499 S.E.2d 790 (1998). State of
North Carolina, acting as life insurer’s liquidator, brought action against
Petree Stockton, L.L.P., insolvent insurer’s attorneys, for negligence and
constructive fraud in connection with loans by insolvent insurer. In addition,
liquidator alleged former attorney’s breach of duty of loyalty by defending
new clients in suit by insolvent insurer. The court concluded that a two‐year
statute of limitations for legal malpractice actions applied to liquidator’s
action on behalf of insolvent insurer. The statute permits liquidator to bring
the suit on behalf of insurer within two years or subsequent time period
permitted by applicable law, and term “applicable law” referred to law
applying to insolvent insurer’s malpractice action. The court dismissed the
liquidator’s actions.
State of North Carolina v. Alexander & Alexander Services, Inc., 680 F. Supp.
746 (E.D.N.C. 1988). The State of North Carolina brought an action for RICO
violations and state unfair business and trade practice violations against
alleged defrauders of an insolvent insurer. The court held that the
Commissioner of Insurance, acting as the rehabilitator for the insolvent
insurance company, could not assert claims on behalf of creditors or policy
holders of the insolvent insurance company as this exceeded its statutory
authority to conduct the business of the insurer. The court did find that the
Insurance Commissioner could bring an action under the RICO statute in his
capacity as insurance commissioner and rehabilitator of the insolvent
insurance company as the claims were claims the company would have had if
not for its insolvency.
Ohio Benjamin v. Ernst & Young, LLP, 167 Ohio App.3d 350 (2006). The State
Superintendent of Insurance, as liquidator of an insurance company, filed an
action claiming an accounting firm negligently audited the insurance company’s
financial statements. The defendants failed in their attempt to remove the
action to the Ohio Court of Claims. The action ultimately remained in the state
liquidation court. The court explained that the superintendent wears two
different hats—one as liquidator of insolvent insurance companies and one as
regulator of the Ohio Department of Insurance—and, when serving as
liquidator, steps into the shoes of the insolvent insurance company.
Benjamin v. Sawicz, 159 Ohio App.3d 265 (2004). The State Superintendent of
Insurance, as liquidator of an insurance company, challenged the state
liquidation court’s ruling requiring her to respond to discovery requests. The
court held that she held vital information and therefore, responding to
discovery was proper. The court also held that a rehabilitator or liquidator of an
insolvent insurance company has the power to: 1) file legal claims on behalf of

the insurer; 2) prepare a rehabilitation plan; 3) collect debts; and 4) acquire,
lease, or sell property.
Fabe v. American Druggists' Ins. Co., 70 Ohio App.3d 595 (1990). The court held
that liquidator has exclusive authority to review, investigate, and value all
claims filed in a liquidation. Consequently, presentation to the court of the
liquidator's recommendations regarding allowed claims is a prerequisite to the
liquidator's distribution of the insolvent insurer's assets. Claimant was not
entitled to any distribution from the insolvent insurer, therefore, until its claim
had been determined by the liquidator.
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.
Ratchford v. Proprietors' Ins. Co., 47 Ohio St.3d 1 (1989). The court held that in
a statutory liquidation of an insolvent insurance company, former Ohio Revised
Code Section 3903.07 authorized a court of common pleas to withhold
approval of the sale, by the statutory liquidator, of real property of the
insolvent company only where there is a finding of fraud or abuse of discretion
on the part of the liquidator.
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.
Pennsylvania Ario v. Deloitte & Touche, LLP, 2007 WL 3276424 (Pa. Commw. Ct. 2007).
Reliance Insurance Company (“Reliance”) was placed into liquidation and the
Insurance Commissioner (“Commissioner”) served as the Liquidator. In a suit
against the defendant accounting firm for inflated financial statements, filing
misleading financial reports, and ignoring risk factors, the defendant sought to
depose the Commissioner and the Insurance Department staff to discover
information regarding the Insurance Department’s reasoning for a delayed
intervention in the insolvency of Reliance. The Commissioner objected, raising
the deliberative process privilege, which permits the government to withhold
documents containing confidential deliberations of law, recommendations, or
advice. The court found the information was protected because it was part of
the deliberative process since it revealed the decision making process and the
legal advise given to the Commissioner before steps were taken in the
insolvency of Reliance.

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.
Commonwealth v. Bankers Mutual Fire Ins. Co. of Lancaster, Pa., 45 D.&C.2d
558 (1968). When the liquidator of a domestic mutual fire and casualty
company uses a 500 per cent loading factor, exceptions to it will be dismissed
where collection is sought after the company has been dissolved nearly 11
years and where it appears that the liquidator computed the factor with care
and precision and that the decision regarding the amount of loading was
proper and reasonable. The liquidator is not bound by a policy provision
limiting the time for making an assessment or by a regulatory time limit.
Commonwealth ex rel. Kelly v. Commonwealth Mutual Insurance Co., 450 Pa.
177, 299 A.2d 604 (1973). When additional funds are required to pay losses and
expenses of a dissolved mutual insurance company, the right to assess
policyholders is governed by the terms of the contract. The statutory
liquidator is bound by the terms of the contract.
Commonwealth ex rel. Sheppard v. Central Penn National Bank, 31 Pa. Cmwlth.
190, 375 A.2d 874 (1977). The insurance commissioner, as statutory liquidator
of an insurance company, stood in the shoes of the company, which had an
account in the defendant's bank and had the same contract rights as the
company. However, commissioner was immune from counterclaims asserted
by the bank because of a specific statutory provision (stays) prohibiting any
action at law or equity from being commenced or prosecuted after the date of
the suspension order issued by the commissioner. This section (now repealed)
was to freeze the rights of creditors and policyholders and prevent prejudicial
preferences.
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" (does not do business).
Grode v. Mutual Fire, Marine and Inland Ins. Co., No. 91‐1179, 1991 U.S. Dist.
LEXIS 16850 (E.D. Pa. Nov. 14, 1991). Pennsylvania Insurance Commissioner,
acting as rehabilitator of an insurance company, filed complaint on behalf of
the insurance company's policyholders against the insurance company's

einsurer and reinsurer's parent companies. The defendants moved to dismiss
the complaint on the ground that the rehabilitator lacked standing to pursue
claims belonging solely to the individual creditors of the insurance company.
The district court denied the motion. The court concluded that Pennsylvania
law does not limit the powers of the rehabilitator to those of receivership. The
court based its conclusion on Pennsylvania case law granting the rehabilitator
authority to litigate claims on behalf of policyholders and creditors.
Hunt v. Auferheide, 330 Pa. 362, 199 A. 345 (1938). The statutory liquidator has
the burden of establishing negligence where the liquidator sues directors of an
insolvent casualty company for diversion of assets. In such a suit, the
liquidator could recover only the value of the diverted assets.
Neel v. Kistler, 21 Leh. L.J. 156 (1944). The liability of subscribers to an
insurance exchange is an asset of the exchange. Therefore, the insurance
commissioner, as liquidator, is authorized, under court direction, to maintain
suit against the subscribers since commissioner's powers as liquidator include
marshalling the assets of the exchange.
South Carolina Insurance Commission v. New South Life Ins. Co., 270 S.C. 612, 244 S.E.2d 289
(1978), on remand, 272 S.C. 438, 248 S.E.2d 591 (1978). It was held that
provision stating that an order of rehabilitation vests title to all of the property,
contracts and rights of action of the company in the Chief Insurance
Commissioner, is exclusive, meaning that the Insurance Commission was
without authority to issue a cease and desist order.
Thrower v. Kistler, 14 F. Supp. 217 (E.D. S.C. 1936). In a suit by a creditor of an
old surety company charging that new surety company had fraudulently
obtained all of the assets of its predecessor and should be held liable for its
debts, it was held that voluntary plan of rehabilitation, approved by New York
commissioner of insurance, whereby new company acquired all assets and
business of the old company that was in danger of forced liquidation was valid
and binding on old company's creditors, because the transfer of assets
promoted the interests of the creditors.
Tennessee Boyce v. Williams, 215 Tenn. 704, 389 S.W.2d 272 (1965). The Tennessee
Supreme Court sustained a dismissal of a stockholder's challenge to the
insurance commissioner's approval of a merger between a domestic life
insurer and a foreign insurer. The court relied on a provision which gave the
commissioner authority to obtain through suit brought by the Attorney
General an order to show cause why an order to rehabilitate or liquidate a
company should not be entered against a company merging with another
against the law or without the commissioner's written approval.
Davis v. Amra Grotto M.O.V.P.E.R., Inc., 169 Tenn. (5 Beeler) 564, 89 S.W.2d 754
(1936). When Tennessee creditors had impounded the Tennessee assets of
insolvent Ohio insurance company, and the Ohio receiver asserted that all of
these assets should be transferred to the receiver, it was held that this issue
was not properly presented for determination because Ohio receiver was not a
creditor, where the order appointing the receiver did not vest the receiver with
title to all assets of the insurer. The court also noted that even if the Ohio
receiver should be allowed to intervene, the receiver would not be allowed to
remove Tennessee assets as long as the insurance company owed obligations
to local creditors, where the insurance, although incorporated in Ohio, had
domesticated in Tennessee.

Flowers v. Tennessee Trucking Ass’n Self Ins. Group Trust, 209 S.W.3d 602
(Tenn. Ct. App. 2006). A liquidator seeking to recover payment from members
of a self‐insured trust could not prevent the members from obtaining through
discovery copies of administrative fee invoices by invoking the attorney‐client
and work product privileges. The liquidator carried the burden of proof to
demonstrate that the discovery limitations requested were necessary to protect
the liquidator from undue burden or expenses. The liquidator failed to meet
that burden.
Flowers/Newman v. Tennessee Trucking Ass’n Self Ins. Group Trust, In re T.L.
Green v. Western Express, Inc., 2008 Tenn. LEXIS 416 (Tenn. 2008). The court
applied the Sizemore factors and concluded that a late claim was excusable
because the liquidator was not prejudiced by the late filing and the length of the
delay was minimal. The claim at issue was late because the claimant’s attorney
missed a deadline to file an objection to the referee’s findings of fact and
conclusions of law before the chancery court.
Flowers v. Universal Care of Tennessee, 2007 Tenn. App. LEXIS 643 (Tenn. Ct.
App. 2007). The liquidator does not have the authority to excuse a late filing by
a claimant if the claimant had knowledge of the claim prior to the deadline. By
contrast, the chancery court may so excuse the lateness of a filing.
United Physicians Ins. Risk Retention Group v. United Am. Bank of Memphis,
1996 Tenn. App. LEXIS 69 (Tenn. Ct. App. 1996). The Commissioner of
Commerce and Insurance, as liquidator of the insolvent insurance company,
filed a petition to avoid a transfer made by the insurance company to a bank.
The Commissioner argued that transfers made within four months of a petition
for rehabilitation were invalid. The court rejected that argument, holding that
the statute looked only to the timing of a payment relative to the filing of a
petition for liquidation—not a petition rehabilitation. Because the transfer at
issue occurred more than four months prior to the filing of the petition for
liquidation, it fell outside the statutory avoidance period. The court upheld a
dismissal of the petition to avoid the transfer.
Texas
Cotten v. Republic National Bank of Dallas, 395 S.W.2d 930 (Tex. Civ. App.
1965), writ ref. n.r.e. In an action by receiver of insolvent insurer against bank
for fraud and receiver appealed from summary judgment in favor of bank, the
court held that receiver has right to sue for fraud to recover assets of insurer
for general benefit of all creditors, stockholders, and policyholders of the
insurer. Receiver may not act as the representative of any individual to bring
suit for fraud that is personal to that individual.
Eagle Life Insurance Co. v. Jesus Hernandez, 743 S.W.2d 671 (Tex. App. 1987). A
liquidator appointed by the State Board of Insurance Commissioners, while
acting as a receiver for an insurance company, is not exempt from the
requirement of filing an appellate cost bond. The court held that the liquidator
is not serving as an officer of a governmental entity (and thereby exempt,
pursuant to the Texas statute), but stands in the shoes of the insolvent
insurance company.
English Freight Co. v. Knox, 180 S.W.2d 633 (Tex. Civ. App. 1944) writ. ref.
w.o.m. As the receiver of an insolvent corporation, that receiver has no
greater rights than the corporation possessed by itself. However, the receiver
acts in a dual capacity. The receiver is a trustee for both stockholders and
creditors and as trustee for the creditors the receiver may maintain an action

and defend actions involving acts done in fraud of creditors, even though the
corporation would not be permitted to so act. The receiver was permitted to
recover premiums owned on policies that were issued to a sole proprietor,
who incorporated and claimed the corporation did not assume the liabilities of
the former proprietorship.
Gibbs v. Wheeler, 306 S.W.2d 929 (Tex. Civ. App. 1957), writ ref. n.r.e. The
court held that the receiver received the promissory note from the insolvent
insurer subject to any equities and defenses available against the note in the
hands of the insurer.
Knox v. Taylor, 277 S.W.2d 174 (Tex. Civ. App. 1953) writ ref. n.r.e. The
Industrial Board awarded a workers compensation judgment to an employee
in a claim filed before a receiver for the insurer was appointed, but the
judgment was rendered after the appointment. The employee filed an action
against the receiver and a judgment was rendered in the employee's favor.
The receiver appealed the judgment. On appeal the receiver raised the issue of
subject matter jurisdiction. The court found that the employee's action in
establishing a workman's compensation claim did not interfere with the
receiver's position, management or control of the insurer. The court found
that the receiver was not immune from suit. The judgment of the trial court
was affirmed.
Langdeau v. Pittman, 337 S.W.2d 343 (Tex. Civ. App. 1960), writ ref. n.r.e. Upon
receiver's denial of their claim for damages for injuries caused by the alleged
negligence of an insured of a company in receivership, the injured parties
brought suit against the receiver, and the court ordered that their claims be
approved and paid pro‐rata from the distribution of assets. The court held
that: 1) the receiver had the right to bring an appeal without obtaining
approval of the receivership court; 2) where a "no action" clause in policy,
which required a judgment establishing the insured's liability as condition
precedent to bringing an action was in conflict with the insurance code
providing that a judgment against an insured obtained after institution of
delinquency proceedings is not evidence of liability, non‐compliance with the
clause would be excused; 3) the receiver's discretion to approve and reject
claims vests the receiver with purely ministerial or administrative discretion,
and the law does not require that the receiver give any reason for rejecting a
claim; 4) actions on rejected claims are not a review of receiver's decision, they
are a trial de novo as if originally filed in the court; and 5) where the attorney
employed by the insurer to represent its insured withdrew upon the insurer's
insolvency and the receiver did not provide counsel, and insured was found not
guilty, but plaintiff was granted new trial, the insurer could not be used to void
new trial order because action was not "pending by or against a delinquent
insurer."
Meyers v. Moody, 475 F. Supp. 232, (N.D. Tex. 1979), rehearing denied, 693 F.2d
1196 (5th Cir. 1982), cert. denied, 464 U.S. 920 (1983). The receiver of an
insolvent insurer brought an action on behalf of the company for negligent
mismanagement and breach of fiduciary duty against the former management
of the insurer. The defendants brought a motion for dismissal for failure to
state the claim upon which relief could be granted. The court held that the
Alabama statutory receiver had standing to sue in Texas and is not restricted to
state of appointment like an equitable receiver, and that the receiver has the
right to sue on behalf of the policyholders and creditors. The evidence showed
that the defendant had concealed material facts from various parties and their
reliance was justified; that the defendants had breached their fiduciary duty to

the insurer under Texas law; and the receiver had the burden of proof on
damages, notwithstanding an order of insolvency in Alabama.
Op. Att'y. Gen. V‐101 (Tex. 1947). The insurance liquidator, and those
functioning under the liquidator, are agencies of the state within the meaning
of statutes defining the duties and responsibilities of the State Auditor.
However, the State Auditor's duties applicable to the liquidator's functions
extend only to a determination that public funds are being properly handled,
that legislative appropriations are being properly expended, that no
duplication of personnel or inefficiency exists constituting a drain on public
funds, and that state‐owned property is being used for proper purposes.
Roberson v. Board of Insurance Commissioners of Texas, 171 S.W.2d 542 (Tex.
Civ. App. 1943) writ dismissed w.o.j. The receiver brought an action against the
former president of an insurer in liquidation to recover for a shortage in one
account of the company, and for recovery under a fidelity bond covering the
former president. A judgment was granted to the receiver in an official
capacity for the benefit of the creditors and policyholders of the association.
The court held that the receiver was validly appointed by a court having proper
jurisdiction and acted properly in bringing action in an official capacity and not
on behalf of the state.
State Board of Ins. v. Betts, 158 Tex. 624, 315 S.W.2d 286 (1958). The court held
that the provisions of the statute giving Board power to appoint and fix
compensation of the liquidator and his counsel is mandatory and judge's order
increasing compensation in disregard of statute was void. The fact that
numerous transactions incident to receivership are under the supervision of
the court does not destroy all discretionary powers of the insurance
department.
Wheeler v. American National Bank of Beaumont, 162 Tex. 502, 347 S.W.2d 918
(1961). This was an action by the receiver of an insurance company against
certain banks and individuals for damages arising out of an alleged conspiracy
to defraud the insurer. The issue presented is whether or not the receiver has
the authority to sue for assets belonging to the insurance company. The trial
court ruled that the cause of action was personal to policyholders and
claimants and could not be brought by the receiver. The Texas Supreme Court
ruled that the receiver could maintain the cause of action on behalf of
creditors, policyholders and claimants of the insurer. The receiver alleged that
the banks and individuals involved secured fictitious loans in order to convince
the State Board of Insurance Commissioners that the financial condition of the
insurer was sound. The receiver was found to have a cause of action for
recovery of company assets alleged to have been misappropriated by the
individual conspirators. A Board examiner aided in the conspiracy by making
false statements to the Board regarding the financial condition of the insurer.
Another individual aided in the conspiracy by providing an inflated appraisal
value of the home office building of the insurer.
Washington Kueckelhan v. Federal Old Line Ins. Co., 74 Wash.2d 304, 444 P.2d 667 (1968).
The court in this case held that the insurance commissioner in a rehabilitation
proceeding had been legislatively vested with authority which necessarily
contemplated and embraced a considerable degree of independent
administrative judgment and discretion to carry out such responsibilities
vested in the commissioner. The trial court imposed an operations manual on
the insurance commissioner which divided, diminished and dissipated the
authority, control and discretion the legislature vested in the commissioner.

The operations manual required, among other things, that the commissioner
consult with the company's officers before taking any significant action and
served to thrust the commissioner into a contentious and litigious partnership
with the company's officers and would serve to put the trial court, as arbiter,
into the role of rehabilitator. The court held that this was not the intent of the
legislature and the trial court may not in its supervisory and reviewing role,
substitute its judgment for that of the commissioner. The trial court may only
intervene or restrain when the commissioner is manifestly abusing the
authority and discretion and the court found that not to be the case here. The
commissioner's plan, which the trial court rejected, was reasonable, was
supported by expert testimony and indicated that the commissioner was
simply following the requirements of the insurance code.
Kueckelhan v. Federal Old Line Ins. Co., 69 Wash.2d 392, 418 P.2d 443 (1966).
The court concluded that continuation of the insurer's existing investment
policies rendered its operation hazardous to the policyholders, its creditors and
to the public. Even though the insurer was solvent in the ordinary business
sense, (that it had not defaulted on claims and had annual premium payment
income substantially in excess of death claims), the court on appeal upheld the
lower court's order of rehabilitation. The court found that there was no
requirement that the insurance commissioner wait until disaster strikes or until
an insurance company is insolvent before he/she is empowered to act to
protect the policyholders and the public. The court concluded that where an
insurance company conducts its business and investment policies in such a
manner as to project more than a slight risk of loss to the policyholders, its
creditors and/or the public, this is hazardous as the word is used in the
insurance code and the commissioner is authorized to take appropriate steps
to eliminate that risk of loss.
McConaughy v. Juvenal, 73 Wash. 166, 131 P. 851 (1913). The insurance
commissioner had demanded that in order to continue selling insurance, the
insurer had to give some security, which was given with the personal notes of
some of the officers of the company deposited with the commissioner. The
court found that these notes were made without consideration, they were
never assets of the company, and should have been returned to their makers.
The court found that the notes never resulted in any benefit to the company
nor did they have the effect of being a security for continued business. No
insurance was ever written because of or on the faith of these notes. Because
of this the court held that the insurance commissioner had no authority to
permit a continuation of the business on such security.
Wisconsin In the Matter of the Liquidation of All‐Star Ins. Corp., 112 Wis.2d 329, 332
N.W.2d 828 (1983). The court concluded that the liquidator, for all practical
purposes, takes the place of the insolvent insurance company. The liquidation
order terminates the company's existence and the liquidator stands in the
shoes of the company. Thus, the liquidator's authority does not extend beyond
that of the property, contracts and rights of action of the insolvent company as
of the date of the liquidation order.
Powers and Duties of the Receivership Court
Fifth Circuit
Webb v. B.C. Rogers Poultry, Inc., 174 F3d 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.”
Eighth Circuit Royal Union Life Ins. Co. v. Gross and Great Republic Life Ins. Co. v. Gross, 76
F.2d 219 (Civ.), cert. denied, 295 U.S. 754 (1935). The court had the power to
use the assets of the insolvent insurer to obtain reinsurance for the
policyholders without subjecting the assets to judicial sale.
Alabama Ex parte City of Brundidge v. City of Brundidge, 897 So. 2d 1129 (Ala. 2004).
No ruling by the court will make certain payments recoverable by AIGA.
Denying the employer its reimbursement and subrogation rights would be at
odds with the Workers' Compensation Act, without advancing the policy
objectives of the Guaranty Association Act. 897 So. 2d at 1134 (statutory
citations omitted).
The Home Ins. Co. v. Montgomery County Comm'n, 902 So. 2d 677 (Ala. 2004).
Alabama law recognizes the right of an insurance company undergoing
rehabilitation in a reciprocal state to obtain, pursuant to the Alabama UILA, a
stay in ongoing litigation in Alabama. The receivership court is required to stay
proceedings regarding receiver's motion to enforce settlement agreement with
insolvent insurer that was undergoing rehabilitation. The receivership court is
without authority to enforce the settlement and enter a judgment in favor of
the receiver. See 902 So. 2d at 679.
Alaska
Williams v. Joyce Wainscott, 974 P.2d 975 (Alaska 1999). The receiver’s role is
closer to that of a personal representative in a probate proceeding and thus the
superior court must review de novo disallowances of claims by the receiver.
Arizona
Florida
Irwin v. Pacific Am. Life Ins. Co. 10 Ariz. App. 196, 457 P.2d 736 (1969). At the
termination of rehabilitation proceedings, the court ordered claimants to
pursue their claims against the new company formed directly. It ordered that
in the event the parties were unable to agree on a settlement of claims, a
claimant could file a separate action against the new company in the court
within one year from the date of the termination of the receivership
proceeding. The plaintiffs contended the court had no jurisdiction to set the
one year limit, the appellate court held that the superior court had jurisdiction
to bar or limit actions against the insurer when necessary to fulfill the purpose
of a delinquency proceeding. The appellate court noted that the power of a
court to bar or limit actions was consistent with the broad powers given by the
statute to enforce its basic purpose.
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 Circuit Court presiding over the
receivership can order funds directed to the receiver on behalf of the insurance
company. 2008 WL 3259045 at 1. The exclusive venue provision of § 631.021(6)
does not apply to cases in which a receiver is pursuing contested claims on

ehalf of an insolvent insurance company as opposed to making a demand for
the undisputed assets of the insolvent insurance company. 2008 WL 3259045 at
4.
Fla. Ins. Guarantee Assoc., Inc. v. Soto, 979 So. 2d 964 (Fla. 3d DCA 2008). Courts
are to liberally construe the FIGA Act “to avoid excessive delay in payment and
to avoid financial loss to claimants or policyholders because of the insolvency of
an insurer.” 979 So. 2d at 966 (citing § 631.51(1), Fla. Stat. (2001)).
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). Issue consent orders appointing
receiver; issue orders commencing automatic stays, authorizing receiver to
liquidate assets, and allowing or prohibiting receiver's ability to accept service of
process.
Super Transport, Inc. v. Florida Dep't. of Ins., 799 So. 2d 286 (Fla. 1st DCA 2001).
Trial court's equitable decision in receivership matter involving insolvent
workers' compensation fund to assess fund members even if fraud in
inducement was proven was supported by long‐established equitable principle
recognizing that, if two innocent parties are injured by fraud of third party, one
who made loss possible must bear legal responsibility. 799 So. 2d at 289.
The court is required to determine the reasonableness of the Receiver's
attorney fee agreement required by section 631.141(6), and is not required to
adopt the lodestar approach applied in statutory fee‐shifting cases pursuant to
Florida Patient's Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla.1985) and
Standard Guar. Ins. Co. v. Quanstrom, 555 So. 2d 828 (Fla.1990). 799 So. 2d at
290.
Georgia
Royal Indem. Co. et al. v. Georgia Insurers Insolvency Pool, 284 Ga. App. 787 (Ga.
Ct. App. 2007), cert. denied (Sep. 10, 2007). Trial court in declaratory judgment
action by Insurers Insolvency Pool did not have subject matter jurisdiction to
order plant owner's insurer to pay workers' compensation to temporary
employee following insolvency of direct employer's insurer; a claim against the
plant owner's insurer remained unresolved. 284 Ga. App. 789.
Illinois Miller v. Central Mutual Ins. Co. of Chicago, 299 Ill. App. 194, 19 N.E.2d 822
(1939). Although the power to appoint a receiver is lodged by statute in the
insurance commissioner, the powers of a court in insurance liquidation
proceedings are not strictly limited to those expressly given by statute: Rather,
such power should be sufficiently broad to permit the effective liquidation of
the company in the proceeding brought before the court. The court noted
that during the course of liquidation, the receiver repeatedly encounters
doubtful questions and, it would be absurd to require the receiver to file
independent proceedings each time the aid and instructions of the court was
needed.
People ex rel. Day v. Progress Ins. Assn., 8 Ill. App. 2d 75, 130 N.E.2d 526 (1956).
The court held that its jurisdiction in insurance liquidation proceedings are not
strictly limited to those expressly given by statute, but should be sufficiently
broad to permit the effective liquidation of the insurance company. The
interwoven affairs of the insolvent insurer and its attorney‐in‐fact, and the
alleged indebtedness of the attorney‐in‐fact to the insurer made impossible an
effective liquidation of the insurer without a receivership for the
attorney‐in‐fact, and such a receivership would have been proper as part of the
relief granted under the original liquidation petition.

People ex rel. Baylor v. Multi‐State Inter‐Insurance Exchange, 12 Ill. App.3d
1058, 299 N.E.2d 482 (1973). Under statute permitting exercise of discretion of
trial court to allow attorney's fees when record discloses evidence of bad faith
on part of pleader, trial court did not abuse its discretion in denying motion of
collector of assessment for fees and reasonable expenses against insurance
commissioner.
People ex rel. Gerber v. Central Casualty Co., 37 Ill. 2d 392, 226 N.E.2d 862
(1967). While receiver obtained order of liquidation fifteen days before the
appellant bank transferred funds sought to be recovered by the Director of
Insurance for the unpaid balance of a loan guaranteed by the insurance
company, the court held it had jurisdiction to decide the question of the bank's
liability to the Director in the liquidation procedure. However, the court held
that a court of equity does not have the power to exercise summary
proceedings against persons holding property under reasonably and adverse
claims.
People ex rel. Lowe v. Marquette Nat. Fire Ins. Co., 351 Ill. 516 (1933). On
request by the Director of Trade and Commerce, the Attorney General
petitioned for, and the court ordered liquidation of defendant insurance
company. The court appointed the director as liquidator and an individual
other than the Attorney General as counsel to the director. In rejecting the
insurance company's objection to payment of fees to counsel other than the
Attorney General, the Supreme Court held that the court had authority to
authorize employment of counsel and that because the state had no interest in
a liquidating insurance company, the Attorney General was not authorized or
required to act as counsel for the court appointed liquidator.
Rheinberger v. Security Life Ins. Co. of America, 4 F. Supp. 824 (N.D. Ill. 1933),
appeal dismissed, 72 F.2d 147 (1933). After a receiver was appointed for an
insolvent insurer, and approval of the receivership court was obtained for a
contract with another insurer, policyholders were prevented from intervening
for the purpose of attacking the court's approval of receivership. Further,
although it is the duty of the court to inquire into allegations by plaintiff that
amendments to the reinsurance contract were secured by or constitute fraud
or deceit upon the court, the court found no basis for such allegations.
Indiana
Louisiana
Indiana Department of Insurance v. Indiana Travelers Assurance Corp., 115 Ind.
App. 285, 58 N.E. 2d 761 (1945), transferred, 223 2d 37, 57 N.E. 2d 625. The court
held out the power to grant the extraordinary rewards of receivership lies in
the discretion of the court.
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.

Brown v. Risk Exchange, Inc., 95 2199 (La. App. 1 Cir. 5/10/96), 674 So.2d
484). In response to an action by the Liquidator to recover payments made
to various debenture holders of defunct insurer, the defendants argued that
the court was improperly formed and contended that they were due a setoff
of sums received. Pursuant to Article V., section 5(A) of the Louisiana
Constitution, the Louisiana Supreme Court has the authority to assign a
judge to act as presiding judge over a case. Furthermore, the Liquidator
does not need to seek court authorization to initiate litigation in order to
collect a debt due to the Liquidator’s obligation to “deal with the property
and business of the insurer in his name as commissioner of insurance.”
Finally, the Court determined that no setoff was owed for the principal
amount of debentures held by the defendants as a result of a failure of a
condition of the debentures requiring that the insurer be sufficiently
capitalized before any principal would be due.
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.
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.
Michigan
Mississippi
Nichol v. Murphy, 145 Mich. 424, 108 N.W. 704 (1906). It is within the authority
of the court having jurisdiction over the receivership proceedings in the
winding up of the affairs of a mutual fire insurance company to accept the
resignation of the receiver of such company and to appoint a successor
without notice to the policyholders, where an emergency makes such a change
necessary.
State Security Life Insurance Co. v. State of Mississippi, 498 So. 2d 825 Miss.
Sup. Ct. 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

equiring 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.
Missouri Angoff v. Holland‐America Ins. Co. Trust, 937 S.W. 2d 213 (Mo. App. 1996).
The Court of Appeals upheld the trial court's order regarding a final
liquidation plan which permitted, in part, the Receiver to estimate the value
of unliquidated and undetermined claims pursuant to Missouri statutes
including permitting estimation of IBNR. The court found that the receiver
had broad discretion in conducting and managing a liquidation and that the
Missouri insolvency statutes grant the receiver considerable latitude in
evaluating and determining claims by estimation. The court held that IBNR
losses were subject to estimation, to the extent that those types of claims
can be determined with “reasonable certainty”. In response to the
arguments from the reinsurance community that this interpretation
rendered the statutes an unconstitutional “taking,” and a violation of due
process rights, the court found that the adoption of a liquidation plan was a
valid exercise of police power. Moreover, the court held the statute
permitting estimation was procedural in nature and could be applied
retroactively.
Freedy v. Trimble‐Compton Produce Co., 329 Mo. 879, 46 879, 46 S.W.2d 822
(1931) reversing, 32 S.W.2d 147 (Mo. App. 1930). The Wisconsin insurance
commissioner as liquidator of a Wisconsin mutual insurance company brought
suit to collect on assessments against a Missouri policyholder. In holding that
assessments made by a court in insolvency proceedings are binding on
members of a mutual insurance company regardless of residence, the Missouri
Supreme Court noted that in the particular circumstances of this case, the
assessment decree was not binding on the former member who was a
Missouri resident since the member's insurance policy had expired and thus
the membership had ceased before the liquidation proceeding was instituted
and therefore, the Wisconsin court did not have jurisdiction over the member
which it would have had had the policy been in force at the time the liquidation
proceeding was instituted.
McPherson v. U.S. Physicians Mut. Risk Retention Group, 99 S.W.3d 462 (Mo. Ct.
App. W.D. 2003). Missouri state district court judge discharged the special
deputy receiver appointed to wind up the affairs of the insolvent insurance
companies. The state district court judge found that the special deputy receiver
engaged in willful and negligent misconduct of her duties. The Missouri Court of
Appeals for the Western District held that the district court had the inherent
power to order the receiver to disgorge the unjustified fees. The court reasoned
that the receiver was not immune for her own acts and omissions and, when
acting as the special deputy receiver, she was an officer of the court. However,
the court also held that the district court did not have the authority to award the
auditor’s costs, fees, and expenses in conjunction with the review of the special
deputy receiver’s activities. Of further interest, the judge was directed to recuse
herself upon remand based upon the appearance of impropriety, bias and
partiality.
Relfe v. Spear, 6 Mo. App. 129 (1878). The Missouri insurance commissioner
brought suit against the receivers of five insolvent life insurance companies on
the question of who had the right to deposits made by each of the insurers.
The court held the Missouri commissioner was not the trustee of the securities
required by Missouri law to be deposited although the commissioner may be
the custodian. The equity court under the statutes of Missouri has supervision

and control over the insolvent insurer and therefore the court's receivers are
entitled to take possession of the deposits.
State ex. rel. Angoff v. Wells, 987 S.W. 2d 411 (Mo. App. 1999). A Petition for
writ of prohibition against trial court judge by Receiver of insolvent insurer
was issued and made absolute by Court of Appeals. The receivership court
judge had entered an order prohibiting the Receiver, Director of the Missouri
Department of Insurance from, (1) terminating the Special Deputy Receiver;
and (2) interfering with the Special Deputy Receiver's day to day operation
of the insolvent estate. The Court of Appeals held that the Receiver could
unilaterally and without cause terminate the Special Deputy Receiver. The
Court of Appeals also held that the insurance code was a self contained and
exclusive method of administering an insolvent insurer and that the actions
of all persons, including the Court, in regard to the insolvent estate were
limited by the Insurance Code. The Court of Appeals held that the statute
provided for the Director of the Department of Insurance as Receiver to
operate the estate and that it exceeded the jurisdiction of the trial court to
order the Receiver not to operate the estate.
State ex. rel. ISC Financial Corp. v. Kinder, 684 S.W. 2d 910 (Mo. App. 1985).
The receivership court appointed a trustee to wind up the affairs of the
insolvent insurer. The Court of Appeals, entered its writ of prohibition,
holding that the court exceeded its jurisdiction when it appointed a trustee
to take over the duties of the director of insurance acting as receiver. The
trial court could not supplant the statutory authority of the Director of the
Department of Insurance to be the Receiver of an insolvent insurer.
State ex. rel. Melahn v. Romines, 815 S.W. 2d 92 (Mo. App. 1991).
Stockholders of an insolvent insurer filed for an accounting, and sought
access to the books and records of the companies in a court other than the
receivership court. The Court of Appeals held that the receivership court
had exclusive jurisdiction over all matters relating to the insolvent insurer
and that the trial court lacked jurisdiction to entertain the stockholders
petition. The Court also relied on the fact that the insurance code did not
expressly authorize the stockholders to obtain such relief.
William Blair Realty Partners, III v. Transit Casualty Co. (In Re Transit Cas.
Co.), 900 S.W. 2d 671 (Mo. App. 1995). The Director of the Department of
Insurance, as Receiver, and the Special Deputy Receiver, may only extend
the insurer's assets subject to court approval. A common law novation of a
lease agreement will occur only with the court's approval.
New Jersey
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.
In the Matter of the Liquidation of Integrity Insurance Company, 231 N.J. Super.
143 (Ch. Div. 1988). Integrity's creditors sought a policyholders' committee to
enable the policyholders to protect their interest in the liquidation of the
company. The policyholders claimed that they had not been informed as to
the progress of the liquidation nor had they been given the opportunity to
participate in negotiations and were unaware of the status of commutations.
The court held that it is empowered and authorized to create a policyholders'
committee pursuant to its equitable powers as Chancery Court and the
Uniform Insurers Liquidation Act. The court, however, concluded that
policyholders had no right to notice of all the proceedings regarding the
liquidation of Integrity under the Uniform Insurers Liquidation Act. Moreover,
the court concluded that the creation of a policyholders' committee would
inevitably result in the inefficient administration of the Integrity estate,
increased litigation, depletion of the assets of Integrity's estate and would
have an adverse impact upon the interests of all other creditors. Thus, the
court denied the motion to appoint a policyholders' committee.
New York 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.
In re Application for an Order Staying Arbitration, No. 24632, slip op. (N.Y. App.
Div., 1st Dept. December 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 Lawyer Mortgage Co., 169 Misc. 802, 9 N.Y.S.2d 127 (1938), affirmed, 256
A.D. 974, 11 N.Y.S.2d 250. The court, in the exercise of its inherent equity
powers, could approve a plan for the reorganization of a domestic insurer if it
was acceptable to the insurance commissioner and was fair to all concerned.
In re National Surety Co., 286 N.Y. 216, 36 N.E.2d 119 (1941). Only the court may
allow or forbid claims on the assets of a dissolved insurance company.
In re National Surety Co., 248 A.D. 111, 288 N.Y.S. 1014 (1936). An order
disapproving the acceptance bid by the insurance commission of the highest
for the stock of a new surety company organized under a plan of rehabilitation
on the ground that the bid was inadequate and that acceptance of an

amended bid was in the best interests of the estate of the rehabilitated
company was improper under the insurance code.
In re North American Title Guaranty Co., 262 N.Y. 455, 188 N.E. 17 (1933). When
the state took possession of an insurance company, a contract of employment
with that company terminated. The court disregarded the claim that there was
a failure of consideration in the loss of a title plant, turned over as part
consideration.
Matter of Casualty Company of America v. America Rubin Claims, 244 N.Y. 443,
155 N.E. 735 (1927). The insurance commissioner was not acting as an
arbitrator in determining the fees to be paid to hired counsel. The attorney
was required to apply to the court for additional compensation and the court
had the power to increase counsel fees, a power incidental to the supervision
of the courts of liquidation, not dependent on the power of approval
contained in the insurance code.
Matter of People, 214 N.Y. 553, 108 N.E. 825 (1915). A court can set another
date for the liquidation of an insurance company other than that set in the
entry directing the company's liquidation, provided that the order of
liquidation applied to all creditors equally and was fixed at the time of the
entry. In the case at bar, the creditors of the company and their proportionate
shares of the estate were to be determined at the time of liquidation. The
insurance code was not meant to permit the court to discriminate between
different classes of creditors. It was designed only to allow a change in the
date of the proceedings.
National Bondholders Corporation v. Joyce, 276 N.Y. 92, 11 N.E.2d 552 (1938).
The court has the power to supervise and control the conduct of the
liquidation proceedings of an insurance company, subject to the discretionary
power vested by the legislature in the insurance commissioner. The court had
the power to permit or deny an application for intervention and could direct
the commissioner to bring actions against former company directors and
officers by nominating one individual from the groups of bondholders,
creditors and stockholders.
Van Schaick v. Carr, 159 Misc. 873, 289 N.Y.S. 495 (1936). The following
grounds were found to be insufficient to disqualify the court in actions brought
by the insurance commissioner against directors of companies to recover for
mismanagement during their tenure of office: the court's knowledge of the
directors' offers of settlement, a previous decision indicating an opinion of the
directors' liability, the court's knowledge of the directors' financial condition,
the possibility of subjecting the court to criticism, and an unestablished
contention that the court's work in connection with rehabilitation had created
sympathy for certificate holders.
North Carolina
State ex rel. Ingram v. All American Assurance Co., 34 N.C. App. 517, 239 S.E.2d
474 (1977). The rehabilitation court has broad supervisory powers, and can
award attorney's fees to insolvent insurer's counsel of record, even though the
statute does not specifically allow this.
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.
Ratchford, v. Proprietors Insurance Company, Ohio Ct. of Appeals, Docket No.
84 AP‐911 (slip op. 1985). After date set by court as deadline for filing claims
against insolvent insurance company, the court will not modify the cut‐off date
to consider the claims as timely filed. The court held that pursuant to the Ohio
statute governing proofs of claims, the court has no discretion to consider
claims to have been timely filed because of equitable considerations.
Oklahoma
State ex rel. Hunt v. Green, 508 P.2d 639 (Okla. 1973). The Supreme Court of
Oklahoma held that the district court judge had no prerogative or power but to
deny or grant the insurance commissioner's application for appointment as
receiver. The writ of prohibition against district court judge was thus a proper
remedy to arrest the district court's decision to put off making a ruling on the
commissioner's application so as to allow the officers of the insurer to submit a
plan of rehabilitation of their own.
South Carolina Parris v. Carolina Mutual Fire Ins. Co., 91 S.C. 344, 74 S.E. 1010 (1912). All
obligations of a mutual company and of its members become fixed on the date
the company is placed in the hands of a receiver, and a court taking charge of
the company through the institution of receivership proceedings must enforce
these obligations and adjust all the equities of the parties.
Wetmore v. Scalf, 85 S.C. 285, 67 S.E. 298 (1910). The court conducting the
receivership of an insolvent South Carolina domestic mutual insurer had
jurisdiction over all members of the company to collect assessments,
regardless of their residence.
Tennessee McReynolds v. United Physicians Ins. Risk Retention Group, 921 S.W.2d 176
(Tenn. 1996). The court reaffirmed the power of a court to terminate
coverage and to reduce the time for filing notice of medical incidents. The
contrary decision of a lower court, holding that the court could terminate
coverage but not require that claims be reported during the shortened
coverage period, was inconsistent with the goals of the Insurer’s
Rehabilitation and Liquidation Act (efficiency, economy, and equity).
Pope v. Xantus Healthplan of Tennessee, 2000 Tenn. App. LEXIS 319 (Tenn. Ct.
App. 2000). Under Tennessee law, only the Commissioner of Commerce and
Insurance has authority to determine whether to seek to rehabilitate, dissolve,
or liquidate a troubled insurer. No court may initiate those processes. Courts,
however, may review such requests. They also may review expenses paid by
the rehabilitator, and they may on their own motion decide that rehabilitation
has been accomplished and that the grounds for rehabilitation no longer exist.
In addition, Tennessee adopted the “California test” for a Commissioner’s
payments during rehabilitation. The Commissioner is not required to wait for
court approval before incurring costs necessary for rehabilitation, but he or she
must be able to provide documentation that the court later requests in
determining whether the payments at issue were proper.

Texas
Op. Att'y. Gen. 0‐3910 (Tex. 1941). A court‐appointed receiver for insurance
company may be removed upon motion of interested party, supported by
competent evidence as to the desirability and necessity of the change, and the
court may appoint the statutory liquidator of the Board of Insurance or any
other person as receiver.
State Board of Ins. v. Betts, 158 Tex. 83, 308 S.W.2d 846 (1958). When the State
Insurance Board failed to appoint a successor to an attorney who had
resigned, the court found that it was not arbitrary and capricious of the judge
to remedy this defect by reappointing the attorney previously discharged by
the Board. The court noted that the insurance code provides for the
establishment of a statutory liquidator appointed by the Board but operating
under extensive judicial control. The authority of the court extends to all
powers essential to effective exercise of the authority delegated by the code
and this can extend to appointment of an attorney. The code does not give the
Board and Commissioner sole and exclusive authority to appoint counsel under
all conditions.
State Board of Ins. v. Betts, 158 Tex. 624, 315 S.W.2d 286 (1958). The court held
that the provisions of the statute giving Board power to appoint and fix
compensation of the liquidator and his counsel is mandatory and judge's order
increasing compensation in disregard of statute was void. The fact that
numerous transactions incident to receivership are under the supervision of
the court does not destroy all discretionary powers of the insurance
department.
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.
Williams v. Knox, 207 S.W.2d 151 (Tex. Civ. App. 1947), writ ref. n.r.e. In a suit by
receiver of reciprocal insurance exchange to recover sum alleged to be owed
by a policyholder of the exchange, the policyholder argued that court had no
jurisdiction to appoint a receiver. The court held that Art. 5068c (repealed;
now Art. 21.28) authorizing appointment of a liquidator for an insurer to act as
a receiver, the court had jurisdiction to appoint a receiver.
Virgin Islands
In the Matter of Dome Ins. Co., 592 F. Supp. 1219 (D. V.I. 1984). The Governor of
the Virgin Islands signed legislation which amended the Uniform Insurers'
Liquidation Act to provide for eight different classes of creditors. However,
since the legislation was signed after Dome Insurance Company was placed in
receivership, the amendment did not apply in this case, and it was up to the
discretion of the Court to establish the order of priority for payments of claims
among general creditors of Dome.
Washington Kueckelhan v. Federal Old Line Ins. Co., 69 Wash.2d 392, 418 P.2d 443 (1966).
The court held that the court's sole and proper function is to supervise and

eview the actions of the insurance commissioner while the commissioner is
operating the seized company. The courts may not dictate or outline general
policy or course of conduct for the insurance commissioner because that
outline is dependent on the statutory provisions. The judiciary may check
abuses of the commissioner's discretion in following statutory provisions for
the rehabilitation of a seized company. The commissioner is not acting as an
agent of the courts and the court's power of discretion vis‐à‐vis the insurance
commissioner is curtailed by the commissioner's statutory powers and the
statutes governing the management of insurance companies and rehabilitation
proceedings.
Plan of Rehabilitation
U.S. Supreme International Life Ins. Co. v. Sherman, U.S. 346, (1923), affirming, 291 Mo. 139,
236 S.W. 634 (1921). A receiver was appointed for an insolvent insurer, and a
number of shareholders and certificate holders proposed a plan of
rehabilitation which would provide in part for the certificate holders to
contribute additional funds and in return receive stock. The plan was approved
by the Missouri state court and the company was allowed to continue in
business for four more years when another solvent company merged with it
and all its obligations. The court held that those who had agreed to the plan
did not act on behalf of all certificate holders and thus, these later holders
were not bound by the cancellation of the certificates.
Eighth Circuit National Surety Corp. v. Williams, 110 F.2d 873 (8th Cir. 1940), cert. denied, 311
U.S. 674. Where a New York corporation, contracted with the insurance
commissioner as rehabilitator of an insolvent insurance company to assume
liabilities, excluding those losses occurring prior to a judgment of insolvency,
the court would not invalidate the contract on the ground that the corporation
received practically all the assets of the old company and should be held liable
for its debts, in view of evidence that corporation received assets of
approximate market value of $11,000,000 and the old company's assets had an
approximate market valuation of $32,000,000.
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.
Mendel v. Garner, 283 Ark. 473, 678 S.W.2d 759 (1984). Policyholders of an
insolvent carrier appealed a provision in the rehabilitation plan that cut off
their rights to surrender their policies for the cash surrender value. In
upholding the plan, the Supreme Court of Arkansas held: "The rehabilitation of
insurance companies pursuant to state insolvency statutes does not impair the
obligation of contracts." 678 S.W.2d at 761.

California
In Re Pacific Standard Life Ins. Co., 9 Cal. App. 4th 1197 (1992). After the
Superior Court placed Pacific Standard in conservation, an insurer offered to
purchase Pacific Standard's Texas subsidiary. The conservation manager
signed the bidder's letter, which signified acceptance and agreement to its
terms. After the California Insurance Commissioner asked the conservation
court to approve the sale, the Commissioner received a joint bid more
favorable than the first bid. Upon receiving the second bid, the Commissioner
presented it to the court for approval, and the conservation court confirmed
the terms of the later bid. The first bidder appealed, claiming that the
conservation court improperly considered the later bid. The Court of Appeal
rejected this claim, finding that the original bidder had no standing to appeal.
According to the court, the original bidder was not an "aggrieved party" under
§ 904 of the Code of Civil Procedure because it had no legally recognizable
interest in the Pacific Standard subsidiary.
California Commercial Nat. Bank v. Superior Court, 14 Cal. App. 4th 393 (Ct. App. 1993).
Appellate court reversed the trial court’s approval of a rehabilitation plan
proposed by the Insurance Commissioner for Executive Life Insurance
Company. On appeal, the court found that the plan failed to meet the
standard set forth in Carpenter v. Pacific Mut. Life Ins. Co., 10 Cal. 2d 307, 329
(1937), aff'd, 350 U.S. 297 (1938), or the statutory requirement that claims in
a class share ratably with other claims in the same class. The plan was found
to be legally deficient in three respects: (a) it established a unique "two tier"
valuing system for municipal guaranteed investment contracts that was
without any basis in law, (b) it established a "dual valuation" system that
improperly discriminated between substantially identical policies in the same
class, and (c) it selected a liquidation valuation date for those who chose not
to accept restructured policies that had no relationship to the amount of
assets that would be available for distribution were liquidation to occur.
In re Executive Life Ins. Co., 32 Cal. App. 4th 344 (Ct. App. 1995). Appellate
court upheld lower court's approval of plan of rehabilitation, finding, inter
alia, that (a) the sale of the insurers' junk bond portfolio was permissible, (b)
agreements to fund municipal bonds were entitled to Class 6 priority, (c) the
Conservation Date Statutory Reserves (CDSR) method could be used to
value policyholder claims and (d) estimated expenses of the liquidation
could be charged against the value of the account contract holders that
opted out of the plan.
Quackenbush v. Mission Ins. Co., 62 Cal. App. 4th 797 (Ct. App. 1998).
Appellate court affirmed lower court order approving the Insurance
Commissioner's amended liquidation plan for Mission Insurance Company,
rejecting the reinsurer's argument that the plan would violate statutory
provisions precluding contingent and unliquidated claims from participating
in distributions of the estate. The plan expressly prohibited requiring
payment from reinsurers for claims until their liability and quantum had been
determined. While claimants were permitted to submit contingent and
unliquidated claims, the Commissioner was required to provide reinsurers
notice and an opportunity to contest the fixing of liability and quantum. The
court rejected the reinsurer's argument that reinsurers would not, as a
practical matter, be provided such notice and opportunity.
Quackenbush v. Mission Ins. Co., 46 Cal. App. 4th 458 (Ct. App. 1996). The
Insurance Commissioner as liquidator of Mission Insurance Company filed a
proposed liquidation plan requiring Mission's reinsurers to pay reinsurance
proceeds in respect of estimated contingent claims, including incurred but

not reported losses (IBNR). The Superior Court approved the plan and the
reinsurers appealed. The California Court of Appeals held that because the
pertinent state insurance statute expressly forbade claimants with
contingent or unliquidated claims from participating in a liquidation plan, the
Commissioner's proposed liquidation plan was not authorized under the
statute. The court further found that absent contrary language in the
reinsurance policy, the reinsurer is not required to pay the original insolvent
insurer's estate unless the claim is certain and allowed by the conservator,
liquidator or statutory successor. The court remanded with instructions to
the trial court to order the Commissioner to submit a new plan that
complied with the statute.
Illinois In re Conservation of Alpine Ins. Co., 318 Ill.App.3d 457, 741 N.E.2d 663 (2000).
Director of Insurance brought liquidation action against insolvent insurance
company. Insurer sought to implement proposed rehabilitation plan, which
Director had previously found impermissibly discriminatory and preferential.
Insurer’s proposal subordinated multiple policy insureds to insurer‐only
insureds. Insurer argued its plan treated all insureds equally, requiring all
insureds to look other coverage first. The court rejected the exhaustion of
non‐extent coverage as a precondition to participation in a distribution. The
court found that 215 Ill. Comp. Stat. 5/201(1), which prioritizes distribution of an
insolvent insurer’s assets, prevents “punishment of multiple policy insureds
based on the fortuitous circumstances of their seeking out additional
coverage.”
Kentucky
Mississippi
Kentucky Cent. Life Ins. Co. v. Stephens, 897 S.W.2d 583 (Ky. 1995). Although
rehabilitation is preferable to liquidation, a commissioner’s reorganization plan
calling for liquidation will not be overturned lightly. The commissioner has
broad discretion to deal with the insurance company’s problems and when
contesting a decision by the commissioner, the burden of proof rests with those
challenging the decision.
Bank of Miss. v. Miss. Life & Health Ins. Guar. Ass’n, 850 So. 2d 127 (Miss. Ct. App.
2003). An annuity purchased by a pension plan was assigned to a liquidating
trust for the benefit of the beneficiaries of the pension plan upon the insolvency
of the insurance company that sold the annuity. The trustee of the liquidating
trust participated in the rehabilitation plan of the insolvent insurer and accepted
a lower interest rate from a second insurance company that assumed the
annuity. The trustee filed a claim with the Mississippi Life and Health Insurance
Guaranty Association (“MLHIGA”) for reimbursement of the losses resulting
from the insolvent insurer’s default. MLHIGA denied the claim because the
pension plan had been protected by the Pension Benefit Guaranty Corporation.
The trustee challenged the denial and, ultimately, the Supreme Court of
Mississippi agreed with the trustee that the losses were covered by MLHIGA.
On remand, two disputes again arose between the parties. First, the trustee
argued that MLHIGA was required to pay to the trust interest accruing after the
original annuity contract’s maturity date at the rate contracted for in the original
annuity (issued by the insolvent insurance company), or alternatively, the
slightly lower legal statutory interest rate. MLHIGA argued that the interest rate
should be an even lower interest rate than that stated in the agreement with
the second insurance company that assumed the annuity under the
rehabilitation plan. The court held that the rehabilitation plan’s lower interest
rate should be applied, reasoning that the relationship with the insolvent insurer
ended at insolvency. By participating in the rehabilitation plan, the trust sought
to mitigate its losses. To award the interest rate in the original contract, or at
the statutory rate, would give the trust greater damages than if it were to

ecover from the insolvent insurer directly. In the same appeal, the court
rejected the trust’s request that it be awarded attorney fees and expenses
because such an award would be punitive in nature in this context.
Missouri
New York
Lakin v. General American Mut. Holding Co., 55 S.W.3d 499 (Mo. App. W.D.,
2001). The rehabilitation court approved a plan of reorganization, approving the
sale of stock to MetLife, but the Director of Insurance and MetLife disputed the
closing date for the sale. The Missouri Court of Appeals held that a statutory
five‐day period for appealing a finding for the Director applied to Metlife, rather
than the longer, 30‐day statute in general appeals, and despite the fact that
MetLife was not a party to the receivership action.
In re Bond and Mortgage Guarantee Co., 243 A.D. 813, 278 N.Y.S. 352 (1935). An
order disapproving a plan promulgated by the insurance commissioner for
readjustment, modification and reorganization of the rights of the holders was
found by the court to be unwarranted where the proposed plan was
reasonable and equitable to the certificate holders, of whom ninety‐one
percent had consented and none of whom had objected, and where it was
doubtful that in the event of foreclosure it would realize a sum sufficient to
pay the certificate holders the amount of their investments.
In re New York Title & Mortgage Co., 171 Misc. 489, 12 N.Y.S.2d 214 (1939). A
plan for the reorganization of a title and mortgage company was to be
declared effective when the holders of not less than a majority in amount of all
allowable claims, as estimated by the insurance commissioner, assented to the
plan. Court approval was required for the plan to become effective. Such
approval would not be forthcoming unless there was a substantial basis for the
commissioner's estimates.
South Carolina
Texas
Thrower v. Kistler, 14 F. Supp. 217 (E.D. S.C. 1936). In a suit by a creditor of an
old surety company charging that new surety company had fraudulently
obtained all of the assets of its predecessor and should be held liable for its
debts, it was held that voluntary plan of rehabilitation, approved by New York
commissioner of insurance, whereby new company acquired all assets and
business of the old company that was in danger of forced liquidation was valid
and binding on old company's creditors, because the transfer of assets
promoted the interests of the creditors.
American Benefit Life Ins. v. Hill Country Life Ins. Co., 582 S.W.2d 227 (Tex. Civ.
App. 1979) writ ref. n.r.e. The sole stockholder of 100% of the insolvent
insurer's stock challenged the receiver's rejection of a plan of reinsurance. On
appeal, the court held that the decision of the receiver and the court regarding
the approval of the plan of rehabilitation was a discretionary one and would
only be set aside if an abuse of discretion were shown.
Stay of Proceedings
Second Circuit Ace Grain Co. v. Rhode Island Ins. Co., 107 F. Supp. 80 (S.D. N.Y.) affirmed, 199
F.2d 758 (2nd Cir. 1952). The court granted the receiver's motion for an order
dismissing supplementary proceedings and restraining all actions or
proceedings in the nature of attachment, garnishment or execution against an
insurer placed in receivership in Rhode Island.
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. 6 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Fifth Circuit
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). Insurance broker brought action as subrogee
against insolvent insurer and its president and chairman of the board to
recover unearned premiums paid after insolvency. Citing the McCarran‐
Ferguson Act, 15 U.S.C. § 1011, the court affirmed an administrative stay
pending resolution of all proceedings in the state liquidation court on the
grounds of Burford abstention. Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098
(1943). The action against the president and chairman of the board individually
for mismanagement and under capitalization was also properly stayed,
because the derivative claim involved the same assets which the Commissioner
was required to collect and distribute in the liquidation proceeding. Pursuit of
those claims in federal court would "usurp" Louisiana's control over the
liquidation proceeding, permit plaintiff to obtain an unfair advantage over
other claimants, and "encroach" into the Commissioner's exclusive power as
liquidator.
Brown v. Link Belt Division of FMC Corp., 666 F.2d 110 (5th Cir. 1982). The court
affirmed a stay of all claims against an insolvent insurer, that was placed in
liquidation during the pendency of the actions.
Eighth Circuit
Beasley v. Keiper, 2002 WL 1078388 (8th Cir. 2002). The Eighth Circuit denied
defendant’s request to stay a pending appeal when defendants’ insurer, PHICO
Insurance Company, became subject to a liquidation order, determining that all
the work of defense counsel already had been done, the case was fully briefed
and ready for decision without argument, there were no additional expenses
chargeable to the insurance company, and further processing by the relevant
state authorities of claims against the insurance company would in no way be
impeded by the court’s affirming the decision in the case.
6 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).

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.
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.
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 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.
Alabama Ex parte Gregory V. Serio v. Cay‐Chel, Inc., and Frontier Ins. Co., 893 So. 2d 1148
(Ala. 2004). Under the UILA, a reciprocal state's rehabilitation order entitled
company to stay of action in Alabama, but that the trial court had the option of
deciding whether to stay the counterclaims by the company. 893 So.2d at 1153.
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.
The Home Ins. Co. v. Montgomery County Comm'n, 902 So. 2d 677 (Ala. 2004).
In states that have adopted the UILA, receivership courts must stay an action
against an insurer involved in a pending rehabilitation proceeding in a reciprocal
state.
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 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.
California Carpenter v. Pacific Mutual Life Ins. Co. of California, 13 Cal.2d 306, 89 P.2d 637
(1939). California Supreme Court held that policyholders' appeal of the order
of rehabilitation did not stay all proceedings such that the lower court did not
have jurisdiction to enter an order of liquidation because that order vested title
to the company's stock under a provision that made the commissioner the
liquidator, not conservator as under the rehabilitation order.
Profeta v. Vesta Fire Insurance, No. A116030, 2008 Cal. App. Unpub. LEXIS 1660
(Ct. App. Feb. 29, 2008). Plaintiff brought suit against insurer to collect a
judgment against insured. During the appeal, insurer’s counsel notified the
court that insured was placed into liquidation in Texas. Insurer moved to stay
based on the Texas Insurance Code and a stay order issued by the Texas court.
The court held a bare assertion that Texas had adopted the UILA was
inadequate to establish that a Texas stay order should be honored by a
California court under UILA reciprocity principles. Additionally, the court found
no reason that permitting the appeal to proceed would interfere with the Texas
litigation.
Serio v. The Superior Court Nos. G030164, G030165, 2002 WL 31794160 (Cal.
App. Dec. 13, 2002). Under the Uniform Insurance Liquidation Act (UILA), an
action brought by performance bond holders against insolvent bond issuing
insurer was required to be stayed. To maintain the action, the holders were
required to file claims against insurer in the state where rehabilitation
proceedings were instituted.
Webster v. Superior Court, 46 Cal. 3d 338, 250 Cal. Rptr. 268, 758 P.2d 596
(1988). California Supreme Court held that a personal injury claimant who
elected to seek recovery only from an insolvent insurer's insurance coverage
rather than the insolvent's own assets must be allowed to maintain a civil
action for damages. The Court reversed the appellate court's granting of a
stay of claimant's action.

Colorado
Connecticut
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.
Burse v. American Int’l Airways, Inc., 808 A.2d 672 (Conn. 2002). An appeal in a
worker’s compensation case by the employer and the employer’s insurer in
rehabilitation was not rendered moot by the Pennsylvania court’s stay order,
because practical relief could be obtained by a decision in the insurer’s favor.
D’Agata v. Nutmeg Intensive Rehab., PC, No. CV020077692S, 508, 2002 WL
1843028 (Conn. Super. July 15, 2002). The court stayed a personal injury action
against a defendant whose insurer was insolvent, in light of a Pennsylvania state
court litigation and stay order and based on Insurers Rehabilitation and
Liquidation Act and reciprocity.
Fothergill v. Proulx, No. CIV.3:99CV2259 (PCD), 2001 WL 34546682 (D. Conn. Oct.
18, 2001) (Not Reported). The court denied a motion to stay trial, despite
ongoing liquidation proceedings involving the defendant’s insurer, where the
Connecticut Guaranty Association had not yet decided whether the claim was
insured; also comity provided no basis for stay because the insurer in liquidation
was not a party to the case.
Grasso v. City of Ansonia, No. CIV. 302CV455MRK, 2003 WL 22918494 (D. Conn.
Nov. 7, 2003). The court denied a motion to stay a federal question action,
despite insolvency and liquidation of the defendants’ insurer. Neither the
liquidator nor Connecticut Insurance Guaranty Association (CIGA) was a party to
the federal action, and neither intervened to prevent disruption of state
proceedings. The CIGA Act applies to state and reciprocal state proceedings,
but does not divest federal courts or jurisdiction. The court also declined to
abstain.
Massey v. Town of Windsor, 289 F. Supp. 2d 160 (D. Conn. 2003). The federal
district court stayed a discrimination action against the defendant city whose
liability insurer was declared insolvent and ordered liquidated in Pennsylvania.
Citing the Uniform Insurers Rehabilitation and Liquidation Act and the
Pennsylvania stay order, the court granted the motion for stay and ordered the

defendant to bring the action to the attention of the Connecticut Insurance
Guaranty Association (CIGA) so CIGA could set forth its position on the case.
Florida Daniel Haili, M.D. v. Radiation Oncology Associates, P.A. et al., 820 So. 2d 415
(Fla. 5th DCA 2002). The stay is required in order to allow FIGA, who must step in
to replace the insolvent insurer, time to investigate, evaluate and defend the
claims. Its ability to do so would be seriously impaired without the six month
stay. In addition, claimants are protected by the stay since FIGA will be in a
better position to determine whether to settle a claim, without incurring
expensive litigation. Finally, FIGA (representing the state funds collected for
such purpose) is also served by a stay since it must have a reasonable time in
which to mount an adequate defense. 820 So. 2d at 416. The stay must also be
as to the entire proceeding, not just as to one party. 820 So. 2d at 417 (citation
omitted).
Fla. Dep't. Fin. Serv. v. Poe Financial Group, Inc., No. 8:07‐CV‐01590‐T‐17, 2008
WL 2704386 (M.D. Fla. Jul. 9, 2008). Bankruptcy Court did not abuse its
discretion in denying the Department’s motion for relief from automatic stay
and for abstention where the Dep't. had a sufficient opportunity to look for the
missing funds but no funds were found; the statutory accounting would be no
more substantial than what was already conducted and where the automatic
stay did not preclude the Dep't from pursuing the funds if it later discovered
that certain third parties were in possession of the missing funds. 2008 WL
2704386 at 2.
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 rates were not given in exchange for
borrowed money, the reinsurer did not need the Florida Department’s
approval before issuing the surplus notes.
Florida Indep. Auto Dealers Ass’n Health and Welfare Benefit Plan v. Fidelity
Sec. Life Ins. Co., 636 So. 2d 37 (Fla. Dist. Ct. App. 1994). Insurer’s and
reinsurer’s post‐receivership stipulation dismissing claims and counterclaims
in pre‐receivership litigation held ineffective where stay provisions of
receivership order prohibited the receiver from defending “legal actions
wherein the insurer or the receiver is a party defendant . . . .”
Frontier Insurance Co. v. American Title Services, 838 So. 2d 1178 (Fla. 5th DCA
2003). It is the public policy of Florida to cooperate with reciprocal states in
delinquency proceedings involving an insurer. 838 So. 2d at 1179.

Gruber v. Caremark, Inc., 853 So. 2d 540 (Fla. 5th DCA 2003). Had employer
claimed the benefit of the stay before the Judge of Compensation Claims
("JCC"), under principles of comity, the JCC would have been required to stay
the worker's compensation proceedings until the Pennsylvania stay was lifted.
However, because employer did not raise that issue before the JCC, the District
Court concluded employer waived the benefit of the stay. The Court reasoned
that where an action is not directly against the troubled insurer, but against its
insured under a liability policy, the insurer's assets are not directly at risk and the
reasons for enforcing a foreign court's stay of litigation is a good deal less
compelling than it might be in a direct action against an insurer. 853 So. 2d at
542‐43.
Hudson v. Charles McGovern, III et al., 949 So. 2d 322 (Fla. 2d DCA 2007). All
proceedings in which the insolvent insurer is a party or is obligated to defend a
party in any court or before any quasi‐judicial body or administrative board in
this state shall be stayed for 6 months, or such additional period from the date
the insolvency is adjudicated, by a court of competent jurisdiction to permit
proper defense by the association of all pending causes of action as to any
covered claims; provided that such stay may be extended for a period of time
greater than 6 months upon proper application to a court of competent
jurisdiction. To give FIGA adequate time to investigate, evaluate, and properly
defend a lawsuit against an insured, the statute authorizes a temporary stay of
all proceedings that FIGA is obligated to defend. 949 So. 2d at 323 (citing §
631.67, Fla. Stat. (2006)). Although the statute provides FIGA with an automatic
stay of six months for covered claims it is obligated to defend, the statute does
not limit a stay to six months; the statute allows for extensions of the stay. 949
So. 2d at 323.
In re Aloisi, Anna Patricia, Debtor, 261 B.R. 504 (Fla. M.D. 2001). As a general
rule, the filing of a bankruptcy petition operates to stay litigation involving prepetition
claims against a debtor. 261 B.R. at 508 (citing 1 U.S.C. § 362(a)(1)).
However, the automatic stay can be lifted if an interested party demonstrates
“cause.” 261 B.R. at 508 (citing 11 U.S.C. § 362(d)(1)). The automatic stay can be
lifted if an interested party demonstrates “cause,” which the judiciary must
determine by examining the totality of the circumstances in each particular
case. 261 B.R. at 508 (citations omitted). Modification of automatic stay;
balancing test‐‐Courts have adopted a balancing test for determining whether
to modify the automatic stay to permit a pending action to proceed in another
forum. A court should balance the prejudice to the debtor against the hardship
to the moving party if the stay remains in effect as well as consider the efficient
use of judicial resources, the location of witnesses, documents, and other
necessary parties. A court can examine whether a creditor has a probability of
success on the merits of his case. 261 B.R. at 508 (citations omitted).
Lang's Auto Serv. and First Alliance Ins. Co. v. Proctor, 667 So. 2d 334 (Fla.
Dist. Ct. App. 1995). Six month statutory stay issued under Section 631.67,
Florida Statutes, to allow the Florida Insurance Guaranty Association (the
“Association”) to defend claims is mandatory and applies to cases before
the Florida District Court of Appeals. Because the stay applies not only to
the insolvent insurer, but also to the proceeding itself, the appeal was
stayed as to co‐appellant. Noting the importance of promptly adjudicating
workers’ compensation claims, the Court urged the Association to prosecute
the appeal as soon as possible, if it ultimately assumed responsibility for the
claim.

Main Ins. Co. v. Bradford, Williams, McKay, Kimbrell, Hamann & Jennings, P.A.,
369 So.2d 380 (Fla. App. 1979). A civil action brought against insurer in Florida.
The insurer thereafter voluntarily sought, and was granted, appointment of
receiver in Illinois, and an ancillary receiver was then appointed in Florida. The
civil action proceeded to judgment. The insurer appealed on grounds that
action should have been stayed, and that the trial court erred in adding Florida
rehabilitator as a party‐defendant. The court held that 1) appointment of
Illinois rehabilitator does not in and of itself halt the Florida action; 2)
appointment of Florida ancillary receiver did not act as an automatic stay of
proceedings; and 3) the responsibility of corporate officials and rehabilitator to
represent the defendant in the litigation was not joint.
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). Delinquency petition operates as
an automatic stay applicable to all persons and entities. 902 So. 2d 834.
Sierra v. International Medical Centers, Inc., 538 So. 2d 102 (Fla. Dist. Ct. App.
1989). Foreclosure proceedings under a mortgage of real property of an
insolvent insurer in liquidation were not "automatically stayed" by the order of
liquidation. A mortgage may, therefore, be foreclosed even though the real
property is in the custody of the insurer's receiver in the liquidation
proceedings.
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.
Theresa Martinez and Theresa Martinez, M.D., P.A. v. Maria Iturbe et. al., 823 So.
2d 266 (Fla. 2d DCA 2002). Entire medical malpractice proceeding was subject to
stay under section of Insurance Guaranty Act (FIGA), which provided that “all”
proceedings should be stayed when an insurance carrier became insolvent,
even though insolvent carrier covered only one of the medical malpractice
defendants. 823 So. 2d 266. A FIGA stay under section 631.67 applies not just to
an individual party, but to the proceeding itself. Id. (citation omitted).
United States Employer Consumer Self‐Insurance Fund v. Payroll Transfers,
Inc., 678 So. 2d 908 (Fla. Dist. Ct. App. 1996). Insurer brought prereceivership
action to recover unpaid workers’ compensation premiums.
The defendant moved to dismiss and for summary judgment within ten days
of appointment of a receiver for insurer. The receiver moved for a
continuance of the hearing on those motions, noting that he had only seven
days actual notice of the hearing. The trial court’s denial of the continuance
and its grant of the defendant’s motion to dismiss and for summary
judgment were reversed as an abuse of discretion. The appellate court
emphasized the lack of prejudice in granting a continuance.
Georgia
Shaw v. Caldwell, 229 Ga. 87, 189 S.E.2d 684 (1972). The court held that the
ancillary receivers lack of notice and failure to appear in plaintiffs successful
action against insurer did not affect the validity of the plaintiff's claim against
the insolvent insurer. The ancillary receiver obtained an injunction prohibiting
the filing or prosecuting of claims against the insurer after plaintiff filed the
action against the insurer, and the court concluded that appointment of a
receiver did not abate pending suits. This case was overruled by statute. See,
Short v. State, below.

U.S. ex rel. ACCA Const. Services, LLC v. F.A.S. Development Co., Inc., 304 F.
Supp. 2d 1359 (N.D. Ga. 2004). After surety became subject to rehabilitation
proceedings in North Carolina and state court issued preliminary injunction,
enjoining pending actions against surety, judicial administration required that
Miller Act suit be allowed to proceed on the grounds that Miller Act suit could
only be adjudicated in federal court and establishment of company's claim
should facilitate state liquidation process. 304 F. Supp. 2d at 1363. Having
decided that the case will proceed, a court may continue the case in order to
allow a party to confer with the rehabilitator in an effort to obtain authority to
pursue settlement negotiations and/or prepare for trial on the Miller Act claim.
304 F. Supp. 2d at 1363.
Hawaii
Illinois
Kansas
Massachusetts
Missouri
Nevada
Takayama v. Financial Sec. Ins. Co., 898 P.2d 610 (Haw. Ct. App. 1995). The
Court of Appeals held that during the period that the Insurance
Commissioner was the court‐appointed receiver of an insolvent insurer and a
stay order was in effect, no one, not even the Director of the Department of
Commerce and Consumer Affairs, could legally take any action with respect
to the insurer without the consent of the Commissioner and/or the court.
Therefore, the Director's involuntary dissolution of the insurer was void ab
initio on the grounds that it violated the stay order and impermissibly
interfered with the receivership court's valid assertion of jurisdiction.
O'Connor v. Insurance Company of North America, 622 F. Supp. 611 (N.D. Ill.
1985). reconsideration denied 688 F. Supp. 1183 (1987) appeal granted, (1989)
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 pre‐liquidation debts
subject to setoff.
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.
Clentimack v. AA Transportation Co., Inc., 2003 Mass. Super. LEXIS 373; Int’l
Church of the Foursquare Gospel v. City of Fitchburg, 17 Mass. L. Rep. 30 (Super.
Ct. 2003); Selinga v. Dukakis, 2003 Mass. Super. LEXIS 355; Jack‐O‐Lantern
Spectacular, Inc. v. Usovicz, 16 Mass. L. Rep. 335 ( Super. Ct. 2003). In each of
these four cases, the action had been stayed for many months pursuant to a
rehabilitation order involving the defendant’s insurer in another state. The
Court held that each case should proceed despite the stay because after such an
extended delay, the interests of justice before the present court outweighed
the justifications for continuing the stay.
Ainsworth v. Allstate Ins. Co., No. 85‐1209‐CV‐W‐6 (S.D. Mo. Dec. 2, 1985). The
domiciliary liquidator initiated litigation to collect reinsurance proceeds, but
the court held that the reinsurer was entitled to a stay of the litigation, pending
the outcome of arbitration, which was required under its reinsurance contract.
Integrity Ins. Co. v. Martin, 769 P.2d 69, 105 Nev. 16 (1989). The Supreme
Court of Nevada held that a Nevada state court should have stayed

proceedings against an insolvent New Jersey insurer, which was concurrently
the subject of liquidation proceedings in New Jersey. Under the Uniform
Insurers Liquidation Act ("UILA"), the New Jersey liquidation court had issued
an order permanently enjoining any claimant from bringing, maintaining, or
further prosecuting any actions. The court further noted that under the UILA
(which Nevada had adopted), all claims have to be proved in the domiciliary
state's liquidation proceedings ‐‐ unless a state has instituted an ancillary
liquidation proceeding. Because Nevada had not instituted such a proceeding,
the court concluded that the Nevada state court should stay its proceedings.
The court explained that a stay was necessary to avoid frustrating the UILA's
purpose "to make uniform the laws of those states which enact it."
New York
AIG Claims Serv., Inc. ex rel. N.H. Ins. Co. v. Bobak, 835 N.Y.S.2d 925 (App.
Div. 2007). The court granted a stay of arbitration to resolve a
supplementary uninsured motorist coverage dispute pending determination
of the issue of insurance coverage in Pennsylvania, in particular whether
liquidation of the insolvent insurer’s assets would benefit the injured
plaintiff.
A.J. Pegno Constr. Corp./Tully Constr. Co. v. Highlands Ins. Co., 834 N.Y.S.2d
109 (App. Div. 2007). A declaratory judgment action for coverage
determination under a contractor’s umbrella liability insurance policy would
not lie against an insurer in receivership in another state while conservation
and rehabilitation were pending. The court cited a Texas state court order
requiring claims to be submitted exclusively to the Texas receiver and
permanently enjoining all litigation against the insurer which was filed in
New York pursuant to the Uniform Enforcement of Foreign Judgments Act.
Corcoran v. Weicholz Management Corp., 144 Misc. 2d 254, 544 N.Y.S.2d 268
(Supreme Court, New York County 1989). The Liquidator of Union Indemnity
Insurance Company brought an action against Union Indemnity's former
broker and its reinsurer, seeking the return of premiums paid after the order of
insolvency had been issued. The Court held that both parties were liable to the
Liquidator for the return of the premiums. Once the liquidation order was
entered, the rights and obligations of the parties are frozen, thereby
terminating the agency relationship between the liquidated insurer and its
broker. Consequently, the funds sent to the broker were to be considered
held in trust for the Liquidator.
Dambrot v. REJ Long Beach, LLC, 836 N.Y.S. 2d 194 (App. Div. 2007). A stay
issued by a court in another state enjoining and restraining claims against the
insureds of an insolvent insurer is entitled to full faith and credit and suspends all
proceedings as of the effective date of the stay. Nevertheless, before issuing a
ruling on the plaintiff’s motion for discovery sanctions, the court should have
permitted the defendant to file an opposition to the plaintiff’s motion because
the deadline for filing the opposition had not expired before the filing of the
stay order.
Harnett v. National Motorcycle Plan, Inc., 59 A.D.2d 870, 399 N.Y.S. 242 (1977).
Where a prior order prohibited all persons from bringing legal proceedings
against an insolvent insurance company or its liquidator, counterclaims could
not be asserted in a suit brought by the liquidator for damages for breach of
contract and fraud.
In re Ancillary Receivership of Reliance Ins. Co., 837 N.Y.S.2d 640 (App. Div.
2007). The liquidator in its governmental capacity was not subject to estoppel.

Therefore the liquidator was not estopped from denying a claim resulting from
a settlement on grounds that the settlement violated a stay of proceedings.
In re Application for an Order Staying Arbitration, No. 24632, slip op. (N.Y. App.
Div., 1st Dept. December 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 Liquidation of Midland Ins. Co., No. 41294/1986, 2008 WL 151786 (N.Y. Sup.
Ct. Jan. 14, 2008). The injunction barring suits against an insolvent insurer
protects policyholders and creditors, and preserves assets. A reinsurer did not
meet its burden of demonstrating that the injunction should be lifted so the
reinsurer could sue the insolvent insurer or the liquidator.
In re National Surety Co., 283 N.Y. 68, 27 N.E.2d 505 (1940), motion denied, 284
N.Y. 593, 29 N.E.2d 668, cert. denied, 311 U.S. 707. When the general
corporation law provided for the continued existence of a dissolved
corporation for the purpose of winding up its affairs, and the insurance code
directly conflicted with this, the court held that the insurance code was
controlling. The corporate existence of a surety company ceases on the date
the insurance commissioner obtains an order directing the immediate
cessation of its corporate existence. The dissolution of the insurer abates all
litigation to which the corporation was either plaintiff or defendant, so that
judgments entered thereafter were void.
In re National Surety Co., 176 Misc. 53, 26 N.Y.S.2d 370 (1941). Upon the entry of
the order of liquidation, the corporate existence of an insurance company
ends. Pending actions against the company and those later instigated are
abated.
In re Rehab. of Frontier Ins. Co., 813 N.Y.S. 2d 50 (App. Div. 2006), leave to appeal
denied, 824 N.Y.S. 2d 605 (N.Y. 2006). The court reversed a decision denying full
faith and credit to a federal appeals court ruling that a performance bond
obligor had a valid and liquidated claim against the surety in rehabilitation. New
York courts must give full faith and credit to federal court judgments, and there
is no automatic stay of litigation in rehabilitation as there is in insurer insolvency
and bankruptcy proceedings.
Interboro Ins. Co. v. Coronel, 863 N.Y.S.2d 448 (App. Div. 2008). The court
granted a petition to permanently stay arbitration of uninsured motorist claims
after a rehabilitation stay order had been lifted, holding that the petition was
timely filed. Also, permanent stay was proper because there was no evidence
of physical contact involving the allegedly uninsured vehicle.
Matter of Second Russian Ins. Co., 219 A.D. 46, 219 N.Y.S. 366 (1926), appeal
dismissed, 244 N.Y. 606, 155 N.E. 916. The court held it was error, to modify a
liquidation order which stayed certain actions brought by creditors against a
corporation in order to allow prosecution of the actions stayed. The stay
provided a thorough procedure for the protection and equal treatment of all
interested parties.

Matter of Title, Etc., Co. of Buffalo, 152 Misc. 428, 274 N.Y.S. 270 (1934),
affirmed, 243 A.D. 277, 276 N.Y.S. 802. While the rehabilitator operated the
title insurance company with the aim of conserving its assets, the claims of all
creditors were suspended pending the outcome of the rehabilitation.
Furthermore, the insurance code authorized an order of rehabilitation which
cut off the remedies of the certificate holders to sue the title company upon its
default under the three‐year clause.
Millgard Corp. v. E.E. Cruz/Nab/Frontier‐Kemper, E.E. Curz & Co., No. 99 CIV.
2952 LBS, 2002 WL 31812710 (S.D.N.Y. Dec. 12, 2002). The federal district court
refused to stay a third party action against the third party defendant, who was
insured by an insolvent insurer, even though a stay of the third‐party action was
possible based on Burford principles; this contract dispute did not involve
difficult or unsettled questions of state law, and had only incidental contact with
state liquidation proceedings.
G.C. Murphy Co. v. Reserve Ins. Co., 74 A.D.2d 235, 427 N.Y.S.2d 800 (1980). It
was held that the trial court erred in not allowing a continuance to permit
proper service on the Illinois insurance commissioner as rehabilitator and
liquidator where the commissioner should have formally been served with all
the papers filed in a suit against a foreign insurance company in liquidation
proceedings in Illinois. The trial court should have granted the continuance
and allowed the liquidator opportunity to respond to a motion to join the
insurer's New York affiliate as a defendant in the action. However, since New
York and Illinois were reciprocal states, both having adopted the Uniform
Insurers Liquidation Act, New York should have recognized the Illinois
commissioner's right to seek a stay of proceedings against the insurer and to
take possession of the insurer's assets. Therefore, the action to recover
unearned premiums was stayed.
New York Title Co. v. Friedman, 153 Misc. 697, 276 N.Y.S. 72 (1934). The court
held that a set‐off did violate an order restraining policyholders and creditors
from bringing suits against the insurer.
Pink v. Title Guarantee & Trust Co., 274 N.Y. 167, 8 N.E.2d 321, reargument
denied, 274 N.Y. 610, 10 N.E.2d 575 (1937). Pursuant to an order of
rehabilitation which prohibited all persons from commencing actions against
an insolvent company, its assets, or its rehabilitator, a creditor of the company
was not permitted to pursue a claim either by direct action or by way of a
counterclaim to an action brought by the rehabilitator.
Pires v. Ortiz, 795 N.Y.S. 2d 9 (App. Div. 2005). The court rejected the insureds’
argument that an inquest into a default judgment entered against the insureds
was barred because it was conducted while a liquidation stay against their
insurer was in effect. The stay took effect after the insurer had disclaimed
coverage, and therefore was inapplicable at the time of the inquest.
Public Serv. Truck Renting, Inc. v. Ambassador Ins. Co., 175 A.D.2d 632, 572
N.Y.S.2d 559 (1991). Vermont is one of New York's "reciprocal states" within
the meaning of New York Insurance Law § 7408(b)(6). Although Vermont,
unlike New York, has not enacted the Uniform Insurers Liquidation Act, its
statutory scheme is so materially similar that it has enacted the Uniform Act "in
substance and effect." Accordingly, the court affirmed a stay of further
proceedings in the New York action during the pendency of liquidation
proceedings in a related Vermont action.

Serio v. Black, Davis & Shue Agency, Inc., No. 05 CIV. 15 (MHD), 2005 WL
2560390 (S.D.N.Y. Oct. 11, 2005). The court granted the liquidator’s motion for
stay of adjudication of the defendant agency’s counterclaims filed in the
liquidator’s action against the agency to recover premiums owed to the
insolvent insurer. An alternative state court forum was available, and under
Burford abstention the court would avoid undermining the state rehabilitation
process.
Wilson v. Galicia Contracting & Restoration Corp., 829 N.Y.S.2d 554 (App. Div.
2007) aff’d, 10 N.Y.3d 827 (2008). The court held that an order striking an
answer in a negligence action was not void ab initio, following entry of a stay in
a receivership action for the defendant’s insurer. The order stayed actions in
which the insurer was obligated to defend the insured, but in this case the
owner had a self‐insured retention that was not yet exhausted. Therefore, the
stay order did not restrain or enjoin the action.
North Carolina
Ohio
Universal Marine Ins. Co., Ltd. v. Beacon Ins. Co., 592 F. Supp. 948 (W.D.N.C.
1984). 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.
State ex rel. Univ. Hosp. of Cleveland v. Cuyahoga County Common Pleas Ct.,
1998 Ohio App. LEXIS 197 (Ohio Ct. App. 1998). A petition for writ of
mandamus seeking to compel a trial court to issue a stay of proceedings
against an insolvent insurance company was denied because the stay already
had been granted. The court also cited Ohio Revised Code § 3303.15(A) for
the principle that once a rehabilitation order is entered against an insolvent
insurance company, all proceedings against that entity must be stayed for at
least ninety days.
The State Ex Rel. Watkins v. Eighth District Court of Appeals, 82 Ohio St.3d
532, 696 N.E.2d 1079 (1998). Cleveland Clinic, a self‐insurer, had a contract
with P.I.E. Mutual Insurance Company (PIE), under which PIE agreed to
manage the defense of certain medical malpractice suits brought against
Cleveland Clinic and pay the Clinic’s defense costs. Shortly after a large
malpractice award against the clinic, and while that verdict was being
appealed, a court ordered the rehabilitation of PIE. The Court of Appeals sua
sponte stayed the appeal of the malpractice verdict for 90 days based on the
rehabilitation order which, inter alia, stayed any action in which PIE was a
party or was obligated to defend. Plaintiffs in the underlying suit sought a
writ of mandamus in The Ohio Supreme Court seeking to dissolve the stay.
While that Supreme Court action was pending, PIE was placed into
liquidation. Pursuant to the liquidation order and Ohio Rev. Code § 3955.19,
all proceeding in which PIE was a party or was obligated to defend were
stayed for six months. The Supreme Court, in the mandamus action, held
that R.C. 3955.19, which was part of the Ohio Insurance Guaranty Association
Act, did not apply to general creditors of insolvent insurance companies like
The Cleveland Clinic. The court stated that the purpose of 3955.19 was to
protect insureds and third party claimants from “potentially catastrophic”
loss due to insolvency. The court concluded that Cleveland Clinic was neither
an insured of PIE or a claimant under a PIE Policy and thus, not entitled to

the R.C. 3955.19 stay provision as the claim did not arise out of any insurance
policy, but instead, out of a contract.
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.
Oregon
Nasef v. U & I Investments, Inc., 755 P.2d 136, 91 Ore. App. 344 (1988). Plaintiffs
obtained a judgment in Oregon state court against an Indiana insurer which
was the subject of rehabilitation proceedings in Indiana. On appeal, the insurer
requested that the judgments against it be vacated, on the ground that the
Indiana rehabilitation court had stayed all proceedings involving the insolvent
insurer. The court agreed with the Indiana insurer, concluding that under the
Uniform Insurers Liquidation Act (which both Indiana and Oregon had
adopted), the rehabilitation court was authorized to stay all proceedings. As
the Indiana rehabilitation court did issue such a stay, the Oregon court was not
authorized to enter judgment against the insolvent insurer unless an ancillary
proceeding had been commenced.
Pennsylvania Bartilucci v. Safeguard Mutual Ins. Co., 212 Pa. Super. 414; 242 A.2d 916 (1968).
Judgment pursuant to arbitration proceeding in favor of insureds was set aside
where it was rendered after the insurer had been suspended by the insurance
commissioner.
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.
Commonwealth ex rel. Woodside v. Seaboard Mutual Casualty Co., 30 D.& C.2d
705, 80 Dauph. 289 (1963), exceptions dismissed, 83 Dauph. 373 (1965). The
court held that after a decree of dissolution has been entered, a pending suit
against an insurance company could not be maintained. The plaintiffs were
required to present their claims to the commissioner of insurance as liquidator.
If a judgment is rendered against one insured by a company in liquidation and
the plaintiff was notified of the dissolution and of the last date of for
presenting claims to the liquidator, such a judgment does not bind the
liquidator. The liquidator may decrease the amount of the plaintiff's claim.

Commonwealth ex rel. Sheppard v. Central Penn National Bank, 31 Pa. Cmwlth.
190, 375 A.2d 874 (1977). The commissioner of insurance, as statutory
liquidator of an insurance company, stood in the shoes of the company, which
had an account in the defendant bank and had the same contract rights as the
company. However, commissioner was immune from counterclaims asserted
by the bank because of a specific statutory provision prohibiting any action at
law or equity from being commenced or prosecuted after the date of the
suspension order issued by the commissioner. This section (now repealed)
was to freeze the rights of creditors and policyholders and prevent prejudicial
preferences.
Hall v. MPH Transp. Inc., 58 Pa. D. & C. 4th 482, 2002 WL 31989010 (Com. Pl.
2002). An agent of the MPH was being sued in his capacity as an employee of
MPH. Despite several attempts to have MPH’s insurer (Reliance) represent the
agent in the action, a default action was entered against him. Four months after
the entry of the default judgment Reliance had counsel enter an appearance on
the behalf of the agent. Shortly after Reliance was placed into rehabilitation and
all actions involving Reliance were stayed. After the stay expired, the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
substituted as counsel for the agent and filed a petition to open a default
judgment. The court noted that PPCIGA shall have the rights, duties, and
obligations of the insolvent insurer as if the insurer never became insolvent. It
held that since PPCIGA stepped into the shoes of the insolvent insurer it could
not belatedly open the default judgment without considering the insolvent
insurer’s pre‐rehabilitation conduct of failing to file. Therefore, PPCIGA could not
open the default judgment.
Johnson v. Cooper, 38 D.& C.2d 599 (1964). When the commissioner of
insurance had ordered an insurance company dissolved, a petition to dissolve
an attachment execution against the company was discharged. The basis of
the petition was that the insurance code (now repealed) cuts off any right of
action against an insolvent suspended company, but the pleadings did not
show the basis for the suspension. Moreover, the plaintiffs stated that the
commissioner had abandoned any property of the company in petitioner's
possession.
Lewycka v. Springfield Mutual Ins. Co., 201 Pa. Super. 341, 191 A.2d 925 (1963).
When a garnishor obtained a judgment against an insurance company before
the company's business was suspended by the insurance commissioner, the
commissioner could not use §202 (now repealed) to obtain a stay of the
garnishment proceedings and a dissolution of attachment. The judgment
created a vested right in the garnishor.
Metzel v. Winnebago Industries, Inc., No. 85‐0186, slip op. (E.D. Pa., April 17,
1985). A federal judge has issued a stay of all proceedings against a New York
domiciled insurance company in liquidation. Nevertheless, a case was
excluded from the stay where plaintiff's counsel had been notified by the Iowa
insurance guarantee fund that the fund might be responsible for all or part of
the damages owed by the company and where there was a need to proceed
with discovery in a case involving serious injuries and technical inquiries into
causation.
Shay v. Flight C Helicopter Services, Inc., 2003 Pa. Super. 86, 822 A.2d 1 (2003).
The plaintiff challenged the trial court’s decision to limit delay damages.
Damages were held to be the responsibility of the Pennsylvania Property and

Casualty Insurance Guaranty Association (“PPCIGA”) at a pro rata portion based
upon PPCIGA’s statutory limit of liability. The defendant was insured under a
general liability insurance policy issued by American Eagle Insurance Company
(“American”). The plaintiff filed a wrongful death action against the defendant.
A year later American was declared insolvent and the trial court stayed the
proceeding for 90 days until PPCIGA could assume the defense. The jury
returned a verdict for the plaintiff and the plaintiff filed a petition for delay
damages, which were granted by the trial court. The appeals court reversed the
lower court’s decision because PPCIGA did not have an opportunity to argue its
position regarding the amount of damages, no notice was served, and no
appearance was made on behalf of PPCIGA. Consequently, the court held that
since PPCIGA was not a party to the underlying action the trial court did not
have the authority to order delay damages against PPCIGA.
Puerto Rico
Velez‐Oliveras v. Asociacion Hospital Del Maestro, Inc., 198 F. Supp. 2d 70 (D.
P.R. 2002). A stay of the medical malpractice action was not granted where (1)
the health insurer in liquidation was not a party to the suit, (2) abstention was
not justified under Burford because the issues presented would not disrupt the
state liquidation scheme, (3) the equities of the case merited prompt attention,
and (4) the defendants would be entitled to guaranty fund protection whether
or not the federal case proceeded.
South Carolina Insurance Commission v. New South Life Ins. Co., 270 S.C. 612, 244 S.E.2d 289
(1978), on remand, 272 S.C. 438, 248 S.E.2d 591 (1978). The court held that an
order of rehabilitation which vests Chief Insurance Commissioner with title to
the property, contracts, and rights of action of insurer is exclusive, and
Insurance Commissioner has no authority to issue a cease and desist order.
Texas
Washington
Whitson v. Harris, 682 S.W.2d 423 (Tex. App. 1984). Under the insurance code,
the court may enjoin the prosecution of any actions against the insurance
company in receivership, except those actions prosecuted in the receivership
court.
American Star Ins. Co. v. Grice, 865 P.2d 507 (Wash. 1994). While a
declaratory judgment action brought by an insurer was pending, an order of
liquidation and a permanent injunction were issued in respect of the insurer
pursuant to the Wisconsin Uniform Insurers Liquidation Act. The Supreme
Court of Washington emphasized the need for interstate comity and
recognition of the Wisconsin liquidation proceeding. The court determined
that to the extent the action was against the insurer ‐‐ since the insured
sought affirmative action against the insurer in seeking a declaration that it
was entitled to coverage ‐‐ the Wisconsin Uniform Insurers Liquidation Act
called for abatement of the action. The court further determined that to the
extent the action was by the insolvent insurer, the liquidator had effectively
exercised his option under the Uniform Act to abandon the action.
Olivine Corp. v. United Capitol Ins. Co., 92 P.3d 273 (Wash. Ct. App. 2004). The
failure of an insolvent insurer that is a party to the litigation to inform the court
of a stay order issued by a court in a reciprocal state under the Uniform Insurers
Liquidation Act does not waive its right to a stay or dismissal of the action. The
stay order removes the court’s jurisdiction in the matter by operation of statute.
Wisconsin
Janek v. Allstate Ins. Co., 319 F. Supp. 215 (W.D. Wis. 1970). In upholding the
restraining order of an Illinois court, the Wisconsin District Court noted that the
Illinois court had the task of providing for an orderly liquidation and that the

assets must be preserved by not forcing the liquidator to defend law suits filed
in other jurisdictions.
Pre‐Answer Security Requirements
Second Circuit
New York
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.
Ace Capital Re Oversees Ltd. v. Cent. United Life Ins. Co., No. 01 CIV.2238
(DC), 2002 WL 959560 (S.D.N.Y. May 8, 2002). The federal district court
denied the defendant life insurer’s motion for an order requiring the plaintiff
reinsurer to comply with New York statutory security provisions. The
reinsurer made a satisfactory showing that it maintained sufficient funds to
pay any final judgments, and stated if the insurer had serious concerns
regarding the reinsurer’s solvency, it would have requested a bond earlier in
the proceedings.
American Centennial Ins. Co .v. Aseguradora Interacciones, S.A., No. 85981, 96
CIV.4062(JFK), 2001 WL 930236 (S.D.N.Y. Sept. 26, 2000). The court granted the
insurer’s motion to compel the defendant successor‐in‐interest to a reinsurer to
post security sufficient to cover a judgment against it, pursuant to N.Y. Ins. Law
§ 1213, because arbitrators have authority to order interim relief to prevent the
final award from becoming meaningless.
Chiquita Int’l Ltd. v. Liverpool and London S.S. Prot. and Indem. Ass’n, 124 F.
Supp. 2d 158 (S.D.N.Y. 2000). In an action by a claimant alleging cargo damage
and seeking specific performance under a Letter of Understanding (LOU)
provision allowing the claimant to demand the filing of a surety bond by the
vessel insurer, a British mutual insurance company in run‐off, the court held that
the claimant could demand that bond be filed. Also, the Supplemental Rules for
Certain Admiralty and Maritime Claims, which provide that the court would
decide sufficiency of the security, did not apply where the parties had set forth
their own terms under the LOU.
Curiale v. Ardra Insurance Company Ltd., 88 N.Y. 2d 268, 644 N.Y.S. 2d 663,
667 N.E. 2d 313 (1996). In this case, the New York Court of Appeals upheld
the pre‐answer security requirements set forth in New York Insurance Law
Section 1213(c). In upholding the constitutionality of Section 1213(c), the
court concluded that the state's interest in insuring the availability of funds,
from which a judgment against a foreign or alien unlicensed insurer may be
promptly paid, justifies striking the answer if pre‐answer security is not
provided. Defendant Ardra argued unsuccessfully that if no pre‐answer
security is posted, a default occurs and the defendant is deprived of

property without a hearing. The Court analyzed the pre‐answer security
requirement and determined that its purpose is to require an unlicensed
insurance company to offer the same security to the public as a licensed
company is required to provide. The Court concluded that the security
feature of the statute is justified (providing funds as is required of a licensed
insurer) to prevent insureds from having to resort to “far‐flung” forums to
press claims against insurers. It is not enough to argue that an erroneous
judgment might be entered because a defendant is prevented from litigating
the merits of a claim if a default judgment is entered against it when it fails
to post security. A motion demanding the posting of pre‐answer security
provides notice and an opportunity to be heard to a defendant. In any
event, according to the Court, Ardra was always aware of the potential
extent of its financial exposure.
In re Cragwood Managers LLC (Reliance Ins. Co.), 132 F. Supp. 2d 285 (S.D.N.Y.
2001). The court upheld an interim arbitration award which required a
management company in the process of winding down to post $4 million bond
to secure a portion of counterclaims against it.
Levin v. Intercontinental Cas. Ins. Co., 719 N.Y.S.2d 634 (N.Y. 2000). The
liquidator sued a reinsurer under a quota share reinsurance agreement and
sought an order requiring the reinsurer, as an unauthorized foreign or alien
insurance carrier, to post bond under the New York statute requiring preanswer
security. The court held that the reinsurer’s motion to dismiss the
complaint was a pleading under the statute, and required the posting of
security.
Moore v. National Distillers & Chemicals Corp., No. 91 Civ. 2901 (JSM)(KAR),
1992 U.S. Dist. LEXIS 12370 (S.D. N.Y. Aug. 14, 1992, as corrected Sept. 8, 1992).
The Liquidator of Delta America Re Insurance Company sued several retrocessionaires
for reinsurance recoverables owed Delta America. The action was
commenced in Kentucky state court, but was removed to the United States
District Court for the Southern District of New York. The Court found that the
Liquidator may seek relief under New York's pre‐answer security requirement
(codified at N.Y. Ins. Law § 1213(c)(1), and that section was applicable in actions
against retrocessionaires. The Court rejected an argument by the Liquidator
that the preemptive effect of the McCarran‐Ferguson Act applies to the
Foreign Sovereign Immunities Act. Finding that three of the retrocessionaires
were "foreign states" as defined under the FSIA, and that these foreign states
had not waived their immunity from pre‐judgment attachment, the Court
declined to apply the pre‐answer security requirement to those reinsurers.
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. 05CIV.15(MHD), 2006 WL 156395
(S.D.N.Y. Jan. 12, 2006). The court granted a motion for preliminary injunction
filed by the rehabilitator seeking an order requiring the defendant agency to
deposit security in the rehabilitator’s action against the agency to recover
premiums allegedly owed to the insolvent insurer. Security represented the
entire balance of premium funds received by the defendant agency on behalf of
the insolvent insurer. The court refused to require the rehabilitator to post
bond in conjunction with the preliminary injunction order.
Vesta Fire Ins. Corp. v. New Cap Reins. Corp., 244 B.R. 209 (S.D.N.Y. 2000), aff’d
sub nom In re McKenna, 238 F.3d 186 (2d Cir. 2001). Following initiation of
arbitration by a creditor against a reinsurer and the appointment of an
administrator for the reinsurer in a foreign insolvency proceeding, the court

Notice to Creditors and Others ‐ In General
denied the creditor’s motion seeking relief from an injunction entered in
ancillary proceeding to continue with an arbitration proceeding, and would
defer to a foreign insolvency proceeding that stayed the arbitration. The court
held that payment by the reinsurer of security required by the arbitration panel
would have the effect of transforming an unsecured creditor into a secured
creditor.
Alaska
California
Williams v. Wainscott, 974 P.2d 975 (Alaska 1999). The receiver's decision to
deny as untimely a ceding company's claims against an insolvent reinsurer
was not upheld when notice of the deadline to file claims had not been
properly served upon ceding company.
Abraugh v. Gillespie, 203 Cal. App. 3d 462, 250 Cal. Rptr. 21 (1988). The court
held that absent a showing of failure to receive statutory notice by a claimant
or any showing that the Insurance Commissioner was responsible for late filing
of a claim, a court cannot grant relief from provisions of the Insurance Code
requiring a claim against an insolvent insurer to be filed within six months.
Bunner v. Imperial Ins. Co., 181 Cal. App. 3d 14, 225 Cal. Rptr. 912 (1986). An
orthopedic surgeon had a malpractice insurance policy with an insurer which
later became insolvent. The Insurance Commissioner was appointed liquidator
and, as required in the Insurance Code, published notice that claims against the
insurer were required to be filed within six months and mailed individual
notices to all insureds. The surgeon never received the notice since he had
moved to a different address. The appellate court held that under the statute,
actual notice is required to be given by the Commissioner to insureds and the
Commissioner's compliance with the mailing requirements of the statute
created only a rebuttable presumption of receipt of notice which was
overcome by the surgeon's testimony before the trial court. Since the
surgeon's non‐receipt of the notice was through no fault of his own, the
surgeon was allowed to file a late claim against the insolvent insurer.
Fitzgibbons v. Low, 2002 Cal. App. Unpub LEXIS 6191. Notice by publication did
not deny claimant due process.
Middleton v. Imperial Ins. Co., 34 Cal.3d 134, 193 Cal. Rptr. 144, 666 P.2d 1
(1983). The California Supreme Court held that the insurance commissioner's
failure to give notice to a doctor and a nurse of the insolvency and the time
limits for filing claims against the insurer, estopped the commissioner from
asserting that they were barred from filing their claims. The court held that
they were entitled to such notice both as "persons known or reasonably
expected to have or be interested in claims against the insurer," and as
"insureds," even though their policies had expired prior to the insurer's
insolvency, since the policies covered occurrences of alleged malpractice
committed during the policy period regardless of when a malpractice claim
might be made. The doctor and nurse received notice of the malpractice
claims two years after the expiration date for filing in liquidation.
Illinois Cork v. Associated International Insurance Managers, Inc., 58 Ill. App. 2d 331,
208 N.E.2d 4 (Ill. App. 1965). The court held that the authority of defendant
insurance broker to make any further disbursements from the bank account of
an insolvent British insurer was effectively revoked by the notice sent it by
British liquidators. Thus, the court held that in dispensing funds without the

consent of the liquidators, the broker assumed the risk for liability to them for
the funds dispensed.
People v. Equity Funding Life Ins. Co., 61 Ill. 2d 303, 335 N.E.2d 448 (1975). The
claimants who objected to the plan of liquidation contended that the amended
plan of liquidation, which included a settlement for the claimants, cannot bar
the claims of defrauded claimants who were not given actual notice of the
amended plan of liquidation and settlement. The court held that the objectors
could not raise the point for the first time on appeal as the appellees would
effectively be deprived of the opportunity to refute the allegation.
Indiana
Reliance Lumber Company v. Brown, 4 Ind. App. 92, 30 N.E. 625 (1892). A
policyholder sustained a fire loss on May 8, 1890 and claimed under a policy
issued by an insolvent manufacturers mutual fire insurance company, which
was placed in liquidation on April 26, 1890. The policyholder's policy was
canceled effective the same day as the court order as to which the receiver
advised all policyholders, pursuant to notice on May 2, 1890 received by the
policyholder on May 12, 1890. The policyholder's policy provided for a 30 day
notice of cancellation. In noting that the policyholder was a member of the
insolvent company, in contrast to a holder of a cash policy, the court held that
such policyholders are barred by the appointment of a receiver for the
company from any further notice of the cancellation of the coverage and thus,
any losses that arise after the appointment of the receiver are barred without
any notice to such policyholders, in spite of what the policy provides.
Kansas In re Liquidation of Nat’l Colonial Ins. Co., 20 Kan. App. 2d 802, 892 P.2d 926
(1995). The Kansas Insurance Commissioner filed a petition for the
liquidation of an insolvent insurer. The liquidator filed an application to
amend agreed order of liquidation to extend claims bar date. Sole
shareholder of the insurance company claimed that he was not notified and
appealed the extension. The Court of Appeals held that (1) the agreed order
for liquidation was a “consent decree” and (2) the consent decree could not
be modified without notifying interested parties and holding a hearing.
Louisiana Bobo v. American Fidelity Fire Ins. Co., 550 So.2d 1278 (La. App. 4th Cir. 1989).
Rehabilitator of insolvent New York insurer had authority, pursuant to Uniform
Insurers Liquidation Act, to cancel policies issued to Louisiana insureds, as long
as rehabilitator satisfied requirements of Louisiana law for cancellation of
policies. Proof of mailing of notices of cancellation submitted by rehabilitator
held insufficient in this instance; therefore, policy was in effect at time of loss,
and Louisianan Guaranty Association was required to cover the claim.
Dardar v. Insurance Guaranty Association, 556 So.2d 272 (La. App. 1st Cir. 1990).
Rehabilitator of insolvent New York insurer had authority, pursuant to
Uniform Insurers Liquidation Act, to cancel policies issued to Louisiana
insureds, as long as rehabilitator satisfied requirements of Louisiana law for
cancellation of policies. Proof of mailing of notices of cancellation submitted by
rehabilitator held insufficient in this instance; therefore, policy was in effect at
time of loss, and Louisiana Guaranty Association was required to cover the
claim.
Michigan
Attorney General ex rel. Commissioner of Insurance v. Lapeer Farmers Mutual
Fire Ins. Ass'n., 300 Mich. 320, 1 N.W. 2d 557 (1942). The trial court did not
abuse its discretion in denying the petition of objecting members and creditors
to intervene in a receivership proceeding against an insolvent insurer, brought
by Attorney General on the relation of the insurance commissioner, for the

purpose of opposing the final accounting of a former receiver and for
directions to successor receiver thereon, where it did not appear that any
useful purpose would be served by permitting the intervention and it appeared
the petition to intervene was but one of many dilatory steps being taken to
delay the proceeding. It was error in failing to give members formal notice of
particular proceedings in receivership, since where members had opportunity
to contest and did contest the various stages of the proceeding, no prejudice
could be shown.
Nebraska
New Jersey
State ex rel. Wagner v. Amwest Surety Ins. Co., 738 N.W.2d 813 (Neb. 2007). A
claimant of an insolvent insurance company challenged the liquidator’s
compliance with the notice provisions of Nebraska Insurers Supervision,
Rehabilitation, and Liquidation Act. The Supreme Court of Nebraska held that
when notice is not properly given in accordance with the Act, a claimant should
not be penalized for failing to timely file a claim in the liquidation proceeding of
which the claimant was unaware. Further, if the liquidator’s file reflected the
potential claimant’s direct address, then mailing a notice to the attorneys listed
in correspondence between the claimant and the insurance company from
several years previous does not satisfy the Act. The Act indicates that notice
must be mailed to the last known address of all persons known or reasonably
expected to have claims. In this case, the insurance company records contained
the last know address of the claimant. However, whether notice was actually
sent to this address by the liquidator was a point of dispute between the
parties. The burden of proof fell to the liquidator to prove the notice
requirements had been met, which the liquidator failed to do.
In the Matter of the Liquidation of Integrity Insurance Company, 231 N.J. Super.
143 (Ch. Div. 1988). Integrity's creditors sought a policyholders' committee to
enable the policyholders to protect their interests in the liquidation of the
company. The policyholders claimed that they had not been informed as to
the progress of the litigation nor had they been given the opportunity to
participate in negotiations and were unaware of the status of commutations.
The court held that it is empowered and authorized to create a policyholders'
committee pursuant to its equitable powers as a Chancery Court and the
Uniform Insurers Liquidation Act. The court, however, concluded that
policyholders had no right to notice of all the proceedings regarding the
liquidation of Integrity under the Uniform Insurers Liquidation Act. Moreover,
the court concluded that the creation of a policyholders' committee would
inevitably result in the inefficient administration of the Integrity estate,
increased litigation, depletion of the assets of Integrity's estate and would
have an adverse impact upon the interests of all other creditors. Thus, the
court denied the motion to appoint a policyholders' committee.
New Mexico Aztec Well Servicing Co. v. Property & Cas. Ins. Guar. Assoc. of the State, 115
N.M. 475, 853 P.2d 726 (1993). Insured, which paid claim of claimant under
excess liability policy issued by insurer which became insolvent, amply
notified insurer’s conservator in its proof of claim form of claimant’s
personal injury claim precipitating coverage under the policy. Therefore, the
statutory notice requirement for claim against property and casualty
insurance guaranty association respecting insolvent insurer was met, despite
fact that the proof of claim form did not specifically denote claimant. The
form substantially complied with statute.
New York
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 and

ecording of 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.
Matter of Title & Mortgage Guarantee Co. of Buffalo, 149 Misc. 643, 269 N.Y.S.
16 (1933), affirmed, 264 N.Y. 69, 190 N.E. 153. When the company is in
rehabilitation and a receiver appointed, there is no statutory or other
requirement that the rehabilitator shall give notice of an application to obtain
control over bonds and mortgages held by the insurer as collateral or any other
similar court relief to the holders of these or any other similar certificates of
mortgage indebtedness any more than to any of the other creditors of the
company.
Tennessee
Texas
Sizemore v. United Physicians Ins. Risk Retention Group, 958 S.W.2d 348 (Tenn.
Ct. App. 1997). The court overturned the rejection of a claim made by a patient
against a doctor who was insured by a company that later fell into liquidation.
The liquidator had failed to comply with the statutory requirement of providing
notice to all persons reasonably expected to have claims against the insurer. As
such, the lateness of the patient’s claim was excusable.
Khalaf v. Odiorne, 767 S.W.2d 856 (Tex. App. ‐‐ Austin 1989, writ denied).
Plaintiff filed proof of claim in receivership proceeding, but inadvertently
stated an incorrect return address. The rejection letter was returned to
receiver undelivered, marked "no such number." More than three months
after the rejection was mailed, plaintiff filed suit. The court affirmed a takenothing
judgment in favor of the receiver, finding that the insurance code
section governing the receiver's notification of potential claimants should be
read in pari materia with the section governing notice of rejection of claims,
and that proof of mailing of the letter was sufficient to constitute notice,
actual receipt of notice was not required. Accordingly, the receiver's rejection
of the claim had become final by claimant's failure to file suit within three
months, as provided in the insurance code.
West Virginia Cannelton Indus. v. Aetna Casualty & Sur., 194 W.Va. 203, 460 S.E.2d 18
(1994). Cannelton Industries, Inc. (“Cannelton”) sought relief from the West
Virginia Insurance Guaranty Association (“WVIGA”) after two of its insurance
carriers became insolvent. Pursuant to W.Va. Code § 33‐26‐8 (1)(a) (1985), the
state guaranty association is obligated for “covered claims” against
insolvent insurers existing prior to insolvency and claims arising within 30
days after determination of insolvency. Cannelton claimed that because it
was not aware of the insolvencies of the two companies and it did not
receive notice from the WVIGA, who was aware of the insolvencies, the
WVIGA is liable for the unpaid claims even if they were filed past the final
date for filing claims.
After reviewing West Virginia State law and other jurisdictions, the court
held that WVIGA is not required to notify insureds of insolvent insurers
unless the Insurance Commissioner requires that such notice be given
pursuant to statute W.Va. Code, 33‐26‐10(2)(a) (1970). Therefore, the Circuit
Court of Kanawha County’s dismissal of Cannelton’s claim was affirmed.
Notice to Creditors and Others ‐ Constitutionality
California
Kinder v. Pacific Public Carriers Co‐Op Inc., 105 Cal. App. 3d 657, 167 Cal. Rptr.
567 (1980). There is no denial of due process of law by failure to receive actual
personal notice of the liquidation proceeding.

New Jersey
Washington
Ballesteros v. New Jersey Property Liability Insurance Guaranty Association,
530 F. Supp. 1367 (D. N.J. 1982), affirmed, 696 F.2d 980. The court held that
due process is not violated when the insurer fails to give notice to its
policyholders of rehabilitation proceedings against it, because the
policyholders' interest is represented by the insurance commissioner and
protected by the state court.
Wash. Life & Disability Ins. Guar. Ass'n. v. Adams, 47 Wash. App. 213, 734 P.2d
932 (1987). The Washington Insurance Commissioner, as receiver, was not
required to give notice to each individual shareholder that an insurer's capital
stock was impaired. Under RCW 48.08.050(1), the Insurance Commissioner
was only required to serve notice upon the insurer to require its stockholders
to make good the deficiency within ninety days after service of such notice.
Duties of Agents
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 collection of insurance premiums by an insurer from an
agent or broker is materially different from other claims or debts. Premiums
belong to the insurer. Premiums are merely collected by the agent or broker for
the insurer, held by the agent or broker in trust for the insurer, as the insurer's
property. Under Pennsylvania and Alabama law, insurance producers such as
the defendant are responsible for maintaining premium funds in a fiduciary
capacity without co‐mingling them with the broker's operating funds. 2007 WL
521254 at 4 (citations omitted).
Arkansas
Johnson & Cotnam v. Baxter, 108 Ark. 350, 157 S.W. 387 (1913). Where a fire
insurance agent presented a policyholder's claim for allowance in insolvency
proceedings after a receiver had been appointed for the insurer and notified
insured of the disallowance of the claim and reasons therefore, it was the duty
of the policyholder and not the insurance agent to appear from such
disallowance if desired to further urge the claim.
California Garamendi v. HIH America Compensation and Liability Ins. No. A098515, 2003
WL 1931866 (Cal. Ct. App. Apr. 24, 2003). Liquidation order requiring immediate
payment of collected funds to Insurance Commissioner did not require
insurance agent to remit uncollected premiums, where agent and company
agreed by contract that agent would act as company's fiduciary only with
respect to premiums that were paid and where the agent was merely guarantor
of unpaid premiums.
Nowlon v. Koram Ins. Center, Inc., 1 Cal. App. 4th 1437 (1991). Plaintiff Koram
sued his insurance broker for obtaining insurance from a non‐admitted insurer
which became insolvent. The trial court sustained the broker's demurrer
without leave to amend, on the ground that plaintiff's negligence theory did
not state a cause of action. The Court of Appeal reversed, finding that the
plaintiff could amend his complaint to state a cause of action against the
broker. Specifically, the court indicated that plaintiff could proceed on a
negligence per se theory by alleging that the broker placed the insurance in
violation of the Insurance Code. In particular, the court noted that the plaintiff
could amend his complaint to allege that the broker violated §§ 703, 1761, and
1776 of the Code ‐‐ which sections prohibit placement of insurance with
nonadmitted companies except through a surplus line broker.

Florida
Imagine Ins. Co. v. State of Florida ex rel. the Dep't of Financial Serv., 999 So. 2d
693 (Fla. 1st DCA 2008). Except as provided in sections 631.192 and 631.252, the
rights and liabilities of the insurer and its creditors, policyholders, stockholders,
members, and subscribers and all other persons interested in its estate shall,
unless otherwise directed by the court, be fixed as of the date on which the
order directing the liquidation of the insurer is filed in the office of the clerk of
the court which made the order, subject to the provisions of this chapter with
respect to the rights of claimants holding contingent claims. No offset shall be
allowed in favor of any person unless the claim of offset is fully mature, or, in
the case of a reinsurance agreement, the insurer's obligation is incurred, as of
the date on which the order directing the liquidation of the insurer is filed in the
office of the clerk of the court which made the order, and a claim of offset shall
not create a secured claim to any funds or property in the possession of the
person claiming offset.
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). Florida law holds that liability between an agent
and an undisclosed principal is alternative. 354 F. Supp. 2d at 1345.
Georgia Todd v. German‐American Ins. Co. of New York, 2 Ga. App. 789, 59 S.E. 94
(1907). The court held that an agent of the company may also act as an agent
of his customers in procuring new contracts of insurance with a solvent
company.
Illinois
Oklahoma
Pennsylvania
Ayh Holdings, Inc. v. Avreco, Inc., 357 Ill.App.3d 17, 826 N.E.2d 1111 (Ill. App. Ct.
2005). Where broker is on notice that insurance company is insolvent, broker
has a duty to notify client. An insurance producer may be liable for losses
sustained by insured where insurer fails to perform as promise, including if
insurer becomes insolvent.
Oklahoma Property & Cas. Ins. Guar. Assoc. v. Class Fire & Marine Ins. Co.,
963 P.2d 622 (Okla. Ct. App. 1998) cert. denied. The general managing agent
owed no duty to speak or assist in guaranty association’s investigation into a
“fronting arrangement” between an insolvent insurer and a second insurer.
Since the second insurer was potentially liable on policies issued by defunct
insurer, and its conduct did not induce the guaranty association to continue
paying claims, it could not be held liable to guaranty association on any
theory.
Al’s Café, Inc. v Sanders Ins. Agency, 2003 Pa. Super. 110, 820 A.2d 745 (Pa.
Super. Ct. 2003). Sanders, an agent, placed a liquor liability insurance policy for
the appellant with Pine, an out‐of‐state insurance company not licensed to do
business in Pennsylvania. Subsequently, Pine was placed in liquidation before
the appellant notified Sanders it had a covered claim. Since Pine was not
licensed in Pennsylvania, the Pennsylvania Property and Casualty Insurance
Guaranty Association (“PPCIGA”) was not under an obligation to defend the
appellant and the appellant had no coverage for liquor liability. The court
recognized a duty of insurance brokers and agents to “exercise the care that a
reasonably prudent businessman in the brokerage field would exercise under
similar circumstances and if the broker fails to exercise such care and if such
care is the direct cause of loss to his customer, then he is liable for such loss.”
Id., 820 A.2d at 750.
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.
Tennessee
Wyoming
Sizemore v. United Physicians Ins. Risk Retention Group, 56 S.W.3d 557 (Tenn.
Ct. App. 2001). A liquidator properly rejected a claim against an insolvent insurer
where the claimant filed after an unambiguous deadline. The basis for the
claimant’s tardiness—that an employee entrusted with filing the claim missed
the deadline—did not amount to excusable neglect.
Arrow Constr. Co. v. Camp, 827 P.2d 378 (Wyo. 1992). Employer brought
action against insurance agent to recover the amounts it paid to employee’s
widow after insolvent insurer failed to pay. The Supreme Court held that any
damages suffered by employer when it made payments to employee to
fulfill its contractual obligation to provide insurance after insurer became
insolvent were caused by the insolvency of the insurer, for which the
procuring agent could not be held liable to the employer.
Gordon v. Spectrum, Inc., 981 P.2d 488 (Wyo. 1999). The Supreme Court of
Wyoming held that an insurance agent or broker has no duty to inform a client
of its insurer’s insolvency after the client’s policy has been terminated. To
establish liability, the insured would be required to present facts demonstrating
that the agent or broker acted negligently by knowingly placing the policy with
an insolvent carrier or a carrier of questionable solvency.
Cancellation of Policies
Tenth Circuit
Georgia
Hobbs v. Occidental Life Ins. Co., 87 F.2d 380 (10th Cir. 1937). As against the
contention that policies of an insolvent insurance company remained in effect
because of a reinsurance agreement entered into with a solvent insurer, and
thereby required the commissioner to maintain on deposit with the state for
the benefit of the policyholders certain securities, it was held that the order
requiring the commissioner to withdraw and forward the proceeds of such
securities was proper, as upon adjudication of insolvency the policies were
terminated and the holders became creditors for an amount equal to the then
value of their policies with no other rights than that of participating pro rata in
the assets.
Fuller v. Wright, 147 Ga. 70, 92 S.E. 873 (1917). The court held that when a
domestic stock life insurance company is adjudged insolvent and ordered into
liquidation, its outstanding policies are cancelled, and a claim of loss which
occurs thereafter may not be asserted by the beneficiary against the company.
Kuhl v. General American Life Ins. Co., 56 Ga. App. 424, 192 S.E. 831 (1937). The
court held that the judicial declaration of insolvency of a life insurer cancels its

executory contracts, and the insured's sole recourse is an action for breach of
contract.
Todd v. German‐American Ins. Co. of New York, 2 Ga. App. 789, 59 S.E. 94
(1907). The court held that a judicial declaration of insolvency of a fire
insurance company cancels all of its existing policies upon which no loss
occurred.
Illinois
Evans v. Illinois Surety Co., 220 Ill. App. 216 (Ill. App. Ct. 1920). The court held
that a claim was improperly disallowed because of the mistaken theory that
the appointment of a receiver had the effect of cancelling the contracts of an
insolvent company because the claims under the contract were not absolute
or liquidated.
In re Liquidation of Inter‐American Ins. Co. of Ill., 329 Ill.App.3d 606, 768 N.E.2d
182 (2002) Insurer’s failure to maintain its portfolio while paying premiums per
reinsurance agreement did not render reinsurance contracts executory such
that reinsurer was still obligated under agreement.
Indiana Lexington Insurance Co. v. American Healthcare Providers, 621 N.E.2d 332
(Ind. Ct. App. 1993). Liability policy that explicitly excludes coverage for
claims involving insolvency or liquidation of insured brought by liquidator of
any insurer is not a violation of public policy. Accordingly, summary
judgment should be entered in favor of liability insurer with respect to
declaratory judgment action filed by insured seeking both defense and
indemnity costs in connection with two lawsuits filed by the Liquidator
against the insured’s officers and directors.
Mutual Security Life Insurance Co. v. Fidelity and Deposit Company of
Maryland, 659 N.E.2d 1096 (Ind. App. 1995). An insurance company in
liquidation sued the insurer which provided coverage to it under a blanket
fidelity bond when the insurer failed to cover claims because of a provision
in the fidelity bond which automatically terminated coverage upon the
taking over of insured by receiver, liquidator or state or federal officials. The
court held that the automatic termination provision did not constitute a
violation of public policy. In so holding, the court rejected the insured’s
argument that the automatic termination provision violated the Liquidator’s
duty to marshal and distribute assets as required by the insolvency
provisions of the Indiana insurance code, reasoning that the Liquidator could
not take possession of an asset that did not exist (due to the termination of
the bond upon insolvency).
Iowa
Schloss v. Metropolitan Surety Co. 128 N.W. 384, 149 Iowa 382 (1910). In an
action to recover on an insurance policy for a loss by burglary, the receiver's
defense was that the insurance had been terminated by insolvency in New
York, the home state of the company, and appointment of a temporary
receiver. The court held that, although an order of liquidation terminates an
insurer's policies and a policyholder is only entitled to recover unearned
premiums, the same is not true during a temporary receivership. Therefore,
the plaintiff was entitled to recover for the loss he incurred during the
temporary receivership.
Louisiana Bobo v. American Fidelity Fire Ins. Co., 550 So.2d 1278 (La. App. 4th Cir. 1989).
Rehabilitator of insolvent New York insurer had authority, pursuant to Uniform
Insurers Liquidation Act, to cancel policies issued to Louisiana insureds, as long
as rehabilitator satisfied requirements of Louisiana law for cancellation of

policies. Proof of mailing of notices of cancellation submitted by rehabilitator
held insufficient in this instance; therefore, policy was in effect at time of loss,
and Louisianan Guaranty Association was required to cover the claim.
Dardar v. Insurance Guaranty Association, 556 So.2d 272 (La. App. 1st Cir. 1990).
Rehabilitator of insolvent New York insurer had authority, pursuant to
Uniform Insurers Liquidation Act, to cancel policies issued to Louisiana
insureds, as long as rehabilitator satisfied requirements of Louisiana law for
cancellation of policies. Proof of mailing of notices of cancellation submitted
by rehabilitator held insufficient in this instance; therefore, policy was in effect
at time of loss, and Louisiana Guaranty Association was required to cover the
claim.
Minnesota
Missouri
Taylor v. North Star Mutual Ins. Co., 46 Minn. 198, 48 N.W. 772 (1891). A
policyholder of an insolvent mutual fire insurance company requested
payment from the receiver for a fire loss that occurred after the appointment
of a receiver for the company. The court held that the adjudication of
insolvency of the insurance company had the effect of cancelling the
outstanding policies and fixed the date for ascertaining debts and claims
against the company.
Carr v. Union Mutual Fire Ins. Co., 28 Mo. App. 215 (1887). In rejecting a
policyholder's claim for a loss arising after the order of liquidation, the court
confirmed that the order of liquidation against a mutual insurance company
terminates the insurance policies as of the date of the order of liquidation,
even though the policyholder had no actual notice of liquidation and resided in
Illinois where the property was also located.
New Jersey Doane v. Milville Mutual Marine & Fire Ins. Co., 43 N.J. Eq. 522, 11 A. 739 (1887).
When the officers of a mutual insurance company, knowing it to be insolvent
before it had been so declared, voluntarily canceled the policy of a member
and executed a release from all liability under the policy, the insurer was still
liable for losses and expenses which actually existed at the time of cancellation
and which occurred during the life of the policy.
New York Ballesteros v. New Jersey Property Liability Insurance Guaranty Ass'n., 530 F.
Supp. 1367 (1982), affirmed, 696 F.2d 980. A court‐ordered termination of
policies pursuant to a plan of rehabilitation is distinct from the contractual right
of the insurer to terminate policies. Constructive notice of the court order is all
that need be given to make the order effective in both New Jersey and New
York. Notice can be deemed given when the order is filed in the place where
instruments affecting title to property are required to be filed or recorded.
Tennessee
Beard v. Benicorp Ins. Co., 2005 U.S. Dist. LEXIS 38500, 37 Employee Benefits
Cas. (BNA) 1889 (W.D. Tenn. 2005). The employer contracted with the insurer
to provide group health insurance coverage for its employees. While the policy
was in effect, the employee fractured his hip. The insurer rejected and refused
to pay the claims related to the hip fracture. The insurer sought dismissal of
the claims asserted by the employer as well as Count II of the complaint which
asserted a state law breach of contract claim. The insurer argued that the
employer lacked standing to maintain a claim for benefits under ERISA because
the employer was neither a participant nor a beneficiary under the plan. The
court agreed and dismissed the claims.
Insurance Premium Services, Inc. v. Wood, 57 Tenn. App. 514, 420 S.W.2d 595
(1967). Upon learning of the impending insolvency, a Tennessee agent

procured new policies in a solvent company for the agent's clients. It was held
that the agent did not have a right to offset the unearned premiums due the
agent's customers against the claim of the Indiana liquidator, since the policies
were not cancelled by operation of law until the Indiana company was
declared insolvent by the Indiana court.
Transfer of Obligations to Another Insurer or Reinsurer
Fourth Circuit
Charleston Area Med. Ctr. v. Blue Cross & Blue Shield, 6 F.3d 243 (4 th Cir.
1993). Blue Cross and Blue Shield of West Virginia, Inc. (the “Charleston
Plan”) notified the Commissioner of the West Virginia Department of
Insurance that the company was economically impaired as defined in the
West Virginia Code. The Commissioner and the CEO of the Charleston Plan
asked the Blue Cross and Blue Shield Association (the “Association”) to find
qualified merger or affiliation candidates but few were identified.
Blue Cross and Blue Shield Mutual of Ohio, Inc. (the “Cleveland Plan”) and
the Charleston Plan began negotiating and signed a letter of intent
expressing their desire to affiliate. After a due diligent examination of the
Charleston Plan, the Cleveland Plan determined the affiliation was imprudent
because of the severe financial problems of the Charleston Plan.
Subsequently, the Cleveland Plan devised a new approach which included (1)
a controlling affiliation with Blue Cross and Blue Shield of West Central West
Virginia, Inc. (the “Parkersburg Plan”), (2) state liquidation of the Charleston
Plan, (3) acquisition of the liquidated assets of the Charleston Plan, and (4)
consolidation of those assets with the Parkersburg Plan to create a new Blue
Cross and Blue Shield entity in West Virginia. Having few other options, the
State of West Virginia put the Charleston Plan into liquidation and its assets
were purchased free of encumbrances. The new conglomerate became
Mountain State Blue Cross and Blue Shield, Inc. and took over payments for
health care providers for services rendered to former Charleston Plan
subscribers after October 11, 1990.
The hospitals and other creditors to which the Charleston Plan owed money
for services prior to October 12, 1990 were left with claims against liquidated
assets of the Charleston Plan. The hospitals claimed the Cleveland Plan, by
abandoning its intention to affiliate with the Charleston Plan, forced the
Charleston Plan into liquidation and, thus, is liable for tortuous interference
with the hospitals’ contracts with the Charleston Plan.
The court held that to prove proximate cause, in this tortuous interference
with a contract case against a solvent health insurer that acquired the
insolvent insurers assets after liquidation, the hospitals had to show by a
preponderance of the evidence that “but for” acts of the solvent insurer,
they would have been paid. The court concluded that the hospitals failed to
prove that claim and, thus, the Cleveland Plan was entitled to judgment as a
matter of law.
Seventh Circuit Sybron Transition Corp. v. Security Ins. of Hartford, 258 F.3d 595 (7th 2001).
Under New York’s time‐on‐the‐risk approach to allocating insurance coverage
for diseases with long latency periods, insurer’s liability is not increased by
insolvency of successor insurer.
California McConnell v. Industrial Indemnity Co., 219 Cal. App. 2d 809, 333 Cal. Rptr. 418
(1963). The insurance commissioner persuaded a group of insurance

companies to execute an agreement providing for the reinsurance and
assumption of liabilities of an insolvent insurer's worker compensation policies.
The court concluded that the receiver of the insolvent insurer was obligated
first to transfer to the reinsurers, which had undertaken such workman's
compensation obligations, the funds collected in liquidation, to the extent of
the liabilities under the workers compensation policies. This was to be done
before the claims of general creditors of the defunct insurer were satisfied.
Colorado
Georgia
Colo. Ins. Guar. Ass’n v. Menor, 166 P.3d 205. (Colo. App. 2007). An uninsured or
underinsured motorist (UM/UIM) insurer is not a third‐party tortfeasor under
Colorado Statute. The UM/UIM insurer does not step into the shoes of the
tortfeasor and an workers’ compensation insurer does not have subrogation
rights against UM/UIM insurers.
Kuhl v. General American Life Ins. Co., 56 Ga. App. 424, 192 S.E. 831 (1937). The
court held that the judicial declaration of insolvency of a life insurer cancels its
executory contracts, and the insured's sole recourse is an action for breach of
contract. If the insured accepts an assumption certificate offered by a
company which is assuming the liabilities of the insolvent company, the insured
is bound by the terms of the assumption contract.
Illinois AAA Disposal Systems, Inc. v. Aetna Cas. & Sur. Co., 355 Ill.App.3d 275, 821
N.E.2d 1278 (2005). Risk of insurance carrier becoming insolvent is placed on
insured, not another carrier that was a stranger to the insurance process.
Insolvency of successor excess carrier does not increase the liability of
previous carrier. Accordingly, in a coverage dispute, court errs where it
excludes from a pro rata allocation years covered by polices written by
insolvent carriers.
American Serv. Ins. Co v. Pasalka, 363 Ill.App.3d 385, 842 N.E.2d 1219 (2006).
Automobile liability insurer’s policy requiring insureds to request arbitration of
uninsured motorist coverage claim within two years of accident violates public
policy of proving uninsured motorists coverage as applied to insureds who
seek arbitration more than two years after accidents and after tortfeasors’
insurers are in liquidation because insureds could not have know about such
insolvencies and denial of coverage would undermine public policy to make
such coverage available.
Argonaut Ins. Co. v. Safway Steel Prods., Inc., 355 Ill.App.3d 1, 822 N.E.2d 79 (Ill.
App. Ct. 2005). General contractor’s excess insurer may not seek equitable
contribution from sub‐contractor’s excess insurer following the insolvency of
sub‐contractor’s primary insurer because of lack of commonality of insureds.
Harrell v. Reliable Ins. Co., 258 Ill. App. 3d 728, 631 N.E.2d 296 (Ill. App. Ct.
1994). Plaintiff was injured when he was struck by a uninsured motorists.
Plaintiff was insured by Reliable Insurance Company, and his wife was
insured by Safeway Insurance Company. After their injuries, the plaintiffs
filed a declaratory judgment action against both Reliable and Safeway
seeking a determination as to how much each insurance company owed.
Both policies contained identical "other insurance" clauses. The trial court
determined that both companies were liable for identical amounts. Reliable
became insolvent after this finding. The Illinois Insurance Guaranty Fund
then intervened in the action and filed a complaint for declaratory judgment
arguing that Reliable no longer remained liable for their portion because
after insolvency the policy no longer constituted "other insurance." The trial
court granted the intervenor's summary judgment motion and found

Safeway liable for the entire amount owed to the insureds. On appeal,
Safeway argued that the insured's rights under the policy should be
determined on the accident date rather than the insurance company's
insolvency date. The court held that to deny the insureds compensation
would go against the purpose of the Guaranty Fund, and therefore a solvent
company should compensate where an insolvent company cannot.
O'Brien v. General American Life Ins. Co.., 345 Ill. App. 264, 103 N.E.2d 193 (Ill.
App. Ct. 1951). Plaintiffs sued for the balance of a claim for total disability
under a policy issued by an insolvent Missouri life insurance company. The
Missouri insurance commissioner entered into a contract with a solvent insurer
whereby the latter purchased the assets and business of the insolvent insurer,
and the agreement contained the "provision that all payments of installment
disability benefits and monthly income disability benefits shall be reduced to a
sum equal to 50% thereof. The contract was mailed to the insured, with a letter
from the president of the insolvent insurer containing language that the
policies and benefits remained unchanged. When plaintiffs received only 50%
of the disability claim, this action was instituted alleging that the terms of the
letter should be interpreted to obligate the assuming insurer to pay stated
benefits in full. The court held that the letter signed by assuming insurer's
president could not be interpreted as requiring defendant to pay full amount
of disability benefit, especially where insured had been put on notice that the
policy was being assumed by another insurer subject to provisions of purchase
agreement.
Indiana Morthland v. Lincoln National Life Ins. Co. 216 Ind. 689, 25 N.E. 2d 325 (1940).
The trustee and certain policyholders under a reinsurance agreement that was
entered into between the receiver of an insolvent insurer and an assuming
insurer for the assumption of the outstanding life insurance policies of the
insolvent insurer challenged a report filed by the assuming insurer with the
court and the Indiana insurance commissioner as receiver. The court noted
that the assuming insurer possessed legal title to the assets of the insolvent
insurer which supported the reinsurance agreement, but that equitable title
remained in the trustee under the reinsurance arrangement. Further, the
approval of the report by the insurance commissioner as receiver did not
conclude the review of the report, as the court must also approve the report,
since the trustee, as an officer of the court, retained equitable title.
Western Life Indemnity Co. v. Bartlett, 84 Ind. App. 589, 145 N.E. 786 (1924),
rehearing denied, 84 Ind. App. 589, 148 N.E. 155. A contract of reinsurance was
entered into by the receiver of an insolvent insurer and a solvent insurer under
which the business of insolvent was transferred to the solvent. As part of the
reinsurance agreement, policyholders of the insolvent insurer could continue in
force at the same premium as their old coverage or elect to purchase different
coverage. The assuming insurer then issued its own policy to the policyholders
under one of these options. In denying coverage to a policyholder for failure
to pay premiums due within the 30 day grace period, the court rejected the
policyholder's argument that the insolvent insurer's policy provided a 60 day
grace period noting that the reinsurance provided was not on the basis as of
the old policy's terms and conditions. The court held that in essence, the
assuming insurer purchased the right to solicit the insolvent insurer's
policyholders for the two types of coverage it was offering to them.
Iowa Royal Union Life Ins. Co. v. Gross and Great Republic Life Ins. Co. v. Gross, 76
F.2d 219, cert. denied, 295 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.
Kansas
Ace Prop. & Cas. Ins. Co. v. Superior Boiler Works, Inc., 504 F. Supp. 2d 1154 (D.
Kan. 2007). On motion for summary judgment, an insurer sought to pay only its
pro rata share of the defense and indemnity costs of a manufacturer named as a
defendant in multiple asbestos cases. Periods of time existed where the
manufacturer was either uninsured, or insured by a now insolvent insurer. The
court held that an unresolved question of whether a single continuous
occurrence resulted in an unallocable loss covering successive policy periods
existed and precluded summary judgment
State v. Bank Savings Life Ins. Co., 147 Kan. 170, 75 P.2d 297 (1938). Where the
receiver of an insolvent insurer enters into a reinsurance contract with another
company, the receiver cannot, by agreement with the reinsurer, modify the
insolvent insurer's policyholders' rights under the receiver's contract with
policyholder.
Kentucky Kentucky Home Mutual Life Ins. Co. v. Leitner, 302 Ky. 789, 196 S.W.2d 421
(1946). Where the insurance commissioner has authorized a reinsurance
agreement to protect all policyholders of an insolvent insurer, a policyholder
who accepts the agreement is bound by it and all amendments thereto, even
without the policyholder's consent, since the interests of policyholders are
protected by the insurance commissioner.
Massachusetts Commissioner of Insurance v. Massachusetts Accident Co., 318 Mass. 238, 61
N.E.2d 137 (1945). Under the state's liquidation law, the rights of all interested
parties are fixed as of the date of the order of liquidation and policyholders are
entitled to prove their claims against the company's assets. If the court
presiding over the liquidation proceeding has approved a reinsurance
agreement, policyholders may elect to accept the reinsurance; however, if they
reject the benefits of the reinsurance agreement or if no such agreement is
negotiated or approved, the rights of policyholders in the liquidation
proceeding are determined without regard to any reinsurance. The terms of
the reinsurance agreement may not be used to measure the rights of the
policyholders who did not accept the reinsurance.
Mississippi
Bank of Miss. v. Miss. Life & Health Ins. Guar. Ass’n, 850 So. 2d 127 (Miss. Ct.
App. 2003). An annuity purchased by a pension plan was assigned to a
liquidating trust for the benefit of the beneficiaries of the pension plan upon
the insolvency of the insurance company that sold the annuity. The trustee
of the liquidating trust participated in the rehabilitation plan of the insolvent
insurer and accepted a lower interest rate from a second insurance company
that assumed the annuity. The trustee filed a claim with the Mississippi Life
and Health Insurance Guaranty Association (“MLHIGA”) for reimbursement
of the losses resulting from the insolvent insurer’s default. MLHIGA denied
the claim because the pension plan had been protected by the Pension
Benefit Guaranty Corporation. The trustee challenged the denial and,
ultimately, the Supreme Court of Mississippi agreed with the trustee that the
losses were covered by MLHIGA. On remand, two disputes again arose
between the parties. First, the trustee argued that MLHIGA was required to
pay to the trust interest accruing after the original annuity contract’s
maturity date at the rate contracted for in the original annuity (issued by the
insolvent insurance company), or alternatively, the slightly lower legal
statutory interest rate. MLHIGA argued that the interest rate should be an

even lower interest rate than that stated in the agreement with the second
insurance company that assumed the annuity under the rehabilitation plan.
The court held that the rehabilitation plan’s lower interest rate should be
applied, reasoning that the relationship with the insolvent insurer ended at
insolvency. By participating in the rehabilitation plan, the trust sought to
mitigate its losses. To award the interest rate in the original contract, or at
the statutory rate, would give the trust greater damages than if it were to
recover from the insolvent insurer directly. In the same appeal, the court
rejected the trust’s request that it be awarded attorney fees and expenses
because such an award would be punitive in nature in this context.
Gregory v. Cent. Sec. Life Ins. Co., 953 So. 2d 233 (Miss. 2007). Plaintiffs
purchased life insurance policies with “vanishing” premiums from an agent of
an insurer which became insolvent and was placed in liquidation. A second
company (“Assuming Company”) entered an assumption reinsurance
agreement with the National Organization of Life and Health Insurance
Guaranty Associations, to perform certain contractual obligations of the insurer.
Thereafter, Assuming Company notified plaintiffs that they were required to
provide additional premiums on the life insurance policies purchased from
insurer. Plaintiffs filed suit against the agent and Assuming Company, as
successor in interest to the insurer, for making false and misleading statements
in a deliberate attempt to induce them to purchase the subject “vanishing”
premium policies. The plaintiffs argued that when Assuming Company assumed
the obligations of insurer under the policies, Assuming Company also assumed
responsibility for any false and misleading statements made by the insurer. The
Supreme Court of Mississippi held that Assuming Company was not liable to the
plaintiffs because it only assumed certain “Covered Obligations” of the insurer,
which did not include any acts or omissions of the insurer or its agent.
Miss. Ins. Guar. Ass’n v. Goldin Props., Inc., 893 So. 2d 1062 (Miss. Ct. App. 2004).
The court of appeals addressed whether the Mississippi Insurance Guaranty
Association (“MIGA”) was required to pay a claim on a policy issued by a nonmember
insurer whose policies were assumed when it merged with a member
insolvent insurer. At all relevant times (including the policy issue date, the event
date, and the merger date) issuing insurer was a surplus lines company and nonmember
of MIGA. Therefore, none of its premiums were assessed to be
included into MIGA’s fund. The court held that it would be inequitable for the
claimant to recover from MIGA when no assessment from the policy issued to
him was ever collected by MIGA.
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 MIGA
assuming its statutory obligation to pay.
Missouri
Johnson v. American Life and Accident Ins. Co., 145 S.W.2d 444 (Mo. App.
1941). While the court noted that a particular Missouri statute did provide for
notice to policyholders of certain reinsurance arrangements, even with notice,
the statue did not provide any remedy for correcting any problems perceived

in the reinsurance agreement or, in fact, provide any basis for concluding that
failure to give notice changes the validity of the actual agreement. Thus, the
policyholder was bound by the terms of the agreement.
New York In re Liquidation of Galaxy Ins. Co., 710 N.Y.S.2d 72 (App. Div. 2000). The
liquidator sued an insurance company that issued suretyship certificates to
policyholders of the insolvent insurer, pursuant to which the company agreed to
assume the insurer’s liabilities in case of insolvency. The court held that any
ambiguity as to conditions precedent in the agreement would be construed
against the company that was required to assume the insolvent insurer’s
liabilities.
Michigan National Bank‐Oakland v. American Centennial Ins. Co. (In re Union
Indemnity. Ins. Co.), 89 N.Y. 2d 94, 651 N.Y.S. 2d 383, 674 N.E. 2d 313 (1996).
The Court of Appeals upheld the affirmative defense of fraud, which resulted
in rescission of reinsurance contracts of an insolvent insurer. The Court ruled
that insolvency is a material fact that insurers are required to disclose to
reinsurers. Failure to disclose insolvency may constitute fraud in the
inducement of the reinsurance agreements, resulting in their
unenforceability. The court found that statements by the Liquidator’s
counsel in a related action that Union Indemnity had fraudulently induced
reinsurers to accept business when its financial condition was impaired were
found to be informal judicial admissions. If the reinsurers had known of
Union Indemnity’s insolvent financial condition, they would not have
reinsured the company’s business.
The Court held that it was not improper to admit the informal judicial
admissions against the Liquidator. An insurer’s insolvency is a material fact
that must be disclosed to a potential reinsurer and failure to do so voids the
reinsurance treaties as against both the Liquidator and the beneficiary of a
bond issued by the insolvent insurer. The Court stated that it would be
“unseemly” for the Liquidator to use admissions to document Union
Indemnity’s fraud and to then deny the relevance of those admissions in an
action involving Union Indemnity’s reinsurers.
The Court rejected the argument of the Insurance Superintendent that
rescission was precluded by the New York statutory liquidation scheme.
Rather, the court reasoned that the liquidator stands in the shoes of the
insolvent insurer; liquidation cannot place the liquidator in a better position
than the insolvent company would have been in if it was not insolvent, nor
can liquidation authorize the liquidator to demand rights or defenses that
the company would not have been entitled to prior to liquidation. The
decision ultimately deprived Union Indemnity's creditors, including state
insurance guaranty funds, of additional assets that would have been
available for distribution from the estate due to the collection of
reinsurance.
Reese v. Smith, 95 N.Y. 645 (1884). The receiver of an insolvent New York life
insurance company entered into a contract with a Connecticut company,
whereby the latter agreed to undertake the former's outstanding policy
liabilities. Certain policyholders in the New York company surrendered their
policies to the Connecticut company, receiving its policies in exchange. The
court held that the Connecticut company did not thereby become a
policyholder in the New York company and was not entitled to share in the
distribution as such.

North Carolina
Texas
North Carolina Insurance Guaranty Association v. State Farm Mutual
Automobile Insurance Company, 115 N.C. App. 666, 446 S.E.2d 364 (1994).
Automobile liability insurer brought declaratory judgment suit seeking to
recover from Insurance Guaranty Association uninsured motorist benefits
paid when tortfeasor’s liability insurer was declared insolvent, more than
three years after accident. The court held that an uninsured motorist clause
which provided that a vehicle is uninsured if liability insurer “is or becomes
insolvent” extended coverage under policy beyond three‐year minimum
mandated by Financial responsibility Act because two occasions of
insolvency were contemplated (1) if insolvency exists at the time of the
accident, and (2) if insolvency occurs some time following accident.
Furthermore, the court noted that when an insurance policy, containing the
aforementioned clause, does not specify any period of time, an uninsured
motorist claim may not be barred even though minimum period specified by
Financial Responsibility Act has elapsed. In addition, the court stated that
the three‐year limitation mandated by Financial Responsibility Act accrued
when tortfeasor’s liability insurer was declared insolvent, even though
declaration did not occur until more than three years after date of accident.
McLean v. Morrow, 137 S.W.2d 113 (Tex. Civ. App. 1940) writ dismissed. When
the receiver assigned the rights obtained against a policyholder to another
party for $10 as consideration, and the assignee attempted to recover against
the policyholder, the court held that the assignment was executed by the
receiver without authority from the court which had appointed the receiver.
Without such approval, the assignment was void and the assignee had no
justifiable interest in the claim asserted by the receiver. The court found the
intent of the assignment was to substitute the plaintiff for the receiver, and
the assignee was not acting for the benefit of the receiver.
Virginia The Uninsured Employer’s Fund v. Flanary, 27 Va. App. 201, 497 S.E.2d 912
(1998). Albert Flanary was originally awarded weekly compensation
disability benefits for 300 weeks. Upon a change in his condition, he was
awarded lifetime benefits. Mr. Flanary’s employer was required by statute,
Va. Code § 65.2‐801 (1950), to continually maintain liability insurance because
its employees were susceptible to pneumoconiosis. Both of the employer’s
insurance carriers became insolvent. The Virginia Property and Casualty
Insurance Guaranty Association became liable for “covered claims” against
Rockwood Insurance and the Uninsured Employer’s Fund became liable for
claims against the Coal Producers Group. Rockwood Insurance was solvent
when compensation was first awarded and paid its share of the original
award. It became insolvent, however, prior to the entry of the award based
upon the claimant’s change in condition.
The Uninsured Employer’s Fund is a statutorily created “governmental
insurance or guaranty program,” which is financed by taxes levied upon
insurers and functions as the workers’ compensation insurer of last resort
under statutorily limited circumstances. The Court of Appeals of Virginia held
that statute requires individuals having a claim against the Fund, which is
also a “covered claim” under the policy of an insolvent insurer, to exhaust
first his rights under the Fund before bringing a claim against the Property
and Casualty Insurance Guaranty Association. Further, the court held when
there has been a failure to maintain the statutorily required liability
insurance, the Fund will be liable because the employer has violated its
statutory duty. The Virginia Property and Casualty Insurance Guaranty
Association would only become liable for payment if the Fund were to be
unable to fully satisfy the award.

Uninsured Employer’s Fund v. Mounts, 255 Va. 254, 497 S.E.2d 464 (1998).
The Supreme Court of Virginia held that the phrase “keeping insured” in Va.
Code § 65.2‐801(A)(1) (1950) means that an employer subject to the
Workers’ Compensation Act “must be and remain insured.” Therefore, an
employer whose employees are susceptible to pneumoconiosis must
anticipate that such claims will accrue in the future and must secure its
liability for such potential claims, even when its insurer has been declared
insolvent. When there has been a failure to do so, the Uninsured Employer’s
Fund will be liable because the employer has violated its statutory duty.
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.
Liability of the Insurance Commissioner
Sixth Circuit
Ass’n of Banks in Ins., Inc. v. Duryee, 270 F.3d 397 (6th Cir. 2001). The plaintiffs, a
national bank and several organizations whose memberships include national
banks, filed suit against the Ohio Superintendent of Insurance seeking: (1) a
declaratory judgment that certain Ohio licensing provisions as applied to
national banks are preempted by § 13 of the Federal Reserve Act; and (2) a
permanent injunction preventing the Superintendent of Insurance from
enforcing these provisions against national banks to the extent they are
preempted. The trial court granted summary judgment in favor of the plaintiffs,
granting a declaratory judgment and permanently enjoining the superintendent
from enforcing the challenged Ohio provisions and the Court of Appeals
affirmed.
Golden Rule Ins. Co. v. Fabe, 1992 U.S. App. LEXIS 8475 (6th Cir. 1992). The
Superintendent rejected the insurer’s request for increases in three policies.
Rather than request the statutorily provided hearing, the insurer brought a §
1983 action against the superintendent to obtain declaratory relief. The insurer
claimed the superintendent systematically disapproved rate revisions without
first making the required finding that the rates were not properly calculated. If
the superintendent issued a finding that an applicant’s request was actuarially
inadequate, without conducting an actual actuarial review, the superintendent
failed to perform his duties. However, the statute created a remedy for such
acts by allowing a hearing process. That the insurer would have had to bear the
costs of the hearing and that the policies only affected a few insureds and were
not cost‐beneficial to appeal did not mean that the insurer was deprived of any
rights. The insurer did not have a property interest in the requested rate
increase until the premium increase was approved. The case against the
superintendent was dismissed.
Alabama
E.F. Hutton v. Forrester, Circuit Court of Mobile County, Ala. (Sept. 28, 1984). A
third party complaint was filed against the Alabama insurance commissioner in

an individual and official capacity, alleging that the commissioner failed to carry
out the statutory duty of ensuring that the Baldwin‐United companies were
solvent, and therefore, that any losses incurred by Baldwin policyholders are
not the legal responsibility of the plaintiff broker. In a companion suit, the
plaintiff also brought similar charges against the Alabama guaranty fund, its
board of directors, and the Arkansas insurance commissioner, as the
rehabilitator of one of the Baldwin insurers.
Arkansas
California
Illinois
Big Rock, Inc. v. Missouri Pac. R.R., 295 Ark, 495, 749 S.W.2d 675 (1988). The
insurance commissioner, as ancillary receiver of an insolvent insurance carrier,
was alleged to have committed constructive fraud. In affirming a lower court
decision denying the claim, the Supreme Court of Arkansas held that nothing in
the record contradicted "the Commissioner's view that a 'retained limit' was in
the nature of a deductible..." 749 S.W.2d at 678.
Garris v. Mitchell, 7 Cal. App. 2d 430, 46 P.2d 225 (1935). When the insurance
commissioner had taken possession of the assets of an insurance company,
the commissioner acted as the trustee of those who were properly entitled to
share in the assets, and had the duty to conserve and to protect their interests.
Where the commissioner had been guilty of fraud for conspiring with some
creditors to the detriment of others, the injured creditors could maintain an
action against the insurance commissioner upon leave of the court. Under the
present circumstances, there could be no presumption that the commissioner
acted properly in fulfilling his/her duties.
Evans v. Potts, 204 Ill. App. 212 (1917). The insurance commissioner filed a
petition to intervene to protect the assets of an insolvent insurer. The
commissioner was allowed to intervene, but the appointment of the receiver
by the equity court would not be reversed. However, if assets were diverted
to the insurance commissioner as intervener by the receiver, such actions
could be deemed improvident at some subsequent point in time and the
intervener, as well as the receiver, could be compelled to restore the assets of
the estate.
Williams v. Continental Stock Transfer & Trust Co., 1 F. Supp.2d 836 (N.D. Ill.
1998). Applying New York law, the court granted on numerous grounds a
motion to dismiss the Illinois Insurance Commissioner's claims that the
defendant breached a contract and fiduciary duties. First, the court
dismissed the claim that the defendant breached a fiduciary duty under an
indenture agreement by failing to inspect documents and ensure valid title.
The court held that according to the indenture agreement, the defendant
did not have any obligation to submit or inspect documents in order to
ensure valid title unless a company had delivered those documents to the
defendant. Second, the court dismissed the claim that the defendant
breached its duty by failing to execute a servicing agreement. Again, the
court relied upon the principle that a fiduciary's duties are strictly limited to
those found within the indenture agreement. Finally, the court dismissed
the allegation the defendant improperly reimbursed itself for litigation
expenses and fees because the indenture agreement specifically allowed for
and gave priority to retention of fees by the trustee in the event of litigation
stemming from the agreement.
The court refused to strike the defendant's affirmative defenses of fraudulent
conduct by the insolvent insurance company because a liquidator is subject
to all defenses that could be raised against the now insolvent company. The
court held that because the Illinois Insurance Commissioner had stepped

into the shoes of the insurance company once liquidation proceedings
began, the affirmative defenses available against the company remained
preserved for use against its successor in interest. The court, however,
agreed that the defendant did not sufficiently plead the affirmative defense
of negligent conduct by the Liquidator because the defendant failed to
demonstrate when the alleged negligent conduct occurred. The court held
that contributory negligence only applies to the Insurance Commissioner for
those actions undertaken while serving as liquidator.
Stamp v. Brown, 1991 U.S. Dist. LEXIS 11963 (N.D. Ill. Aug. 27, 1991). The
plaintiff asserted that the defendants fraudulently misrepresented the
financial status of a company and, based upon these misrepresentations, the
Illinois Department of Insurance allowed a troubled company to further
spiral into insolvency. The defendant asserted that the Illinois Department
of Insurance was negligent in reviewing the financial status of the insurer
company, and that the Department's conduct shielded the allegations of
fraudulent conduct. The court held that a defendant's wrongdoing cannot
be shielded by the conduct of a regulatory body. Moreover, a finding that
the defendants engaged in fraudulent activity would dispel any affirmative
defense of negligent conduct on the part of the Department. Based on the
stricken affirmative defense, the court prohibited any expert testimony
relating to a Department's alleged negligent conduct.
Indiana
Iowa
Kentucky
Louisiana
Employers Insurance of Wausau v. Indiana Department of Insurance, 452 N.E.
2d 441 (Ind. App. Ct. 1983). In refusing to dismiss for failure to state a claim for
which relief could be granted a reinsurer's claim against the Indiana
rehabilitator for failure to properly distribute assets to the reinsurer, along
with the ten other reinsurers who received settlement of their claims against
the insolvent insurer, it was noted that the Indiana insurance commissioner, in
the official capacity as rehabilitator and/or liquidator, could be liable for either
knowingly or negligently distributing assets from the estate. Although under
ordinary circumstances creditors have no right to sue the insurance
commissioner for the collection and handling of the assets of an insolvent
insurer, such general principle is not applicable if the commissioner has
wrongfully dissipated assets to the detriment of a creditor.
Builders Transport, Inc. v. State, 421 N.W. 2d 539 (Iowa 1989). The State of
Iowa was sued for the losses caused by the alleged negligent supervision of
the plaintiff's insurance carrier. In denying the relief sought, the Supreme
Court of Iowa found (i) the lower court lacked subject matter jurisdiction due
to the plaintiff's failure to comply with an existing administrative remedy for
claims against the State; (ii) the state is immune from suit unless such
immunity is expressly waived; (iii) any consent to be sued is a privilege given by
the State and not a property right conferred on the plaintiff. The Court held
that the plaintiff's due process rights were not violated by the withdrawal of
the right to sue the State for negligent supervision.
Exec. Branch Ethics Comm’n v. Stephens, 92 S.W.3d 69 (Ky. 2002). Kentucky law
grants a measure of immunity to governmental officials involved in insurance
rehabilitation/liquidation, but this is only for acts taken during the course of the
liquidation proceedings. A deputy liquidator is not immune from an ethics
investigation where none of the alleged ethical violations were based on acts or
decisions made in his official capacity.
Brown v. ANA Ins. Group, 994 So. 2d 1265 (La. 2008). An insolvent insurance
company, ANA Insurance Group (“ANA”), was found to be a single business

enterprise with United States General Agency (“USGA”) and American Funding
Services, Inc. (“AFSI”), and was placed in receivership. A co‐owner of ANA sued
the commissioner of insurance, as liquidator, for mismanagement of the
receivership estate based on the liquidator’s conduct with respect to the sale of
securities owned by USGA. Overruling the lower appellate court’s reasoning
that a finding of a single business enterprise (“SBE”) makes the liquidator a
fiduciary to the co‐owner of ANA, as if she were an owner of the entire SBE, the
state supreme court held that an SBE makes the liquidator owner of all of the
SBE’s assets, but that the owners of the individual entities of the SBE remain the
same. Therefore, the co‐owner of ANA did not have standing to bring an action
against the liquidator of USGA.
Wooley v. Lucksinger, 961 So. 2d 1228 (La. Ct. App. 2007). Owner of an insolvent
health plan filed a third‐party claim against the Department of Insurance in the
same lawsuit where the Commissioner of Insurance, as liquidator of the same
insolvent health plan, was pursuing causes of action against the owner for
corporate mismanagement and accounting negligence. The owner sought
indemnity, contribution, and governmental tort damages based on the
Department’s alleged negligent enforcement of rules and regulations thereby
allowing the health plan to fall deeper into insolvency. The owner also sought
damages from the Department on the basis of detrimental reliance. The court
of appeals held that, as a matter of law, the Department’s executing and
applying its statutory functions are not promises for the purposes of a Louisiana
statutory detrimental reliance claim or for public contract purposes. Therefore,
the owner’s claim for detrimental reliance on this basis is legally nonexistent.
The owner’s remaining third‐party demands of the Department could not be
sustained because, under Louisiana law, a third‐party plaintiff must allege and
prove that a third‐party defendant is liable to the plaintiff for all or part of the
damage. The joint and divisible nature of negligence under the Louisiana
statutes makes no damage award possible to the owner as co‐obligor.
Therefore, because the Department is not liable to the owner for all or part of
the demand, the owner also has no cause of action for third‐party demands as a
matter of law.
Missouri Avidan v. Transit Cas. Co., 20 S.W.3d 521 (2000). A former employee of a
receivership filed suit against the receivership for breach of contract, and
against both the receivership and the receiver for deprivation of his civil rights
under 42 U.S.C. § 1983. The lower court dismissed the claim against the receiver
based on statutory immunity. On appeal, however, the Supreme Court of
Missouri reversed and remanded, holding that the immunity provided to a
deputy receiver for an insurance receivership initiated prior to August 28, 1991, is
conditioned upon actions taken in “good faith” and it was error to dismiss a
petition that had alleged the deputy receiver's actions were “willful, wanton
and malicious.”
Lucas v. Manufacturing Lumberman's Underwriters, 349 Mo. 835, 163 S.W.2d
750 (1942). The new Missouri insurance commissioner filed charges against the
prior insurance commissioner and secured a judgment of $85,264.44. In
reversing this award, the Missouri Supreme Court noted that the Missouri
commissioner had the authority during rehabilitation to preserve the status
quo while awaiting the decision of various questions of jurisdiction pending
before the state and federal courts concerning the reciprocal exchange, and
this included the expending of funds for the purpose of reinsuring and
maintaining as much as possible the status quo of the exchange. The
insurance commissioner is vested with much discretion in conducting and

managing the affairs of insurance companies under the commissioner's
control.
Nebraska State ex rel. Sorensen v. Lincoln Hail Ins. Co., 133 Neb. 496 276 N.W. 169, (1937).
The court stated that the insurance department's special agents had been
directed to administer the insurer as a "going concern," and therefore, the
agents were required to conduct the insurer's affairs in the usual ordinary way
and in compliance with public policy of the state as expressed in its statutes.
The agents were liable for use of the statutory "loss fund" for purposes other
than payment of losses to the extent of the amount used and diverted. In
addition, because the agents had dissipated more than $40,000 of the insurer's
loss fund and continued operation of the business with knowledge that it was
losing money, the lower court, in exercise of its discretion, properly denied the
agents' claim for additional compensation.
Witzenburg v. State, 140 Neb. 171, 299 N.W. 533 (1941). The plaintiff in this case
had been ordered to pay the sum of $12,633.56 for monies unlawfully diverted
and misappropriated in State v. Lincoln Hail Ins. Co., 133 Neb. 496, 276 N.W. 169
Supra. In the instant case, plaintiff brought suit against the department of
insurance, alleging that pursuant to a contract of employment, the department
of insurance had agreed to hold the plaintiff harmless from liability for acts
done pursuant to orders of the insurance department. The Nebraska Supreme
Court sustained the lower court's determination that plaintiff was not entitled
to obtain reimbursement from the department of insurance. The court stated
the state could not underwrite items of compensation and expenses which the
agents were to receive from the insolvent insurer and could not authorize its
officials to contract to hold agents harmless from liability for acts done in the
administration of an insurance company, including the handling of funds.
New Jersey Lincoln Bus Co. v. Jersey Mutual Casualty Ins. Co., 1 12 N.B. Eq. 523, 10 N.J.
Misc. 1114, 162 A. 915 (1932). Where the insurance commissioner made an
honest mistake in defending suits against the insolvent insurer, without
authorization, the commissioner is not chargeable with the expenses of the
litigation as the commissioner, as a public official, was acting with due care.
New York
Capitol Indemnity Corporation v. Salvatore Curiale, 871 F. Supp. 205 (S.D.N.Y.
1994). Agency Managers Casualty Reinsurance Pool (the “AMI Pool”) was
formed by several insurance companies to reinsure risks ceded to
retrocessionaires. Plaintiff Capitol Indemnity Company participated in the
AMI Pool as a direct participant, a retrocessionaire and as a group
retrocessionaire. Capitol established trust fund accounts and an operating
account. From 1978 through 1986, four member companies of the AMI Pool
were placed into liquidation. In 1988 the AMI Pool filed for Chapter 7
Bankruptcy protection. Following litigation in Bankruptcy Court, the trust
fund accounts were ordered transferred to the New York Superintendent as
Liquidator of three of the member companies of the AMI Pool. In this action
against the New York Superintendent and a Deputy Superintendent, both in
their official capacities and individually, Capitol alleged that it was the owner
of the trust account funds and that those funds had been improperly
distributed to the estates of the insolvent companies by the Superintendent.
The defendants’ moved to dismiss the complaint under the Burford
abstention doctrine, that requires federal courts to abstain where the
exercise of jurisdiction would unnecessarily interfere with the administration
of a complex state regulatory system. The court found that although the
Superintendent and the Deputy Superintendent were named as defendants
individually, the acts complained of were part of their official duties and

were not ultra vires acts. There were no allegations of self‐dealing against
the defendants. Upon application of the Burford abstention doctrine, the
court declined to decide the parties’ summary judgment motions and
granted the defendants’ motion to dismiss the action.
Curiale v. Ambassador Group, Inc. et al., Supreme Court, New York County,
IAS Commercial Part 14. This case involves an action by the New York
Superintendent of Insurance as Liquidator of Horizon Insurance Co. against
some of its former officers, directors and its former accountants. The
defendants raised a variety of affirmative defenses, including assertions that
the Superintendent’s claims were barred by his own culpable conduct and
contributory negligence. The defendants’ theory was that the
Superintendent, as Regulator, was insufficiently vigilant or committed errors
during the regulatory process, leading to the insolvency of Horizon. The
court ruled that although the Superintendent as Liquidator was a party to
the action, the Superintendent as Regulator is a “different person” and was
a non‐party to the action. Accordingly, the defenses addressed to the
conduct of the Superintendent as Regulator were dismissed.
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 state, by
authorizing a fund for the security of state policyholders, incurs no
responsibility except as a depository.
Klein v. New York Title & Mortgage Co., 155 Misc. 513, 279 N.Y.S. 931 (1935).
The court held that the insurance commissioner as rehabilitator of a title and
mortgage company, was liable as a statutory receiver with respect to personal
injuries sustained by a tenant of the property under rehabilitation. A statutory
receiver is inherently liable in actions upon either passive or active negligence.
North Carolina
Ohio
North Carolina, ex rel. Long v. Alexander & Alexander Services, Inc., 711 F. Supp.
25 (E.D.N.C. 1989), 1989 W.L. 38567 (E.D.N.C., April 12, 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 defendant's 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.
Anderson v. Ohio Dept. of Ins., 58 Ohio St.3d 215, 569 N.E.2d 1042 (1991). Ohio
Department of Insurance ("department") was sued by a Health Maintenance
Organization ("HMO") for alleged negligent actions arising from an order of
the Superintendent of Insurance to liquidate the HMO which was later vacated
by a common pleas court. The Supreme Court of Ohio held that even though a
discretionary decision of the department is not actionable, the manner in
which that decision is carried out is actionable if a special duty is owed by the
department to the HMO. In reversing the court of appeals, however, the court

ead the applicable statute as saying that the department's regulation of
HMOs is for the benefit and protection of the public. Thus, the court found no
special duty and, therefore, no private right of action.
McManamon v. Ohio Dep’t of Ins., 2008 Ohio LEXIS 6958 (Ct. App. 2008). The
plaintiff insurance agent sued the Ohio Department of Insurance, claiming that
the Department fraudulently led an insurer into liquidation. The plaintiff
brought the suit in common pleas court. The court explained that the Ohio
Department of Insurance “wears two different hats in a rehabilitation
proceeding that ultimately results in liquidation.” First, until the Ohio
Department of Insurance becomes the liquidator through a liquidation order, it
is a regulator, subject to suit “under the usual principles that apply to actions
against the state.” The plaintiff could not hold the Ohio Department of
Insurance liable for fraud in this capacity because the plaintiff brought the
action in common pleas court, not the Court of Claims as Ohio law requires for
actions against the state. Second, after a liquidation order is entered, the Ohio
Department of Insurance becomes a liquidator and enjoys the protection of
Ohio Revised Code Chapter 3903. Among other things, that Chapter bars civil
actions against the liquidator. No exception exists to this bar for actions based
on a theory of fraud, so the plaintiff’s suit failed in this respect as well.
Wallace v. Ohio Dep’t of Commerce, 96 Ohio St. 3d 266 (Ohio 2002). Wallace
explicitly overrules Anderson v. Ohio Dep’t of Ins. by holding that the public duty
rule is not applicable in Ohio. In Anderson v. Ohio Dep’t of Ins., the Department
of Insurance was held not liable to the HMO due to the application of the public
duty rule. However, following the Wallace decision, the court held the
Superintendent of Insurance—and the Department—had a legal duty identical
to that which would be applicable if the defendant were a private individual or
entity. The public duty rule no longer shields the actions of Ohio public officials
from liability.
Oklahoma
State ex rel. Weatherford v. Senior Sec. Life Ins. Co., 1996 Okla. 92, 916 P.2d
288 (Ct. App. 1996). Following the appointment of a receiver for an
insolvent life insurance company, the company’s management filed an
application for payment of attorney fees that it incurred in resisting the
Insurance Commissioner’s application for appointment of receiver as cost of
receivership estate. The court held that attorney fees incurred by insolvent
insurer’s management did not have to be paid out of the receivership estate
given the lack of evidence that the management acted in good faith in
opposing the Commissioner’s application.
Pennsylvania Greenfield v. Pennsylvania Insurance Guaranty Association, 256 Pa. Super. 136,
389 A.2d 638 (1978). A law firm which provided legal services to an insurance
company which was later liquidated could make a claim against the insurance
commissioner, as receiver, but could not recover from the Pennsylvania
guaranty fund.
Safeguard Mutual Ins. Co. v. Commonwealth of Pa., 372 F. Supp. 939 (E.D. Pa.
1974). An insurer brought suit against the insurance commissioner claiming
that the commissioner was using the insurance code to circumvent a state
court order vacating the commissioner's suspension of the insurer from
transacting business in the state. It was held that the remedy for illegal or
malicious actions by the insurance commissioner was in the state courts.
Texas C.M. Clark Insurance Agency, Inc. v. Reed, 390 F. Supp. 1056 (S.D. Tex. 1975).
Since the chief counsel to Pennsylvania's insurance commissioner was

authorized by state law to petition for the liquidation of an insurance company,
the chief counsel was immune from a civil rights action by the insurance
company that it had been denied due process and equal protection of the
laws. The actions cited ‐‐ filing the petition, using discovery, conducting the
trial, and filing exceptions to the court's orders in the case ‐‐ were all part of the
prosecutorial role. As a quasi‐judicial officer, the counsel's motives were
irrelevant.
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.
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.
El Paso Electric Company v. Texas Department of Insurance, 937 S.W.2d 432
(Tex. 1996). The Supreme Court of Texas held that conservator and
liquidator of an insurance company are agents of the state for purposes of
allowing litigants to recover fees and expenses when the state agency brings
a frivolous claim. The court reasoned that the receiver for an insolvent
insurer is an agent of the state based on the Board of Insurance’s ability to
remove the receiver, and the fact that the receiver’s compensation is within
the Board’s control. The court also concluded that the conservator, which is
appointed by the Commissioner of Insurance, is an agent of the state. The
court further reasoned that the Commissioner has direct control of the
conservator and the actions of conservator can be attributed to the Board of
Insurance.
Liability of Company Directors or Officers
Fifth Circuit
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). Insurance broker brought action as subrogee
against insolvent insurer and its president and chairman of the board to
recover unearned premiums paid after insolvency. Citing the McCarran‐
Ferguson Act, 15 U.S.C. § 1011, the court affirmed an administrative stay
pending resolution of all proceedings in the state liquidation court on the
grounds of Burford abstention. Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098
(1943). The action against the president and chairman of the board individually
for mismanagement and under‐capitalization was also properly stayed,
because the derivative claim involved the same assets which the Commissioner
was required to collect and distribute in the liquidation proceeding. Pursuit of

those claims in federal court would "usurp" Louisiana's control over the
liquidation proceeding, permit plaintiff to obtain an unfair advantage over
other claimants, and "encroach" into the Commissioner's exclusive power as
liquidator.
Connecticut
Florida
Reider v. First Conn. Life Ins. Co., No. CV9605595135, 2001 WL 837933 (Conn.
Super. June 27, 2001). The court upheld a settlement agreement between the
insurance commissioner as rehabilitator of a life insurance company and the
owner of the insurance company as clear and unambiguous, and held that
rehabilitator was entitled to retain a portion of the funds paid under the
agreement to satisfy the claims of small agent of the insolvent insurance
company.
In re Wilbur, 211 B.R. 98 (Bankr. M.D. Fla. 1997). Officer and director of an
insolvent insurance company who failed to explain the loss of assets, failed
to maintain proper financial records, transferred property within one year of
his bankruptcy petition with the intent to defraud creditors, and concealed
property of his estate after filing the petition was denied a discharge under
the Bankruptcy Code.
Illinois Holland v. Stenhouse, 1991 WL 30138 (N.D. Ill.). The trustee of a holding
company had standing to sue the officers and directors of the holding
company and an insurance subsidiary based upon injury to the holding
company independent of the loss holding company may have incurred as a
result of the insolvency of its principle insurance subsidiary. Under Delaware
law, directors reliance on information provided to them must be reasonable;
blind reliance is not protected under the business judgment rule.
Stamp v. Brown, 1991 WL 169377 (N.D. Ill.). In an action brought by a Liquidator
alleging that defendants engaged in a fraudulent scheme to misrepresent the
financial conditions of Reserve Insurance Company, defendants asserted
several affirmative defenses based upon the conduct of the Illinois
Department of Insurance in regulating Reserve. The court struck defendants'
affirmative defenses to the extent that defendants asserted that the
Department's negligence shielded them from liability for their own fraudulent
conduct.
Stamp v. Touche Ross & Co., 1992 WL 46900 (Ill. App. Ct., 1st Dist., March 13,
1992). Liquidator of the insurance company brought an action for negligence
and breach of fiduciary duty against outside, non‐management directors. The
trial court dismissed the Liquidator's complaint, holding that because the
Liquidator did not charge defendants with any wrongdoing bordering on
fraud, illegality, or conflict of interest, the business judgment rule protected
defendants from liability for honest errors or mistakes in judgment. The
Appellate Court affirmed, noting that the Liquidator's complaint attacked the
defendants' actual decisions or determinations of judgment and did not allege
that any such failure was by reason of inexcusable unawareness, inattention or
lack of good faith on the part of the directors.
Selcke v. Bove, 258 Ill. App. 3d 932, 629 N.E.2d 747 (Ill. App. Ct. 1995). In suit
by Illinois Director of Insurance against the directors and officers of an
insolvent insurance company, the court held that the business judgment rule
applies to both corporate officers and directors under Illinois law, and thus
complaint as filed was legally insufficient to state a claim. However, the
court did grant the Director leave to amend to allege that the defendants
failed to exercise reasonable care.

Stamp v. Touche Ross & Co., 263 Ill. App. 3d 1010, 636 N.E.2d 616 (Ill. App. Ct.
1993). The plaintiff alleged that the defendant non‐management directors
of Pine Top, an insolvent insurer, failed to perform their fiduciary duties
owed to the company and that the directors negligently mismanaged the
affairs of the company. The trial court dismissed the complaint based upon
the Liquidator's failure to assert any allegation of fraud, illegality, or selfdealing.
On appeal, the court agreed with the lower court that the business
judgment rule "shields directors who have been diligent and careful in
performing their duties from liability for honest errors or mistakes of
judgment." The court, however, determined that the Liquidator should be
granted leave to amend the pleading because it would have been futile for
him to ask for amendment at the trial court level. Because the trial court
dismissed the complaint based upon a legal insufficiency, the failure to plead
fraud, illegality, or self‐dealing, and did not address the factual sufficiency of
the negligence claim, the appellate court held that the Liquidator would
have gained nothing by moving for an amendment to the complaint at that
time. As a result, the court denied Liquidator's appeal from the trial court's
dismissal, but remanded the case to allow for leave to amend.
Holland v. Stenhouse, 1991 U.S. Dist. LEXIS 2518 (N.D. Ill. March 11, 1991). The
receiver of the bankrupt holding company of an insolvent insurer filed a
complaint against the company's officers and directors, alleging that the
officers and directors devised a scheme to hide the subsidiary's insolvency,
including concealing their knowledge that accountants' reports
misrepresented the insurer's solvency. Defendants asserted that the
plaintiff trustee lacked standing to sue, and that they were insulated from
liability by Delaware's business judgment rule. The court held that he
Delaware business judgment rule does not fully immunize insurance
company directors from liability for actions they take or fail to take that
cause or deepen the insurance company's insolvency. Whether the directors
acted in good faith reliance on information given to them is a fact question
to be resolved at trial.
Washburn v. Becker, 186 Ill. App. 3d 629, 542 N.E.2d 764 (Ill. App. Ct. 1989).
The Illinois Director of Insurance filed a complaint seeking damages and
injunctive relief from the officers and directors of a New York based holding
company of an insolvent Illinois insurer for the alleged participation in
voidable transfers, negligent actions, and for breaching the fiduciary duty
owed to the plaintiffs and policyholders. The Defendants argued that they
were not subject to personal jurisdiction in Illinois under the fiduciary shield
doctrine, which provides that if an individual's contact with a state is only by
virtue of the acts as a fiduciary of a corporation, such acts do not form the
predicate for personal jurisdiction over the individual. The court held that
because the fiduciary shield doctrine is equitable in nature, it would go
against those equitable principles to automatically bar every case that fit the
factual profile for the fiduciary shield doctrine. Rather, the appellate court
concluded that equity required a discretionary application of the fiduciary
shield doctrine, and that the circuit court should consider on remand
whether application of the doctrine was appropriate under these
circumstances.
Indiana
Welliver v. Coate, 65 Ind. App. 195, 114 N.E. 775 (1917). The receiver of an
insolvent insurer brought an action to recover funds against the directors and
officers of the insolvent insurer. Since the $20,000 in question had been
"advanced" to the company during organization, it had been returned to the

directors that had contributed the moneys upon the opinion of the Executive
Committee of the Board of Directors when it was safe to do so, and when such
arrangement had been approved by the Indiana Attorney General and the
state auditor in charge of the insurance department, it was concluded that
despite a misinterpretation of the organizations statute by all concerned, the
directors had proceeded in good faith with no selfish or improper motive, and
therefore, the receiver could not pursue the directors on the ground that the
transaction was ultra vires. Further, where the policyholders were estopped
from recovering the payments by their previous knowledge of the transaction,
the receiver could not attempt to recover on their behalf.
Iowa
Hoyt v. Hampe, 214 N.W. 718, 206 Iowa 206 (1928), rehearing denied, 220 N.W.
45, 206 Iowa 206. The court held that the insurance company was required to
maintain a reserve for unearned premiums in addition to paying losses on
policies in force. The court also held that policyholders were creditors and,
from the dates of their policies had the right to require fulfillment of obligation
the company owed them. Therefore, the appropriation of company funds by
defendants was constructively fraudulent as to creditors, including
policyholders.
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.
Michigan
Missouri
Baldwin v. Hosmer, Circuit Judge, 101 Mich. 119, 59 N.W. 482 (1894). The court
refused to adjudge the officers of a local branch of an insolvent corporation
guilty of contempt for neglecting to relinquish to the receiver monies,
property, and effects in their control.
Relfe v. Spear, 6 Mo. App. 129 (1878). The Missouri insurance commissioner
brought suit against the receivers of five insolvent life insurance companies on
the question of who had the right to deposits made by each of the insurers.
The court held the Missouri commissioner was not the trustee of the securities
required by Missouri law to be deposited although the commissioner may be
the custodian. The equity court under the statutes of Missouri has supervision
and control over the insolvent insurer and therefore the court's receivers are
entitled to take possession of the deposits.
U.S. v. Riley, et al., Slip Op., No. 94‐00197‐01/03‐CR‐W‐8 (W.D. Mo Oct. 26,
1994). Three defendants were indicted for fraud, racketeering, and bribery
of government officials. The indictment alleged that one defendant
controlled several insurance companies, and operated with the other two
defendants to defraud several state insurance departments. They listed
assets of scam businesses. The assets were either nonexistent or
overvalued, and the defendants planned to obtain money and property
through sale of insurance policies within the several states. The Defendants
also bribed several state insurance officials.
Nebraska
New Jersey
Lange v. Orrico, Slip Op., No. 8:CV94‐00116 (D. Neb. March 1996). Liquidator
of two insolvent insurance companies awarded judgment against Bahamian
Company and other defendants for Rico violations. The defendants were
part of a conspiracy to divert premium dollars and other assets from the
now insolvent insurance company. The wrongful conduct included grossly
excessive management fees, grossly excessive commissions, undetermined
commissions, diversion of policy fees, diversion of funds, and conspiracy.
In the Matter of Integrity Ins. Co., 245 N.J. Super. 133 (Law Div.). The court held
that an action brought by the liquidator of Integrity under the New Jersey's
Racketeer Influenced and Corrupt Organization Act ("RICO") against, inter alia,
directors and officers of Integrity was timely filed. Although neither the RICO
Act nor state case law provided a statute of limitations, the court applied the
four year limitations period established in federal RICO case law. Thus,
although filed two years after the cause of action accrued, the RICO action was
properly filed within four years.
Matter of Integrity Insurance Co., 240 N.J. Super. 480 (App. Div. 1990). The
court set forth the extent to which the liquidator of Integrity may act in that
capacity and established the procedures to be followed when asserting claims
of the insolvent estate and other claimants against third parties. The action
involved a collateral suit on behalf of Integrity, its creditors, policyholders,
claimants and beneficiaries to recover damages from third parties such as the
insurer's accountant and auditor and directors and officers. The action alleged
theories such as negligence, fraud, breach of fiduciary duties and violations of
statutes such as anti‐racketeering and consumer fraud statutes.

The court held that the liquidator could prosecute claims "on behalf of"
creditors, policyholders, and other beneficiaries of Integrity if the objective of
the suit was to increase the estate's assets to which the creditors,
policyholders and public may look for satisfaction of their debt. However, the
liquidator could not maintain a suit in a representative capacity to assert
personal claims which really belonged to individual creditors or policyholders.
The court also held that Integrity's accountant and auditor, sued for
misrepresentation, could not invoke the "doctrine of constructive notice" to
allege that if Integrity's officers and directors were part of the fraudulent
scheme to misrepresent the corporation's financial condition, the estate was
charged with the knowledge of the directors and officers.
New York
Curiale v. Peat, Marwick, Mitchell & Co., 214 A.D. 2d 16, 630 N.Y.S. 2d 996 (1 st
Dept. 1995). In this action, the New York Superintendent of Insurance
alleged accounting malpractice by the defendant that led to a settlement
that delayed the rehabilitation of American Fidelity Fire Insurance Company
and American Consumer Insurance Company by about thirteen months. The
settlement with the New York Insurance Department required repayment of
management fees paid to Peat, Marwick back to the insolvent companies.
The Appellate Division reversed the trial court and reviewed the evidence of
the conduct of the accountants, using the test that the evidence must be
viewed in a light most favorable to the plaintiff. The trial court had granted
judgment to the defendant accountants notwithstanding a jury verdict for
the Superintendent after trial. The trial court had also directed a verdict in
favor of defendant on a fraud claim and on a claim of aiding and abetting a
fraud and refused to allow a trial of the punitive damages issue. The fraud
claim alleged that the accountants had disseminated a false report that the
companies had “positive results”. Upon a detailed review of the evidence,
including the method of calculating damages, the Appellate Division
reinstated the jury verdict and directed trial of the other issues. The court
upheld the claim for punitive damages, noting that the complaint alleged a
fraud directed at the New York Insurance Department, a public agency.
Ghose v. CX Reins. Co., 841 N.Y.S. 2d 519 (App. Div. 2007). Citing forum non
conveniens, the court dismissed a coverage action filed by the chief executive
officer of a reinsurer in liquidation in Bermuda and Australia. The executive was
sued by investors for alleged securities violations, and also was advised he
would be sued by the Australian liquidator for insolvent trading. Noting that all
parties are non‐residents, material events occurred outside New York, and that
similar suits were pending in Australia, there was insufficient justification for
New York courts to hear this matter.
In Re New York Title & Mortgage Co., Series C‐2, F‐1, B‐K, 257 A.D. 19, 11 N.Y.S.
2d 828 (1939), motion denied, 257 A.D. 933, 12 N.Y.S. 2d 853, reargument
denied, 257 A.D. 822, 12 N.Y.S. 2d 1021, appeals dismissed, 281 N.Y. 829, 24
N.E.2d. Damage claims for misconduct on the part of a company in liquidation
and its officers were considered "doubtful claims" in a liquidation proceeding
because of questions as to their validity and amount. The "doubtful claims"
were within the power of the insurance commissioner to settle by agreement.
In re State Title & Mortgage Co., 160 Misc. 106, 289 N.Y.S. 487 (1936). The
court refused approval of applications by company directors to compromise
on an action brought against them by the insurance commissioner for
mismanagement of a mortgage or surety company. The court refused the

offers to compromise because several of the directors had income, net worth
or had made gifts well in excess of the amount offered in compromise.
Serio v. Ardra Ins. Co., 761 N.Y.S.2d 1 (App. Div. 2003). The court upheld a
judgment in favor of the liquidator against a reinsurer and its principals in an
action by the liquidator alleging breach of reinsurance treaties. The liquidator
was not equitably estopped to pierce the corporate veil in order to hold the
principals responsible for the reinsurance debt.
Serio v. Nat’l Union Fire Ins. Co., 795 N.Y.S.2d 529 (App. Div. 2005). The court
rejected an attempt by the liquidator to find coverage under a directors and
officers liability/corporate reimbursement insurance policy for costs the
liquidator incurred in defending the insolvent insurer’s former treasurer in a
third‐party action.
Serio v. Rhulen, 806 N.Y.S.2d 283 (App. Div. 2005). The court denied a motion to
dismiss filed by the defendant officers and directors in an action brought by the
rehabilitator alleging breach of fiduciary duties, voidable transfers, preferential
payments, and diversion of funds. The causes of action alleged in the
rehabilitator’s complaint were adequately supported by factual allegations, and
the claims were not barred by limitations.
North Carolina
State of North Carolina, ex rel. Long v. Cooper, 14 F. Supp. 2d 767 (E.D.N.C.
1996). North Carolina Commissioner of Insurance, as receiver of insolvent
insurer, sued former owner of insurer, who had allegedly stolen premiums,
and other individuals, under North Carolina Racketeer Influenced and
Corrupt Organizations Act. The court held that North Carolina Insurance
Commissioner, as receiver of insolvent insurer, had standing to sue former
president of insurer, under North Carolina’s Racketeer Influenced and
Corrupt Organizations Act (“RICO”), for allegedly stealing insurance
premiums. Furthermore, the court held that the Commissioner’s allegation
that the former president of insurer had stolen premiums sent by
policyholders, while leaving insurer obligated to pay claims, through scheme
which involved use of fraudulent mailing, embezzlement, and willful filing of
a false annual statement, stated claim for violation of North Carolina’s RICO.
The court also noted that a Commissioner “assumes the identity” of an
insolvent insurer when he becomes a receiver.
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. Pipoly, 155 Ohio App. 3d 171 (2003). The liquidator’s complaint
asserted that the officers of the insurance companies breached numerous
fiduciary duties owed to the insolvent insurance companies. The officers argued
that the claims were subject to arbitration clauses. The Court held that the
arbitration clauses were trumped by the importance of the liquidation process.
Resolution Trust Corp. v. Zimmerman, 853 F. Supp. 1016 (N.D. Ohio 1994).
Resolution Trust Corporation brought a lawsuit against four former officers and
directors of Superior Federal Savings Association. The lawsuit alleged
negligence, gross negligence, breach of contract and breach of fiduciary duty.
The court noted that 12 U.S.C. § 1821(k) displaces federal common law claims
against directors and officers of insolvent institutions, and held that state law
claims were similarly preempted. Here, the state law claims against the former
directors and officers of an institution in receivership, which stemmed from or
implicated the defendants’ alleged failure to act with “due care,” fell within the
preemptive reach of 1821(k).
Pennsylvania
Texas
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" (does not
do business).
Meyers v. Moody, 475 F. Supp. 232, (N.D. Tex. 1979), rehearing denied, 693 F.2d
1196 (5th Cir. 1982), cert. denied, 464 U.S. 920 (1983). The receiver of an

insolvent insurer brought an action on behalf of the company for negligent
mismanagement and breach of fiduciary duty against the former management
of the insurer. The defendants brought a motion for dismissal for failure to
state the claim upon which relief could be granted. The court held that the
Alabama statutory receiver had standing to sue in Texas and is not restricted to
state of appointment like and equitable receiver, and that the receiver has the
right to sue on behalf of the policyholders and creditors. The evidence showed
that the defendant had concealed material facts from various parties and their
reliance was justified; that the defendants had breached their fiduciary duty to
the insurer under Texas law; and the receiver had the burden of proof on
damages, notwithstanding an order of insolvency in Alabama.
Washington
Herman v. Cissna, 82 Wash. 2d 1, 507 P.2d 144 (1973). The liquidator brought an
action against and insolvent insurer's officers and directors alleging that the
company's losses were due to their negligence, misfeasance, malfeasance
and/or fraud. The officers and directors contended the action was barred by
the statute of limitations. The Supreme Court of Washington held that the
insurance commissioner had brought the action as an agent of the state and
that law provided that there should be no limitation on actions brought in the
name of, or for the benefit of the state. This action was therefore not barred
by the statute of limitations. The court further stated that although this action
was for the benefit of the company and its policyholders, it was also for the
benefit of the public generally. The legislature reasonably could have
concluded that the deterrent effect of such proceedings by the commissioner,
upon other parties charged with the responsibility of managing insurance
companies, was a factor tending to benefit the public in general.
Senn v. Northwest Underwriters, Inc., 875 P.2d 637 (Wash. Ct. App. 1994). In
an action brought by the Insurance Commissioner as receiver for an
insolvent insurer, a director and officer of the insurer was found personally
liable for another director's conversion of funds. The court held that the
defendant had a statutory fiduciary duty to discover and take steps to
prevent another director's blatant fraud, and the defendant's failure to act
proximately caused the insurer's loss.
Mutualization of an Insolvent Insurer
California
Pacific Mutual Life Ins. Co. of California v. McConnell, 44 Cal.2d 715, 285 P.2d
636 (1955), cert. denied, 350 U.S. 984, rehearing denied, 351 U.S. 943. The
insurance commissioner's rehabilitation plan included the organization of a
new solvent and nondelinquent insurance company from the old insolvent
company. Although the procedures differed between mutualizing insolvent
companies and solvent companies, the commissioner undertook to mutualize
the new company under the procedures relating to solvent companies. The
commissioner's actions were approved by the court.
Dissolution of Corporate Existence
Illinois
People v. Peoria Life Ins. Co., 376 Ill. 517, 34 N.E.2d 829 (1941). At the moment
the decree for liquidation is entered, the title to all of the property of an
insolvent insurer passes to the liquidator by virtue of the insurance liquidation
law, and from that moment, the insurer is without corporate power.

Stamp v. Inamed Corp., 777 F. Supp. 623 (N.D. Ill. 1991). The Liquidator of the
insolvent Cooperative Health Plan brought an action against the defendant,
which become the sole shareholder of Cooperative pursuant to a merger
agreement. The complaint alleged a breach of a contract that called for the
defendant to provide capital contributions and subordinated loans as
necessary for compliance with the financial requirements set by the Illinois
Department of Insurance. Furthermore, the Liquidator alleged that the
defendant failed to provide a promised loan that Cooperative had
represented and relied upon in its application for approval of a purchase
agreement which it submitted to the Illinois Department of Insurance.
The defendant first argued in its motion to dismiss that the plaintiff did not
have standing to sue because Cooperative neither constituted a party nor a
third‐party beneficiary of the agreement. The court disagreed and found that
the agreement between the parties clearly manifest[ed] an intention to
directly benefit Cooperative because the defendant promised to maintain
Cooperative's solvency and viability for two years. Thus, the plaintiff fell
within an exception to the privity rule barring those not party to a contract
from suing because they received a direct benefit from the contract.
Defendant also argued that Cooperative/the Liquidator lacked standing to
sue because Cooperative was defendant's wholly‐owned subsidiary and an
entity cannot sue itself. The court rejected defendant's attempt to use
"reverse piercing" to treat it and Cooperative as a single entity because the
defendant "freely chose to form a subsidiary and consequently...cannot reap
the benefits of incorporation while at the same time side‐stepping its
reciprocal pit‐falls." Therefore, as a separate corporate entity, the plaintiff
had standing to sue.
New York Application of Bohlinger, 199 Misc. 941, 106 N.Y.S.2d 953 (1951), affirmed, 280
A.D. 517, 113 N.Y.S.2d 755, affirmed, 305 N.Y. 258, 112 N.E.2d 280, cert. denied,
346 U.S. 857, rehearing denied, 346 U.S. 913. In the proceeding by the
insurance commissioner for an order to dissolve the corporate existence of a
fraternal benefit society, where the society received ample notification of the
charges against it and of the contents of the report by the insurance examiner
and it availed itself of the right to a hearing, the requirements of due process
were met.
In re National Surety Co., 283 N.Y. 68, 27 N.E.2d 505 (1940), motion denied, 284
N.Y. 593, 29 N.E.2d 668, cert. denied, 311 U.S. 707. When the general
corporation law provided for the continued existence of a dissolved
corporation for the purpose of winding up its affairs, and the insurance code
directly conflicted with this, the court held that the insurance code was
controlling. The corporate existence of a surety company ceases on the date
the insurance commissioner obtains an order directing the immediate
cessation of its corporate existence. The dissolution of the insurer abates all
litigation to which the corporation was either plaintiff or defendant, so that
judgments entered thereafter were void.
In re National Surety Co., 176 Misc. 53, 26 N.Y.S.2d 370 (1941). Upon the entry of
the order of liquidation, the corporate existence of an insurance company
ends. Pending actions against the company and those later instigated are
abated.
Pennsylvania Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 366 Pa. 149,
76 A.2d 867 (1950). Policyholders of a mutual insurance company are

"interested parties" in a proceeding to dissolve the company because the
proceeding may impose liability on them. Therefore, the court may permit
them to intervene. Following a dissolution decree, the company's funds were
in the statutory liquidator's possession and, therefore, under the court's direct
supervision.
Commonwealth v. Pension Mutual Life Ins. Co., 20 Dauph. 51, 45 C.C. 216, 26
Dist. 1007 (1917). Stockholders of a life insurance company have no
independent right, apart from the corporation, to object to a court order
dissolving the company and directing the distribution of its assets.
Texas
John L. Hammond Life Ins. Company v. State of Texas, 299 S.W.2d 163 (Tex.
Civ. App. 1957), writ ref. n.r.e. When the insurer appealed from a proceeding
instituted by the Attorney General for the purpose of cancelling the insurer's
charter and liquidating it because of insolvency, the court held that such a suit
did not abate the liquidation proceedings because in the first suit the court was
limited in what it could do. The provisions in the insurance code that provide
for liquidation proceedings do not give the State Insurance Board authority to
revoke or sue for cancellation of the charter of an insurer and do not displace
or impair the authority of the Attorney General to proceed against an insolvent
insurance company to revoke its corporate charter or seek the appointment of
a receiver and liquidation of the insurer. The court expressed no opinion on
whether the Attorney General could sue independently to revoke a certificate
of authority.
State v. Teachers Annuity Life Ins. Co., 149 S.W.2d 318 (Tex. Civ. App. 1941) writ
ref. When the Attorney General instituted a suit without the authority of the
Board of Insurance Commissioners to void the charter of an insurance
company, the question was raised regarding the Attorney General's authority
to act on his own initiative. Under the Constitution of the State of Texas, Art.
IV, Sec. 22, the duties of the Attorney General include seeking judicial forfeiture
of charters when sufficient cause exists, unless otherwise expressly directed
by law. While the regulatory power and control of insurance companies and
the business of insurance in general is vested in the Board of Insurance
Commissioners, such language does not expressly give the Commissioners the
sole authority over the forfeiture of the corporate charters. Thus, the court
found the Attorney General acted properly.
Termination of Receivership or Rehabilitation Proceedings
Arizona
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 had not abused its discretion in finding that the
insurer was solvent and 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 appraisals of property, the
acceptance of such appraisals were within the lower court's discretion.
California Caminetti v. Prudence Mutual Life Insurance Association, 62 Cal. App. 2d 945,
146 P.2d 15 (1944). The court of appeals conceded that the lower court erred in
placing the burden of proof on the insurance commissioner instead of the

moving party for an order to set aside conservatorship, but ruled that the error
was not prejudicial.
Illinois People v. Acme Plate Glass Mutual Ins. Co., 292 Ill. App. 275, 10 N.E.2d 988
(1935). The court, noting that although the application can be made to the
court either by the insurance commissioner or the company to find that the
causes for an order that a receiver be appointed has been removed and that
the company can properly resume possession of its property and the conduct
of its business, held that because the purpose of the liquidation law is also the
protection of the public against a willful default or misconduct of the company,
it was not required to permit resumption of insurance business. Liquidation
had been ordered pursuant to findings of insolvency, misrepresentations and
mismanagement.
Massachusetts
In re: Harvard Pilgrim Health Care, Inc., 434 Mass. 51 (2001). Where a consumer
advocacy group acted as amicus curiae in a receivership proceeding, the Court
ruled that the group lacked standing to appeal the order terminating the
proceeding.
New York Matter of Globe and Rutgers Fire Ins. Co., 149 Misc. 18, 266 N.Y.S. 603 (1933).
The court concluded that on no conceivable theory is it possible to justify
terminating rehabilitation while there exist grounds for rehabilitation. The
court recognized that a substantial reduction in the company's liabilities at a
time when advancing prices had enhanced the value of its assets, would
transform insolvency into a considerable net worth.
Pennsylvania Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 61 Dauph. 131
(1950). Once an insurance company has been dissolved, a court does not have
equitable powers to authorize its rehabilitation. Nor does any statute
authorize reestablishing its corporate entity.
Reopening Liquidation
Michigan
Pennsylvania
Croley v. Union Indemnity Co., 307 Mich. 177, 11 N.W. 2d 850 (1943). Where an
ancillary for a foreign insurance company was appointed by a receiver state
court and had transmitted to the domiciliary receivers all the assets of the
ancillary receivership, including an allowed claim against an insolvent bank, and
the domiciliary receivership had been closed, and there was no suit pending in
the state courts for or against the insurance company, the higher state court
had no jurisdiction to reappoint the ancillary receiver upon petition for
instructions concerning a check payable to the receiver for dividends on the
claim against the insolvent bank.
Commonwealth v. Bankers Mutual Fire Ins. Co. of Lancaster, Pa., 45 D.& C.2d
558 (1968). When the liquidator of a domestic mutual fire and casualty
company uses a 500 per cent loading factor, exceptions to it will be dismissed
where collection is sought after the company has been dissolved nearly 11
years and where it appears that the liquidator computed the factor with care
and precision and that the decision regarding the amount of loading was
proper and reasonable. The liquidator is not bound by a policy provision
limiting the time for making an assessment or by a regulatory time limit.

Assets of the Insolvent Insurer's Estate
Assets of the Estate ‐ In General
First Circuit
Second Circuit
Third Circuit
Fifth Circuit
MRCo., Inc. v. Ins. Comm. of Puerto Rico, 521 F.3d 88 (1st 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.
In re First Cent. Fin. Corp., 377 F.3d 209 (2d Cir. 2004). The liquidator brought an
adversary proceeding for a determination that a federal income tax refund held
by a Chapter 7 trustee for the insolvent insurer’s corporate parent should not be
included in the parent’s bankruptcy estate, but instead should be turned over to
the liquidator. The court held that a constructive trust could not be imposed on
the refund because a written agreement existed covering allocation of taxes,
and the parent’s estate was not unjustly enriched by the bankruptcy trustee’s
retention of the refund.
Fidelity & Deposit Co. of Maryland v. Hunt, 107 F.2d 42 (3rd Cir. 1939). The
insurance commissioner liquidating an insurance company is required to
liquidate, as an asset, a claim for alleged embezzlement against the company's
president and to maintain a lien on the stock of the president.
Barnhardt Marine Ins., Inc. v. New England International Surety of America, Inc.,
961 F.2d 529 (5th Cir. 1992). Insurance broker brought action as subrogee
against insolvent insurer and its president and chairman of the board to recover
unearned premiums paid after insolvency. Citing the McCarran‐Ferguson Act, 15
U.S.C. § 1011, the court affirmed an administrative stay pending resolution of all
proceedings in the state liquidation court on the grounds of Burford abstention.
Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098 (1943). The action against the
president and chairman of the board individually for mismanagement and
undercapitalization was also properly stayed, because the derivative claim
involved the same assets which the Commissioner was required to collect and
distribute in the liquidation proceeding. Pursuit of those claims in federal court
would "usurp" Louisiana's control over the liquidation proceeding, permit
plaintiff to obtain an unfair advantage over other claimants, and "encroach"
into the Commissioner's exclusive power as liquidator.
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.
Eighth Circuit
Ainsworth v. General Reinsurance Corp. 751 F.2d 962 (8th Cir. 1985). A reinsurer
sought to reduce its obligation to the estate of an insolvent carrier by making a
settlement directly with the insured and without allowing the receiver to

participate in the settlement negotiations. In disallowing the practice, the
United States Court of Appeals for the Eighth Circuit found that the insolvency
clause of a reinsurance agreement provided that all proceeds of reinsurance
vested in the receiver of an insolvent ceding carrier and are considered an asset
of the insolvent estate. The reinsurer could not "reduce its obligation by taking
advantage of the willingness of the insured and the insured's obligee to take
less because of the insolvency." 751 F.2d at 965.
Ninth Circuit
Bank Of New York v. Freemont General Corp 523 F.3d 902 (9th Cir. 2008). A
parent insurance holding company unlawfully transferred funds belonging to
a insolvent subsidiary insurance company and held in escrow account as a
statutory deposit from a bank to itself without gaining approval from state
insurance official. The bank reinstated the statutory deposit and brought
suit for conversion and intentional interference with contract against the
parent holding company. In an action for conversion, the court held, that
because the bank knowingly permitted the transfer, the bank itself could not
bring a claim for conversion. The court, however, permitted the bank to
proceed on an intentional interference with contract claim against the
parent holding company.
Insurance Commissioner. v. Altus Fin. S.A., 540 F.3d 992 (9th Cir. 2008).
Commissioner sought damages from a corporation that had conspired to
fraudulently purchase assets of insolvent insurer. In a jury trial the court had
excluded evidence of damages based on the value of offers submitted by other
bidders for the assets. Based on the evidence permitted by the court, jury
found that the commissioner had suffered no compensatory damages as a
result of the actions of the conspiring party, but that the actions of the
conspirator entitled the commissioner to $700 million in punitive damages. The
Ninth Circuit held the absence of an award of compensatory damages
established that the commissioner did not suffer actual damages and thus was
not entitled to punitive damages. The court also held that the trial court had
improperly excluded evidence of damages based on the alternative bids and
that the commissioner was entitled to pursue the theory at the damages phase
of the new trial.
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 form 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
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 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. 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.

Garamendi v. SDI Vendome, No. CV 02‐5983, 2003 U.S. Dist. LEXIS 13438 (C.D.
Cal. July 29, 2003) [modified, but not for this point]. Under California law, a
commissioner need not know specific facts necessary to establish a cause of
action for the statute of limitation to accrue. Suspicion of wrongdoing is
sufficient to start the statute running.
In re Imperial Ins. Co., 157 Cal. App. 3d 290, 203 Cal. Rptr. 664 (1984). The court
held that the deductibles paid to the insurers by policyholders, with respect to
claims against them, were held in trust for the insureds and were not available
to the insurance commissioner to satisfy the claims of the insurer's general
creditors. Furthermore, the court held that the deductibles were not merely
disguised premiums and that the guaranty fund was therefore entitled to the
deductibles in accordance with its statutory duty to administer the claims of the
insolvent companies insureds.
Sierra National Ins. v. Altus, No. CV 01‐01339, 2001 U.S. Dist. LEXIS 22301 (C.D. Cal.
June 20, 2001). Insolvent insurer and receiver brought suit against corporation
for fraudulently purchasing assets from the California Commissioner in
connection with another insolvency. Plaintiff was a rival bidder for the assets.
Defendants argued California law and federal preemption immunize them from
liability because all remedies must be brought under the insolvency statutes.
The court held Cal. Ins. Code § 12919 does not immunize a defendant from
liability for fraudulently inducing the commissioner to accept bids for assets of
insolvent insurer. While §12919 makes communications involving the
commissioner regarding a certificate or license under the code confidential and
prevents liability from attaching, it does not apply to false statements to the
commissioner by licensees and applicants about themselves. However, Cal. Ins.
Code § 47 prevented plaintiffs from pursuing state claims as the privilege
includes actions related to a judicial or quasi judicial proceeding
State of California v. Altus Finance, 36 Cal. 4th 1284 (Cal. 2005). Assets of an
insolvent insurer held by the Commissioner do not become part of the public
treasury, but are held in trust for the benefit of private parties.
Colorado Herstam v. Bd. of Dir. of Silvercreek Water Sanitation Dist., 895 P.2d 1131
(Colo. App. 1995). Insolvent Arizona life insurer’s security interest as deed of
trust beneficiary with regard to property in state was “asset” within
meaning of Insurers’ Rehabilitation and Liquidation Act and, therefore, was
subject to receivership. The fact that a deed of trust is a security interest,
rather than an ownership interest in real property, does not mean that it is
not an asset.
Connecticut
District of Columbia
Reliance Ins. Co. v. Ransom, No. CV030829611S, 2004 WL 3090643 (Conn. Super.
Nov. 29, 2004). Based on decisions from other states and the Model Insurers
Rehabilitation and Liquidation Act, a subrogation action brought by an insurer in
liquidation was time barred. The Connecticut limitations statute providing that
the liquidator may, upon or after an order for liquidation, within two years bring
an action on behalf of the insurer’s estate, only applies to actions brought by
the liquidator rather than suits brought by the insolvent insurer itself.
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 Florida Dep’t of Ins. v. Blackburn, 633 So. 2d 521 (Fla. Dist. Ct. App. 1994).
The court held that the receiver stated cognizable causes of action on behalf
of an insolvent insurer against prior owners and managers for management,
waste, RICO and voidable preferences. The court rejected “sole
shareholder” argument that, under the allegations of the complaint,
defendant damaged only himself, because creditors of the insurer also were
damaged. The court also refused to impute the defendant’s alleged
misconduct to the insolvent insurer under the imputation rule (in pari
delicto), because the imputation rule protects only innocent parties.
Florida Dep’t of Ins. v. Blackburn (In re Blackburn), 209 B.R. 4 (Bankr. M.D.
Fla. 1997). A natural person, as well as an artificial, non‐natural person such
as a corporation, can be an “affiliate” of an insurance company as such term
is used in provision of Florida insurer insolvency statute allowing a receiver
to recover distributions made to affiliates within five years before liquidation
petition. The court also held that an officer’s or director’s breach of duties
inherent in their office does not create a debt which is non‐dischargeable in
bankruptcy.
Gibson v. Resolution Trust Corporation, 750 F. Supp. 1565 (S.D. Fla. 1990).
Premiums paid to an insurance company are not held in trust for the benefit of
the insured, but are assets of the insurance company available to satisfy the
insurance company's general debts. Accordingly, an insolvent insurer does not
hold paid premiums in trust for an insured; rather, the premiums are assets of
the estate subject to general creditors.
In re Allen, 217 B.R. 945 (Bankr. M.D. Fla. 1998). The receiver for an insolvent
insurer obtained a judgment against Allen. Allen filed bankruptcy, and his
discharge was denied because he had failed to account for assets.
Notwithstanding the denial of his discharge, Allen sought to avoid the lien of
the judgment on property that he had claimed as exempt. The bankruptcy
court agreed with Allen, holding that a debtor in bankruptcy may avoid a lien
on exempt property regardless of the nature of the underlying debt. See
also In re Clark, 217 B.R. 943 (Bankr. M.D. Fla. 1998).
Georgia
Conex Freight Systems v. Georgia Insolvency Pool, 561 S.E. 2d 221 (Ga. Ct. App.
2002). Corporation seeking insurance coverage from Insurers Insolvency Pool

for personal injury claim brought against it after its commercial automobile
liability insurer became insolvent was not a “resident” of Georgia, and thus
could not obtain coverage from Pool due to its residency, although corporation
operated a facility in Georgia and was authorized to do business in Georgia,
where corporation was a California corporation with its principal place of
business in California. 561 S.E. 2d at 224.
Illinois American Bonding & Casualty Co. v. Chicago Bonding & Ins. Co., 226 Ill. App. 465
(1923). Where an insolvent Illinois insurance company was consolidated with an
Iowa insurance company, the former remained in existence for purposes of
liquidation and the Director of Trade and Commerce of Illinois retained title to
the Illinois company assets for such purpose.
General Railway Signal Company v. Corcoran, 1990 U.S. Dist. LEXIS 16934
(N.D. Ill. Dec. 18, 1990). 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.
After granting summary judgment to defendant SBA in the interpleader
case, the court resolved the issue of how the money judgment should be
distributed. The court held that the net amount due to SBA was to be
determined by subtracting the insolvent insurer's recovery expenses from
the gross amount of the judgment. The SBA's recovery, then, was 80% or 90%
of this amount, pursuant to the terms of the different guaranty agreements
at issue.
Sangamon Loan and Trust Company v. Peoples Savings Bank and Trust
Company, 204 Ill. App. 7 (Ill. App. 1917). Where insurance commissioner had
turned over to receiver of the insolvent insurer a certificate of deposit posted as
security for the obligations of the insolvent company to its policyholders, the
receiver represents not only the insolvent insurance company, but also stands in
place of the commissioner as respects to the security deposit. As a result, the
defendant bank was estopped from asserting that the certificate of deposit was
anything other than a security deposit as stated on its face.
Iowa
Kentucky
Sherman v. Harbin, 124 Iowa 643, 100 N.W. 622 (1904). The receiver of an
insolvent mutual life association was not entitled to recover on the fidelity bond
of its president for money which the president erroneously withdrew from a
benefit fund to pay claims expenses when such fund was to be used for
different losses. The resolution was based in part on the fact that the
beneficiaries of the erroneously allocated funds were paid from subsequently
collected assessments so, in fact, there was no loss to the beneficiaries.
Kentucky Central Life Insurance Company v. Stephens, 898 S.W.2d 83 (Ky.
1995). The Supreme Court of Kentucky held that that it was not
unreasonable for the Commissioner, as rehabilitator, to sell the real estate
assets of a company by means of group or pool sales.

National Distillers & Chem. Corp. v. Stephens, 912 S.W.2d 30 (1995). The
Liquidator alleged that the insurance company had no assets from which to
lawfully declare dividends, yet still paid its parent company over $12 million in
dividends. The Liquidator claimed these dividends were proper assets of the
insurance company and were recoverable and applicable to outstanding
indebtedness. The court held that as long as certain basic accounting principles
and statutory requirements are followed, retroactive evaluations are immaterial
in ascertaining the legitimacy of foregone dividend payments.
Louisiana
Brown v. Adolph, 961257 (La. App. 1 Cir. 3/27/97), 691 So.2d 1321. In the
liquidation of a single business enterprise, advances made to owners of an
insurer that were “written off” as “cash expenses” on the company’s books
prior to liquidation does not constitute a “remission” of the debt under LSA
C.C. art. 1888, such as to relieve the owner of repaying the advance to the
estate. In this case, prior to liquidation various advances had been made to
A.J. Adolph, the former owner of Automotive Financial Services (“AFS”), an
affiliate of Automotive Casualty Insurance Company (“ACIC”) which had
been placed into Liquidation pursuant to a declaration that the entities along
with another affiliate (“APS”) constituted a “single business enterprise” and
as such were to be liquidated under the Louisiana Insurance Code.
Furthermore, the Court determined that Mr. Adolph’s affidavit filed
subsequent to the entry of the summary judgment which recharacterized
the advances as “bonuses” could not be considered as “newly discovered
evidence,” because the affiant was aware of the information before the
hearing and failed to disclose it.
Green v. Champion Insurance Company, 577 So.2d 249 (La. App. 1st Cir. 1991),
writ denied, 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 noninsurer
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.
LeBlanc v. Bernard, 554 So.2d 1378 (La. App. 1st Cir. 1989), writ denied, 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.
Rimsky v. Currier, 26,379 (La. App. 2 Cir. 2/10/95), 649 So.2d 1248. While
waiting appeal of judgment for the plaintiff, insurer was placed in
liquidation. Judgment was affirmed, and plaintiff sought funds deposited
for the suspensive appeal. The Commissioner urges plaintiff is only entitled
to a pro rata share of the insurer’s assets, as any other creditor. The court
found that the proper dispersal of cash posted for a suspensive appeal was
governed by the rules of suspensive appeal, La. C.C.P. 2124, not by the
Louisiana Insurance Code. When the insurer relinquished possession of the
cash to the clerk of court, it created an enforceable security agreement and
perfected a security interest in the cash bond. Once judgment in favor of the
creditor becomes final, the cash appeals bond ceases to be an asset of the
insurer. The court stated that the rules of suspensive appeals do not
contravene Louisiana’s statutory liquidation scheme because the Louisiana
Insurance Code expressly recognizes a preference for creditors with secured
claims.
Maryland
Cappage v. Coleman, 263 Md. 639, 284 A.2d 211 (1971). The receiver of an
insolvent insurance company sued the receiver of an insolvent savings and loan
company for payment of interest on secured loans which the insurer had made
to the bank. The court held that since the sale of the pledged collateral
produced more than sufficient funds to pay principal and interest, the savings
and loan was obligated to pay the interest according to the terms of the loan
agreement. The court ruled that this outcome was unaffected by the fact that
both parties were in receivership or that there would ultimately be a claim
against the insurer on behalf of savings and loan regarding the deposits of the
savings and loan that the insurer covered.
United General Title Insurance Company v. Land Title Research of Maryland,
Inc., 875 F. Supp. 309 (1995). United General Title Insurance Company, a title
insurer, brought an action against Land Title Research of Maryland, its
former limited agent, to recoup payments resulting from agent’s alleged
embezzlement of premiums and failure to pay loan closings. The Court
granted a preliminary injunction which prohibited the title insurer’s agent
from wasting assets and transferred funds from the agent into the Registry

of the Court. The Special Deputy Insurance Commissioner (“Commissioner”)
made a motion to stay the proceedings and to transfer the funds to the
Commissioner for use as approved by the state receivership court. The
Court granted the Commissioner’s motions, holding that insolvency of the
title insurer’s agent warranted a Burford abstention by the federal court
because (1) the title insurer’s agent was in the business of insurance; (2) the
Court had been assured that potential state court review of the pending
action would be both timely and adequate; and (3) the Commissioner was
required by statute to take charge of the transferred funds.
Michigan
Calkins v. Green, 130 Mich. 57, 89 N.W. 587 (1902). Where the defendant took
out one of the certificates issued by the benefit association, payable six years
after date, according to the terms of which the society agreed to pay $1,200 on
the insurer's payments of assessments amounting to $432, in 72 monthly
payments, and the contract was fulfilled, and defendant paid, a receiver
appointed on the insolvency of the association could not recover the payment,
or any portion thereof, for the benefit of others whose certificates remained
unpaid, as the funds paid in did not become a trust fund to be held for all the
members.
Fletcher v. State Treasurer, 16 Mich. App. 87, 167 N.W.2d 594 (Mich. App. Ct.
1969). A trust deposit of securities made by a domestic casualty insurer was not
made for the benefit of a limited class of persons but was a general asset for the
benefit of all policyholders, including their judgment creditors and general
creditors.
Insurance Commission of Michigan v. Arcilio, 221 Mich. App. 54 (Mich. App.
1997). The Court of Appeals of Michigan explained that under MCL 500.8113
(1), a rehabilitator was authorized to take possession of the assets of the
insurer and to administer them under the court’s general supervision. The
court stated that “general assets” included “all property, real, personal, or
otherwise”. The court concluded that included in the insurers assets, was a
cause of action based in tort against a third party whose breach of the
appropriate standard of care was alleged to have defrauded the insurer and
its policyholders.
Whitaker v. Empire Mutual Fire Ins. Co. of Michigan, 262 Mich. 681, 247 N.W. 781
(1933). When a note secured by mortgage was deposited as capital stock in a
mutual insurance company which had no capital, but the evidence showed that
the deposit was made to remedy an inadequacy of the company's assets, the
deposit was to the general assets or working capital of the company and the
decree for its return by the receiver of the company was erroneous.
Mississippi
National Casualty Co. v. Hallam, 163 Miss. 164, 138 So. 572 (1932). When the
receiver of an insolvent company brought an action on fidelity bonds issued to
officers of the company in favor of the company, the court held that the
receiver could collect on the bonds on behalf of all the parties in interest, and
pay out the funds under the court's direction.
Missouri Angoff v. Holland‐America Company Trust, 969 S.W. 2d 351 (Mo. App. 1998).
The Receiver asked the circuit court to approve a plan for distribution
including statutory interest on claims allowed against the trust from the date
of liquidation through payment. The court approved the plan and the
holding company for the insolvent insurer appealed. The Court of Appeals
found it did not have jurisdiction to address the interest issue because the
order did not qualify as final and appealable and the appellant failed to file
the appeal within five days of the judgment as required by the Missouri
Insurance Code.

Bent v. Hart, 10 Mo. App. 143 (1881). A reinsurer's use of the assets received
from an insurer to purchase the insurer's stock showed no indication of fraud or
misappropriation. Thus, the shareholders of the insolvent insurer who
exchanged their stock were not liable to the receiver. For the same holding,
See, Bent v. Garrison, 10 Mo. App. 577 (1881) and Bent v. Jamenson, 10 Mo. App.
577 (1881).
Ellerbee v. National Exchange Bank of Kansas City, 109 Mo. 445 19 S.W. 241
(1892). The cashier of a bank ,who was also a director of an insolvent insurer,
received several stock subscription notes aggregating $25,000 which were
deposited with the bank. The notes were secured by the pledge of stock from
the insurance company. Further, the insurer agreed not to draw down on the
$25,000 before it received its certificate of authority from the commissioner of
insurance. To obtain the certificate, the cashier certified to the insurance
commissioner as to the necessary paid up capital stock of the company for
licensing. As a result, in a subsequent action by the Missouri insurance
commissioner dissolving the insolvent insurer, the bank was estopped from
claiming that the full $25,000 was not on deposit with the bank, and therefore it
became an asset of the insolvent insurer.
Lincoln Safe Deposit Co. v. Continental Life Ins. Co., 249 S.W. 677 (1923). An
action was brought to recover on a certificate of deposit issued to the now
insolvent insurer. The defendant, having absorbed the insolvent insurer,
insisted that it was liable only for obligations assumed in insurance policies. The
court found no basis to omit the defendant's obligations. The insolvent insurer
had an outstanding obligation as the endorser on the certificate of deposit and
defendant had assumed that obligation by merging with the insolvent insurer.
McPherson, et al. v. Holland‐America Insurance Co. Trust, et al., 1999 WL
408152 (Mo. App. W.D. June 22, 1999). The supervisory court of an insolvent
Missouri insurer approved interest payments on claims in the plan for
distribution of assets of the insolvent insurer where the Missouri statutes
contained no provision for such interest. That provision in the plan was
appealed. The Missouri appellate court reversed and held that a supervisory
court’s jurisdiction in an insurance receivership was limited exclusively to
provisions in the insurance code and disallowed the interest. The court
interpreted the Missouri statutes permitting the Receiver to settle and
compromise claims to mean that the Receiver could only settle claims legally
owed by the insolvent insurer and that interest would be in addition to that
which was legally owed.
Reynolds v. Gerdelman, 185 Mo. App. 176, 170 S.W. 1153 (1914). The receiver of
an insolvent insurer attempted to recover money paid by the company prior to
receiving its license to do business in Missouri. The receiver's action was
rejected on the basis that although there was no record regarding the nature of
the transaction which formed the basis for the issuance of the check, the check
was assumed to have been issued in good faith and in the ordinary course of
business even though the company may not have been licensed at the time it
was issued because it had authority to conduct business.
New Jersey
In Re the Rehabilitation of Mutual Benefit Life Ins. Co., 297 N.J. Super. 179 (App.
Div.), certif. denied, 149 N.J. 408 (1997). In this case, the New Jersey Appellate
Division affirmed the lower court's decision to prohibit withdrawals by
policyholders of annuity funds of Mutual Benefit Life Insurance Company, even
though the aggrieved policyholders requested the withdrawal prior to the entry
of a restraining order barring policyholders from doing just that. The Court
reasoned that deferential treatment was not warranted and that the appealing
policyholders were not entitled to reclassification of their annuity contract

ecause such reclassification would "inequitably give its participants better
treatment than all others whose transfer rights were cutoff by the... Order."
In Re the Liquidation of Integrity Ins. Co., 147 N.J. 128 (1996). Affirming a
decision of the Appellate Division, cited at 281 N.J. Super. 368 (App. Div. 1995),
the New Jersey Supreme Court held that the owner of a surety bond was
entitled to file a claim for the full amount of the policy, less amounts already
paid and amounts recoverable from the debtors, against an insolvent insurer
where the insured risk was no longer insurable on the date of default, i.e., the
date of insolvency. Addressing the bond owner's claim under general principles
of contract law, the Court found the insolvent insurer to be liable for all
damages that occurred due to its wrongful termination of the insurance
contract. The Court found it particularly relevant that the debtors' defaults
before the date of termination indicated such a likelihood of future default that
replacement insurance was unavailable.
Kostick v. Janke, 223 N.J. Super. 311 (App. Div. 1988). Transit Casualty Co.
deposited its full policy limits into the court hearing an accident case involving a
Transit insured. Fifteen months later, Transit was declared insolvent. The
liquidator intervened in the accident case and filed a motion to withdraw the
funds on behalf of Transit's estate.
The appellate court affirmed the trial court's denial of the Transit receiver's
motion. The court emphasized that Transit's deposit was made without
expectation that the funds would be returned. The court noted that Uniform
Liquidation Act's definition of "general assets" with which a receiver of an
insolvent insurer is vested provides that such assets include property "not
specifically ... deposited or otherwise encumbered for the ... benefit of specified
persons..." The funds deposited for the injured party here were specifically
intended for that plaintiff's benefit and therefore, Transit's receiver was never
vested with any right to that property.
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 out‐of‐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 Holy v. M.L. Nathanson & Co. 5 Misc. 2d 266, 159 N.Y.S. 2d 785 (1957) affirmed, 4
A.D. 2d 858, 167 N.Y.S. 2d 412. A liquidation proceeding under the insurance
code does not function as a barrier preventing the collection of the dissolved
company's assets.
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 Liquidation of Midland Ins. Co., No. 41294/1986, 2008 WL 151786 (N.Y. Sup.
Ct. Jan. 14, 2008). A reinsurer sought to sue the liquidator, alleging claims
mishandling and seeking to interpose defenses to claims, and the court in its

discretion allowed policyholders to speak on their own behalf, regarding the
reinsurer’s obligations. In this case, the reinsurer, rather than the insolvent
insurer’s estate, would bear the cost of providing notice to policyholders and
reinsurers and expenses associated with enforcing its interposition rights; costs
are chargeable to the insolvent estate only if benefit would accrue to the estate,
subject to court approval.
In re Liquidation of Union Indem. Ins. Co., 802 N.Y.S.2d 14 (App. Div. 2005). The
court affirmed judgment in favor of the liquidator in the liquidator’s action for
recovery on an investor bond, and rejected the defendant’s fraud defense. The
insolvent insurer guaranteed payment of a promissory note made by the
defendant obligor to purchase a certain investment and the obligor agreed to
indemnify the insolvent insurer for amounts paid by the insurer on the
guarantee and expressly waived defenses against the insurer. The obligor failed
to raise sufficient factual issues to show fraud.
In re Liquidation of the Union Indem. Ins. Co. of N.Y. 132 Misc. 2d 102, 502 N.Y.S.
2d 907 (N.Y. Sup. Ct. 1986). The New York Supreme Court held that funds
segregated by an insurer, although presently in the possession of its agent, for
payment of workers' compensation claims constituted "general assets" for the
security of all the policyholders of the insolvent insurer, and thus the liquidator
was entitled to recover such funds.
In the Matter of Liquidation of Union Indemnity Insurance Company of New
York, the Royal Bank & Trust Company. v. The Superintendent of Insurance
of the State of New York, ___A.D. 2d___, 687 N.Y.S. 2d 132 (1 st Dept. 1999).
The Court applied the 1998 New York Court of Appeals ruling in this case
(see case note immediately preceding) to the issue of the rate of postliquidation
interest to be paid to a claimant on a bond issued by Union
Indemnity. New York Insurance Law § 7405(b) fixes claims against an
insolvent insurer as of the date of the Order of Liquidation. The court noted
that the purpose of Insurance Law Article 74 (Rehabilitation, Liquidation,
Conservation and Dissolution of Insurers) is to preserve the limited funds of
the insured to satisfy all creditors equally. By contrast, Article 76
(Property/Casualty Security Funds) which is applicable to post‐liquidation
interest claims under the 1998 Court of Appeals holding, is to provide dollar
for dollar recovery from the Security Fund. The court observed that if the
claim is deemed to be fixed as of the date of the Order of Liquidation, as
argued by the New York Insurance Superintendent, then no post‐liquidation
would be permitted, contrary to the 1998 Court of Appeals decision. The
Court found that the contract rate of interest rather than the statutory rate
applicable to post‐judgment interest should apply subsequent to the date of
the Order of Liquidation and remanded the case for recalculation of the
interest.
In re Liquidation of U.S. Capital Ins. Co., 724 N.Y.S.2d 311 (App. Div. 2001). The
court rejected the defendant’s claim to a disputed security deposit, holding that
the deposit was the property of the insolvent insurer, and therefore was now
property of the liquidator, pursuant to entry of the liquidation order. The court
also declined to address defendant’s counterclaims seeking declaratory
judgment that it was entitled to recover a security deposit because those claims
for relief were barred by injunctions in the liquidation order and were timebarred
having not been filed within four months from the date of entry of the
liquidation order.
Kelly v. Overseas Investors, Inc., 45 Misc.2d 292, 256 N.Y.S.2d 702, (1965)
reversed on other grounds, 24 A.D.2d 157, 264 N.Y.S.2d 586. A cause of action in
tort was an "asset" of the domiciliary receiver of an insurer domiciled in a
reciprocal state with New York, where that receiver could sue in New York to

ecover any assets of the insurer in receivership which could be reached under
New York law.
Levin v. Nat’l Colonial Ins. Co., 774 N.Y.S.2d 465 (N.Y. 2004). The court affirmed
a decision in favor of the insurer in liquidation and ordered that a trust fund
established by the insurer, which had been deposited in New York, be
transferred to the liquidator in Kansas, the insurer’s domiciliary state. The court
ruled that Kansas was the proper forum in which to adjudicate competing
claims to the trust remainder, citing the UILA’s goal of orderly and equitable
liquidation proceeding.
Matter of the Attorney‐General v. Atlantic Mutual Life Ins. Co., 100 N.Y. 279, 3
N.E. 193 (1885). The court held that the word "assets" was defined as all
property, real and personal of any company coming under the provision, and
that title to real or personal property immediately vested in the receiver so that
no conveyance to the receiver was necessary to effect transfer of title. The
court further held that any surplus remaining after the satisfaction of
obligations accrues to the receiver.
Matter of Nemerov, 149 Misc. 797, 268 N.Y.S. 588 (1933). Where a mortgage
company's agency was conditioned on continued performance of guaranties,
the agency did not in the event of a default upon the guaranty terminate
automatically. In the absence of an affirmative election to terminate the
agency, it continues to remain an asset of the guarantor and as such it is a part
of the assets to be taken over by the insurance commissioner as the
rehabilitator of the mortgage company.
New York Ins. Dept., Liquidation Bureau v. Generali Ins. Co., 844 N.Y.S.2d 13
(App. Div. 2007) After paying defense and settlement costs in the underlying
action, the liquidator of an insolvent insurer was entitled to recover half of
defense costs and indemnification costs from another insurer, although the
policy periods were discontinuous.
Ohio
Fabe v. American Druggist's Ins. Co., 70 Ohio App.3d 595 (1990). In American
Druggists', an insurance company acted as a surety by posting a bond to cover
the principal's Pennsylvania workers' compensation obligations. A letter of
credit ("Letter") was issued to secure the bond; it provided that funds not
applied to reimburse the surety's loss under the bond were to be returned to
the account of the principal. Consequently, the court held that any proceeds of
the Letter remaining after distribution were not assets of the liquidated surety.
Ratchford v. Proprietors' Ins. Co., 47 Ohio St.3d 1 (1989). The court held that in a
statutory liquidation of an insolvent insurance company, former Ohio Revised
Code Section 3903.07 authorized a court of common pleas to withhold approval
of the sale, by the statutory liquidator, of real property of the insolvent
company only where there is a finding of fraud or abuse of discretion on the
part of the liquidator.
Oklahoma
Cockrell v. Grimes, 740 P.2d 746 (Okla. App. 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.

In re New State Life Ins. Co., 23 P.2d 376, 164 Okla. 208 (1933). Where all parties
agreed that one insurer did not have the power to enter into the contract with
the insolvent insurer, and therefore the contract was ultra vires, the court held
that where money has been advanced under an ultra vires contract, the party
receiving the money has an obligation to return the money as implied by law.
Pennsylvania Crozer‐Chester Medical Ctr. v. Gerald J. Sullivan & Assocs., Inc., No. 86‐4890,
1989 U.S. Dist. LEXIS 13577 (E.D. Pa. Nov. 14, 1989). Insured and its
comprehensive liability insurance carrier and liquidator of insolvent directors,
officers and trustees insurance carrier filed cross‐motions for summary
judgment to recover interpleaded settlement funds paid to the court by
underwriter of directors, officers and trustees coverage. The court determined
that New York law controlled the dispute and that the relationship between the
insolvent directors, officers and trustees insurance carrier and the underwriter
was one of reinsurance. The court then pointed out that "[i]t is well established
by both statute and case law that the proceeds of reinsurance policies are paid
to the liquidation estate following the insolvency of a ceding company."
Accordingly, since the insured and its comprehensive liability insurance carrier
offered no proof that the settlement agreement was a novation intended to
supersede the original reinsurance arrangement, the court concluded the
liquidator was entitled to the interpleaded settlement proceeds. The court
granted the liquidator's motion for summary judgment.
Hunt v. Auferheide, 330 Pa. 362, 199 A. 345 (1938). The statutory liquidator can
sue directors of an insolvent casualty company for diversion of assets. In such a
suit, the liquidator could recover only the value of the diverted assets.
Neel v. Kistler, 21 Leh. L.J. 156 (1944). The liability of subscribers to an insurance
exchange is an asset of the exchange. Therefore, the insurance commissioner,
as liquidator, can maintain suit against the subscribers.
Tennessee
Bostick v. Maxey, 37 Tenn. (5 Sneed) 173 (1857). When the trustee of insolvent
mutual company sought to recover amount of premium note from policyholder,
it was held that, where the liabilities of the company had been discharged,
policyholder was not liable to pay balance of the note.
Ewing v. Coffman, 80 Tenn. 79 (1883). The owner of life a policy took out a loan
against a policy secured a by mortgage. All assets of the insurer were then
transferred to a second company. The insured assented to a new contract with
the second company. The second company thereafter became insolvent, and a
receiver was appointed in Tennessee. The receiver sued to collect the loan debt
and foreclose the mortgage. The insured asserted a right to set‐off premiums
paid to both companies against the debt. The court held, that all rights against
the first company were surrendered when the new contract was assented to,
and that no right of set‐off existed, among other reasons, because the insurer's
insolvency did not void the policy.
Gleason v. Prudential Fire Ins. Co., 127 Tenn. 8, 151 S.W. 1030 (1912).
Policyholders' premium notes become assets of the company for distribution to
its creditors.
Utah
In re Rehabilitation of American Investors Assurance Co., 521 P.2d 560 (Utah
1974). For purposes of the statute permitting the insurance commissioner to
take possession of the property of a financially troubled insurance company
under rehabilitation proceeding and to transfer the property and business of
the company to a new corporation, good will is a part of the property that
may be transferred. Consequently, the court, in affirming the
commissioner’s rehabilitation plan, may directly transfer the name of the
former company to the new corporation.

Unpaid Stock Subscriptions
U.S. Supreme
Ogilvie v. Knox Ins. Co., 63 U.S. 380, (1860). Creditors of an insolvent insurance
company sued stockholders of the company who had paid only 10% of their
stock subscription. The U.S. Supreme Court rejected all the defenses raised by
the stockholders for payment of their notes: the purported fraud by the
company was unfounded because insufficient facts were presented; the
stockholders did not attempt to correct the purported misrepresentation even
after it was brought to their attention until after the insolvency of the company;
and the stockholders could not plead that the creditors could have also pursued
others for satisfaction of the amount due the creditors.
Upton v. Tribilcock, 91 U.S. 45 (1875). The U.S. Supreme court held that the
obligation of subscriber to the stock of an insolvent Illinois insurer could not be
avoided on the grounds of fraudulent misrepresentations and the limitation of
liability found in the stock subscription agreement. The court found that the
contract limiting liability to only 20% of the purchase price to be void as to the
creditors of the insolvent insurer. Similarly, the representations of an agent of
the company that the remaining 80% was "non‐assessable" was immaterial and
further was a misstatement of law which the subscriber could not rely on.
Alabama
Indiana
McDonnell v. Alabama Gold Life Ins. Co., 85 Ala. 401, 5 So. 120 (1888). In an action where
policyholders of an insolvent insurer attempted to subject the stockholders to
personal liability equal to the amount of their stock and such other stock which
was in force at the time of the company was organized, the court held that
liability of the stockholders was not merely statutory but was also contractual
and that the contract of subscription by each stockholder formed a part of the
security of the creditors of the corporation when debts were contracted.
Therefore, the stockholders were held personally liable.
Marion Trust Co. v. Bennett, 169 Ind. 346, 82 N.E. 782 (1907). The receiver of an
insolvent insurer sought to collect on certain stock subscriptions. Because it
was found that the insurer was created under a special act 65 years earlier,
which was superseded by a general act of 1873, it resulted in conferring upon
the insolvent insurer a capacity to increase its capital stock that was
unconstitutional. The receiver can stand in no higher plane than the corporation
itself even though the receiver represents the interests of all creditors and thus,
the unauthorized stock subscriptions cannot be enforced. Further, the principle
of estoppel is not applicable to estop stock subscriptions that are void.
Kentucky Levassor v. Metropolitan Fire Ins. Co.'s Receiver, 188 Ky. 23, 220 S.W. 752 (1920).
The court held that stockholders were liable for unpaid subscriptions to an
insolvent insurer even if the subscription contracts were entered into before the
insurer received a certificate of authority to do insurance business. The
subscribers were liable for the subscription price, even though above par. The
stockholder also does not have a defense of fraud unless the stock was
acquired so close to the time of insolvency that the stockholder did not have a
reasonable time to investigate the company's affairs.
Lock v. Stout, 173 Ky. 304, 191 S.W. 90 (1917). The court held that the receiver of
an insolvent stock insurance company may bring one suit in the county of the
receivership proceeding to collect unpaid capital stock subscriptions from
stockholders of the company, rather than pursuing independent actions in the
county of residence of each stockholder.
Minnesota Dwinnell v. Minneapolis Fire & Marine Mutual Ins. Co., 90 Minn. 383, 97 N.W. 110
(1903). The receivers of an insolvent mutual insurance company brought suit to

ecover a subscription fund executed by the directors of the insurance
company. The directors argued that the insurance company was a mutual
company and therefore the policyholders had accepted mutual liability for all
claims. The court estopped the directors from making such an argument on the
ground that the directors had induced policyholders to take policies upon the
representation that the company was a stock company with a paid‐up capital
stock. The court also held that reliance by creditors and policyholders on these
representations would be presumed without direct proof of reliance from each
creditor. Thus, each director was liable to the receiver, and thereby the
creditors, to the amount of the subscriptions so far as necessary to pay off the
claims of the creditors.
Missouri
Gill v. Balis, 72 Mo. 424 (1880). In a suit to recover stock subscriptions, the court
held that a resolution by the board of directors, which permitted that all
stockholders who paid 5% of the subscription agreement and who surrendered
their stock certificates would be relieved of any further liability, was a fraud on
the creditors of the company since the directors knew at the time of the
resolution of the unsound condition of the company and that the expert
appointed by the Missouri insurance department had reported that the
company was hazardous to the public and its policyholders.
New York People ex rel Conway v. Metropolis Fire Ins. Co., 136 Misc. 133, 239 N.Y.S. 55
(1930). The court held that money held by a bank‐trustee acting under a
subscription agreement for a proposed insurance corporation to be returned to
the subscribers if the corporation was not completely organized and that such
money was not a part of the assets of the corporation which the liquidator
could reach, but rather belonged to the stockholders when in fact the
corporation was never completely organized.
Texas
Washington
Forman v. Irby, 115 S.W.2d 1229 (Tex. Civ. App. 1938) writ ref. In an action against
the receiver, a subscriber sought to cancel and set aside a personal subscription
contract for stock in the corporation on the basis that there was fraudulent
inducement to subscribe. The court held that the contract by the subscriber
was merely voidable and not void, and that the established rule in Texas is that a
subscriber to the capital stock of a corporation cannot, as against subsequent
creditors, defeat liability as a stockholder due to fraud in the inducement of the
contract of subscription. The subscriber was in a better position to discover the
fraud and prevent loss in comparison with the position of subsequent creditors.
Smith v. Hopkins, 10 Wash. 77, 38 P. 854 (1894). The defendants in this case had
executed stock notes to the insolvent insurer on the condition that they would
only become binding if they were approved by the insurance commissioner and
allowed as assets of the company. The defendants claimed the commissioner
had never so approved and that they were therefore not bound. When the
receiver brought an action to recover these notes, claiming they were assets of
the company, the court held that conditional subscriptions to the stock of
corporations could be made and that payment had therefore depended on the
performance of the conditions, but this could only be done at the time of the
company's organization and before the organization had become complete.
The court found it doubtful that these notes had been made under such
conditions and that even if they had, the condition relied upon could not have
been given any effect by a court. The court held that when the notes passed
into the hands of the company to be presented to the insurance department as
a part of the company's assets, they became company assets at least as
between the creditors of the corporation and the makers, uninfluenced by the
condition that they should not be binding if the insurance commissioner
rejected them.

Fraudulent Conveyances
Second Circuit
Motlow v. Southern Holding & Securities Corporation, 95 F.2d 721, (2nd Cir.
1938), cert. denied, 305 U.S. 609. The court found that a creditor's mere
allegation that the insurance commissioner as liquidator had not attempted to
recover the company's assets which had been fraudulently transferred was
insufficient to show an intent to abandon the assets or that the court had
approved such abandonment so as to prevent recovery.
Eighth Circuit Motlow v. Southern Holding & Securities Corporation, 95 F.2d 721 (8th Cir. 1938),
cert denied, 305 U.S. 609. By an order of liquidation of a New York court, title to
a cause of action for setting aside fraudulent transfers by an insolvent insurance
company was vested in the insurance commissioner as the statutory successor
of the insurance company for purposes of liquidation. The commissioner is
subject to the direction, supervision and control of the court entering the
liquidation order over the insolvent insurer's estate.
Tenth Circuit
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.
Connecticut Reider v. Arthur Andersen, LLP, 784 A.2d 464 (Conn. Super. 2001). In the
liquidator’s action against an accounting firm to recover the alleged
misrepresented value of the insurer’s largest asset ‐‐ an account receivable
owed by a corporation controlled by the insurer’s two shareholders – the court
rejected the firm’s argument that the liquidator could not prevail because the
harm resulted from the insurer’s own fraudulent conduct; the alleged fraud by
the shareholders was a fraud upon, rather than by, the insurer and was not
imputable to the insurer in the liquidator’s action.
District of Columbia
Argon Financial Group v. Marro, 897 F. Supp. 568 (D.C. 1995). The creditor of
an insolvent insurer filed suit against a government official for breach of
fiduciary duty, tortuous interference with a contract, and civil rights
violations. Previously, the Delaware Chancery Court had issued a liquidation
order and injunction prohibiting actions against the insolvent insurer and the
Commissioner as Receiver.

Pursuant to D.C. Code Ann. § 35‐2822 (1994 Supp.), the court held that full
faith and credit are to be given to the injunctions of neighboring courts.
Further, the court held that the McCarran‐Ferguson Act required the court to
defer to the Delaware Chancery Court so that it may supervise and regulate
the entire liquidation process. Therefore, the creditors complaint was
dismissed.
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 Florida Dep’t of Ins. v. Blackburn, 633 So. 2d 521 (Fla. Dist. Ct. App. 1994).
The court held that the receiver stated cognizable causes of action on behalf
of an insolvent insurer against prior owners and managers for management,
waste, RICO and voidable preferences. The court rejected “sole
shareholder” argument that, under the allegations of the complaint,
defendant only damaged himself, because creditors of the insurer also were
damaged. The court also refused to impute the defendant’s alleged
misconduct to the insolvent insurer under the imputation rule (in pari
delicto), because the imputation rule protects only innocent parties.
In re Allen, 217 B.R. 945 (Bankr. M.D. Fla. 1998). The receiver for an insolvent
insurer obtained a judgment against Allen. Allen filed bankruptcy, and his
discharge was denied because he had failed to account for assets.
Notwithstanding the denial of his discharge, Allen sought to avoid the lien of
the judgment on property that he had claimed as exempt. The bankruptcy
court agreed with Allen, holding that a debtor in bankruptcy may avoid a lien
on exempt property regardless of the nature of the underlying debt. See
also In re Clark, 217 B.R. 943 (Bankr. M.D. Fla. 1998).
Lidsky v. Florida Dep’t of Ins., 643 So. 2d 631 (Fla. Dist. Ct. App. 1994). Florida
statute, based upon Section 31 of the NAIC Model Insurers Rehabilitation

and Liquidation Act, allowed the receiver to avoid certain transfers between
the filing of a petition for rehabilitation or liquidation and the entry of an
order thereon, unless the payee (a) acted in good faith and (b) made the
transfer(s) for present fair equivalent value. The statute further stated that
“[a] person having knowledge of the pending delinquency proceeding shall
be deemed not to act in good faith.” Fla. Stat. § 631.263(3). The appellate
court held that the presumption of bad faith was rebuttable.
Illinois Bouton v. Dement, 22 Ill. App. 619, (Ill. App. 1887) reversed, 123 Ill. 142, 13 N.E. 62.
Just prior to insolvency, a director shareholder owing $10,000 to the company
for a stock subscription entered into a collusive arrangement with the other
directors and officers of the company resulting in a fraudulent assignment of his
financial obligations to the company. Finding that the director shareholder
must pay the note for the benefit of all creditors of the company.
In the Matter of the Liquidation of Medcare HMO, Inc., 294 Ill. App. 3d 42,
689 N.E.2d 374 (Ill. App. Ct. 1997). Liquidator of insolvent HMO filed suit to
recover attorney's fees paid to a law firm asserting that the payment was a
fraudulent conveyance, or, in the alternative, a voidable preference. While
the payment was made pursuant to the order of the bankruptcy court and
for legal services actually rendered, the bankruptcy court was later found to
lack subject matter jurisdiction. In affirming the dismissal of plaintiff's
fraudulent conveyance count, the court stated that there was no evidence
that the bankruptcy court knew it lacked jurisdiction and colluded with the
law firm. Then, in affirming the dismissal of the plaintiff's fraud in fact claim,
the court noted that the mere preference of one or more creditors over
others does not constitute a fraudulent transfer under Illinois law. Finally,
while noting that Section 204 of the Insurance Code does allow for the
voiding of all preferential payments made within four months prior to the
filing of a complaint for the conservation of the insolvent company's estate,
the court concluded that all payments to the law firm fell outside of this
period.
Kentucky
National Distillers & Chem. Corp. v. Stephens, 912 S.W.2d 30 (Ky. 1995). The
Liquidator alleged that the insurance company had no assets from which to
lawfully declare dividends, yet still paid its parent company over $12 million in
dividends. The Liquidator claimed these dividends were proper assets of the
insurance company and were recoverable and applicable to outstanding
indebtedness. The court held that as long as certain basic accounting principles
and statutory requirements are followed, retroactive evaluations are immaterial
in ascertaining the legitimacy of foregone dividend payments.
Missouri Alexander v. Relfe, 74 Mo. 495 (1881). The Life Association of America
purchased 9,763 shares of the 10,000 shares outstanding of St. Louis Life
Insurance Company, with the St. Louis business then reinsured with the Life
Association. The new directors elected by the Life Association voted for the
redemption of 90% of the outstanding shares which in essence alleviated the
Life Association from liability on its notes for 9,000 of its 9,763 shares. The
reinsurance contract was then rescinded two months later resulting in the
ultimate insolvency of St. Louis. The court held that these transactions, if not
actually fraud (as some evidence indicated) was at least fraudulent at law as
respects the creditors of St. Louis and its receiver which was appointed when St.
Louis was adjudged a year after the transactions.
Alexander v. Williams, 14 Mo. App. 13 (1888). In an action by the receiver of a
dissolved insurance company against the Missouri insurance commissioner, the
court upheld the validity of certain transactions between the insurer and
another now insolvent company that had assumed the assets and liabilities of
the dissolved insurer. The court held that the transaction was not void merely

ecause all the directors of the dissolved insurer were also directors of the now
insolvent insurer. Furthermore, the court held that the transaction was not in
violation of state law or against public policy. The insolvent insurer was not
alleged to be insolvent at the time of the transaction nor did the transaction
create insolvency. There was also no intent to delay, hinder or defraud
creditors.
Rent v. Hart, 73 Mo. 641 (1881). In an action brought by the receiver of an
insolvent reinsured company, the validity of a transaction between the
reinsuring company and the reinsured company was upheld. An insurer and a
reinsurer entered into an agreement by which the insurer transferred all of its
assets to the reinsurer in exchange for reinsurer's assumption of its liabilities
and reinsurance of outstanding risks. As part of the agreement, the reinsurer
exchanged its own stock for the insurer's with a promise to redeem that stock
at full value within twelve months. The receiver brought suit to recover the
amount paid to a specific shareholder in redemption of that shareholder's stock.
The court held that the money could not be recovered and the contract
between the companies was valid. The assets of the insolvent belonged to the
reinsurer, and therefore, any disposition of such assets was a matter of concern
for the reinsurer's creditors, not the insolvent insurer's creditors.
New York In re Liquidation of Union Indem. Ins. Co., 802 N.Y.S.2d 14 (App. Div. 2005).
In the liquidator’s suit for indemnification under a promissory note, the
obligor on the promissory note failed to establish fraud as a defense to the
liquidator’s recoupment of the payment obligation.
Mills v. Everest Reins. Co., 410 F. Supp. 2d 243 (S.D.N.Y. 2006). The federal
district court dismissed the rehabilitator’s claims against a reinsurer for
mutual mistake and fraud, but let stand the rehabilitator’s claims for
fraudulent conveyance. The rehabilitator alleged that compensation
provided by the insolvent insurer to the reinsurer was excessive and
inappropriate, and that the insurer was insolvent when the reinsurance
contract was entered into or was rendered insolvent as a result of the
contract. For limitations purposes, the court held that each alleged transfer
of assets was a separate conveyance for calculating the date the limitations
accrued.
Muhl v. Trabucchi, 673 N.Y.S.2d.103 (App. Div. 1998). Evidence established a
prima facie case of civil contempt against attorneys for the principals of an
insolvent reinsured, who knew that checks received from a principal’s liability
insurer were property of the reinsurer. Attorneys for the principals therefore
had violated a consent order prohibiting the transfer of assets by sending funds
to Bermuda pursuant to instructions from the insolvent reinsured’s principals.
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. The court held that as the rehabilitator of an
insolvent guarantee company, the insurance commissioner had to disaffirm the
fraudulent sale of mortgages to the guarantee company, tendering return of
the mortgages upon the discovery of fraud.
Sklaroff v. Rosenberg, 125 F. Supp.2d 67 (S.D.N.Y. 2000), aff’d, 18 Fed. App. 28
(2d Cir. 2001). The federal district court granted the Receiver’s motion for
summary judgment in the receiver’s action to recover funds due under a written
guarantee of payment from the defendant transferors. The payment guarantee
was not extinguished by delivery of a mortgage satisfaction because the
transferors were insolvent at the time of delivery, therefore delivery of the
mortgage satisfaction was a fraudulent conveyance under New York statute.

Superintendent of Ins v. Chase Manhattan Bank, 840 N.Y.S.2d 479 (App. Div.
2007). The Superintendent of Insurance as liquidator of a subsidiary insurance
company raised genuine issues of material fact sufficient to withstand summary
judgment in an action against the defendant financial entities which entered
into credit and lending agreements with the subsidiary’s holding company,
where the liquidator alleged that the defendants knew or should have known
that the subsidiary was or would be rendered insolvent as a result of the
agreements. Timing and circumstances surrounding repayment negotiations
and defendants’ knowledge of the subsidiary’s precarious financial state raised
a triable issue of fact regarding the adequacy of the transaction and whether
the transaction was undertaken with intent to defraud.
Oklahoma
Pennsylvania
Oklahoma ex rel. Fisher v. Heritage Nat’l Ins. Co., 146 P.3d 815 (Okla. Civ. App.
2006). Two individuals served as officers of both an insurance company and a
claims processing company, which companies were commonly owned. The
claims processing company had an agreement with the insurance company to
consult and process claims on behalf of the insurance company. The officers
had actual authority to file claims for consulting fees with the insurance
company and to obtain payment on behalf of the claims processing company
for processing fees. The officer filed fraudulent claims with the insurance
company for processing fees provided by the claims processing company. The
insurance company then entered receivership and the receiver sought to
recover the funds fraudulently paid to the claims processing company for said
processing fees. The common owner of the claims processing company raised
the defense that the officers acted outside of the scope of their authority and,
therefore, their actions could not be imputed to the claims processing company.
The court held that the officers’ knowledge was imputed because the claims
processing company derived a benefit from the officers’ misconduct (retention
of a portion of the improperly obtained fees). The court explained that the
claims processing company was estopped from denying knowledge due to
receipt of the benefit.
Hunt V. Auferheide, 330 Pa. 362, 199 A.345 (1938). The statutory liquidator has
the burden of establishing negligence where the liquidator sues directors of an
insolvent casualty company for diversion of assets. In such a suit, the liquidator
could recover only the value of the diverted assets.
Voidable Preferences and Liens
U.S. Supreme United States v. Knott, 298 U.S. 544 (1936). The New Jersey receiver of
domiciliary surety company sought to enjoin the Florida Treasurer from
disposing of any securities of the company held by the Florida Treasurer. When
the New Jersey liquidation proceeding began there were no outstanding
judgments against the insolvent insurer in Florida. A Florida statute gave power
to a Florida court to sell the securities and distribute the proceeds to Florida
claimants. The U.S. Supreme Court held that this statute did not perfect a lien
on the securities in favor of the Florida creditors, and therefore, claims of the
United States would take priority.
Second Circuit
Stephens v. National Distillers and Chemical Corporation, 6 F.3d 63 (2d Cir.
1993). In 1985, a Kentucky court issued an order declaring Delta America Re
Insurance Company insolvent and ordered its assets liquidated. Plaintiff
Commissioner of Insurance of Kentucky, as Liquidator of Delta, commenced
this action against National Distillers, the owner of Delta to recover over $12
million in stock dividends paid at a time in 1980 when Delta’s liabilities
allegedly exceeded its assets, but prior to the liquidation order. The U.S.
Circuit Court of Appeals for the Second Circuit certified the following two
questions to the Kentucky Supreme Court because the parties could not

agree on whether Kentucky statutory or common law was applicable to
resolve the issues: “(1) In determining whether dividends of a reinsurance
corporation were properly paid under Kentucky law, can information
received by the corporation after the date of payment be used to
retroactively determine its financial condition at the time of payment?” “(2)
If the answer to question 1 is “yes”, are shareholders of the reinsurance
company directly liable for return of dividends paid during a period when the
corporation was in fact insolvent, but the dividends were received in good
faith?” The Liquidator argued that “good faith belief” by the management
that Delta was solvent at the time of the dividend payments was no excuse.
The U.S. District Court for the Southern District of New York found the
dividends illegal under Kentucky law because of the insolvency of Delta.
Stephens v. National Distillers and Chemical Corporation, 70 F. 3d 10 (2nd Cir.
1995). In response to the two questions certified to the Kentucky Supreme
Court by the above Second Circuit decision, the Kentucky Supreme Court, in
National Distillers & Chemical Corp. v. Stephens, 912 S.W. 2d 30 (Ky. 1995),
decided that information developed after payment of dividends could not be
used to decide whether a company was insolvent at time of dividend
payment. The Kentucky court held that “the lawfulness of dividend
distribution is to be determined at the time of payment,” and not “at some
time later when additional financial information begins to surface."” The
Kentucky ruling also provided that “retroactive evaluations play no role in
ascertaining the legitimacy of any foregone dividend payments”.
Accordingly, the Second Circuit overturned the holding of the District Court
for the Southern District of New York that the dividend payments were
illegal under Kentucky law, and remanded the case to the District Court.
Seventh Circuit Barrett v. International Underwriter's, Inc., 346 F.2d 345 (7th Cir. 1965). A
policyholder of an insolvent insurance exchange had secured a judgment
against the exchange. Following such judgment, the policyholder filed a
garnishment proceeding against the banks in which accounts of the exchange
were maintained. The policyholder's lien on the bank accounts was filed after
the Indiana insurance commissioner filed a petition for liquidation against the
exchange, but before an order of liquidation had been entered. The court
confirmed that the order of liquidation does not operate retroactively back to
the date of filing petitions, and thus, the liens were valid.
Pine Top Ins. Co. v. Bank of America National Trust and Savings, 969 F.2d 321
(7th Cir. 1992). Where a bank issued a letter of credit to a reinsured pursuant
to a security agreement with the insolvent reinsurer, but where there was a
delay of approximately three weeks between the issuance of the letter of
credit and the transfer of the reinsurer's collateral to the bank, the exchange
was "substantially contemporaneous" and thus the transfer was not
preferential and not voidable by the reinsurer's liquidator.
Pine Top Ins. Co. v. Bank of America Nat'l Trust and Sav. Ass'n., 969 F. 2d 321
(7th Cir. 1992). United States Court of Appeals for the Seventh Circuit
affirmed district courts' grants of summary judgment in two diversity suits
brought by the Illinois Department of Insurance ("Department") as
liquidator of plaintiff insurance company, to recover allegedly preferential
transfers made to several of plaintiff's creditors just prior to going into
liquidation. The district courts separately concluded that Bank of America
National Trust and Savings Association ("Bank"), a defendant in both suits,
did not receive a preferential transfer and granted summary judgment in
Bank's favor. See Pine Top Ins. Co. v. Century Indem. Co., 123 B.R. 287 (N.D.
Ill. 1990); Pine Top Ins. Co. v. Republic Western Ins. Co., 123 B.R. 277 (N.D. Ill.
1990). In affirming the district courts' grants of summary judgment to Bank
in the two cases, the appellate court emphasized that Bank was a new

creditor, offering new capital to a struggling debtor, and that it conditioned
that new credit on the provision of security. The delay of three weeks in
transferring that security did not defeat the legitimate expectations of
plaintiff's other creditors because the net value available assets were not
diminished by the Bank's entrance into the pool of creditors. Because the
transactions were substantially contemporaneous, the appellate court
concluded that Bank was properly dismissed from the district court actions.
Stamp v. Ins. Co. of North America, 908 F.2d 1375 (7th Cir. 1990). Before
becoming insolvent, an insurance company entered into a pooling
arrangement that resembled reinsurance "treaties" with other insurance
companies in order to spread any risk. The manager of the pooling
arrangement determined that the insurance company had financial
problems and consequently canceled 107 of the insurance companies
policies while replacing them with new policies from other pool members.
The cancellation of the policies created "unearned premiums" for the
insurance company or the amount paid in advance by an insured. After
becoming insolvent, the reinsurance pool owed the company for the policies
that had been reinsured, but not canceled. The court held that the amount
an insolvent insurer owes to a reinsurance pool for losses incurred before
bankruptcy may be set off despite the fact that the losses are not presently
due. In addition, the court held that unearned premiums are voidable
preferences after being credited to customers when their policy has been
canceled from an insolvent firm. Despite agreeing with the company's
argument that the unearned premiums amounted to voidable preferences,
the court held that because the reinsurance pool did not receive a transfer
or benefit no cause of action existed against them.
Eighth Circuit Jump v. Goldenhersh, 474 F. Supp. 1306 (E.D. Mo. 1979), affirmed, 612 F.2d 11
(8th Cir. 1980). The court held that the Ohio statute prohibiting any transfer of
or lien upon any property of any insurance company within four months prior
to the filing of a petition for an order to show cause, that enables any creditor,
policyholder, or contract holder to obtain a greater percentage of a debt than
any other creditor, policyholder, or contract holder in the same class, does not
require proof of intent to prefer the creditor, but only requires the creditor to
have a reasonable cause to believe that a preference will occur. Legal fees
paid by the insurance company to defendants at most four months prior to
filing a petition to show cause were prohibited since they enabled the
defendants to obtain 100% of debts owing to them by the insurance company
while other creditors received nothing or received less than 100% of debts
owed to them.
Alabama
Galloway v. State ex rel. Payne, 371 So. 2d 48 (Ala. 1979). When a creditor
obtained a money judgment against an insurer before institution of
delinquency proceedings by the insurance commissioner and the judgment
was not filed and recorded until after the delinquency proceedings had been
commenced, the court held that the creditor was a general creditor with no
lien or preference over policyholders.
Arkansas Combs v. Haddock, 408 S.W.2d 861 (Ark. 1966). The court rejected the
Arkansas liquidator's argument that a claim against a special deposit should be
denied because the lien was created within four months prior to the filing of
the liquidation petition.
California
Low v. Lan, 96 Cal. App. 4th 1371, (Ct. App. 2002). The California Court of Appeal
held that a three year statute of limitations applies to preference actions and
that the statute of limitations begins to run with the filing of the liquidation
petition.

W. J. Jones & Son v. Independence Indemnity Co., 52 Cal. App. 2d 374, 126 P.2d
463 (1942). The insolvent insurer had a claim against a bank, and at the same
time the insurer was in the possession of a receiver. The insurer attempted to
levy on the attached property but was told that the property had been issued
and delivered to the International Reinsurance Corporation. Thereafter the
insurer obtained a judgment against the reinsurer and filed a writ of execution
for sums or credits due to it from the bank. After the insurer filed its writ, a
court appointed the insurance commissioner as liquidator for International, the
reinsurer. The appellate court found that the insurer's execution had ceased
and that its lien of attachment had ended by the time of its appeal and that the
insurer had no claim against International. Although the insurer had an
attachment lien on the date of the order of liquidation, the lien expired when
the insurer failed to act on it. The court's opinion supports the proposition that
an unsecured general creditor of a defunct insurance company would not be
permitted to levy on and obtain insurance company's assets, to which the
insurance commissioner, as liquidator of the company, was entitled to under
the court's order. Otherwise, other creditors would be deprived of any share
in the dividends, and the unsecured creditor would obtain a preference or a
greater percentage than the other creditors.
Florida
Florida Dep’t of Ins. v. Blackburn (In re Blackburn), 209 B.R. 4 (Bankr. M.D.
Fla. 1997). A natural person, as well as an artificial, non‐natural person such
as a corporation, can be an “affiliate” of an insurance company as such term
is used in provision of Florida insurer insolvency statute allowing a receiver
to receive distributions made to affiliates within five years before liquidation
petition. The court also held that an officer’s or director’s breach of duties
inherent in their office does not create a debt which is non‐dischargeable in
bankruptcy.
Florida National Bank at Lakeland v. State ex rel. Department of Ins., 350 So.2d
365 (Fla. App. 1977). Although bank had been in possession of collateral bonds
for more than six months, the transfer of the collateral to the bank did not
occur until the parties agreed that a security interest attached, which event
occurred within six months prior to the insolvency of the insurer. Therefore
the insurance commissioner, as receiver, could void the transfer except to the
extent that the bank had advanced new funds against the collateral.
In Re Receivership of Syndicate Two. Inc., 538 So. 2d 945 (Fla. Dist. Ct. App.
1989). Pursuant to statute, the appointed receiver of an insolvent insurer had
title to all property, including documents, of the insurer, and a law firm
retaining documents of the insurer, claiming they were subject to an attorney's
retaining lien, was required to deliver the documents to the receiver. The
validity of the law firm's lien and its rights under the lien, however, were not
determined or compromised by the transfer.
Vetter v. Knott, 114 Fla. 95, 153 So. 606 (1934), appeal dismissed, 293 U.S. 634
(1934). The Florida law gave the holder of an unsatisfied judgment against a
foreign surety company a lien against the securities of such foreign company
held by the Florida Treasurer, upon thirty days notice of the unsatisfied
judgment. The court held that where Florida receiver was appointed prior to
thirty day's notice being given, no lien could be acquired.
Illinois
Cadillac Ins. Co. v. American Nat'l Bank, 1995 U.S. Dist. LEXIS 11700 (N.D. Ill.
Aug. 9, 1995). The Illinois Director of Insurance, as Liquidator of Associated
Life Insurance Company ("ALIC") and United Fire Insurance Company
("UFIC"), and as Conservator of United Diversified Corporation ("UDC"),
claimed that transactions which facilitated the purchase of Certificates of
Deposit ("CDs") by Cadillac Insurance Company ("CIC") constituted voidable
transfers under the Illinois Insurance Code, and also constituted a breach of

fiduciary duty by defendant Solomon, the previous owner of ALIC, UFIC, UDC
and CIC. The court considered motions for summary judgment brought by
both defendant Solomon and CIC. The court denied Solomon's motion for
summary judgment on the fiduciary duty claim, because genuine issues of
material fact existed regarding the origin of the funds used to purchase the
CDs, and because genuine factual issues existed regarding an administrative
agreement which related to the transactions at issue. The court also denied
Solomon's motion for summary judgment on the voidable transfer count.
Solomon had advanced three reasons for summary judgment: the Director's
claim was untimely under Section 204 of the Illinois Insurance Code, the
funds were never UDC's property, and the transfer was not voidable
because it was part of a substantially contemporaneous exchange of value.
The court disagreed with Solomon's interpretation of the Illinois Insurance
Code, which would have rendered one portion of Section 204 of the Code a
nullity. The court said the correct reading was that the Illinois Director must
bring a claim within four months of the transfer, or within two years of the
transfer against a participant who intentionally executes a preferential
transfer. Because there was a genuine issue of material fact as to the origin
of the funds used to purchase the CDs, summary judgment was not proper
on the grounds that UDC was not the owner of the funds. Furthermore,
Solomon could not meet the requirements to assert equitable estoppel
against the Director based on an internal memorandum saying UDC owned
the CDs. The court also rejected Solomon's argument regarding
substantially contemporaneous exchange of value, holding that Solomon did
not demonstrate that CIC and UDC participated in any substantially
contemporaneous exchanges in value, as the assumption of additional
liability canceled out any increases in assets. The court granted the motion
for summary judgment brought by CIC with respect to the voidable transfer
claim, finding on the facts presented that CIC was not a participant in making
the transfer of the CDs.
O'Connor v. Insurance Company of North America, 622 F. Supp. 611 (N.D. Ill.
1985) reconsideration denied 668 F. Supp. 1183 (1987), appeal granted (1989).
The liquidator of an insolvent insurer sued 26 reinsurers that were involved in a
petroleum reinsurance pool with the fronting policies issued by the insolvent
insurer. Just prior to the entry of an order of liquidation, the manager of the
pool canceled all the insolvent insurer's policies and reissued them with
another fronting insurer. The liquidator sought recovery of reinsurance
proceeds from the 26 reinsurers based on losses incurred on policies issued by
the insolvent insurer. The court held that the cancellation did not constitute a
voidable preference under the insurance code even though the cancellation
was in anticipation of an impending insolvency.
People v. Central Casualty Co., 37 Ill.2d 392, 226 N.E.2d 862 (1967). The court
compared the proceedings of liquidating an insolvent insurance company to
those in bankruptcy, noting that when a creditor has received or acquired a
preference void or voidable, the claim can neither be allowed or disallowed
until the preference matter is adjudicated. Only colorable, insubstantial claims
may be summarily disallowed.
Pine Top Ins. Co. v. Century Indemnity Co., 123 B.R. 287 (N.D. Ill. 1990). Where a
bank issued a letter of credit to a reinsured pursuant to a security agreement
between the bank and the reinsurer, but where there was a delay of
approximately three weeks between the issuance of the letter of credit and
the transfer of the reinsurer's collateral to the bank, the exchange was
"substantially contemporaneous" and thus the transfer of the collateral was
not preferential. Furthermore, until the bank actually received collateral from
the reinsurer, the bank had an equitable lien on collateral that had been
identified prior to its issuance of the letter of credit to reinsured, thus

precluding liquidator's avoidance of transfer of reinsurer's assets to bank as
preference. Thus, the bank was entitled to summary judgment on this issue.
Where there was evidence that reinsured had reason to believe reinsurer was
insolvent, there existed a material issue of fact whether reinsured had
reasonable cause to believe that a preference would occur from the transfer.
Thus, reinsured's motion for summary judgment was denied.
Pine Top Ins. Co. v. Century Indemnity Co., 716 F. Supp. 311 (N.D. Ill. 1989).
Where reinsurer transferred its assets to a bank to secure the bank's issuance
of a standby letter of credit to reinsured, the reinsured was denied summary
judgment on liquidator's "indirect transfer" preference claim against reinsured
because a genuine issue of material fact existed as to whether the letter of
credit was issued for a preexisting unsecured debt reinsurer owed reinsured.
Furthermore, where reinsurer's complaint alleges that reinsured knew it was
insolvent at the time the letter of credit was issued, the complaint was
sufficient to infer that reinsured had reasonable cause to believe it was
receiving a preference.
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.
Pine Top Ins. Co. v. Republic Western Ins. Co., No. 88‐2032, (N.D. Ill. July 26,
1988). The court ruled that if the reinsured was found liable to the reinsurer's
liquidator for amounts transferred to it from a voidable transfer, it would not
be entitled to an offset of amounts due to it by the reinsurer pursuant to the
reinsurance agreement, as these claims are not considered "mutual" for
purposes of a setoff.
Pine Top Ins. Co. v. Republic Western Ins. Co., 123 B.R. 277 (N.D. Ill. 1990).
Where a bank issued a letter of credit to a reinsured pursuant to a security
agreement between the bank and the reinsurer, but where there was a delay
of approximately three weeks between the issuance of the letter of credit and
the transfer of the reinsurer's collateral to the bank, the exchange was
"substantially contemporaneous" and thus the transfer of the collateral to the
bank was not preferential. The bank was entitled to summary judgment on
this issue. Where there was evidence that reinsured had reason to believe
reinsurer was insolvent, there existed a material issue of fact whether
reinsured had reasonable cause to believe that a preference would occur from
the transfer. Finally, reinsurer was not required to prove that reinsured had
knowledge that the letter of credit issued to it by the bank was collateralized
with reinsurer's assets. Thus, reinsured's motion for summary judgment was
denied.
Pine Top Ins. Co. v. Century Indem. Co., 716 F. Supp. 311 (N.D. Ill. 1989).
Plaintiff, an Illinois insurance company in liquidation, sued defendants,
Century Indemnity Company ("Century") and Bank of America National Trust
and Savings Association ("Bank") to recover two allegedly voidable
preferential transfers. Plaintiff provided reinsurance coverage for Century
in accordance with their reinsurance treaties. The treaties required plaintiff
to reimburse Century for certain losses covered by the reinsurance policies
Century had initially issued. After plaintiff was placed into voluntary
rehabilitation but prior to the time plaintiff was placed in liquidation and

deemed insolvent, Century drew down the entire amount of the letters of
credit previously issued in its favor. Bank liquidated plaintiff's pledged
collateral to cover its loss when Century drew down on the letters of credit.
Century moved for summary judgment or dismissal for failure to state a
claim. The district court also denied Century's motion to dismiss for failure
to state a claim. Stating that a preference is voidable only if the creditor had
reasonable cause to believe a preference would occur, the district court
concluded that if the creditor has reasonable cause to believe that plaintiff
was insolvent at the time a letter of credit was issued, then a creditor has
reasonable cause to believe that a preference will occur.
Pine Top Ins. Co. v. Republic Western Ins. Co., 123 B.R. 277 (N.D. Ill. 1990),
aff'd, 969 F.2d 321 (7th Cir. 1992). Plaintiff, an Illinois insurance company in
liquidation under the Illinois Insurance Code, brought an action against
defendants, Bank of America National Trust and Savings Association
("Bank") and Republic Western Insurance Company ("Republic") to recover
the proceeds of allegedly preferential transfers in violation of section 204 of
the Illinois Insurance Code ("Code"). Both Bank and Republic moved for
summary judgment on the grounds that the transfers at issue were not
voidable under section 204 of the Code. The district court granted Bank's
motion for summary judgment and denied Republic's motion for summary
judgment. The district court stated that a voidable preference does not
result if the transfer was part of a "substantially contemporaneous
exchange" for new value. The court then determined that the facts of the
case clearly demonstrated that the transfer of collateral to Bank from the
plaintiff was part of a substantially contemporaneous exchange involving
Bank's issuance of a ten million dollar line of credit to plaintiff earlier in the
same year.
Pine Top Ins. Co. v. Century Indem. Co., 123 B.R. 287 (N.D. Ill. 1990), aff'd, 969
F.2d 321 (7th Cir. 1992). Plaintiff, an Illinois insurance company in liquidation,
sued Century Indemnity Company ("Century") and Bank of America National
Trust and Savings Association ("Bank") to recover two allegedly voidable
preferential transfers. To enable plaintiff to give security for its reinsurance
treaties, Bank's parent company asked Bank to grant plaintiff a line of credit
of ten million dollars on which letters of credit could be drawn. The district
court granted Bank's motion for summary judgment on the basis that the
issuance of the letter of credit and the later transfer of the collateral were
substantially contemporaneous. Specifically, the district court found that
Bank issued to Century, on behalf of the plaintiff, a letter of credit that was
not only intended to be fully secured but that never would have been issued
but for that intent and but for the expectation that it would be
implemented. The district court denied Century's motion for summary
judgment, holding that reasonable cause to believe that a preference will
occur exists when the creditor has reasonable cause to believe that the
debtor is insolvent, and the evidence indicated that Century had notice of
plaintiff's insolvency.
Washburn v. Weiss, 218 Ill. App. 3d 674, 578 N.E.2d 1075 (1st Dist. 1991).
Attorneys' retaining lien on insurance company's documents did not lapse
when liquidator acknowledged debt and acknowledged attorneys as general
creditors of the estate, particularly where there might be insufficient assets
from which to satisfy the claim. Thus, it was not error to require the liquidator
to provide adequate security to attorneys before attorneys would be ordered
to surrender documents.
Winger v. Chicago City Bank and Trust Co., 325 Ill. App. 459, 60 N.E.2d 560 (Ill.
App. Ct. 1945), reversed, 394 Ill.94, 67 N.E.2d 265. Members and policyholders
of an insolvent mutual assessment life insurance company, sued the

association's directors for monies wrongfully retained pursuant to a scheme by
such directors to take over the Association's assets by reason of a reinsurance
contract with another company organized by the directors. The court held
that the insurer is entitled to a lien on the stock held in trust. Further, the court
concluded that establishing this lien would not interfere with the conduct of
the insurer's business nor would the court supervise the operation of the
insurer, as the court merely established a legal right in favor of the insurer for
those who were rightfully entitled to such a lien. Further, the monies received
are to be received as a special fund in trust for the benefit of any policyholders
who have converted their assessment policies into legal reserve policies on a
date‐back basis and who paid an extra year's premium covering the cost of
conversion.
In re Liquidation of Mile Square Health Plan of Illinois, 218 Ill. App. 3d 674,
578 N.E.2d 1075 (Ill. App. Ct. 1991), superseded by statute, 215 ILCS 5/191
(West 1996). Notwithstanding the insolvency of an insurance company, an
attorney may assert a viable possessory lien for the value of his or her unpaid
services without breaching his or her ethical duties as an attorney. While
there are circumstances under which asserting such a lien would be
unethical, an attorney may assert a retaining lien in competition with other
creditors where the property of the client is to be distributed ratably among
the client's creditors by a trustee or liquidator.
In the Matter of the Liquidation of Prestige Cas. Co., 276 Ill. App. 3d 698, 659
N.E.2d 50 (Ill. App. Ct. 1995). Out of concern for fees that could be lost, the
law firm retained the files of a former client that had been placed into
receivership as a lien against the legal fees money the company owed the
law firm. The court held that once the Liquidator posted security the law
firm could not refuse to turn over the files.
Schacht v. Cadillac Ins. Co., 1991 U.S. Dist. LEXIS 11606 (N.D. Ill. Aug. 20, 1991).
The Illinois Director of Insurance filed a complaint against an insolvent
insurer, alleging that it made illegal transfers of funds from other insolvent
insurers in violation of Section 204(3) of the Illinois Insurance Code. The
court first rejected Cadillac's argument that the court should abstain from
asserting its jurisdiction under the Burford abstention doctrine. Although
the transfers were made from two Illinois insolvent insurers, now in
conservation proceedings, to a Michigan insolvent insurer, in liquidation
proceedings in Michigan, the federal court's exercise of jurisdiction would
not interfere with the state liquidation courts' equitable distribution powers.
With respect to the Director's voidable preference claim, the court held that
the fact that the first conservation complaint was dismissed by agreed order
(although a second complaint was filed) did not affect the classification of
the transfer as a voidable preference, since that transfer occurred within
two years of the filing of the complaint. § 204(3) of the Illinois Insurance
Code imposes liability for preferential transfers of assets upon those who
participate in the transaction "on behalf of" the Cadillac, corporation. While
not explicitly alleging that defendant acted "on behalf of" his corporation,
the pleadings were sufficiently detailed to allow for such an inference.
Therefore, the court denied defendant's motion to dismiss for failing to
state a cause of action.
Kansas
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.
Kentucky Glogower v. Miller, 2002 Ky. App. LEXIS 2337 (2002). The appeals court
determined that the language of Kentucky Revised Statutes § 304.33‐310(1)(a)
defined preferences as encompassing any transfer made or suffered by an
insurer within one year before the filing of a successful petition for liquidation,
the effect of which transfer could be to enable the creditor to obtain a greater
percentage of his debt than another creditor of the same class would receive,
regardless of when the underlying antecedent debt was created. A payment
within that time frame was a preference, but whether it was voidable under
Kentucky Revised Statutes § 304.33‐310(1)(b) depended upon whether insurer
was insolvent when it made a loan payment.
Minnesota Magnusson v. American Allied Ins. Co., 282 Minn. 287, 164 N.W.2d 867 (1969).
When an attorney filed a claim for fees for services rendered to an insolvent
insurer, the receiver counterclaimed for recovery of payments made to the
attorney for services not related to the receivership, which were made within
three months before the commencement of the receivership proceedings.
The receiver argued that the payments constituted a preference. The court
rejected the receiver's counterclaim for the recovery of money previously paid
to the attorney, within the three months preceding the receivership
proceedings, for services not related to the receivership. The court held that in
order to set aside payments to creditors as preferences, the receiver must
prove that the person receiving the payments had reasonable cause to believe
that a preference would occur as a result. The court found that the receiver
did not establish that the attorney knew actually or constructively that the
attorney was being preferred when being paid.
Smith v. National Credit Ins. Co., 78 Minn. 214, 80 N.W. 966 (1899). A
policyholder's loss was agreed upon by the insurance company before it
became insolvent, but the policyholder obtained a judgment against the
company two years later. The court held that in order for a creditor to have
specific interest in or lien upon a fund, the lien must be complete and
enforceable when the company is declared insolvent. Since the policyholder's
judgment against the insurance company was not rendered until two years
later, the policyholder did not have a specific lien against the fund and could
recover its losses only as a general creditor.
Nebraska State ex. rel. Wagner v. Gilbane Building Co., 276 Neb. 686, 757 N.W.2d 194
(Neb. 2008). The insurance company was declared insolvent in 2001 and the
subject of a liquidation order entered pursuant to the Nebraska Insurers
Supervision, Rehabilitation, and Liquidation Act. On appeal, the question was
whether the four payments made by the insurance company to the obligee on a
performance bond, were preferences avoidable by the liquidator pursuant to
Nebraska law. The Court affirmed the judgment of the lower court regarding
three of the payments because they were made within four months before the
filing of the petition for liquidation and were therefore voidable as preferences.
The court reversed and remanded the lower courts decision that one of the four
payments made four months prior to the filing of petition for liquidation
because there was a genuine issue of material fact as to whether the insurance
company was insolvent at the time of the payment. The Court declined to read
an “ordinary course of business” exception into the Act that would make the
preferences voidable.
New Jersey
Kostick v. Janke, 223 N.J. Super. 311 (App. Div. 1988). Transit Casualty Co.
deposited its full policy limits into the court hearing an accident case involving

a Transit insured. Fifteen months later., Transit was declared insolvent. The
liquidator intervened in the accident case and filed a motion to withdraw the
funds on behalf of Transit's estate.
The appellate court affirmed the trial court's denial of the Transit receiver's
motion. The court emphasized that Transit's deposit was made without
expectation that the funds would be returned. The court noted that
Uniform Liquidation Act's definition of "general assets" with which a
receiver of an insolvent insurer is vested provides that such assets include
property "not specifically ... deposited or otherwise encumbered for the ...
benefit of specified persons..." The funds deposited for the injured party
here were specifically intended for that plaintiff's benefit and therefore,
Transit's receiver was never vested with any right to that property.
New York Callon Petroleum Co. v. Superintendent of Ins., 863 N.Y.S.2d 92 (App. Div. 2008).
A performance bond obligee argued that the rehabilitator of the insolvent
surety ignored its claim for payment, and further contended that prior
payments made by the rehabilitator to other creditors reflected improper
preferences. The court decided that the record was insufficient to resolve the
issue, but that adequate allegations were made in the petition to allow a
hearing on the issue of improper preferences.
Reinsurance Company of America, Inc. v. Superintendent of Insurance of the
State of New York, 203 A.D.2d 43, 610 N.Y.S.2d 43, (1st Dept. 1994). In 1988,
an Order of Conservation was obtained by the New York Superintendent of
Insurance with respect to River Plate Reinsurance Company, a foreign
insurer. The order enjoined creditors of River Plate from bringing or further
prosecuting any action or proceeding against the Superintendent, as
Conservator of River Plate. Reinsurance Company of America, the petitioner,
had a judgment lien against River Plate and sought to levy on a trust fund of
River Plate that had been transferred to the Superintendent in conjunction
with the Conservation proceeding. The problem faced by the court was a
procedural one. It was necessary to determine whether the petitioner had
perfected its judgment lien more than four months prior to the Order to
Show Cause that commenced the Conservation proceeding. Under New
York Insurance Law § 7425(a), the Superintendent had the authority to void a
transfer made within the four‐month period if it created a preference. (That
section has been amended to expand the period to twelve months). Here,
the court affirmed the finding of the trial court that the petitioner had not
completed procedures required under the terms of the trust agreement
prior to the four‐month period within which a transfer or a lien on the
property of an insurer may be voided by the Superintendent under the
statute.
Serio v. Rhulen, 806 N.Y.S.2d 283 (App. Div. 2005). In an action by the
Superintendent of Insurance as rehabilitator against the insolvent insurer’s
officers and directors, the court held that the rehabilitator’s complaint stated a
claim against the officers and directors for voidable transfers. The rehabilitator
alleged that the defendants caused preferential payments to be made in the
twelve months before the insurer’s ordered rehabilitation, and the insurer was
caused to make payments for which it received no benefit.
Ohio
Covington v. HKM Direct Market Communications, Inc., 2003 Ohio 6306 (Ohio
Ct. App. 2003) Ohio law permits a liquidator to void preferential transfers made
for or on account of antecedent debt if the transfers were made within one year
before the filing of a liquidation complaint. However, the appellate court
recognized that to give meaning to the phrase “antecedent debt,” it was
necessary to recognize an exception for transactions conducted in the ordinary
course of business. The court also concluded that this exception furthered the

Liquidation Act’s goal of helping struggling insurers by encouraging vendors and
trade creditors to continue to conduct business with them.
Covington v. Univ. Hosp. of Cleveland, 778 N.E. 2d 54 (Ohio Ct. App. 2002). This
case resolved the tension between two sections of Ohio’s Liquidation Act—one
dealing with the right of setoff, and another dealing with preferences.
Following the lead of federal bankruptcy law, the Ohio appellate court found
that the setoff provision in Ohio Revised Code § 3903.30, although it purports to
deal with “any action or proceeding,” does not permit set off against a
preference otherwise avoidable by the liquidator. The court noted that the
preference section in Ohio Revised Code § 3903.28(I) contains its own setoff
provision and therefore its ruling did not render the language in Ohio Revised
Code § 3903.30 meaningless.
Oklahoma Joplin Corp. v. State ex rel. Grimes, 570 P.2d 1161 (Okla. 1977). Where
delinquency proceedings against an insurer under the Uniform Insurers
Liquidation Act were commenced by the insurance commissioner on April 4,
where a creditor took judgment against the insurer in Missouri on April 14,
where an order enjoining all persons from seeking or obtaining preferences or
attachments or other liens against the insurer was entered in Oklahoma on
April 16, and where the creditor's Missouri judgment was filed in Oklahoma on
April 18, the filing of the Missouri judgment did not create a lien in favor of the
creditor so as to make it a secured creditor for purposes of the Act.
Pennsylvania
Ario v. Ingram Micro, Inc. 2009 WL 428450 (Pa. 2009). The court interpreted
Pennsylvania preference law regarding insurer insolvencies and considered
whether an insurers pre‐liquidation payment for a covered loss to an insured
constituted a preference which the liquidator of the insurer could recover.
They concluded that a payment made by an insurer to an insured in the
ordinary course of business is not a preference because it does not include
an antecedent debt. The court stated its interpretation protects the
economic interest of insureds while prohibiting unusual transfers. Further,
the court believes its decision regarding legislative intent was consistent
with federal bankruptcy law and the contrary interpretation of the
interpretation of the Pennsylvania preference law would be harmful to the
states insurance industry as well as the insureds.
Arroyo v. Chesapeake Ins. Co., 209 Pa. Super. 174, 224 A.2d 101 (1966). The
liquidator of an insolvent local insurance company could not be subject in local
courts to liens acquired by subsequent attaching creditors.
Stopper v. Chesapeake Ins. Co., 209 Pa. Super. 474, 228 A.2d 35 (1967). Under
Pennsylvania's Suspension of Business Voluntary Dissolution Act (repealed),
attachment of a domestic insurer's assets is prevented by the suspension of
the company from the further transaction of business, with notice to all
creditors, which is generally followed by the appointment of a statutory
liquidator.
South Carolina
Tennessee
Wise v. Carolina Hail Ins. Co., 108 S.C. 504, 94 S.E. 535 (1918). The court held
that assignment of premium notes in return for cash loans made while
company was solvent was not voidable as a preference.
United Physicians Ins. Risk Retention Group v. United Am. Bank of Memphis,
1996 Tenn. App. LEXIS 69 (Tenn. Ct. App. 1996). The commissioner filed a
petition, on behalf of and as liquidator for an insolvent captive insurance
company, against the bank, seeking to avoid a transfer made by the insurance
company to pay off an outstanding loan to the bank. The bank filed a motion to
dismiss the commissioner’s petition because the challenged transfer occurred
outside of the avoidance period in Tennessee Code § 56‐9‐317(a)(2)(B). The trial

court granted the motion. On appeal, the issue was whether a preferential
transaction entered into more than four months before the filing of a petition
for liquidation was voidable under § 56‐9‐317(a)(2)(B) if it were made within four
months before the filing of a petition for rehabilitation. After determining that
the meaning of the phrase “the petition” in § 56‐9‐317(a)(2)(B) referred only to
petitions for liquidation, the court held the transfer at issue was not a voidable
preference under § 56‐9‐317(a)(2)(B) because the petition for liquidation was
not filed until more than seven months after the transfer.
Utah Wasatch Crest Ins. Co., in Liquidation v. LWP Claims Adm’rs Corp., 158 P.3d 548
(Utah 2007). The liquidator of two insolvent insurance companies filed an
action to recoup from an affiliate of the two insurance companies funds that
said companies paid to the affiliate for claims handling purposes. The liquidator
argued that the funds were distributions made to an affiliate within five years
preceding the liquidation, and therefore, could be recouped by the liquidator
pursuant to statute. The supreme court rejected the liquidator’s argument. The
sums paid to the affiliate were not distributions to an affiliate that controlled
the insurer. Rather, the court reasoned, they were payments to an affiliate to
provide services. Moreover, the affiliate did not meet the definition of
“Affiliate” in the statute because it did not control the companies as required by
the statute. Similarly, the term “distribution” in the statute was not met
because the term only applies to dividends or other transfers of equity.
Therefore, the court held that the payment for services were not distributions
to an affiliate that could be recouped by the liquidator.
Setoffs and Counterclaims
Wilcox v. Anchor Wate Co., 164 P.3d 353 (Utah 2007). The receiver of Southern
American Insurance Company (“SAIC”), in receivership, filed suit against Anchor
Wate Co. (“Anchor”) alleging that pre‐receivership payments made by SAIC to
Anchor were voidable preferences within the meaning of the Utah insurance
receivership statutes. The alleged preference arose from settlement of a suit
filed by Anchor against SAIC, its insurer, for bad faith refusal to defend and
settle another lawsuit. SAIC settled the claim for policy limits, received funds
from its reinsurer therefore, and made substantial payments to Anchor to
satisfy the settlement. Shortly thereafter, SAIC entered receivership. The
receiver argued that the payments were a voidable preference because in
transferring the property, Anchor received a greater percentage of its debt
from SAIC then did other creditors of the same class. The supreme court held
that the reinsurance proceeds were assets of the SAIC estate and were not
“earmarked” or held in a constructive trust for Anchor. Transferring these
assets to Anchor constituted a voidable preference, and to hold otherwise
would grant Anchor direct access to reinsurance proceeds of the insolvent
insurer’s estate.
Wilcox v. CSX Corp., 70 P.3d 85 (Utah 2003). The supreme court addressed the
issue of whether federal bankruptcy law should be used to interpret the
voidable preference provisions of the Utah insurance receivership statutes, and
whether a voidable preference occurred when an insurance company settled a
claim for an antecedent debt shortly before insolvency. The court held that
without legislative history on point, it would follow the reasoning of the
Seventh Circuit and turn to federal bankruptcy law for guidance. In so holding,
the court defined the nature of an antecedent debt under Utah insurance
receivership statutes, as well as the requirements to establish statutory
affirmative defenses based on contemporaneous consideration and the
ordinary course of business. The court found that a voidable preference had in
fact occurred in the settlement of an antecedent debt shortly before
receivership and that no statutory affirmative defenses applied.

U.S. Supreme Forsythe v. Kimball, 91 U.S. 291 (1875). An insured was unsuccessful in
sustaining an argument that a $5,000 loan from an insolvent insurance
company given to him and his four brothers should be used in total as offset
against $11,000 fire loss sustained by one brother. The insured was only
allowed to set off his proportional share of the loan.
Scammon v. Kimball, 92 U.S. 362 (1875). A private banker, who was a director
of an insolvent insurance company, and who also was an insured, was
permitted to set off against an amount held as the insurer's banker, losses
arising from The Great Chicago Fire of 1871, but not an obligation given by the
insured banker to secure balances of stock subscriptions.
Sawyer v. Hoag, 84 U.S. 610 (1873). Stockholders of an insolvent insurance
company were not allowed to set off against losses the stockholders' unpaid
debts to an insolvent insurance company owed for stock since such debts
were a trust fund devoted to the payment of all creditors of the company. In
essence, the debts were not mutual, since the stockholders' debts belonged
equally to all creditors and not just the corporation.
Second Circuit
Fifth Circuit
Seventh Circuit
Theodore Rich, Commissioner of Insurance of the Commonwealth of
Kentucky, as Liquidator of Delta America Re Insurance Company v. Federal
Insurance Company, 113 F. 3d 1230 (2d Cir. 1997). This case involved an effort
by Federal Insurance Company to obtain an offset against Delta America Re
in Liquidation. The Court affirmed the decision of the district court sub. nom.
Don W. Stephens v. Federal Insurance Company (93 Civ. 4222 (JSM), 1995 WL
702385, S.D.N.Y., Nov. 28, 1995) that allowed the setoff. The district court
found that Federal had reinsured Delta. In a separate transaction, Delta had
reinsured a reinsurance pool of which Federal was a member. After Delta
was placed in liquidation by Kentucky, the Liquidator demanded balances
due from Federal. As an affirmative defense, Federal claimed a setoff in the
amount of Federal’s proportional share under the reinsurance pool
arrangement. The district court, in Stephens v. American Home Assurance
Co., 811 F. Supp. 937 (S.D.N.Y.), had previously ruled that Kentucky law
governed setoffs in the Delta liquidation. Kentucky law allows a setoff when
there is a mutuality of obligation. The court ruled that although Delta’s
obligation ran to a pool rather than to Federal directly, the mutuality
requirement was fulfilled because both Delta and Federal were parties to
reinsurance contracts.
Malone v. Robertson, 88 F. Supp. 749 (N.D. Fla. 1950), aff’d in part, rev'd in
part, 190 F.2d 756 (5th Cir. 1951). In a suit by the Pennsylvania liquidator of an
insolvent insurer to recover unremitted premiums held by a Florida agent, the
agent filed a counterclaim asserting a right to offset premium amounts owed
to the agent under a separate contract with the insurer. The trial court held
that the counterclaim could only be asserted in the Pennsylvania liquidation
proceeding. On appeal, the court held that the agent had no right to set off
personal debts owing from the insolvent company against funds of the
company held in the capacity as agent. However, the agent's counterclaim
could be asserted in the Florida proceeding because the Pennsylvania
liquidation court had not issued an order staying the assertion of claims against
the liquidator. Any judgment in the Florida proceeding would only serve to
liquidate the agent's claim and entitle the agent to share in the assets of the
insurer pro‐rata in the liquidation proceeding.
Fabe v. Facer Insurance Agency, Inc., 588 F. Supp. 1330 (N.D. Ill. 1984) (7th Cir.
Oct. 9, 1985), cert. denied, 475 U.S. 1013, affirmed, 733 F.2d 142. The insurance
code prohibits agents from setting off against premiums due to an insolvent
insurer the unearned portion of premium on any cancelled policy unless the
policy was cancelled prior to the entry of order of liquidation and unless the

unearned portion of the premium was refunded or credited prior to entry of
order. Thus, the agent was liable for unearned premiums without setoff for
unearned commissions returned to policyholders upon cancellation of their
policies.
Stamp v. Ins. Co. of North America, 908 F.2d 1375 (7th Cir. 1990). Liquidator of
insolvent insurer brought action against various reinsurers seeking to recover
debts owed by reinsurance pool to insolvent insurer. Reinsurers argued they
were entitled to offset debts incurred by insolvent insurer relating to pool.
Liquidator responded that insolvent insurer itself did not "owe" anything to
pool members until supervising court approved payment, therefore debts
were not mutual and entitled to offset. The Seventh Circuit held, as a matter
of Illinois law, that debts on account of transactions within a reinsurance pool
are mutual, and, therefore, entitled to setoff..
Stamp v. Reserve Ins. Co., 908 F.2d 1375 (7th Cir. 1990). Before becoming
insolvent, an insurance company entered into a pooling arrangement that
resembled reinsurance "treaties" with other insurance companies in order to
spread any risk. The manager of the pooling arrangement determined that
the insurance company had financial problems and consequently canceled
107 of the insurance companies policies while replacing them with new
policies from other pool members. The cancellation of the policies created
"unearned premiums" for the insurance company or the amount paid in
advance by an insured. After becoming insolvent, the reinsurance pool
owed the company for the policies that had been reinsured, but not
canceled. The amount an insolvent insurer owes to a reinsurance pool for
losses incurred before bankruptcy may be set off despite the fact that the
losses are not presently due. In addition, the court held that unearned
premiums are voidable preferences after being credited to customers when
their policy has been canceled from an insolvent firm. Despite agreeing with
the company's argument that the unearned premiums amounted to
voidable preferences, the court held that because the reinsurance pool did
not receive a transfer or benefit no cause of action existed against them.
Eighth Circuit
Hager v. Davis Transport, Inc., 901 F.2d 1470 (8th Cir. 1990). Iowa's Insurance
Commissioner, as liquidator of insolvent Carriers Insurance, Inc., brought action
to recover unpaid premiums. Section 507C.30(2)(d) of the Iowa Code prohibits
setoffs or counterclaims against premium owed. Insured sought to setoff
contract damages against unpaid premium. Court held that statute does not
violate equal protection or deny due process.
Transit v. Selective Cas. Ins. Co., 137 F.3d 540 (8 th Cir. 1998). Reinsurer’s
receiver brought state action against insurer for amounts owed under
retrocession contracts. The insurer removed to federal court and pled as an
affirmative defense that it had the right to set off amounts it owed to the
reinsurer against sums owed by reinsurer to insurer under the reinsurance
contracts. The U.S. District Court entered summary judgment holding that
the insurer could not offset its debt. The insurer appealed and the Circuit
Court held that allowing the set‐off did not violate the Missouri Insurance
Code or Missouri public policy and that the reinsurance contracts allowed for
a set‐off of mutual obligations. Additionally, the court found that the
reinsurer and insurer were mutually indebted, as required for set‐off.
Winchester Insurance & Indemnity Co. v. Manchester Premium Budget Corp.,
469 F. Supp. 126 (E.D. Mo. 1979), affirmed, 619 F.2d 389 (8th Cir. 1980). Under
Ohio law, a corporation which financed premiums on policies written by an Ohio
insurer, which later filed insolvency proceedings and cancelled policies, was not
entitled to set off unearned premiums against obligations on notes it executed
in favor of the insurer. The policies were not cancelled until after insolvency and

defendants' right to the returns did not attach until after the insolvency. To
allow such set‐offs would permit those policyholders who had financed their
premiums through the defendant to receive a preference over other creditors.
Ninth Circuit
Alabama
Alaska
Arizona
California
Quackenbush v. Allstate Ins. Co., 121 F.3d 1372 (9th Cir. 1997). The Ninth
Circuit held that arbitration clauses in the reinsurance contracts of an
insolvent insurer required arbitration of the offset issue.
Melco System v. Receivers of Trans‐America Ins. Co., 268 Ala. 152, 10S So.2d 43 (1958). In
a liquidation proceeding, the question raised was whether or not unpaid
premiums owed from insolvent insurers should be an offset against the
reinsurers' settlement offer. Because the reinsurers debt did not arise until
after the insolvency, the debts of the parties could not be set off against each
other and the reinsurer's claim for premiums must be treated ratably with all
other creditor claims.
King v. Jordan. 601 P.2d 273 (1979). A motorist brought a personal injury against
an insured of an insolvent insurer, also obtained a settlement against her insurer
under the uninsured motorist clause since the other motorist's insurer had
become insolvent. The court awarding damages to the motorist in the personal
injury action held that the award should not be offset by the settlement with
the motorists own insurer. The motorist then filed declaratory judgment action
requiring insurance guaranty fund to pay the personal injury judgment. The
Alaska Supreme Court held that the award entered in motorist's favor should
have been offset by settlement recovered from the motorists own insurer.
Urias v. PCS Health Sys., 118 P.3d 29 (Ariz. Ct. App. 2005). Receiver of an
insolvent health insurer, sued corporation for amounts due under a contract
with insurer. Corporation argued it was entitled to offset the amounts it owed
against sums owed to it by the insurer, under Ariz. Rev. Stat. § 20‐638(A). The
court of appeals held that corporation was entitled to offset debts as “mutual
debts” under Arizona law, as the contract stated that the parties were
independent contractors, not fiduciaries, trustees, or agents.
Downey v. Humphreys, 102 Cal. App. 2d 323, 227 P.2d 484 (1951). The court
permitted a general agent to offset money due the agent from the insolvent
insurer from the unremitted premiums the liquidator sought to recover because
the evidence showed the relationship between the insolvent insurer and
general agent to be debtor and creditor. Had the relationship been trustee and
beneficiary, the court agreed that the defendant would not be permitted to
setoff unearned premiums.
Garrison v. Edward Brown & Sons, 25 Cal. 2d 473, 154 P. 2d 377 (1945). The court
stated that if insurance agents undertook obligations as to remittance of
premiums on insurance policies in a fiduciary capacity, they could not set‐off
personal claims in an action by the insurance commissioner as liquidator of
insurance company for recovery of premiums.
Garrison v. Edward Brown & Sons, 28 Cal.2d 28, 168 P.2d 153 (1946). The
California Supreme Court concluded that the agent could set‐off a sum
representing a debt incurred by the agent as trustee in collecting the premiums
against the amount of the trust fund in his possession. The court, however, also
stated the well‐settled rule that if insurance agents undertook obligations as to
remittance of premiums in a fiduciary capacity, this could not set‐off personal
claims owed to them in such personal capacity against those which they had
assumed as a trustee.
Mission Ins. Co. v. Imperial Cas. & Indemnity Co., 41 Cal. App. 4th 828 (Ct.
App. 1995). The court determined that debts owed to two subsidiaries of

the insolvent Mission Insurance Company lacked the requisite mutuality with
a debt owed by Mission to permit setoff. Imperial Casualty reinsured each of
the three Mission companies; however, only Mission ‐‐ not its subsidiaries,
Mission National or Holland America ‐‐ reinsured Imperial. Although the
treaties at issue referred to the Mission companies collectively as "the
Company," the court found that mutuality for setoff purposes was lacking,
holding that setoffs are limited to mutual debts and credits between
principal reinsurers.
Prudential Reinsurance Company v. Superior Court, 3 Cal. 4th 1118 (1992). The
California Supreme Court held that mutual debts and credits between an
insolvent insurance company and its reinsurers arising out of reciprocal
reinsurance relationships qualify for set‐off under Section 1031 of the California
Insurance Code. In a suit by the liquidator of the Mission Insurance Companies
("Mission"), Mission's reinsurers sought to reduce their obligations for
reinsurance proceeds payable to the insolvent estates by amounts which
Mission owed to the reinsurers under contracts in which Mission had reinsured
them and by the amount of any unearned premium held by Mission at the time
it was ordered into liquidation. The Liquidator contended that such set‐off by
general creditors constituted an improper preference which defeated the
statutory distribution priority favoring policyholders. The Liquidator further
argued that obligations of the insolvent were not "mutual" with the preinsolvency
obligations owed to the insolvent by the reinsurers. The California
Supreme Court held that the liquidator "stands in the shoes" of the insolvent
insurer and that all debts and credits arising out of pre‐insolvency contracts
remain mutual for purposes of the statutory right to set off under Section 1031
of the California Insurance Code.
Colorado
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. The Colorado Supreme Court also held that allowing setoffs in a
liquidation proceeding destroys the quid pro quo between the insurer and
reinsurer. The court held that setoffs could be denied on a number of grounds.
Setoff can be properly denied where there is an insolvency clause which
provides that, in the case of insolvency, the reinsurance is payable to the
receiver without diminution. Setoff may also be denied pursuant to Colorado
liquidation law which requires that reinsurance be payable by the reinsurer on
the basis of contractual liability. Other provisions of the insurance code also
justify disallowing setoffs, for example, the "absolute transfer clause" which
provides that if a primary insurer is to take a credit for reserves on risks ceded to
a reinsurer, the reinsurance contract must result in the absolute transfer to the
reinsurer of the risk or liability. The further noted that the reinsurer signed the
reinsurance contract even though the Division of Insurance would not approve
the contract unless the setoff provision was omitted. The reinsurer, therefore,
entered in to the contract knowing that setoff would not be allowed. It was
also noted that the reinsurer chose not to terminate the contract even though
the insolvent insurer had not paid premiums to the reinsurer for at least five
consecutive quarters.
Colo. Ins. Guar. Ass’n v. Menor, 166 P.3d 205 (Colo. Ct. App. 2007). Appellant
Colorado Insurance Guaranty Association (“CIGA”) sought to modify, terminate,
or suspend appellee employee’s workers’ compensation benefits, asserting
entitlement to a statutory offset in the employee’s uninsured and underinsured
motorist (“UM/UIM”) insurance settlement. The Colorado Court of Appeals
held that COLO. REV. STAT. § 10‐4‐512(1) (2006) addresses an injured party’s claim
against his own insurer for any type of insurance that is also a “covered claim”
under the CIGA Act (COLO. REV. STAT. § 10‐4‐501, et seq.), and is intended to
further the purposes of the CIGA Act by ensuring nonduplication of recovery.

Thus, CIGA is “deemed to be the insurer to the extent of its obligation on
covered claims, subject to the purposes and limitations of other provisions of
the Act,” such as the nonduplication of recovery, which was enacted to avoid
windfall recoveries, and other sections which address the problem of
conserving resources to protect the financial stability of CIGA.
Delaware
Marra v. Wilson, 2003 WL 367831 (Del. Super. Ct. 2003). The court considered
how a “statutorily‐mandated credit is to be applied when a tortfeasor’s source
of insurance has been declared insolvent before liability has been determined.”
Id. at *1. The plaintiffs recovered $100,000 from their own insurer and claimed
the credit should be applied to the total amount of damages they were entitled
to. The Delaware Insurance Guaranty Association (“DIGA”) argued the credit
should be applied to its statutory maximum exposure of $300,000. Defendants,
at the time of the accident, were insured by Reliance who was later declared
insolvent and DIGA assumed its responsibilities. Plaintiffs filed a claim with their
uninsured motorist carrier and received $100,000. The court held that Delaware
law supported that the $100,000 must be deducted from DIGA’s $300,000 limit.
Florida Barnett Bank of Jacksonville, N.A. v. State ex. rel. Department of Insurance, 507
So. 2d 142 (Fla. Dist. Ct. App. 1987). A person's mutual debts with an insolvent
insurer which arise prior to a liquidation order may be offset, and only any
balance remaining after offset must be paid to the insurer's receiver. As a
result, under an indemnification agreement between a bank and an insolvent
insurer, the insurer's debt to the bank for checks presented before, but
dishonored after, insolvency may be offset against funds held in the insurer's
account. This preference given to persons having a mutuality of debt with the
insolvent insurer is consistent with Florida statute which allows the prioritizing
of creditor's claims.
Sunset Commercial Bank, v. Florida Department of Insurance, 509 So. 2d 366
(Fla. Dist. Ct. App. 1987). Although not entitled to a self‐executing offset, a bank
was entitled after presentment of its claim to the receivership court to offset
the account funds of an insolvent insurer against that insolvent insurer's
obligation on a promissory note provided in consideration of the issuance of a
letter of credit. A lower court's order which directed the bank to transfer the
balance of the insolvent insurer's accounts to the Florida Department of
Insurance was reversed because such setoff should be allowed as a specie of
preference before general distribution to claimants with claims against the
assets of the insolvent insurer.
Urich & Schenkman, P.A. v. Horton Insurance Co., 491 So. 2d 1195 (Fla. Dist. Ct.
App. 1986). The trial court held that an attorney's retaining lien is not a secured
claim and not subject to foreclosure by setoff under the liquidation provisions of
the Florida Statutes. The court reversed the lower court's holding that an
attorney's lien could not be offset against funds of an insolvent insurer which
were in the attorney's possession, but, certified the issue to the Supreme Court
of Florida.
Georgia
Pink v. Georgia Stages, 35 F. Supp. 437 (D. Ga. 1940). The holder of automobile
casualty policies issued in Georgia by a New York insurer was not entitled to
offset unpaid premiums against a claim for losses covered by one of the policies.
Illinois Clark v. Cannon Steel Erection Co., 359 Ill.App.3d 739, 835 N.E.2d 394 (2005).
Policyholder may not set‐off unliquidated claims for defense and indemnity
expenses against liquidator’s claims for unpaid premiums and assessments
because, in addition to meeting the requirements of 215 Ill. Comp. Stat. 206, only
mature and liquidated debts may be set off under the common law of the state.

Drake v. Rollo, 7 Fed. Cas. Pg. 1053, Case No. 4066 (N.D. Ill. 1872). A claim for fire
loss under an insurance policy may be set off against an indebtedness of the
insured to the insolvent insurance company, even though such a set off gives a
preference to the insured. The insurer was rendered insolvent by the Chicago
Fire of October 9, 1871, and the court held that the loan to the insured and the
loss under the insurance policy constituted a mutual debt and credit.
Lincoln Towers Insurance Agency, Inc. v. Boozell, 291 Ill. App. 3d 965, 684
N.E.2d 900 (1997), appeal denied, 175 Ill.2d 529, 689 N.E.2d 1140 (1997).
Plaintiff, an insurance producer, sought a declaration of its right to set off
claims against an insolvent insurer for commissions against premiums due
the insolvent company. The court first held that because the set off
provision embodied in Section 206 of the Illinois Insurance Code was in
existence before the contract in question was executed and no contractual
language barred its application, it was a part of the contract. Section 206
requires a mutuality in debts and credits that result from insurance
transactions if a set off is to be allowed. Given that all money received by
the producer for selling or renewing insurance policies was held by the
producer in a fiduciary capacity for the benefit of the insurer, the court held
that there was no mutuality necessary to permit a set off under Section 206.
The court further noted that to permit the producer to receive the full
amount of their commission through set‐offs would work to the detriment
of other creditors.
In re Rehabilitation of Am. Mutual Reins. Co., 238 Ill. App. 3d 1, 606 N.E.2d 32
( 1992). One of Amerco's cedents filed a petition with the court supervising
Amerco's rehabilitation, asking the court to order the rehabilitator to
recognize the ceding company's alleged set off rights. The cedent argued
that the rehabilitation plan's limitation on its set off rights was contrary to
Section 206 of the Illinois Insurance Code. The court held that the purpose
of Illinois' Insurance Code is to rehabilitate as well as liquidate, conserve, and
dissolve insolvent insurance companies. Thus, the rehabilitator's regulation
of setoff rights does not conflict with § 206 of the Insurance Code. The court
further noted that by seeking unlimited exercise of its set off rights, the
cedent was threatening to undermine the rehabilitative process.
In re Rehabilitation of American Mut'l Reins. Co., No. 1‐90‐3384 (Ill. Ct. App.
June 26, 1992). Company, which was reinsured by and reinsurer to reinsurance
company in rehabilitation, challenged set‐off provisions under rehabilitation
plan. Rehabilitation plan permitted companies in dual relationship as reinsured
and reinsurer to set‐off obligations in one quarter with amount owed to them in
the same quarter. However, the plan permitted the amounts owed to be paid
part in cash and part in interest‐bearing surplus drafts. The Appellate Court held
that, reading provisions of Illinois Insurance Code relating to set‐offs in context
of all of the receivership provisions of the Code, (1) company had an opportunity
to object to set‐off provisions during consideration of the rehabilitation plan but
failed to do so; and (2) rehabilitation plan did not improperly impair statutory
set‐off rights.
O'Connor v. Insurance Company of North America, 622 F. Supp. 611 (N.D. Ill.
1985) reconsideration denied, 668 F. Supp. 1183 (1987), appeal granted (1989).
The court held that the reinsurance proceeds due the liquidator could be set off
by the other debts owed to the reinsurers by the insolvent insurer, which were
primarily unearned premiums and the insolvent insurer's share of the
reinsurance pool. The court rejected the holding of Melco System v. Receivers
of Transamerica Ins. Co., 268 Ala.152, 105 So.2d 43 (1958) by holding that the
concept of "mutuality" was applicable because the reinsurance proceeds are
preliquidation assets that could be set off against the preliquidation debts of
the insolvent insurer to the reinsurers.

O'Hern v. De Long, 298 Ill App. 375, 19 N.E.2d 214 (1939). The agents of an
insolvent insurer were denied a setoff by way of counterclaim in mortgage
foreclosure proceeding for future renewal commissions due defendants under
agency contracts with insolvent insurer. The court noted that the continued
solvency of the company and its ability to collect and receive future premiums
was one of the conditions contemplated by the agents in entering into the
agency contracts.
Pine Top Ins. Co. v. Republic Western Ins. Co., No. 88‐2032, (N.D. Ill. July 26,
1988). The court ruled that if the reinsured was found liable to the reinsurer's
liquidator for amounts transferred to it from a voidable transfer, it would not
be entitled to an offset of amounts due to it by the reinsurer pursuant to the
reinsurance agreement, as these claims are not considered "mutual" for
purposes of a setoff.
Traer v. Consolidated Coal Co. of St. Louis, 221 Ill. App. 576 (1921). A
policyholder was not allowed to set off against the losses on policies issued by
the insolvent company the amount of the assessment the policyholder owed
the company since such assessments had been voluntarily agreed to by the
policyholder (prior to liquidation) in order to raise money to pay losses.
Further, the claim loss had been allowed in the estate on a pro rata share.
Kentucky
Louisiana
Stephens v. Fed. Ins. Co., 1995 U.S. Dist. LEXIS 17680 (S.D.N.Y. 1995) (applying
Kentucky law), aff’d, Rich v. Fed. Ins. Co., 113 F.3d 1230 (2d Cir. 1997), summary
order opinion at 1997 U.S. App. LEXIS 12284. The federal district court granted
defendant’s motion for summary judgment and found that defendant had a setoff
defense to the liquidated reinsurer’s claim for balances due under
reinsurance treaties. While the liquidation order barred counterclaims against
the liquidated reinsurer, the defense of set‐off was not a counterclaim. The
defendant did not waive its set‐off defense when it indicated that it did not have
a set‐off claim on the proof of claim form because it had no knowledge at the
time of any claims by the plaintiff against which it could exercise set‐off. Finally,
the requirement that the debts be mutual was satisfied because both plaintiff
and defendant were parties to the relevant pool contracts.
Brown v. Adolph, 961257 (La. App. 1 Cir. 3/27/97), 691 So.2d 1321. In the
liquidation of a single business enterprise, advances made to owners of an
insurer that were “written off” as “cash expenses” on the company’s books
prior to liquidation does not constitute a “remission” of the debt under LSA
C.C. art. 1888, such as to relieve the owner of repaying the advance to the
estate. In this case, prior to liquidation various advances had been made to
A.J. Adolph, the former owner of Automotive Financial Services (“AFS”), an
affiliate of Automotive Casualty Insurance Company (“ACIC”) which had
been placed into Liquidation pursuant to a declaration that the entities along
with another affiliate (“APS”) constituted a “single business enterprise” and
as such were to be liquidated under the Louisiana Insurance Code.
Furthermore, the Court determined that Mr. Adolph’s affidavit filed
subsequent to the entry of the summary judgment which recharacterized
the advances as “bonuses” could not be considered as “newly discovered
evidence,” because the affiant was aware of the information before the
hearing and failed to disclose it.
Brown v. Risk Exchange, Inc., 95 2199 (La. App. 1 Cir. 5/10/96), 674 So.2d
484). In response to an action by the Liquidator to recover payments made
to various debenture holders of defunct insurer, the defendants argued that
the court was improperly formed and contended that they were due a setoff
of sums received. Pursuant to Article V., section 5(A) of the Louisiana
Constitution, the Louisiana Supreme Court has the authority to assign a

judge to act as presiding judge over a case. Furthermore, the Liquidator
does not need to seek court authorization to initiate litigation in order to
collect a debt due to the Liquidator’s obligation to “deal with the property
and business of the insurer in his name as commissioner of insurance.”
Finally, the Court determined that no setoff was owed for the principal
amount of debentures held by the defendants as a result of a failure of a
condition of the debentures requiring that the insurer be sufficiently
capitalized before any principal would be due.
Maryland
Cappage v. Coleman, 263 Md. 639, 284 A.2d 211 (1971). The receiver of an
insolvent insurance company sued the receiver of an insolvent savings and loan
company for payment of interest on secured loans which the insurer had made
to the bank. The court held that since the sale of the pledged collateral
produced more than sufficient funds to pay principal and interest, the savings
and loan was obligated to pay the interest according to the terms of the loan
agreement. The court ruled that this outcome was unaffected by the fact that
both parties were in receivership or that there would ultimately be a claim
against the insurer on behalf of savings and loan regarding the deposits of the
savings and loan that the insurer covered.
Maine Ventulett v. Maine Insurance Guaranty Association, 583 Me. LEXIS 307, 583
A.2d 1022 (1990). The plaintiff had been injured in the course of his
employment and was awarded workers' compensation. Plaintiff subsequently
sued third‐party defendant and recovered damages in an amount less than he
had been paid through workers' compensation. The insurer of the third‐party
defendant was insolvent. Court held that plaintiff's claim against the Guaranty
Association must be set off against the workers' compensation benefits
plaintiff had received, even though the insolvent insurer of the third‐party
defendant would have been liable to the workers' compensation insurer in
that amount. Court reasoned that, as between solvent workers'
compensation carrier and the Guaranty Association, statute required that the
loss be borne by the solvent carrier.
Massachusetts Commissioner of Ins. v. Munich American Reinsurance Co., 429 Mass. 140
(1999). Responding to certified questions regarding a reinsurer's right of
offset in an insurer liquidation proceeding where no express provision
appears in the applicable liquidation statutes, the Court held that the
Massachusetts insurance insolvency statutes did not make common law
offset rules inapplicable. The Court rejected the receiver's argument that a
reinsurer would receive an improper preference if offset were allowed. The
Court noted that, by statute, every other state allows setoffs between
insolvent insurers and their reinsurers, and that the Massachusetts
legislature had passed an offset statute after the questions had been
certified to the Court.
Gaeta v. Nat'l Fire Ins. Co. of Hartford, 410 Mass. 592, 574 N.E.2d 377 (1991).
The plaintiff was an injured employee who had been awarded workers'
compensation benefits. Plaintiff subsequently sued a third‐party defendant for
the same injuries and received damages in excess of the amount he had
recovered from the workers' compensation carrier. The third‐party
defendant's insurer was insolvent. The court held that the Massachusetts
Insurers Insolvency Fund must satisfy the workers' compensation lien under
G.L. c. 152, § 15. The Fund's payment to the workers' compensation insurer did
not constitute payment of "an amount due to insurer" in contravention of the
statute under which the Fund was created.
In re: The Liquidation of American Mut’l. Liab. Ins. Co., 434 Mass. 272 (2001). In
connection with the approval of a liquidation plan, the Court held that (1) the
statute prohibiting offsets by affiliates against the insolvent insurer, though

enacted after the liquidation order and given prospective effect only, accords
with the pre‐existing common law requiring mutuality for setoffs and was given
effect; and (2) offset of case reserves and IBNR was not part of the
Massachusetts common law, and such offsets are counter to the requirement
that claims be absolute. As such offsets were not included in the recently
amended statute, the Court determined that the Legislature did not intend to
permit them.
Michigan
Ely v. Oakland Circuit Judge, 162 Mich. 466, 125 N.W. 375 (1910). The court held
that the cash premium policyholders in a mutual fire insurance company are
entitled to offset the unearned premium on their policies where they were
liable to assessment on the company's insolvency. Furthermore, it is the
receiver's duty to ascertain and report to the circuit court the amount of the
unearned premiums due as well as the amount required to pay valid loss
claims.
Hallam v. Southern Surety Company, 216 N.W. 546 (1927). The court held that
the defendant was not entitled to an offset of the payments made to the
corporate creditors of an insolvent corporation against the receiver plaintiff's
recovery from the defendant.
Yetzke v. Fausak, 194 Mich. App. 414, 488 N.W.2d 222 (1992). Motorist injured
in an accident with an insured whose insurer is insolvent may not recover both
uninsured motorist coverage under his own policy and the amount available
under the insolvent insurer's policy as paid by an insurance guaranty fund, even
though an "uninsured motorist" is defined in the policy to be a motorist whose
insurer is insolvent. Rather, the amount received under the uninsured motorist
policy reduces (is to be setoff from) the amount due under the covered claim
as defined by the limits of coverage in the insolvent insurer's policy. Moreover,
recovery from the insurance guaranty fund is limited to the coverage amounts
under the insolvent insurer's policy.
Missouri Angoff v. Marion A. Allen, Inc., 39 S.W.3d 483 (2001). The receiver of an
insolvent insurer brought an action against an insurance agency to collect
$88,819.50 in earned premiums due to the insurer at the time it was deemed
insolvent. The agent argued that the lower court erred in granting summery
judgment because of a factual dispute as to whether, prior to the insurer's
insolvency, policies had been cancelled and insurance agent was entitled, under
parties' course of dealing, to set‐off pre‐insolvency unearned premium of
$321,649.34 owed to the agent. The Supreme Court of Missouri reversed and
remanded, finding that agent’s evidence showed that agent owed insurer
nothing at the time of insolvency, and insurer owed agent approximately
$232,829.84, as to which debt agent is a creditor of the insolvent insurer, subject
to the usual rules of priority under the Insurers Supervision, Rehabilitation and
Liquidation Act. The court further held that the receiver’s argument that the
debts were not mutual did not apply because the premium did not involve
earned premiums the agency had collected but not turned over to the insurer,
but rather the agent sought a set‐off only of pre‐insolvency earned premiums
with pre‐insolvency unearned premiums, as reflected on the insolvent insurer's
books and records pursuant to their course of dealing.
Bent v. Alexander, 15 Mo. App. 181 (1884). An insurer retained an intermediary
to promote the transfer of the assets of another insurer to it in return for its
reinsurance of the other insurer's business. The intermediary was paid
$100,000. Subsequently, both insurers were found insolvent and liquidated.
Both receivers claimed the $100,000 paid to the intermediary, who ultimately
agreed to return $25,000 which was paid to the first insurer's receiver on the
understanding that if the other receiver should succeed in rescinding the
reinsurance contract and recover all the assets transferred to first insurer, the

$25,000 compromise would be paid to the other insurer. But if the first insurer
were successful, the two insurers would split the $25,000 compromise. The
second insurer's receiver lost the suit, and the court, in considering the $25,000
compromise, held that the $12,500 due from one insurer to the other could not
be used as a set off against the sums due the one receiver from the other
receiver in settlement of their relationship.
Bockover v. Missouri Superintendent of Insurance, 91 Mo. 177, 3 S.W. 833
(1887). The Missouri liquidator offset a distribution to creditors with a prior
amount received by a Virginia policyholder from the Virginia deposit. The
Missouri court upheld the reduction based on the prior distribution to the
Virginia policyholder on the basis of a statutory provision in Missouri, and
furthermore, upheld the statute against the constitution of challenge.
Nevada
New Hampshire
New Jersey
Frontier Ins. Serv., Inc. v. State, 849 P.2d 328 (Nev. 1993). The Supreme
Court of Nevada upheld the lower court's decision to release premiums
collected by appellant, as agent for an insolvent insurer, to the Nevada
Insurance Commissioner as ancillary receiver of the insurer. The court
rejected the appellant's argument that it was entitled to the premiums by
virtue of a setoff against commissions owed it by the insurer. The court held
that the applicable law was the Indiana Uniform Insurers Liquidation Act,
which was the liquidation statute of the domiciliary state. Under the Act, set
off is prohibited where "the obligation of the person is to pay premiums,
whether earned or unearned, to the insurer." The court determined that the
"obligation to pay premiums" includes premiums paid for surety bonds. The
court also found mutuality to be lacking because the premiums collected by
the appellant were held in trust for the insurer while any money the insurer
may have owed the appellant was a mere debt.
In re: The Liquidation of The Home Ins. Co., 953 A.2d 433 (N.H. 2008). An insurer
assumed all of its affiliates’ reinsurance recoverables from a reinsurer prior to
the insolvency of the reinsurer. The insurer sought to apply the affiliates’ losses
against the reinsurer’s claims against the insurer. The Court held that the
assignment by the affiliates to the insured was an absolute, not conditional,
assignment. As a result, the debts between the insurer and the reinsurer were
mutual for purposes of offset. The Court also found that the reinsurance
recoverables were not acquired with a view to being used as offset because the
transfer occurred years before the insolvency. Finally, the Court held that the
offset statute, which states that mutual debts and credits “shall” be offset, is
mandatory, not discretionary.
Bohlinger v. Ward & Co., 20 N.J. 331, 120 A.2d 1 (1956). In an action by the
liquidator of an insolvent insurance company against an agent of the company
for an accounting of premiums, the evidence did not establish that,
subsequent to the agency agreement, a course of business modified the
agreement to allow the agent to offset net return premiums on cancelled
policies against collected premiums. Nor did the evidence establish that such a
course of business substituted a creditor‐debtor relationship for the
principal‐agent relationship created by the agreement. Although the insurance
company permitted the agent to deduct unearned premium credits on policies
cancelled in the ordinary course of business at the request of policyholders or
the company, such treatment of unearned premiums would not apply to
policies conditionally surrendered by policyholders at the agent's request
where the solvency of the company, not cancellation, was the issue. To permit
otherwise would give a preference to such policyholders. The liquidator was
entitled to the full amount of collected premiums.
Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504, 800 A.2d 54 ( 2002). At
issue was the amount of credit the New Jersey Property‐Liability Insurance

Guaranty Association (“NJPLIGA”) was entitled to receive because of the
Pennsylvania Property and Casualty Insurance Guaranty Association’s
(“PPCIGA") primary liability. The plaintiff had several actions filed against it and
sought coverage from its insurance companies, three of which became
insolvent. As a result, NJPLIGA and PPCIGA were added as defendants to the
action. The court held that NJPLIGA was entitled to a credit equal to the
statutory maximum amount payable by PPCIGA. It reasoned that the holding
was in conformity with the New Jersey Legislature’s intent in creating NJPLIGA
George Dapper, Inc. v. New Jersey Prop. Liab. Ins. Guar. Ass’n., 2008 WL
2445261 (N.J. Super. A.D. 2008) (Unpublished opinion). Dapper appealed from a
trial court order granting summary judgment to New Jersey Property‐Liability
Insurance Guaranty Association (“NJPLIGA”), the Appellate Court affirmed.
Legion Insurance Company had been declared insolvent in 2003 and NJPLIGA
assumed its obligations. NJPLIGA’s liability was capped at $300,000 and it was
required to reduce its coverage by the amount of uninsured motorist (“UM”)
coverage benefits received by the injured party. As a result, NJPLIGA was only
liable for $50,000 dollars. The Supreme Court held that NJPLIGA would no
longer be entitled to set‐offs against its cap and the UM benefits received by the
injured party. NJPLIGA argued that its obligation should be determined by the
state of law as of the date of the settlement. As a result, it argued the
calculation of $50,000 should not change. The Appellate court upheld this
argument that the settlements are not invalidated by subsequent changes in
the law.
Newman v. Hatfield Wire & Cable Co., 113 N.J. 484, 174A. 491 (1934). When a
insurance company's policies are canceled upon its insolvency, unearned
premiums paid on the policies are properly set‐off against the receiver's claims
for premiums due from an insured on other policies. However, an insured's
counterclaim for estimated damages it might have to pay its employees for
injuries sustained before the insurer's insolvency was properly stricken as
unliquidated and presently unprovable losses in an action by the insurer's
receiver for premiums due on policies other then those covering liability for
such damages.
Sheeran v. Sitren, 168 N.J. Super. 402, 403 A.2d 53 (Ch. 1979). The court held
that an agent‐broker of an insurance company in liquidation is required to
remit all earned premiums which in the ordinary course of business would have
been remitted to the company. Allowing the agent‐broker to keep the earned
premiums would be to the disadvantage of others. An agent‐broker, who was
neither a debtor nor a creditor of the liquidated insurer, but was rather an
agent of both the insured and insurer and a mere conduit for premium
payment and refunds, was not entitled to set off premiums which were
unearned against premiums earned by the insurer but not yet paid by the
agent‐broker, where the unearned premiums ultimately belonged to the
insured.
Tuttle v. State Mutual Liability Ins. Co., 2 N.J. Misc. 973, 127 A. 682 (1925). When
a mutual insurance company is liquidated, policyholders are entitled to a return
of unearned premiums, but the receiver should not permit a set‐off of such
claims against assessments levied or to be levied by the receiver.
New Mexico Aztec Well Servicing Co. v. Property & Cas. Ins. Guar. Assoc. of the State, 115
N.M. 475, 853 P.2d 726 (1993). Payment from primary insurer cannot be used
to offset pecuniary obligations of property and casualty insurance guaranty
association for insolvent excess insurer under the statute governing
nonduplication of recovery. This interpretation complies with the intent of
the Property and Casualty Insurance Guaranty Law, because the Law’s

express purpose is to avoid financial loss to a legitimate claimant as a result
of the insolvency of its insurer to which the claimant paid premiums.
New York
B.D. Cooke & Partners Ltd. v. Nationwide Mut’l. Ins. Co., 791 N.Y.S.2d 103 (App.
Div. 2005). Pursuant to the liquidator’s plan and petition to close liquidation of
the reinsurer, the liquidator assigned to the plaintiff all reinsurance recoverables
owed to the insolvent reinsurer by reinsurance pool members. The reinsurer
was not entitled to setoff amounts due to the plaintiff, a cedent and major
creditor of the reinsurer in liquidation, because the liquidation order specified
that claims against the estate were to be either asserted and adjudicated in the
liquidation proceeding or were thereafter barred.
Corcoran v. American Plan Corp., CV No. 86‐1729 (E.D. N.Y. Feb. 5, 1987) (LEXIS,
Genfed library, Courts file). Pursuant to New York Insurance Law,
Superintendent, as liquidator of insolvent insurer, has standing to initiate any
claim that the insolvent insurer could bring, including causes of action against
former directors.
Corcoran v. American Plan Corp., No. CV‐86‐1729 (E.D. N.Y. filed Nov. 16, 1988)
(LEXIS, Genfed library, Courts file). In a Racketeer Influenced and Corrupt
Organizations Act ("RICO") action, the court, in dicta, asserted that the New
York Superintendent of Insurance may serve in a dual capacity as
representative of the insurance department and liquidator. Although the
Superintendent represents the insolvent insurer, he must still satisfy the
requirements of the particular predicate mail fraud acts alleged in order to
sustain a RICO claim.
Craig v. Bank of New York, 169 F. Supp. 2d 202 (S.D.N.Y. 2001). The federal
district court granted a motion for summary judgment in favor of the former
trustee of the insolvent insurer’s domestic trust account. The liquidator’s class
action against the trustee, who previously had sent a letter to NAIC announcing
his resignation, was barred due to lack of damages to the insurer and the
insurer’s own fraudulent conduct. Also, the trustee’s letter to NAIC announcing
its resignation triggered the running of the limitations period on claims against
the trustee; the trustee was not required to notify all policyholders and
claimants.
Crist v. J. Henry Schroder Bank & Trust Co., 693 F. Supp. 1429 (S.D. N.Y. 1988).
Bank's refusal to honor receiver's sight drafts that were made payable to the
receiver instead of the insolvent insurer which was the beneficiary of the
letters of credit was improper. The court asserted that a party who succeeds
by operation of law to the rights of the beneficiary of a letter of credit may
demand payment. Moreover, receiver may delegate to his subordinates his
authority to request such payments.
Harnett v. National Motorcycle Plan, Inc., 59 A.D.2d 870, 399 N.Y.S.2d 242
(1977). An agent named as a defendant in an action brought by the liquidator
cannot set off a claim for damages for alleged breaches of contract by the
insolvent insurer against the agent's obligations to the insurer. The agent's
claim had not matured at the time of insolvency. The concept of "mutuality"
depends on whether the debts to be offset are due to, and from, the same
persons in the same capacity.
Home Ins. Co. in Liquidation v. Accident & Cas. Ins. Co. of Winterthur
Switzerland, 807 N.Y.S.2d 348 (App. Div. 2006). The plaintiff insurer’s failure to
plead setoffs in its answer to an action seeking to enforce a settlement
agreement, was excusable, where the liquidation order giving rise to the claim
for setoffs was not rendered until after the filing of the note of issue.

In re Consolidated Indemnity & Ins. Co., 287 N.Y. 34, 38 N.E.2d 119 (1941). To
offset debts pursuant to insurance code these debts must be "mutual,"
meaning debts due to, and from, the same persons in the same capacity.
In re Consolidated Indemnity & Insurance Company, 287 N.Y. 34, 38 N.E.2d 119
(1941). The court held that "mutual" debts within the meaning of insurance
code do not include a salvage fund held by the reinsured as trustee for the
reinsurer, or a debt created by contract in which the reinsurer would pay the
reinsured its proportionate share of losses on three bonds. The risk on the
bonds was reinsured by the reinsurer, and did not produce the salvage fund.
Hence, the reinsurer's obligation to the reinsured could not be offset against
the salvage fund. The holding of the salvage fund by the reinsured did not
create a "debtor‐creditor" relationship between the parties. Rather, the
salvage fund was deemed a trust fund held as a cestui que trust.
In re Liquidation of Ideal Mut'l Ins. Co., 140 A.D. 2d 62, 532 N.Y.S. 2d 371 (N.Y.
App. Div. 1988). The court held that when acting as the statutory liquidator of
an insolvent insurer the Superintendent of Insurance is essentially a courtappointed
private trustee who takes the place of the insolvent insurer and
"stands in its shoes." The Superintendent occupies a legal personality which is
separate and distinct from the Superintendent as the public official charged
with regulating the insurance industry generally. Therefore, defendants'
affirmative defense of comparative negligence, which was based on acts of
the Superintendent in his capacity as a regulator, could not be asserted in an
action brought by the Superintendent in his capacity as liquidator.
In Re Liquidation of The Realex Group, N.V. v. Curiale, 210 A.D.2d 91, 620
N.Y.S.2d 37 (1 ST Dept. 1994). A New York state court upheld the right of a
reinsurer, which was also a cedent of the insolvent insurer under a separate
agreement, to setoff monies due from the insolvent company as a cedent
against amounts due to the insolvent estate as a reinsurer. The court also
held that any settlement arrangement or commutation entered into
between the reinsurer and the liquidator of the insolvent cedent would not
invalidate the reinsurer’s right of setoff.
In re Liquidation of Union Indem. Ins. Co., 802 N.Y.S.2d 14 (App. Div. 2005). In an
action by the plaintiff liquidator on an investor bond to enforce an
indemnification obligation under a promissory note guaranteed by the insolvent
insurer, the court held that the individual obligor under the promissory note
failed to show fraud, which was required to avoid enforcement of a waiver in
the bond of all defenses against recoupment by the liquidator of the obligor’s
indemnification payment.
In re Liquidation of U.S. Capital Ins. Co., 724 N.Y.S.2d 311 (App. Div. 2001). After
holding that a disputed security deposit belonged to the insolvent insurer and
therefore now the liquidator pursuant to entry of a liquidation order, the court
rejected the defendant’s counterclaims regarding the security deposit because
those claims were not filed within four months after entry of the liquidation
order.
In re New York Title & Mortgage Co. (Series Q‐1), 260 A.D. 729, 23 N.Y.S.2d 303
(1940). The court held that mutual debts and credits are those that are due
from the same persons in the same capacity. Mutual debts and credits cannot
be liabilities held in inconsistent relations.
Kemper Reins. Co. v. Corcoran, 79 N.Y.2d 253, 590 N.E.2d 1186, 582 N.Y.S.2d 58
(1992). Kemper Re instituted an action against the Liquidator of Midland
Insurance Company seeking a declaration that section 7427 of the New York
Insurance Law authorized it to offset moneys it owed Midland under a

einsurance contract against moneys Midland owed Kemper under a separate
contract. Rejecting the Liquidator's contention, New York's highest court
concluded that the contractual obligations between Kemper Re and Midland
constitute mutual debts for purposes of offset under section 7427 of New
York's Insurance Law despite the fact that the debts arose out of two separate
and distinct transactions. Further, the Court concluded that mutuality is not
destroyed by the existence of an insolvency clause in the carrier's contract
with the reinsurer. An insolvency clause requires the reinsurer to make full
payment to the liquidator in the event of insolvency, regardless of the amount
paid to the insured by the insolvent insurer, but the insolvency clause does not
affect the reinsurer's right of offset.
New York Title Co. v. Friedman, 153 Misc. 697, 276 N.Y.S. 72 (1934). The
receiver of a mortgage guaranty insurer brought an action to recover
payments mistakenly paid to the defendant, but intended for a person with
the same name. The defendant held a mortgage certificate guaranteed by the
insurer, and the court held the defendant could not retain the payments by
way of set‐off where the basis of set‐off was a contingent liability which had
not ripened into an absolute debt on the date of the commencement of
rehabilitation proceedings.
New York Title & Mortgage Co. by Van Shaick v. Irving Trust Co., 268 N.Y. 547,
198 N.E. 379 (1935), reargument denied, 268 N.Y. 709, 198 N.E. 569. The court
exceeded its jurisdiction when it enjoined a bank's right of offset of
guaranteed mortgages in an action by a title company for deposits.
New York Title & Mortgage Co., by Van Shaick v. Irving Trust Co., 268 N.Y. 547,
198 N.E. 397 (1935) reargument denied, 268 N.Y. 709, 198 N.E. 569. Where a
title and mortgage company in rehabilitation sued to recover balances on
deposit with a bank, a counterclaim was permitted for principal and interest
due on mortgages which the plaintiff guaranteed in writing as the right to
set‐off or counterclaim. The court found the insurance code, which created
the right of set‐off or counterclaim, applied to rehabilitations as well as
liquidations.
Pink v. American Surety Co. of New York, 283 N.Y. 290, 28 N.E.2d 842 (1940).
The reinsured was a trustee for the reinsurer as to the reinsurer's share of
salvage received by the reinsured. The reinsured became a surety on a bond
given by the reinsurer. The reinsured had not been required to make
payments on its bond until after the reinsurer's insolvency. The reinsured's
claim based on bond payments could not be offset against its liability as a
trustee for the reinsurer's share of the salvage. The debts were not mutual.
Pink v. Isle Theatrical Corporation, 246 A.D. 24, 284, N.Y.S. 447 (1935).
Although a lump sum award was not entered until after the insurer's
liquidation, claims against the insurer under workers' compensation policies for
payments made by the insured from the date of the insurer's liquidation until
the trial were a "debt" which the insured could offset against the insurer's
claim for premiums due.
Pink v. Title Guarantee & Trust Co., 274 N.Y. 167, 8 N.E.2d 321, reargument
denied, 274 N.Y. 610, 10 N.E.2d 575 (1937). A guarantee company and a trust
company shared a common directorate. The guarantee company purchased
mortgages from the trust company at an excessive price through fraud
perpetrated by the directorate. The guarantee company subsequently
became insolvent. The trust company owed no duty to return the purchase
price of the mortgages, and there was no debt that was subject to offset until
the guarantee company or the appointed rehabilitator discovered the fraud
and disavowed the purchase. Accordingly, the trust company was not entitled

to offset its claims against the guarantee company in an action by the
rehabilitator for the purchase price. Although the form of action brought by
the rehabilitator was founded in contract, the debt was not truly contractual.
The allowance of offset would be a preference prejudicial to other creditors.
Moreover, the parties did not claim mutual debts based on the same right.
Schenck v. Coordinated Coverage Corporation, 50 A.D.2d 50, 376 N.Y.S.2d 131
(1975) and Schenk v. Citizens Casualty Company, 60 Misc. 811, 322 N.Y.S.2d 483
(1971). The court held that where a party with a claim against an insurance
company is sued by the liquidator of the insurance company pursuant to a
liquidation order which contains an injunction barring counterclaims against
the liquidator's actions, such party has the option of either filing its claim in the
liquidation proceeding or raising its claim as a set‐off.
Serio v. Black, Davis & Shue Agency Inc., No. 05 CIV. 15 (MHD), 2005 WL 2560390
(S.D.N.Y. Oct. 11, 2005). The federal district court granted the liquidator’s
motion for stay of adjudication of the defendant agency’s counterclaims
seeking setoff in favor of the state liquidation and rehabilitation proceeding, but
stated that any obligation by the insolvent insurer to pay withheld commissions
to the agency would constitute a proper setoff in the litigation.
Van Schaick v. Astor, 154 Misc. 543, 277 N.Y.S. 394 (1935). In an action to
recover unearned premiums, the insured was entitled to offset the insurer's
periodic payments under a compensation award for the death of the insured's
employee, and the insurer's debt against the insured's liability over a seven
year period before conservation. However, the insured was not entitled to
offset based upon the insurer's failure to defend personal liability actions
brought against the insured prior to the conservation order.
Van Schaick v. Bank of Yorktown, 154 Misc. 400, 277 N.Y.S. 311 (1934). The
defendant who loaned money on promissory notes secured by bonds of the
surety company was entitled to offset the amount of the unpaid notes against
the time deposits of the surety company when receiver attempted to recover
such deposits.
Van Schaick v. Lincoln Dye Works, Inc., 146 Misc. 342, 263 N.Y.S. 114 (1933).
When the liquidator brought an action to recover premiums, the defendant
counterclaimed that the insurer was obligated under its policies to defend
actions pled prior to order of the liquidation and to pay the resulting claims.
The court held the counterclaims could not be maintained where the order of
liquidation enjoined any actions against the insurer or the liquidator. In
liquidation proceedings the amounts due for premiums are absolute debts and
could not be offset against any loss or individual claim due from the insurer in
liquidation.
Van Schaick v. Pennsylvania Exch. Bank, 236 A.D. 453, 260 N.Y.S. 37 (1932). The
insurance commissioner as liquidator could recover a deposit in the
defendant's bank, but the defendant was entitled to offset a claim against the
insurer, as guarantor of a note, where the note was duly presented and
payment refused prior to the date of the liquidation order.
Ohio
Covington v. Univ. Hosp. of Cleveland, 778 N.E. 2d 54 (Ohio Ct. App. 2002). This
case resolved the tension between two sections of Ohio’s Liquidation Act—one
dealing with the right of setoff, and another dealing with preferences.
Following the lead of federal bankruptcy law, the Ohio appellate court found
that the setoff provision in Ohio Revised Code § 3903.30, although it purports to
deal with “any action or proceeding,” does not permit set off against a
preference otherwise avoidable by the liquidator. The court noted that the
preference section in Ohio Revised Code § 3903.28(I) contains its own setoff

provision and therefore its ruling did not render the language in Ohio Revised
Code § 3903.30 meaningless.
Lloyds v. Cincinnati Checker Cab Co., 67 Ohio App. 89, 36 N.E.2d 67 (1941). The
court held that once the propriety of an assessment is established, the
policyholder did not have the right to a set‐off of the amount of losses against
the assessment, as the assessment created a "trust fund" for benefit of
creditors of company.
Oklahoma Mosier v. Oklahoma Property & Cas. Ins. Guar. Assoc., 1994 Okla. 145, 890
P.2d 878 (1994). Pursuant to Oklahoma Property and Casualty Insurance
Guaranty Association Act, Oklahoma Property and Casualty Insurance
Guaranty Association was entitled to set off workers’ compensation benefits
previously received by injured plaintiff in products liability suit against drilling
rig manufacturer against the statutory funds remaining available. The
available funds include the amount left within the statutory cap after set off
of funds available from Texas Guaranty Association, the guaranty association
in the home state of manufacturer’s insolvent insurer.
Oklahoma ex rel. Fisher v. Heritage Nat’l Ins. Co., 146 P.3d 815 (Okla. Civ. App.
2006). Two individuals served as officers of both an insurance company and a
claims processing company, which companies were commonly owned. The
claims processing company had an agreement with the insurance company to
consult and process claims on behalf of the insurance company. The officers
had actual authority to file claims for consulting fees with the insurance
company and to obtain payment on behalf of the claims processing company
for processing fees. The officer filed fraudulent claims with the insurance
company for processing fees provided by the claims processing company. The
insurance company then entered receivership and the receiver sought to
recover the funds fraudulently paid to the claims processing company for said
processing fees. The common owner of the claims processing company raised
the defense that the officers acted outside of the scope of their authority and,
therefore, their actions could not be imputed to the claims processing company.
The court held that the officers’ knowledge was imputed because the claims
processing company derived a benefit from the officers’ misconduct (retention
of a portion of the improperly obtained fees). The court explained that the
claims processing company was estopped from denying knowledge due to
receipt of the benefit.
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.
Pennsylvania
Bell v. Slezak, M.D., 571 Pa. 333, 812 A.2d 566 (2002). A settlement was agreed to
between the plaintiff and defendant where it was understood that part of the
money was to come from the Doctor’s malpractice insurance carrier. Prior to
the disbursement of funds the malpractice insurer was declared insolvent
triggering the statutory obligations of the Pennsylvania Property Insurance and
Casualty Guaranty Association (“PPICGA”). PPICGA refused to tender payment
claiming it was entitled to an offset of the medical expenses paid by the
plaintiff’s health insurer. The court noted that both first and third‐party
claimants may possess covered claims. Further, the court held that the health
insurer’s payment of the patient’s medical bills entitled PPCIGA to a setoff.

Since the plaintiff received an amount greater than the limit of the defendant’s
insurance policy limits, PPCIGA’s obligation for payment of the plaintiff’s claim
was extinguished.
Brostoski v. Lucchino, M.D., 2003 Pa. Super. 406, 835 A.2d 751 (2003). The
Pennsylvania Property Insurance and Casualty Guaranty Association (“PPICGA”)
assumed the obligations of Dr. Lucchino’s insolvent insurer. The medical
malpractice case settled for $35,000. PPICGA argued that its obligation should
be reduced to $29,308.15 to reflect an offset of monies that was paid on behalf
of the plaintiff’s health insurer. At issue was the non‐duplication of recovery
provisions of 40 P.S. § 991.1817. The court held that monies recovered by a
patient from his health insurance did not constitute an offset against the
amount payable by the PPICGA. It reasoned that the settlement monies
awarded to the plaintiff were for pain and suffering and not for his medical
expenses covered by his health insurer. Additionally, the plaintiff’s claim for
medical expenses had been withdrawn prior to settlement.
Commonwealth v. Guardian Fire Ins. Co. v. Pennsylvania, 65 Pa. Super. 208
(1916). Local agents, possessing premiums paid but not remitted to the
company before it was placed in receivership, could not set them off against
dividends on claims for return premiums due policyholders of which the agents
had become assignees.
Corrigan v. Methodist Hosp., 234 F. Supp. 2d 494 (E.D. Pa. 2002). In a
malpractice action the defendant’s primary malpractice insurer was declared
insolvent and the Pennsylvania Property Insurance and Casualty Guaranty
Association (“PPCIGA”) assumed its obligations. The defendants asserted that
pursuant to the PPCIGA Act (“Act”) they were entitled to an offset for the
amounts paid on behalf of the plaintiff’s workers’ compensation carrier
covering the plaintiff’s employment. The court stated that the Act does not
intend to place a claimant in the same position they would have been had their
insurance company remained solvent. Instead, the Act creates a way by which
limited recovery can be had when no recovery could have been possible due to
the insolvency. Consequently, the court found that where a claimant receives
insurance benefits under workers’ compensation, a court may shape the verdict
by applying the offset provision.
Cynthia Maleski, Insurance Commissioner of the Commonwealth of
Pennsylvania, as Liquidator of World Life and Health Insurance Company of
Pennsylvania v. Landberg, 93 Civ. 5318 Z(JSM), 1995 U.S. Dist. LEXIS 154. The
Pennsylvania Insurance Commissioner as Liquidator of World Life and Health
Insurance Company of Pennsylvania, commenced an action against parties
alleging fraud and unjust enrichment arising from a series of land
transactions by the defendants to World Life and its affiliates. The
defendants counterclaimed for amounts allegedly due them from World
Life’s corporate parent for the land transactions. The Commissioner moved
to dismiss the counterclaim on the ground that it should be adjudicated in
the Pennsylvania liquidation proceeding rather than in the federal court. The
motion to dismiss was granted on the basis of New York Insurance Law §
7412(a), that requires claims against the estate of an insolvent insurer to be
made either in an ancillary proceeding commenced in New York or in the
out‐of‐state liquidation proceeding. The court concluded from New York
case law that Insurance Law § 7412(a) bars counterclaims, as well as direct
actions, against an insurer undergoing liquidation in a jurisdiction other than
New York. To allow a counterclaim to go forward would afford the
defendants a preference over similarly situated creditors. Although the
court dismissed the counterclaim on the ground that the defendants could
not seek affirmative relief, it ruled that because the facts in issue in the
counterclaims were precisely those put in issue by the Commissioner’s

complaint, the defendants would not be required to relitigate their claim in
the liquidation proceeding and would be able to present evidence in support
of their claim in the Pennsylvania proceeding if the Commissioner’s
complaint in this court proceeding was dismissed.
Fanning v. Davne, M.D., 2002 Pa. Super. 45, 795 A.2d 388 (2002). Appellant, the
Pennsylvania Property and Casualty Insurance Guaranty Association
(“PPCIGA”), argued a jury reward received by the appellee should be offset by
the amount the appellee already received from his workers’ compensation
carrier, and the award should be molded to zero. The court noted that the
damages awarded to the appellee were for pain and suffering, not for the
medical bills or wage loss. The appellee’s pain and suffering caused by the
defendant was not covered by any other type of insurance. Therefore, the nonduplication
provision in the PPCIGA did not apply because the jury award was
for pain and suffering and not for medical bills or lost wages. Thus, PPCIGA was
not entitled to an offset and had to fulfill the obligations of the defendant’s
insolvent professional liability insurance company.
Kuether v. Loev, 51 Pa. D. & C. 4th 124, 2001 WL 113034 (Pa. Commw. Ct. 2001).
The court denied plaintiff’s petition to enforce settlement in this case where a
set‐off was required under the facts and law. The court distinguished this case
from McCarthy v. Bainbridge, 739 A.2d. 200 (Pa. Super. 1999) because this case
involved a setoff of amounts already received by plaintiffs under their health
insurance, which was specifically set forth in the statute. Whereas, McCarthy
involved life insurance not specifically set forth in the statute.
O'Neil v. Burnett, 263 Pa. 216, 106 A. 246 (1919). An injunction against an
insurance company in insolvency proceedings froze the assets of the company,
including funds later received by an agent even though the agent was unaware
of the injunction. The agent had no right to the money superior to that of
other creditors. An arrangement between the agent and the company
allowing the agent to set off a general agency account against the proceeds of
mortgages which the agent collected was made void by the insolvency
proceeding and the injunction.
Panea v. Isdaner, M.D., 2001 Pa. Super. 108, 773 A.2d 782 (2001). At issue was the
proper application of § 991.1817(a) (the non‐duplication of recovery provision,
hereinafter the “Provision”) of the Pennsylvania Property Insurance and
Casualty Guaranty Association (“PPICGA”) Act. There were multiple cases
involved in the dispute, the first two cases involved parties that reached a
settlement prior to trial. The third case involved a defendant’s insurer being
ordered into liquidation after a jury verdict in favor of the plaintiff, followed by a
granting of an offset. The court held that: (1) the Provision applied to unpaid
tort settlements reached prior to insolvency; (2) the Provision applied to causes
of action that accrued prior to the effective date of the Act; (3) the insureds
were not personally liable for the amounts offset under the Provision; (4) the
Provision can be applied in post‐trial proceedings to form the jury verdict; (5)
insured’s claim of a defense against a tort claim did not estop him from
asserting a setoff.
Price v. Pennsylvania Prop. and Cas. Ins. Guar. Ass’n, 2002 Pa. Super. 74, 795 A.2d
407 (2002). As individual plaintiffs, parents sought compensation for their
daughter’s incurred medical expenses in a negligence action. The doctors’
insurer was declared insolvent and the Pennsylvania Property and Casualty
Insurance Guaranty Association (“PPCIGA”) assumed its obligations. The
parents settled with PPCIGA and specifically agreed that the settlement was
intended to cover both present and future damages. PPCIGA argued it was
entitled to an offset of the monies the plaintiffs received from the parent’s
insurer. The court held since the parents demanded personal compensation in

the negligence action, the medical expenses sought were also covered by the
settlement. Therefore, PPCIGA was entitled to an offset up to the amount
recovered from the parent’s insurer and to the extent the father had a claim for
coverage.
Schmidt v. Workers’ Comp. Appeal Bd., 835 A.2d 877 (Pa. Commw. Ct. 2003). An
employer, who paid workers’ compensation benefits to its injured employee,
was entitled to subrogate against amounts the employee received from the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
in a settlement for injuries sustained on the job. The plaintiff brought the suit
against a third party whose insurer had been declared insolvent and PPCIGA had
assumed its obligations. The court reasoned that the non‐duplication provision
of the PPCIGA Act did not specify a workers’ compensation policy as a policy
subject to the exhaustion requirement. The court further noted that the nonduplication
provision did not specify a workers’ compensation policy as being
subject to its exhaustion provision. Additionally, there was no evidence PPCIGA
ever reduced its settlement to the injured worker to account for the workers’
compensations he had received.
Storm v. O’Malley, M.D., 2001 Pa. Super. 184, 770 A.2d 548 (2001). Parties in the
action agreed to a settlement without regard to the Pennsylvania Property and
Casualty Insurance Guaranty Association’s (“PPCIGA”) right to a setoff. PPCIGA
asserted that it was only responsible for the statutory limit of $200,000 less the
medical benefits already paid on the plaintiff’s behalf. The plaintiff asserted that
PPCIGA waived or was estopped from asserting a setoff because it did not raise
the claim at the pretrial conference. The court concluded that the plaintiff did
not reasonably rely on PPCIGA’s omission of its setoff rights during the pretrial
conference. The plaintiff’s counsel researched the setoff issue and admitted
they assumed PPCIGA waived its right. Therefore, PPCIGA could not be
estopped from asserting its right to setoff. Further, estoppel against the
government will not lie where its agents(counsel) had no authority to waive a
governmental right.
Strickler v. Desai, M.D., 571 Pa. 621, 813 A.2d 650 (2002). Dr. Desai was sued in a
medical malpractice action. The Doctor’s insurer was declared insolvent and the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
became obligated to cover the claims and defend the Doctor. After the
insolvency, the plaintiffs entered into and the court approved a settlement
between the parties. PPCIGA refused to fund the settlement because it would
allow the plaintiffs to get a double recovery. The plaintiffs demanded medical
expenses in their complaint, but later admitted they received medical expenses
from Aetna, their health insurer. PPCIGA claimed it was entitled to reduce the
amount of its obligation by the amount the plaintiffs received from Aetna, who
already paid medical costs in excess of the amount PPCIGA was obligated to
pay. Since Aetna already reimbursed the plaintiffs for medical expenses, PPCIGA
argued it would result in duplicate payments for the same expense. The court
determined that “[b]ecause [plaintiffs] sought medical expenses in the
complaint and settled all of the claims in the complaint, we deem the
settlement to include amounts attributable to medical expenses.” Id. at 631. The
court affirmed the lower court’s ruling that PPCIGA was entitled to offset the
amount of medical expenses Aetna paid from the amount of its liability.
Taggart v. Graham, 108 Pa. Super. 320, 165 A. 68 (1933), affirmed, Taggart v. De
Fillippo, 315 Pa. 438, 173 A. 423 (1934). A holder of mutual insurance company
certificates could not set off assessments against a claim for insured losses.
Puerto Rico
Phico Ins. Co. v. Pavia Health, Inc., 413 F. Supp 2d 76 (D.P.R. 2006). The Court
determined the choice of law to be used to evaluate a defendant’s counterclaim

as an offset against the insolvent insurer is the law identified in the underlying
insurance policy under which the counterclaim is made. The Court did not
agree, once the insurer was placed in liquidation, that all proceedings would be
governed by the law of the domicile, regardless of past agreements to the
contrary.
South Carolina
Grambell v. Cox, 250 S.C. 228, 157 S.E.2d 233 (1967). The court held that the
conduct of the agency following the insolvency, such as procuring new
insurance contracts for its clients, cannot create a right of set‐off. Any right of
set‐off must exist at the time of the insolvency.
In re Banks, 85 S.C. 37, 67 S.E. 19 (1910). It was held that a policyholder of an
insolvent mutual insurer cannot offset any claims against the insurer from the
receiver's claim for assessments.
Tennessee
Ewing v. Coffman, 80 Tenn. (12 Lea) 79 (1883). The owner of life policy took
out loan against the policy, secured by a mortgage. All assets of the insurer
were then transferred to a second company. The insured assented to a new
contract with the second company. The second company thereafter became
insolvent, and a receiver was appointed in Tennessee. The receiver sued to
collect the loan debt and foreclose the mortgage. The insured asserted a right
to set‐off premiums paid to both companies against the debt. The court held
that all rights against the first company were surrendered when the new
contract was assented to, and that no right of set‐off existed, among other
reasons, because the insurer's insolvency did not void the policy.
Insurance Premium Services, Inc. v. Wood, 57 Tenn. App. 514, 420 S.W.2d 595
(1967). Upon learning of the impending insolvency, a Tennessee agent
procured new policies in a solvent company for the agent's clients. It was held
that the agent did not have a right to offset the unearned premiums due the
agent's customers against the claim of the Indiana liquidator, since the policies
were not cancelled by operation of law until the Indiana company was
declared insolvent by the Indiana court.
McReynolds v. Cherokee Ins. Co., 896 S.W.2d 137, 1994 Tenn. App. LEXIS 530
(Tenn. Ct. App. 1994). A reinsurer was a wholly owned subsidiary of the parent.
The reinsurer’s business was secured through letters of credit from a third
party. When the third party failed to furnish a letter of credit, the parent orally
agreed to provide a replacement letter of credit. When the reinsurer was placed
into receivership, all proceedings against the reinsurer were enjoined, and the
receiver was appointed. The receiver attempted to draw down the letter of
credit, and the parent filed an action to enjoin the bank from honoring the letter
of credit. The parent was charged with contempt. The receiver filed an action
against the parent and the bank for release of the letter of credit funds, and the
parent filed a counterclaim based on the oral side agreement. The chancery
court entered summary judgment for the receiver. The parent appealed, and
the court affirmed, holding that any claim by the parent against the reinsurer on
the oral side agreement had to be pursued in a separate action. Under
Tennessee Code § 47‐5‐114, the letter of credit was an independent contract to
be honored as written, so whether the funds were held as a constructive trust
was unnecessary to litigate in this action.
McReynolds v. Cherokee Ins. Co., 815 S.W.2d 201 (Tenn. Ct. App. 1990).
Insolvent insurer's estate brought an action against agencies to recover unpaid
premiums. The lower court permitted the agencies to set‐off the insurer's
profit sharing obligations against the agencies' debts for unpaid premiums. In
affirming the lower court's decision, the court of appeals held the following:
(1) that where insurance agencies had a right to their share of the profits on
insurance, even though the amount of such profits were not to be ascertained

until the end of the calendar year, the agencies were entitled to set‐off their
share of profits from the amount of premiums owed to the insolvent insurer;
(2) that the insurance agencies' obligations to insurer to collect and remit
premiums, and insurer's obligation to agencies for share or profit, were mutual
and thus could be offset; and (3) that the insurance agencies' delay in paying
premiums to insolvent insurer in order to assure payment of insurer's profit
sharing obligation did not preclude agencies from offsetting amount owed by
insurer against agencies' debt to insurer regarding unpaid premiums
Texas
Wheeler v. Clark, 306 S.W.2d 158 (Tex. Civ. App. 1957) writ ref. When agent of
insolvent insurer refunded policyholders for unearned premiums or secured
new policies for them, and took assignments from them for their claims
against the receiver, the agent was not allowed to offset these amounts
against unearned commissions the agent owed the receiver. Otherwise, the
agent could become a preferred creditor of the estate.
Utah 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.
R&R Indus. Park, L.L.C. v. Utah Prop. & Cas. Ins. Guar. Ass’n, 199 P.3d 917 (Utah
2008). A fire was caused by material stored by CDR, the insured, at an industrial
park. CDR’s insurance company entered receivership and the Utah Property
and Casualty Insurance Guaranty Association (“UPCIGA”) assumed the role of
insurer of CDR. Other parties, R&R and AlumaTek, were damaged by the fire
caused by CDR, and each collected insurance from their own (third party)
insurance carriers. R&R collected insurance for both lost profits and property
damage. R&R, AlumaTek, and UPCIGA attended a mediation to resolve what
portions of the claims UPCIGA would pay. The three parties sought a
declaratory judgment to determine whether, in settling the claims, UPCIGA
would only be required to pay “one covered claim per claimant” and whether
UPCIGA would be entitled to offset the amounts that R&R and AlumaTek’s own
insurers had paid for the damages suffered. The supreme court held that the
Guaranty Act in Utah applies to multiple claims because to allow for only one
claim out of a single occurrence would defeat the remedial nature of the Act.
The court further held that UPCIGA could not offset amounts that R&R and
AlumaTek recovered from third‐party insurers.
Virginia Swiss Re Life Company America v. Gross, 253 Va. 139, 479 S.E.2d 857 (1997).
Protective Life Insurance Company (“Protective”), Fidelity Bankers Life
Insurance Company (“Fidelity”), and North American Reassurance Company,
now known as Swiss Re Life Company of America (“Swiss Re”), entered into
reciprocal treaties of reinsurance. Swiss Re agreed to indemnify Protective
for any payments above levels established in schedules and interest for the
policies acquired from Fidelity and Fidelity agreed to indemnify Swiss Re for
the payments. Fidelity went into receivership and the Commissioner of
Insurance was appointed deputy receiver.

Swiss Re made payments to Protective and filed a claim with the deputy
receiver seeking administrative priority for the sum due it under the
reciprocal treaty as an administrative expense under Va. Code § 38.2‐1509
(1950). The deputy receiver classified Swiss Re as an unsecured creditor of
Fidelity and disavowed the reciprocal treaty. Later, the deputy retracted his
disavowal of the treaty. Swiss Re asserted that the reciprocal treaty was an
executory contract and the deputy receiver’s retraction of his disavowment
was a de facto assumption of it. Swiss Re also acquired various reinsurance
treaties from Integrated Resources Life Insurance Company where Fidelity
was the indemnified party. Further, Swiss Re held some reinsurance treaties
which predated the Fidelity and Protective treaties where Fidelity was the
protected party. Swiss Re sought to set‐off its claims against Fidelity with
the monies owed to Fidelity under these treaties.
The Supreme Court of Virginia held that Swiss Re was not entitled to
administrative priority over the claims of policyholders on the theory that
the deputy receiver’s retraction of his prior disavowment of Fidelity’s treaty
constituted an assumption of the contract. Rather, the reinsurer was an
unsecured creditor of the insurance company for both prior and succeeding
claims under the treaty. The Supreme Court also denied Swiss Re’s attempt
to claim a set‐off on the Integrated Resources claims for lack of mutuality,
but the Court did find sufficient mutuality for the set‐off on the other
treaties.
Washington In Re Washington Physicians Service v. Marquardt, 67 Wash. App. 650; 838
P.2d 142 (1992). The Washington Appellate Court held that the claim of health
service contractor for excess premiums held by the receiver of insolvent
insurer is not a claim for "unearned premium" entitled to statutory distribution
priority. Washington Physicians Service (WPS) contracted with Rainier
National Life Insurance Company ("Rainier") for Rainier to underwrite claims
for optometric and chiropractic benefits provided by WPS to its policyholders.
The contract provided that premiums received by Rainier in excess of amounts
required to pay claims would be returned to WPS in the following year. After a
receiver was appointed for Rainier, WPS sought to recover $71,750.51 in excess
premiums. Under the Washington State Insurance Code, claims arising from
insurance policies, including claims for unearned premiums, were entitled to
priority over "all other claims." However, the court found that the contract
between WPS and Rainier created a joint venture and was not an insurance
policy. Therefore, the claim for "excess premiums" was not a claim for
unearned premiums and was not entitled to priority.
Wisconsin Cheese Makers Mutual Casualty Co. v. Duel, 247 Wis. 485, 19 N.W.2d 889
(1945). A solvent insurer could not set off its unearned premium claim from a
reinsurance contract for any claim the liquidator may have against it for
payments under the reinsurance contract.
In the Matter of the Liquidation of All‐Star Ins. Corp., 112 Wis.2d 329, 332
N.W.2d 828 (1983). The court found that under the agency agreement, by
which the liquidator was bound, the agency did not have to remit its unearned
commissions to the insolvent insurer until the liquidator allowed the unearned
premium claims in the insolvent insurer's estate. The liquidator had argued
that the order of liquidation itself triggered the obligation under the agency
contract. With respect to unpaid premiums held by the agency, the agency
argued that the insolvent insurer owed it certain moneys and therefore the
unpaid premium should be set off against the amount owned. The court held
that the agency was not entitled to a set off under the Wisconsin set off
statute because of a specific exception to the payment of unearned premiums.
The court also rejected the agency's argument that it had no notice of the

liquidation proceeding, noting that the insolvent insurer had complied with the
notice requirements of the liquidation article.
Wisconsin Mutual Ins. Co. v. Manson, 24 Wis.2d 673, 130 N.W.2d 182 (1964).
The court held that one insurer could not offset the $500 in interest due on its
surplus note to an insolvent insurer.
Assessments
U.S. Supreme
Fourth Circuit
Pink v. AAA Highway Express, Inc., 314 U.S. 201 (1941). The U.S. Supreme Court
held that an assessment validly determined according to the laws of the state
of incorporation of a mutual insurer is entitled to full faith and credit, but the
question whether a resident of another state is a member of the mutual
insurer is a question of the law of the state of residency.
Keehn v. Parrish Dray Line, 145 F.2d 646 (4th Cir. 1944). The Illinois statutory
receiver of an insolvent Illinois insurer brought suit in South Carolina to recover
assessments levied by the Illinois receivership court against all policyholders of
the insolvent mutual insurer. It was held that a valid assessment levied by the
Illinois court was conclusive and binding against all South Carolina
policyholders, but since they were not personally served with process in the
liquidation proceeding and parties to the action, they could attempt to prove
that they were not members of the company and therefore not liable to pay
the assessment.
Miller v. Barnwell Bros., Inc., 137 F.2d 257 (4th Cir. 1943). The Illinois domiciliary
receiver of an insolvent mutual insurer brought suit against North Carolina
residents to recover assessments levied by the receivership court. The
insureds argued that they were not bound by the assessment, since they had
not been a party to the proceedings. The court held that members of a mutual
insurer are subject to the valid regulatory power of the state of incorporation.
Therefore, where the assessment was valid under Illinois law, it would be
binding upon North Carolina policyholders.
Arkansas
House v. Siegle, 121 Ark. 236, 180 S.W. 747 (1915). The court held that when a
mutual fire insurance company became insolvent during the life of a policy, this
did not relieve the policyholder of liability on a premium note, though the
by‐laws of the company provided that a member might withdraw from the
company at any time (in which case the unearned portion of the premiums
would be returned), notwithstanding the statutory requirement that such
companies file a qualified indemnity bond for the payment of losses and that
by statute each policyholder is a member and liable to assessment (even
though no assessment can be made until the bond is exhausted).
Johnson V. House, 131 Ark. 113, 198 S.W. 876 (1917). The insolvency of a mutual
insurance company before the expiration of its policies is no defense to actions
on premium notes and the receiver of such company may recover from
policyholders the full amount of unpaid premium notes, at least as long as the
company has outstanding debts, because such notes constitute the principal
assets of the company.
Swing v. Arkadelphia Lumber Co., 90 Ark. 394, 119 S.W. 265 (1909). The
directors of an insolvent insurer had made monthly assessments against the
policyholders up to the time of the dissolution. Nearly six years thereafter, the
same court made an assessment against the policyholders. About eight years
thereafter, the trustee sued a policyholder for the assessment levied such
court. The court held that in order to defeat the defense of limitation, the
court‐appointed trustee must show that the assessments made by the

directors were not included in that made by the court and thus show that
limitations were not set in motion by the assessments levied by the directors.
California Mitchell v. Pacific Greyhound Lines Inc., 33 Cal. App. 2d 53, 91 P.2d 176 (1939).
Subscribers of the California Highway Indemnity Exchange collaterally attacked
an order appointing a liquidator and the provisions of the order regarding the
manner of computing the liability of the subscribers. The court concluded that
the subscribers were subject to a limited assessment liability upon liquidation
of the exchange.
Colorado
Benham v. Manufacturers & Wholesalers Indem., 685 P.2d 249 (Colo. App.
1984). Subscribers to an insurance exchange cannot challenge the
reasonableness of assessments levied against them by a Receivership Court
where subscriber's status as a creditor is adequately represented by the
receiver.
Benham v. Pryke, 744 P.2d 67 (Colo. 1987). Contracts between participants in
an insurance exchange and underwriters or reinsurers obligated to provide
coverage to participants against assessments by a receivership court are
interpreted in accordance with general contract principals.
Florida
Southeastern Staffing, Inc. v. Florida Dep’t of Ins., 728 So. 2d 248 (Fla. Dist.
Ct. App. 1998) (certified question to Florida Supreme Court pending). The
Florida Department of Insurance as receiver of an insolvent workers'
compensation fund could assess fund members for workers' compensation
claims, awards and administrative expenses of the receivership. Such
assessment was authorized by statute and was not an impermissible taking
of private property.
Georgia Pink v. Georgia Stages, Inc., 35 F. Supp. 437 (M.D. Ga. 1940); Swing v. Farrar, 124
Ga. 951, 53 S.E. 269 (1906); Lockridge v. State Mutual Life Ins. Co. 142 Ga. 30, 82
S.E. 131 (1914); Alma Gin & Milling Co. v. Peeples, 145 Ga. 722, 89 S.E. 820 (1916);
Riggs v. Scarboro, 57 Ga. App. 457, 195 S.E. 918 (1938); Lyle v. Keehn, 195 Ga.
508, 24 S.E.2d 655 (1043); Gaston v. Keehn, 195 Ga. 559, 24 S.E.2d 675 (1943)
transferred, 69 Ga. App. 500, 26 S.E.2d 107 (1943). These cases all involve the
insolvency of a mutual or cooperative insurer, and the issues of when members
may be assessed, which court has jurisdiction to determine the assessment,
whether the action is one at law or in equity, whether independent actions
must be brought, which state's law determines whether a party is a member of
the company, and whether members may set off dividends or claims due from
or against the company against an assessment.
Illinois Clark v. Lehman, 65 Ill. App. 238 (1895). A receiver of an incorporated
association succeeds to all the rights of action which had accrued to the
insolvent association, including the authority to collect assessments from
members for death losses. The determination of what a defaulting member is
liable to pay depends upon the contract between the member and the
association.
In re Protection Life Ins. Co., Fed. Cas. Case No. 11,444, 9 Biss 188 (Cir. Ct. Ill.
1879). Under the terms of the assessable life insurance policy issued to the
members of an insolvent insurance company, assessments were to be paid at
the election of the policyholder. Thus, the effort by the receiver to collect such
assessments cannot be enforced and the failure of the insolvent company to
make assessments on a monthly basis as provided in the policy cannot be
retrieved by the receiver of the insolvent company.
Lehman v. Clark, 174 Ill. 279, 51 N.E. 229 (1898). The receiver of an insolvent
benefit association was not allowed to recover certain assessments against the

members of the association because the only remedy available to the
association under its organization and policy for nonpayment of an assessment
by a member was the forfeiture by the member of rights under the policies for
the payment of death benefits. The contract between the member and the
benefit association was unilateral and not bilateral.
Lindheimer v. Baylor, 5 Ill. App. 3d 114, 283 N.E.2d 298 (1972) affirmed, 54 Ill. 2d
433. Creditors challenged the insurance commissioner's cessation of
assessments against policyholders. The insurance code, which had provided
that the commissioner may levy such assessments against policyholders as
may be necessary to pay all allowed claims in full was repealed in August 1969.
The court held that the repeal was prospective only and that it was inequitable
to allow the commissioner to assess and collect from some policyholders and
not others of the same company in liquidation. Further, the court held that a
creditor may intervene in a liquidation proceeding as a matter of right, the
circuit court was in error in sustaining the motion to dismiss the action.
People v. Central Mutual Ins. Co. of Chicago, 313 Ill. App. 84, 39 N.E.2d 400
(1942). Although the liquidation law makes no express provision for a levy on
policyholders by either the court or the receiver or by the independent action
of the insurance commissioner without leave of court, the court is permitted to
exercise such power upon petition of the receiver. The method of assessment
is sufficient if it is based upon a fair method of calculation, is equally applied,
and is substantially correct. The levy of an assessment on policyholders is
nothing more nor less than the exercise, by the receiver, of contractual rights
that the receiver vest by the liquidation decree, and amounts to no more than
a demand for payment of the contingent liability which the policyholder
assumed. The levy is, in essence, the collection by the receiver of assets of the
estate, title to which are vested in the receiver.
Pioneer Furniture Co. v. Langworthy, 84 Ill. App. 594 (1899). Assessments
against policyholders of an insolvent mutual fire insurance company were
proper against holders of policies that were canceled since the assessments
cover losses and expenses incurred prior to cancellation.
Thompson Lumber Co. v. Mutual Fire Ins. Co., 66 Ill. App. 254 (1896). A person
who was not a policyholder of the insolvent insurer at the time of the
appointment of a receiver and making of an assessment is not bound by the
proceeding or the assessment. However, the policyholder, albeit, receiving a
policy of insurance in violation of the insolvent insurer's charter, had the
benefit of the insurance policy and was therefore, subject to assessment.
Traer v. Consolidated Coal Co. of St. Louis, 221 Ill, App. 576 (1921). A
policyholder was not allowed to set off against the losses on policies issued by
the insolvent company the amount of the assessment the policyholder owed
the company since such assessments had been voluntarily agreed to by the
policyholder (prior to liquidation) in order to raise money to pay losses.
Further, the claim loss had been allowed in the estate on a pro rata share.
Indiana
Boland v. Whitman, 33 Ind. 64 (1870). In an action by the receiver of an
insolvent mutual fire insurance company for the collection of assessments
against policyholders, the court noted that the complaint does not need to
include a transcript of the decree appointing the receiver, and that the alleged
misrepresentations of the company's agents concerning the frequency of
potential assessments and the solvency of the company did not allege material
facts constituting fraud as a defense to the assessment. However, a
fraudulent representation relied upon by the insured about the solvency of the
company will constitute a defense to a suit on the premium note. In addition, a

purported rescission by the company prior to the appointment of a receiver
would provide a valid defense to the assessment.
Clark v. Manufacturer's Mutual Fire Ins. Co., 130 Ind. 332, 30 N.E. 212 (1892).
The court held that the amounts received from the assessable policies would
be used for the payment of loss claims under both the all cash and mutual
policies. Assessments cannot be used to pay unearned premium claims, but
rather can only be paid out of the cash or other assets of the company. Thus
the assessment fund should be first exhausted in the payment of fire losses
and only then upon exhaustion should the cash fund on hand be drawn upon
to pay fire losses. Otherwise the cash fund would be used to pay unearned
premium claims.
Clark v. Schromyer, 23 Ind. App. 565, 55 N.E. 785 (1899). The receiver of an
Illinois benevolent association tried to collect assessments from an Indiana
policyholder, who had failed to pay, but was rejected because the policy of the
association merely provided that upon failure to pay the assessment, the only
penalty attached was an end to membership in the benevolent association
because the contracts were unilateral and not bilateral.
Embree v. Schidler, 36 Ind. 423 (1871). A receiver of an insolvent mutual
insurance company cannot collect on an assessment of members unless the
court has examined and determined the validity of the claim, that the amount
of such claims is appropriate, and that the assessment of the members is only
for those losses that occurred during the time the policyholder was a member
of the company. Cases following a similar holding are: Heller v. McCormick, 38
Ind. 30 (1871); Manlove v. Curtis, 38 Ind. 31 (1871); Tippecanoe Twp., Carroll
County v. Manlove, 39 Ind. 249 (1872); Manlove v. Naylor, 38 Ind. 424 (1871);
Manlove v. Naw, 39 Ind. 289 (1872); Manlove v. Bender, 39 Ind. 371 (1872);
Whitman v. Mason, 40 Ind. 189 (1872); Hasagan v. Manlove, 42 Ind. 330 (1873);
and Downs v. Hammond, 47 Ind. 131 (1874).
Manlove v. Berger, 38 Ind. 211 (1871). In an action by receiver of an insolvent
mutual insurance company to recover assessments, it was held that the
receiver is authorized to sue in the receiver's own name, but must allege all the
facts necessary to show liability on the premium notes. Further, while the
appointment of a receiver is binding on the premium note holders, that
appointment alone does not establish their liability on such notes.
Mueller v. State Life Ins. Co., 27 Ind. App. 45, 60 N.E. 958 (1901). In an action by
the receiver of an insolvent mutual life insurance company for collection of
assessments, the court rejected the policyholder's argument that the
policyholder had an "illegal" special contract for appointment as counsel since
the contract had nothing to do with the policy. The second defense was also
properly rejected on the theory that the policyholder had no right to consent
to the reorganization of the company, since the reorganization had no effect
on the policyholders rights and duties under the policy of insurance
Whitman v. Hall, 34 Ind. 422 (1870). Although no facts were provided to the
court as to action by the receiver of an insolvent mutual insurance company to
collect assessments, the complaint standing alone is sufficient to state a cause
of action, and the policyholder's motion to dismiss was not properly granted.
Whitman v. Meissner, 34 Ind. 487 (1870). The receiver of an insolvent mutual
insurance company attempted to collect on assessments against various
policyholders who raised a number of defenses, including misrepresentation
by the agent that the company was solvent, that it could not assess more than
10% per year, and that no assessments could be made in the first year. In
addition, it was noted the policyholders were German immigrants. Based on

the facts alleged in the complaint, the court felt there was enough evidence to
provide a defense to the motion to dismiss, and thus required the receiver to
answer the defenses to best determine whether the assessments were
proper.
Iowa
Corey v. Sherman, 164 N.W. 828, 96 Iowa 114 (1875). The insolvent insurer had
issued two kinds of policies, cash and assessment. The policyholders of
assessable policies claimed a 25% assessment was illegal. The court held that
the insolvent insurer was a validly organized as a mutual insurance company
and not a stock company and, thus, the cash policies issued by it were invalid
since only assessable policies were permitted to be issued by mutuals. The
court, however, upheld the assessment because the holders of assessable
policies had no reason to believe that the guaranty fund would be used to
relieve them permanently from their assessment obligations. However, the
assessments would not reflect the losses sustained under the invalidly issued
cash policies.
Sherman v. Frasier, 112 Iowa 236, 83 N.W. 886 (1900). A policyholder's defense
to an assessment was that the company's agent had misrepresented the
condition of the company. The court rejected this because the policyholder
had enjoyed the benefits of the insurance for six years. The policyholder was
stopped from alleging fraudulent misrepresentation.
Kansas
Herdman v. Eubank, 158 Kan. 224, 146 P.2d 387 (1944). In an action by an
assignee to collect an assessment on a policy issued by an insolvent mutual
company, the assignee did not sustain the burden of proving that the
assessment was made within one year after termination of the policy as
required by the insurance contract.
Keehn v. Stapleton, 161 Kan. 476, 169 P.2d 811 (1946). In an action against
former policyholders of an insolvent Illinois mutual insurance company to
recover assessments fixed by the Illinois court, the right to plead the Kansas
statute providing that no member shall be liable for any part of a contingent
premium in excess of the amount demanded within one year after termination
of policy, was a defense applicable to all Kansas policyholders, and applied
irrespective of the fact that the right to recover against Kansas policyholders
was thereby lost before the receiver took possession of the company for
liquidation.
Kentucky
Maine
Maryland
Allen v. Thompson, 108 Ky. 476, 56 S.W. 823 (1900); Enterprise Fire Ins. Co.'s
Receiver v. Enterprise Fire Insurance Co., 25 Ky. L. Rep. 1630, 79 S.W. 1180
(1904); Equitable Mutual Fire Ins. Corp. of New York's Receiver v. Murray, 131
Ky. 740, 115 S.W. 816 (1909); White v. Harbeson, 169 Ky. 224, 183 S.W. 475
(1916); Darnell v. Equity Life Ins. Co.'s Receiver, 179 Ky. 465, 200 S.W. 967
(1918); Providence Mining Co. v. Hind, 190 Ky. 445, 227 S.W. 789 (1921); Hind v.
Cook & Co., 220 Ky. 526, 260 S.W. 349 (1924). These cases all involve mutual or
cooperative insurance companies, and address the issues of liability for an
assessment, and where jurisdiction is proper to collect the assessment.
Pink v. Town Taxi Company, 138 Me. 44, 21 A.2d 656 (1941). A New York court
had jurisdiction over an automobile mutual indemnity company organized
under the laws of New York. It could determine the necessity of an
assessment against the policyholders and the amount of the assessment. A
policyholder could set up such personal defenses as non‐membership,
payment or limitations in a subsequent action brought against the policyholder
in a jurisdiction where the policyholder resided.
Joyce v. Abrams, 178 Md. 535, 16 A.2d 296 (1940). The court held that once a
receiver is appointed, the directors of a company are powerless to assess

members. The court further held that the assessment is a decree which sets
forth the rate of liability, but that the liability, but the liability of each member
assessed would have to be established by the receiver.
Michigan
Bakon v. Clyne, 70 Mich. 183, 48 N.W. 207 (1888). Where the statute provides
that the defendant shall recover costs when a plaintiff obtains a judgment for
less than $100 and another statute provides that where one insured in a mutual
fire company shall neglect to pay an assessment, the receiver of the company
may sue for it, and the assessment shall be prima facie evidence of its own
regularity and of the receiver's right to recover, with costs, the receiver for an
insolvent insurer was permitted to recover costs although the judgment was
for less than $100.
Calkins v. Angell, 123 Mich. 77, 81 N.W. 977 (1900). Reversing the trial court, the
Supreme Court of Michigan held that the defendant, a member and
policyholder at the time the petition for dissolution of a mutual insurance
company was filed, is liable to the receiver for assessments levied to pay death
claims which had accrued prior to the filing for dissolution.
Cavanagh v. Connon, 123 Mich. 685, 82 N.W. 523 (1900). The court reversed a
judgment in favor of a policyholder of a mutual fire insurance company. The
court held that the holder, even after he had cancelled his policy, must pay the
assessment for losses and expenses incurred during the life of his policy, in an
action by the receiver of the company to cover a deficiency in the sum
necessary to pay the losses and expenses of the insolvent company.
Central Mutual Auto Ins. Co. v. Gauss, 292 Mich. 309, 290 N.W. 808 (1940). The
receiver of a mutual insurance company could not levy assessments on
members whose policies had expired over one year prior to appointment of
receiver and over two years prior to filing of petition by receiver for authority
to levy assessments, where, when the receiver was appointed, neither the
company nor its officers could have imposed any such assessments.
Collins v. Welch, 141 Mich. 676, 105 N.W. 31 (1905). In an action by the receiver
of an insolvent mutual fire insurance company to enforce the assessment
ordered by the circuit court judge to be paid by each member of the company,
the court held that a member of the company cannot collaterally attach the
order levying the assessment on the ground that the assessment is excessive.
Coy v. Lapeer Farmers' Mutual Fire Insurance Association, 327 Mich. 333, 41
N.W.2d 888 (1950). Where statutory receiver was appointed, and the method
of settlement, including voluntary contributions of those who had not paid
their assessments, and the final account of the receiver, were approved, and
the receiver was authorized to sell assets of the association to trustees for
benefit of its creditors, a suit by former members of association to vacate
assessment orders on the ground of fraud, which was discovered in 1942, and
not brought to light until 1948, when the suit was instituted, was barred by
latches.
Keehn v. Charles J. Rogers, Inc., 311 Mich. 416, 18 N.W.2d 877 (1945). In an
action by a receiver to collect an assessment where no demand for the
payment of the assessment was made within one year after termination of
policy, though the policyholder was an insured within one year preceding the
liquidation proceedings, there was no liability for the assessment, as the
statute governing Illinois mutual insurance companies, which fails to fix limits
as to time when assessment against policyholders can be demanded, does not
extend beyond territorial limits of that state. The remedy of the Illinois
receiver in suing a Michigan corporation in Michigan courts can be effective in
Michigan only on grounds of comity and not by constitutional mandate.

Maclem v. Bacon, 57 Mich. 334, 24 N.W. 91 (1885). Where all of the parties
insured in the mutual company, including those who had suffered loss by fire,
when they took the insurance understood and agreed that they were liable
only to the amount of their premium notes, when, under the statute, they
became liable in the event of the company becoming insolvent and the
receiver being appointed, to pay all assessments levied by the receiver for the
purpose of paying the losses and liabilities of the company, and the services
and expenses of the receiver, in proportion to the amount of their insurance or
interest in the company, they will be entitled to relief on the ground of a
mistake of law when the company becomes insolvent and the receiver
appointed attempts to enforce their statutory liability.
Nichol v. Murphy, 145 Mich. 424, 108 N.W. 704 (1906). The court held that it is
clearly within the authority of the court having jurisdiction to accept the
resignation of the initial receiver and to appoint a successor receiver after the
notice required by law has been given. Even if proper notice is not served, the
appointment may not be collaterally attacked. Furthermore, the court may set
aside the initial assessment made by the first receiver based upon irregularities
in the assessment which was grossly excessive in amount, and may confirm a
new assessment which is lesser in amount.
Nichol v. Newman, 160 Mich. 582, 125 N.W. 760 (1910). In an action by the
receiver of an insolvent mutual fire insurance company to recover an
assessment, the court held that the statute of limitations begins to run against
the receiver's right of action from the date of the assessment, and not from
the date of the appointment of the receiver.
Peake v. Yule, 123 Mich. 675, 82 N.W. 514 (1900). Where a policyholder in a
mutual fire insurance company cancels a policy, and thereafter pays several
assessments for the payment of losses and expenses incurred during the time
the policy was in force, such holder is not relieved from the payment of other
assessments necessary to cover such expenses and losses.
Russel v. Berry, 51 Mich. 287, 16 N.W. 651 (1883). The defendant claimed that
under his contract with the insurance company, he was not liable for
assessments beyond a given sum. The court, denying the defendant's claim,
held that the receiver was entitled to assess all insured members of the
company such amounts as will be sufficient to pay all the losses and liabilities
of the insolvent company, including the services and expenses of the receiver,
in proportion to the amount of their insurance.
Simpson v. Goodwich, 280 Mich. 351, 273 N.W. 595 (1937). The lower court
properly dismissed the action by the receiver to recover an assessment not
paid by the defendant. The assessment was unenforceable as it was not made
in accordance with the court order which clearly instructed the method of
ascertaining and enforcing the liability of policyholders. See also, Eli v. Oakland
Circuit Judge,,162 Mich. 466, 125 N.W. 375 (1910), modified in other respects,
162 Mich. 466, 127 N.W. 769.
Tolford v. Church, 66 Mich. 431, 33 N.W. 913 (1887). The court held that a
policyholder in a mutual fire insurance company is not liable for an assessment
claimed by the receiver subsequent to the surrender and cancellation of his
policy.
Toy v. Lapeer Farmers Mutual Fire Ins. Ass'n., 297 Mich. 174, 297 N.W. 232
(1941). Members of a mutual fire insurance association who continue as
members after the expiration of the association's certificate of authority were
held liable for assessments covering the period from such expiration until the

instituting of the receivership proceeding. The acts of the association were
binding in all respects upon these members.
Wardle v. Hudson, 96 Mich. 432, 55 N.W. 992 (1893). An action brought by the
receiver of an insolvent mutual insurance company to recover an assessment
levied against a member, by order of the court in liquidation proceedings, was
barred by the statute of limitations as it was not commenced within six years
after the assessment fell due.
Wardle v. Townsend, 75 Mich. 385, 42 N.W. 950 (1889). The court upheld the
validity of an assessment by the receiver of an insolvent mutual insurance
company as being unreasonably excessive. the court held that, as some of the
assessments may reasonably be expected to prove uncollectible, the receiver
may make the aggregate assessment large enough to cover all probable
deficiencies. Furthermore, costs were properly awarded to the receiver,
although the sum recovered was less than the statutory prescribed amount,
$100.00.
Minnesota
Dwinnell v. Felt, 90 Minn. 9, 95 N.W. 579 (1903). An insured brought suit to
recover an assessment paid to an insolvent insurance company on the basis
that there was inducement to accept the insurance policy upon the
representation that there would be no contingent liability. The court denied
recovery because the policy stated that the insurance company was a mutual
company and the insured was subject to pay assessments. The insured also
could not bring a defense of fraudulent misrepresentation when the policy was
retained and the policyholder received the benefits of the insurance.
In re Minneapolis Mutual Fire Ins. Co., 49 Minn. 291, 51 N.W. 921 (1892). The
court held that premium notes of the members of the insolvent mutual insurer
were subject to assessment to pay such unearned premiums.
Langworthy v. C. C. Washburn Flouring‐Mills Co., 77 Minn. 256, 79 N.W. 974
(1899). The receiver of an insolvent mutual fire insurance company brought
suit to recover an assessment. The insurance company issued two policies to
the policyholder in consideration for two premium notes executed by the
policyholder. The policyholder challenged the collection of notes on several
grounds. First, it argued that the insurance company had no power to insure
the policyholder's flour mills. The court rejected this argument and held that
the policyholder, regardless of the interpretation of the insurance company's
charter, was estopped from questioning the validity of the insurance contract
because it had benefited from the insurance contract and the insurance
company had borne its burden under the contract. Further, the assessment
may include the expenses of winding up the affairs of the insurance company
because the payment of the expenses of the company, as well as its losses,
was secured by their premium notes.
Swing v. Cloquet Lumber Co., 121 Minn. 221, 141 N.W. 117 (1913). Members of an
insolvent insurance company had given the insolvent insurer a premium note
which was subject to assessment for losses and expenses. The insurance
policy provided that no member would be liable for losses and expenses in an
amount greater than the notes given by the policyholders. The policyholders
also argued that the notice of assessment was invalid because it stated an
amount in excess of the amount for which the policyholder was liable and it
was incorrectly stated the time within which the assessment should be paid.
The court held that these errors in the notice of assessment did not make it
invalid because the notice incorporated the decree in full and the decree
indicated the precise amount assessed on account of the policy and the time
within which the assessment should be paid. However, the court agreed that
the policyholders should receive credit for the amounts previously paid on the

premium notes, and found that the court could not make an assessment
against the policyholders for an amount in excess of the amount for which
they were liable under the by‐laws of the company.
Swing v. Humbird, 94 Minn. 1, 101 N.W. 938 (1904). The court found that the ex
parte decree making an assessment without personal notice to member was
conclusive as to all matters relating to the necessity for making the
assessment. However, the court noted, the decree was not conclusive as to
the question of whether the particular member's relationship to the insurance
company was such as to subject it to liability for an assessment. The court
found that the policies at issue were of a class which imposed no liability upon
its holders beyond the amount of cash deposit required. Therefore the court
held that the policyholder was not liable for assessment of losses because it
paid in advance its cash deposit.
Swing v. Red River Lumber Co., 105 Minn. 336, 117 N.W. 442 (1908). The trustee
of an insolvent mutual fire insurance company sought to recover an
assessment entered by an Ohio court. The Minnesota Supreme Court found
that the insurance company was never organized to allow its policies to have
contingent liability. Thus, the court held that to the extent that the
assessment imposed contingent liability upon policyholders, the trustee could
not recover from the assessment.
Swing v. Wurst, 76 Minn. 198, 79 N.W. 94 (1899). Receiver of an insolvent
insurance company sued to recover an assessment made in an Ohio court. An
Ohio statute required notice of any assessment to be made publicly and gave
members 30 days in which to pay. Although notice was by mail, no public
notice was made. The court held that the receiver was bound to comply with
the conditions precedent prescribed by the statute before the member could
be held liable. Because no public notice was made, the receiver could not
recover at this time.
Missouri Freedy v. Trimble‐Compton Produce Co., 329 Mo. 879, 46 S.W.2d 822 (1931)
reversing, 32 S.W.2d 147 (Mo. App. 1930). The Wisconsin insurance
commissioner as liquidator of a Wisconsin mutual insurance company brought
suit to collect on assessments against a Missouri policyholder. In holding that
assessments made by a court in insolvency proceedings are binding on
members of a mutual insurance company regardless of residence, the Missouri
Supreme Court noted that in the particular circumstances of this case, the
assessment decree was not binding on the former member who was a
Missouri resident since the member's insurance policy had expired and thus
the membership had ceased before the liquidation proceeding was instituted
and therefore, the Wisconsin court did not have jurisdiction over the member
which it would have had had the policy been in force at the time the liquidation
proceeding was instituted.
Swing v. Karges Furniture Company, 123 Mo. App. 367, 100 S.W. 662 (1907). In
an action by an Ohio mutual insurance company against a Missouri
policyholder for an assessment, it was held that even though the mutual
insurance company had failed to fix the assessment liability of its members as
required by statute in Ohio and had not required the policyholders to sign an
agreement respecting such fixed assessment, the Ohio court had the power to
enforce assessments as determined by its receiver and approved by the Ohio
court even though the assessed policies were issued to an Indiana corporation
on Indiana property.
Nebraska
Burke v. Scheer, 130 N.W. 962, 89 Neb. 80 (1911). The Nebraska Supreme Court
held that the receiver could not bring a single suit in equity against all 254 of
the policyholders of the insolvent company, on the ground that such single suit

would prevent a multiplicity of actions of law; nor could such a suit be
maintained on the ground that it was ancillary to the main insolvency
proceeding; nor upon the ground that the money when collected would
become part of a fund that would be distributed under the direction of the
court since no question was involved in which the defendants had a common
interest. The court then held that the governing statute fixed the maximum
liability and the mere fact that no bylaws had been adopted fixing such liability
did not render the member's liability unlimited so that each member would be
personally liable for all the debts of the company.
Randall v. McClean, 143 N.W. 478, 94 Neb. 487 (1913). The court held that the
liabilities of a member of a company are fully as great as those of a stockholder
in an ordinary stock corporation. It was immaterial whether members of this
corporation would be designated as members or stockholders, because during
the time that their policy of insurance covers they are as essentially members
of the corporate body as owners of stock in the stock corporation are of such a
corporation.
Witzenburg v. State, 299 N.W. 53, 140 Neb. 171 (1941). The Nebraska Supreme
Court held that the receiver's action to recover an assessment was properly
brought in equity against all the members of the mutual insurance company
and, hence, summons was properly served in any county of the state in which
the defendant resided or might be summoned. Such a joint action was proper
because the insurance company was a mutual insurance company and, under
the statute authorizing same, there was a provision providing that a member
may be sued for failure to pay an assessment.
New Jersey Affiliated FM Ins. Co. v. State, 338 N.J. Super. 540, 770 A.2d 741 (App. Div. 2001).
A group of property and liability insurance companies, which did not write
automobile insurance, brought an action against the State alleging the Good
Driver Protection Act (“GDPA”) was unconstitutional. The GDPA required the
New Jersey Property‐Liability Insurance Guaranty Association (“NJPLIGA”) to
collect assessments from its members as loans to the State as a contribution to
the accrued debt of the Automobile Full Insurance Underwriting Association
(“JUA”). The court held the insurers had no contract rights harmed by the
GDPA deferring repayment of loan assessments by the NJPLIGA to assist the
JUA and the assessments were legal.
Cunningham v. Brockway Fast Mortar Freight, Inc., 18 N.J. Misc. 101, 11 A.2d 422
(1940). A foreign, unauthorized mutual insurance company insured property
located in New Jersey upon the unlawful solicitation of business by an agent in
New Jersey. The New Jersey Supreme Court would not permit an action by
the custodial receiver of the company, which was in liquidation, to recover
assessments against policyholders which were so insured.
French v. Millville Manufacturing Co., 70 N.J.L. 699, 59 A. 214 (1904). The
receiver of an insolvent mutual insurance company was entitled to recover on
premium notes where the insured had promised to pay premiums required by
the company's directors, even though the receiver, and not the director, had
made the assessment.
In the Matter of the Appeal by American Millennium Insurance Company
Regarding Its 2002, 2003 And 2004 UCJF Assessments, Order No. A06‐111 (State
of N.J., Dep’t of Banking and Ins. June 19, 2006). American Millennium Insurance
Company (“American”) appealed the New Jersey Property‐Liability Insurance
Guaranty Association’s (“NJPLIGA”) assessments of it to cover the obligations
of the Unsatisfied Claim and Judgment Fund (“UCJF”). The Commissioner found
that there was no statutory basis for American’s argument that the
assessments should be based on the proportional benefit received from the

UCJF Fund. This dispute is currently pending decision from the New Jersey
Superior Court, Appellate Division. It has been consolidated with the below
referenced matter.
In the Matter of the Appeal by American Millennium Insurance Company
Regarding Its 2005 And 2006 UCJF Assessments, Order No. A07‐102 (State of
N.J., Dep’t of Banking and Ins. January 17, 2007). This dispute is currently
pending decision from the New Jersey Superior Court, Appellate Division. It
involves the same issues as the above mentioned dispute and has been
consolidated with it.
Keehn v. Laubach, 22 N.J. Misc. 380, 39 A.2d 73 (1944), appeal dismissed, 133
N.J.L. 227, 43 A.2d 857. The law of the domiciliary state governs as to the
validity of an assessment made in connection with the liquidation of an
insolvent mutual insurance company.
Matter of American Reliance Ins. Co., 251 N.J. Super 541, 598 A.2d 1219 (App. Div.
1991). Several New Jersey property and casualty insurance companies appealed
the New Jersey Property‐Liability Insurance Guaranty Association’s (“NJPLIGA”)
assessments under the Fair Automobile Insurance Reform Act (“FAIR Act”)
claiming the assessments were an unconstitutional taking and violated their
equal protection rights and due process rights. The court held that the act did
not violate the insurance companies’ constitutional rights. Specifically, it held
that imposition of assessments upon all the members of the NJPLIGA to create
revenue to pay for the New Jersey Full Insurance Underwriting Association
(“JUA”) did not damage the contractual right of the insurance companies.
Further, even if the companies contractual rights were impeded, it would be
justified because the Act focuses on an important public purpose. The court
noted that all insurers benefit from a stable insurance market and the plaintiffs
could not reasonably resist payment of the assessments because they might
not have derived a direct economic benefit.
Meley v. Whitaker, 61 N.J.L. 602, 40 A. 593, 68 Am. St. Rep. 719 (1898). The
promissor on a premium note was required to pay an assessment on the note
levied by the receiver of an insolvent insurance company where the
promisor‐insured had promised to pay the directors and the power of the
directors has passed, upon appointment, to the receiver.
New York
Beha v. Weinstock, 247 N.Y. 221, 160 N.E. 17 (1928), motion for reargument or to
amend remittitur denied, 247 N.Y. 584, 161 N.E. 191. The court concluded that
Section 63 of the Insurance Law of 1909 (now Section 7430) governs the
assessment by a liquidator of an insolvent insurance corporation. Section 346
of the same law (now Sections 4111 and 4114) governs assessments made by a
corporation as a going concern.
Conway v. North Side Lumber Co., 141 Misc. 231, 252 N.Y.S. 476 (1931). A cause
of action to recover assessments levied against policyholders of an insurance
company in liquidation accrues not when the company is ordered into
liquidation, but when the order is procured confirming the amount of the
assessment fixed by the insurance commissioner.
Conway v. Plank, 136 Misc. 403, 243 N.Y.S. 215 (1930). The court held that the
right of action to recover for an assessment made by the liquidator of a mutual
casualty insurance company did not accrue until the assessment was
determined and levied.
Dutchess & Columbia Co‐Operative Ins. Co. v. State, 43 A.D.2d 769, 530
N.Y.S.2d 766 (1973), aff’d 36 N.Y.2d 835, 370 N.Y.S.2d 907, 331 N.E.2d 686. The
provisions of the insurance code which provides for the judicial levy of

assessments against members of a domestic mutual insurer ordered into
liquidation or rehabilitation come into play when the insurer's assets are not
sufficient to satisfy claims, and this is a remedy that should only be applied as a
last resort.
In re Auto Mutual Indemnity Co., 14 N.Y.S.2d 601 (1939). The laws of the state
of the corporation's domicile determine the validity of an assessment made in
the liquidation of an insolvent insurance corporation, and the assessment
creates an obligation in res. and binds both resident and non‐resident
policyholders. Even though the policyholders were not notified of the
assessment within one year after the expiration or cancellation of their
policies, and they were not members of the company at the time it was
ordered into liquidation, they were not relieved of their liability for the
assessment. Also the policyholders were not relieved from liability for
assessments by the fact that the insolvent insurer breached its contract with
them when it was placed in liquidation. The company's breach did give rise to
a provable claim against the company fund held by the insurance
commissioner.
Kelly v. Bremmerman, 23 A.D.2d 346, 260 N.Y.S.2d 971 (1965), affirmed in part,
appeal dismissed in part, 21 N.Y.2d 195, 287 N.Y.S.2d 41, 234 N.E.2d 217. A
provision of a mutual policy stated that additional premiums would be levied
within one year of expiration and that in the event that the policy was
cancelled, the liquidator was barred from levying an assessment against a
policy which expired more than one year before the order of dissolution. The
court held that the liquidator had an obligation to conduct the liquidation with
reasonable diligence, and that the insured was entitled to have the period of
limitation of liability for assessment calculated from the date at which the
liquidator could reasonably have obtained a court order of assessment.
Furthermore, the court found that even though a member of a mutual insurer
is not a party to the proceedings, such member is still liable for the assessment.
New York Auto. Ins. Plan v. American Transit Ins. Co., 673 N.Y.S.2d 895 (Sup. Ct.
1998). The Superintendent of Insurance had primary jurisdiction in an action to
determine whether an insolvent insurer was liable for assessments for the Auto
Insurance Plan during liquidation proceedings.
North Carolina Blackwell v. Mutual Reserve Fund Life Association, 141 N.C. 117, 53 S.E. 833
(1906). The plaintiff sued a foreign insurer and asked the court to appoint a
receiver in order to take control of the insurer's North Carolina assets, which
plaintiff alleged the insurer was removing from state in order to defraud North
Carolina policyholders. The court held that where only "property" of the
insurer in the state was assessments due from members, no receiver would be
appointed as the assessments were an unattachable debt.
Commonwealth Mutual Fire Ins. Co. v. Edwards, 124 N.C. 116, 32 S.E. 404 (1899).
Where foreign insurer had complied with statutory deposit and other
requirements of North Carolina law, and thereafter became insolvent in its
domiciliary state, North Carolina residents were subject to assessments validly
rendered in the domiciliary state.
Ohio
A. Wilhelm & Son v. Parker, 9 O.C.D. 724, 17 Cir. Ct. R. 234 (1898). Where a
receiver is appointed to wind up the affairs of an insolvent mutual insurance
company, and such receiver is authorized to make assessments upon its
policyholders to pay its debts, it cannot be said that former policyholders,
whose policies had been cancelled and surrendered before such company
became insolvent, although they are liable for such indebtedness that was
incurred during their membership, occupied any other relation to the company

other than that of debtors to the creditors of the company. Such former
policyholders are no longer members of that company, and may not be
represented by the receiver and thereby made parties in the proceedings.
Keehn v. Hodge Drive‐It‐Yourself, 53 N.E.2d 69, affirmed, 146 Ohio St. 454, 64
N.E.2d 117 (1945). A member of a mutual insurance company organized in
Illinois was liable for assessments made in the liquidation proceedings,
notwithstanding that the member was not personally served and did not
appear in the Illinois proceedings, since it was not a necessary or proper party,
being represented by the company properly before court as defendant in the
Illinois proceedings. If, however, the Illinois mutual insurance company was
insolvent when it wrote the defendant's policy, the company was operating
illegally in Ohio and, if insolvent, the assured could defend the action for
assessment on such ground, as well as on any other personal grounds, such as
failure of the petition to allege necessary facts or that due to cancellation, the
insured was liable, if at all, in a lesser or pro rata amount.
Keehn v. Hodge Drive‐It‐Yourself, 146 Ohio St. 45, 64 N.E.2d 117 (1945). An
Illinois court having jurisdiction of receivership proceedings relating to an
insolvent Illinois insurance company had power to determine that the
company was insolvent, that a receiver should be appointed to collect the
assets and to liquidate the business, and that an assessment upon the
members was necessary to satisfy the claims of the creditors. However, the
receiver was not entitled to recover against an Ohio policyholder for an
assessment levied by the Illinois court where it was shown that policyholder
was not notified of assessment within one year after cancellation of policy and
that the insurance company had continued to do business within the state of
Ohio for more than one year after such cancellation, as pursuant to Ohio's
insurance code, the failure to notify an Ohio policyholder of an assessment
within one year after expiration or cancellation of its policy extinguishes the
right to collect the assessment.
Lloyd v. Cincinnati Checker Cab Co., 67 Ohio App. 89, 36 N.E.2d 67 aff'd
dismissed, 138 Ohio St., 35 N.E. 2d 466 (1941). An omission from a policy issued
by an insolvent mutual insurance company of provisions for assessments
against policyholders in the event of liquidation of the company would not
deprive the insurance commissioner in charge of the liquidation of the right to
make such assessments, where the statute provided for such assessments, in
view of rule that statutory provisions are made for benefit of public and
required to be incorporated in contracts between parties thereto are by law
considered to be written into such contracts.
Normsfield v. Cincinnati Ice Co., 11 Dec. Reptr. 617, 28 Wkly. Law Bull. 113 (1892).
In an action by the trustees for the benefit of creditors of an insolvent mutual
insurance company against a policyholder for assessments, it is no defense
that the policyholder was induced to take the policy by false representations of
the insurer's agent as to its solvency and plan of doing business, where the
defendant had notice of such false representations for over a year without
seeking a reformation of its policy. Until so reformed, the policy must be taken
as expressing the final understanding of the assured and insurer.
Parker v. Central Ohio Paper Co., 4 Ohio Dec. 250 (1896). A member of an
insolvent mutual insurance company, although not a necessary party to a suit
brought and pending in Illinois state court in which an assessment made by the
court upon the defendant and other policyholders, was bound by the
judgment of the Illinois court, as defendant had the opportunity to make such
defenses against the assessment as might have been made had the suit been
brought exclusively on the contract of insurance.

Richards v. Hale, 14 O.C.D. 468, 1 Cir. Ct. R., N.S. 181 (1903). In an action by the
receiver of an insolvent mutual insurance company against a policyholder to
recover assessments to pay liabilities incurred during the time the policy was in
force, more irregularities, such as the contract signed was not the true
contract, that the holder did not know the policies' terms, where the holder
authorized that a bank hold the policy as security for a loan and the policy
remained in the possession of the bank, and that the holder did not sign the
policy, will not defeat liability for assessments, particularly where holder
accepted the insurance and received its benefits.
Richards v. Swain & McCormick, 9 Ohio Dec. 70 (1899). While a provision of
Ohio statutes provides that a person may become a member of a mutual
insurance association by signing its constitution, and a person who takes out
and holds a policy issued by such an association has not signed the
constitution, such policyholder is nonetheless estopped in equity from denying
liability for assessments made by a receiver under orders of the supervising
court in proceedings to dissolve the association.
Swing v. Crane, 22 O.C.D. 616 (1908), affirmed, 79 Ohio St. 461, 87 N.E. 1141. A
decision in a suit imposing assessments upon policyholders who gave premium
notes, whether parties to the proceeding or not, does not bar any policyholder
from questioning their liability for an assessment or from setting up any other
defenses. Thus, it was a proper defense that the insurance company's policies
were of the standard form that contained no special regulations attached in
any way to said policies, where the company never reorganized under the
statutes in Ohio relating to mutual fire insurance companies.
Swing v. Ohio Cultivator Co., 19 O.C.D. 365 (1906), rev'd 77 Ohio St. 610, 84 N.E.
1134. It was a proper defense to an action on an assessment pursuant to an
Ohio Supreme Court decree six years previously, that the lapse of six years
from and after the making of a prior assessment and notice thereof served
upon the defendant with demand for repayment conclusively bars a trustee
from seeking to enforce such subsequent assessment, where it appeared the
present action sought assessments covering the same liabilities.
Wadsworth v. Davis, 13 Ohio St. 123 (1862). The receiver of an insolvent mutual
insurance company brought suit to recover an assessment upon the premium
notes. A former suit between the same parties, to recover for other
assessments upon the same notes, had been settled by the payment of those
assessments, the cancellation of the policies of plaintiffs, and the surrender of
their premium notes, by the order of the company's board of directors,
pursuant to provisions in the company's charter. It was held that the directors
of the company had power to settle the former suit, by cancelling the policies
and surrendering the premium notes, and that the terms of settlement in that
case were such as to constitute a defense against assessments subsequently
made upon the same notes on account of losses sustained prior to the
settlement.
Pennsylvania
Backenstoe v. Kline, 31 Pa. Super. 268 (1906). A cancelled policy of a mutual life
insurance company is the same as an expired policy. In an action by the
company's receiver, it is liable to pay its share of losses up until the date of
cancellation. A policyholder cannot attack the appointment of a receiver of a
mutual insurance company in a suit brought to recover assessments from the
policyholder, nor can the policyholder attack the amount of the assessment
levied by the court.
Commonwealth ex rel. Kelly v. Commonwealth Mutual Insurance Co., 450 Pa.
177, 299 A.2d 604 (1973). When additional funds are required to pay losses and
expenses of a dissolved mutual insurance company, the right to assess

policyholders is governed by the terms of the contract.
liquidator is bound by the terms of the contract.
The statutory
Commonwealth ex rel. Schnader v. Keystone Indemnity Exchange, 338 Pa. 405,
11 A.2d 887 (1940). The rate of assessments levied in the liquidation of a
reciprocal insurance exchange is discretionary unless statutorily fixed. Unless
abuse of discretion is established, such rate will be sustained.
Commonwealth v. Bankers Mutual Fire Ins. Co. of Lancaster, Pa., 45 D.& C. 2d
558 (1968). When the liquidator of a domestic mutual fire and casualty
company uses a 500 per cent loading factor, exceptions to it will be dismissed
where collection is sought after the company has been dissolved nearly 11
years and where it appears that the liquidator computed the factor with care
and precision and that the decision regarding the amount of loading was
proper and reasonable. The liquidator is not bound by a policy provision
limiting the time for making an assessment or by a regulatory time limit.
Commonwealth v. Yellow Cab Co. of Allentown, Inc., 39 D. & C. 2d 86 (1965).
The insurance commissioner's assessment order, which required policyholders
to pay an assessment computed by multiplying the total monthly assessment
factors for the months when each policy was in force by the cash premiums
stated in the policy was sustained. The defendant claimed that the assessment
factor should e multiplied by only the portion of the premium earned before
cancellation of the policy before the end of a full year of coverage. Also
sustained was the insurance commissioner's denial of a set off against the
assessment of the amount of a settlement on a claim against the policyholder.
Moore v. Reifsnyder, 22 Pa. Super. 326 (1903). The amount of assessments and
their necessity are determined by the court which authorizes the receiver of a
mutual insurance company to make assessments. The decree of that court
cannot be collaterally attacked.
Taggart v. Graham, 108 Pa. Super. 320, 165 A.68 (1933), affirmed Taggart v. De
Fillippo, 315 Pa. 438, 173 A. 423 (1934). A holder of mutual insurance company
certificates could not set off assessments against a claim for insured losses.
Tanner v. O.M. Weber Co., Inc., 59 Pa. Super. 14 (1915). Where a party has been
fraudulently induced by officers of a mutual insurance company to become a
member, that party may not use the fraud as a defense to an action for
assessments by the company's receiver where innocent third parties
subsequently joined the company.
South Carolina
In Re Banks, 85 S.C. 37, 67 S.E. 19 (1910). It was held that a policyholder of an
insolvent mutual insurer cannot offset any claims against the insurer from the
receiver's claim for assessment.
Pink v. Aaron, 196 S.C. 423, 13 S.E.2d 489 (1941). New York court liquidating
insolvent mutual insurer ordered an assessment against all members of the
company. The New York liquidator sought to collect the amounts due from
South Carolina insureds by joining them all in one action. The court held that
each assessment must be pursued in a separate legal action; a single action in
equity against all policyholders could not be maintained.
Wetmore v. McElroy, 96 S.C. 182, 80 S.E. 266 (1913). It was held that receiver of
insolvent mutual insurer was estopped from collecting assessment from
member of the insurer where agent of the insurer had guaranteed member
against liability for premium assessments in return for paying triple the normal
premium.

Wetmore v. Scalf, 85 S.C. 285, 67 S.E. 298 (1910). Court conducting receivership
of insolvent South Carolina domestic mutual insurer had jurisdiction over all
members of the company to collect assessments, regardless of their residence.
Tennessee Flowers v. Tennessee Trucking Ass’n Self Ins. Group Trust, 209 S.W.3d 602, 2006
Tenn. App. LEXIS 251 (2006). Members of a self‐insured group trust were held in
civil contempt for their willful disobedience of a court ordered payment plan.
The members had objected to the initial assessment made by the Deputy
Liquidators and after a petition by the Liquidator to hold the members in
contempt for failure to pay, the members proposed payment plans which were
approved by the trial court. Despite the court ordered payment plan, the
members still failed to pay and the court held each nonpaying member in civil
contempt for willfully failing to comply with the court ordered payment plan.
Texas
Archie v. Knox, 224 S.W.2d 504 (Tex. Civ. App. 1949) writ ref. n.r.e. When the
receiver of a reciprocal insurance exchange sued the subscribers for an
assessment, the main issue was the question of calculation of the loss payable
reserve and whether that should be based on past loss experience or on a per
case basis in determining solvency. The court found that after the period when
the loss was incurred, the per case basis using actual facts should prevail over
historical experience. The assessment against the subscribers was proper.
Howell v. Knox, 211 S.W.2d 324 (Tex. Civ. App. 1948) writ ref. n.r.e. The
subscribers challenged the assessment receiver of a reciprocal insurance
exchange to recover an assessment against its subscribers. The subscribers
had contractually agreed to pay an additional premium as a contingent liability
for expenses, claims and reserves. The reciprocal was insolvent based on the
evidence that the balance sheet showed liabilities in excess of assets. The
action to levy an assessment was upheld.
Hurley v. Knox, 244 S.W.2d 557 (Tex. Civ. App. 1951), writ ref. n.r.e. When the
receiver of reciprocal insurance exchange brought suit against policyholder to
recover assessment the court held that judgment of receivership court which
fixes period of insolvency of insurer and amount of assessment is binding on all
who were subscribers of the exchange during the period involved.
Nichols v. Wheeler, 304 S.W.2d 229 (Tex. Civ. App. 1957), writ ref. n.r.e. More
than one year after automobile liability policy of mutual insurer had been
cancelled, a former policyholder received notice of assessment from the
receiver of the insurer who had been appointed subsequent to the
cancellation. It was held that the judgment of the receivership court
authorizing the assessment was not res judicata, since the notice provided was
not authorized by statute and former policyholder did not appear at hearing,
and that the 1955 amendment of a provision giving receiver four years
following order of rehabilitation to apply for assessment would not be given
retroactive effect.
Wilson v. Marshall, 218 S.W.2d 345 (Tex. Civ. App. 1949). When the receiver of
an insolvent insurance exchange filed a class action suit against the subscribers
of a reciprocal exchange, the defendant subscriber claimed res judicata based
on a prior settlement of another case. At the time of the earlier case, the
receiver did not know the full extent of subscriber liabilities. The court held
that the release in the earlier case was not a bar to this action.
Virginia Morrow v. Vaughn‐Bassett Furniture Co., Inc., 173 Va. 417, 4 S.E.2d 399 (1939).
A Virginia member of an insolvent Texas mutual insurer was assessed.
Although the Virginia resident was not a party to the Texas suit, the court held
that the assessment was valid as the Virginia resident was a party by

epresentation, and liability for the assessment attached while the Virginian
was a member of the company and while the company was in fact insolvent.
Wisconsin
Davis v. Oshkosh Upholstery Co., 82 Wis. 488, 52 N.W. 771 (1892). In an action
to recover assessments against policyholders of an insolvent insurer, the court
rejected a defense that the insurer was both a mutual and stock company,
finding that it was a mutual company albeit organized under a unique
Wisconsin statute. The court then rejected additional challenges based on the
actual forty percent assessment and concluded that the certain premium and
deposit notes were surrendered by the insurer to the policyholder without first
requiring them to pay their portion of the assessment. The court did find the
assessments invalid because they required some members of the mutual to
pay a disproportionate amount of the losses and expenses.
Davis v. Shearer, 90 Wis. 250, 62 N.W. 1050 (1895). Where a mutual insurance
company became insolvent and the court appointed receiver canceled all
existing policies, no assessment can be made for unearned premium claims.
Thus, the premium notes of the insolvent mutual insurance company can be
assessed only to pay losses and expenses occurring during the period of the
insurance and not to pay unearned premium claims. Further, the inclusion
within the assessment of interest, expenses and shrinkage of 25% for
uncollectible assessments was proper.
Duel v. Ramar Baking Co., 246 Wis. 604, 18 N.W.2d 345 (1945). The court
rejected a mutual insurance company's policyholder's position that a
fraudulent misrepresentation by the company's insurance agent is no defense
to an action by the liquidator of the insolvent mutual insurance company for an
assessment since the rights of innocent policyholders and members had
intervened since the alleged misrepresentations. On the facts of the case, the
court also noted that the member was estopped from asserting such defense
because of the delay in moving for cancellation or rescission of his policy.
In re Builders' Mutual Casualty Co., 229 Wis. 365, 282 N.W. 44 (1938), rehearing
denied, 229 Wis. 365, 282 N.W. 504. During the voluntary liquidation period,
assessments were levied which were superseded and replaced by new
assessments levied by the commissioner. The court noted that an assumption
of only 25% collectability was not unreasonable, and that it was not improper to
reassess only holders of worker's compensation policies since the losses were
generated by this class of business. While noting that the assessment may be
inequitable and unfair in view of the spreading of the assessment over a
number of policy years when only certain years generated the adverse losses,
the court noted that liquidation involves a great many intricate problems and
the effort of the courts must be in the direction of fair and practical solutions.
Concessions must be made to the practical necessities of the liquidation
process.
In re Wisconsin Mut'l Ins. Co. v. Duel, 241 Wis. 394, 6 N.W. 2d 330 (1942). An
assessment on policyholders of liquidated mutual casualty insurance company
was invalid if made on earned premium rather than annual income.
Mansfield v. William Becker Leather Co., 93 Wis. 656, 68 N.W. 411 (1896). The
court applied a six month statute of limitation applicable to the collection of
assessments against members of foreign mutual insurance companies to an
assessment made by an Ohio liquidator of an Ohio company. The court noted
the same rules applicable to a Wisconsin liquidator were applied to an Ohio
liquidator.
Oscar Mayer & Company v. Manson, 19 Wis.2d 521, 120 N.W.2d 683 (1963). The
Supreme Court upheld an assessment against a policyholder of a Wisconsin

mutual insurance company because Wisconsin law provided policyholders are
liable for their pro rata share of losses and expenses, although the liability of a
member may be limited under the statute if both the articles of the company
and the policy so stated. In the circumstances of this case, the articles of the
company limited assessments to one additional annual premium but the policy
issued was on a monthly premium basis and therefore did not meet the
exception in the statute.
Seamans v. Millers' Mutual Ins. Co., 90 Wis. 490, 63 N.W. 1059 (1895).
Although a member of a mutual insurance company was entitled to withdraw
upon surrender of policy and paying a ratable share of all losses up to the date
of withdrawal, the policyholder nevertheless was still subject to further
assessment when receiver of the insolvent mutual insurance company found
that the first assessment was insufficient to meet all claims.
Strum v. Duel, 241 Wis. 394, 6 N.W.2d 330 (1942) cert. denied, 319 U.S. 747.
Numerous challenges were made to an assessment by the liquidator of an
insolvent insurer. The court upheld the assessment, holding that assessments
need only approximate an equitable distribution of burdens and benefits; and
therefore the assumption that 60% of the assessments were uncollectible
would be given effect. To require the liquidator to proceed on a step by step
basis by not assuming uncollectible assessments and thus materially increase
the expenses and delay the liquidation would be beneficial neither to the
policyholders nor the creditors. Finally, the assessments can include several
classes of business without distinguishing among losses and expenses
associated with each.
Wyman v. Kimberly‐Clark Co., 93 Wis. 554, 67 N.W. 932 (1896). The receiver of
the insolvent Minneapolis insurer brought suit to recover certain assessment
against policyholders including those in Wisconsin. The Wisconsin Supreme
Court upheld the application of a six month statute of limitation applicable to
all assessments against policyholders and members of mutual insurance
companies.
Assessments ‐ Notice and Hearing
U.S. Supreme
Fourth Circuit
Georgia
Pink v. AAA Highway Express, 314 U.S. 201, 152, 62 S. Ct. 241 (1941), rehearing
denied, 314 U.S. 716. According to New York court decisions, personal
judgments for payment of assessments should not be ordered against
non‐resident policyholders of an insolvent mutual automobile casualty where
they had not been served with process within the jurisdiction and had not
appeared generally, even though they were bound by the finding of the
necessity for the assessment and the amount specified.
Keehn v. Parrish Dray Line, 145 F.2d 646 (4th Cir. 1944). When Illinois statutory
receiver of an insolvent Illinois insurer brought suit in South Carolina to recover
assessments levied by the Illinois receivership court against all policyholders of
the insolvent mutual insurer, it was held that a valid assessment levied by the
Illinois court was conclusive and binding against all South Carolina
policyholders but since they were not personally served with process in the
liquidation proceeding and parties to the action, they could attempt to prove
that they were not members of the company and therefore not liable to pay
the assessment.
Pink v. Georgia Stages, 35 F. Supp. 437 (D.C. Ga. 1940). When a New York
mutual insurance company's policy issued in Georgia did not specify any cash
premium or refer to any contingent liability, and the insurance commissioner,
as the company's liquidator, sought to recover an assessment from the

insured, the commissioner had the burden of showing that the insured had
notice of the provision in the company's charter authorizing an assessment.
Illinois
Collins v. Bolton, 287 F. Supp. 393 (N.D. Ill. 1968). A group of policyholders
sued the insurance commissioner, seeking injunctive relief declaring they were
denied due process in that the commissioner's assessments, although
approved by court order, were levied without notice to the plaintiffs. The
court noted that the Illinois law provides for notification to each policyholder
of any actual assessment who are then given the opportunity to object to the
necessity or amount of the assessment and may intervene in the liquidation
proceeding to question the proprietary of the assessment and seek
reconsideration. Furthermore, each individual shareholder may raise defenses
peculiar to himself in the course of the collection proceeding. Without
rendering a decision on the constitutionality, the court noted that the practical
convenience of commencing liquidation proceedings and allowing assessment
without notice to policyholders must be weighed against the argument that
policyholders need prior notice or else they have the difficult burden of
overturning an assessment after it is levied.
Mallen v. Longworthy, 70 Ill. App. 386 (1897). Although members of an
insolvent mutual fire insurance company were not parties in the proceedings in
which the assessment was made, they were still bound by the assessment for
losses and expenses incurred prior to cancellation of the policy.
People ex rel. Baylor v. Bell Mutual Casualty Co., 2 Ill. App. 3d. 17, 276 N.E.2d 113
(1971) affirmed, 54 Ill. 2d 433. The court held that an order authorizing the
liquidator to take all steps necessary to enforce collection of assessments
against policyholders was final and conclusive as to parties and to amount and
cannot be collaterally attacked by policyholder in an action by liquidator to
collect amount assessment. However, where policyholders were not
represented in liquidation proceedings except by liquidator and had no
opportunity to contest levy of assessment or amount thereof, the
policyholders were entitled to intervene in the liquidation proceedings, as such
intervention is not inconsistent with liquidation article of the Illinois insurance
code, which does not preclude intervention to expedite litigation by disposing
of the entire controversy in one action.
Ross v. Knapp, Stout & Co., 77 Ill. App. 424 (1898), appeal dismissed, 181 Ill.392,
55 N.E. 127. The policyholders of a mutual fire insurance company are bound by
the proceeding appointing the receiver in assessing them, although they are
not made parties to the proceeding.
Swing v. American Glucose Co., 123 Ill. App. 156 (1905). Member of insolvent
Ohio insurer was liable for assessment even though it was not a party to the
proceeding on the theory that the members are an integral part of the
company and as such, they are represented in court by the company. Thus, the
assessment is not subject to collateral attack by the members, and further that
the domiciliary court order is binding upon Illinois residents in an action to
recover the assessment.
Tarnow v. Hershey, 91 Ill. App. 2d 124, 234 N.E.2d 409 (1968). Although
approved by court order, members and policyholders alleged that the
insurance code prevented the insurance commissioner from levying an
assessment on the notice given in the proceedings because it was not given
within one year after the termination of the policies. The court held that the
liquidation law demonstrates that the legislature intended to have a strong
system for the protection of the public when mutual insurance companies
require liquidation. This purpose dictates that the commissioner in carrying

out liquidation assessment powers is not limited by the notice requirement
applicable to mutual companies generally.
West and South Towns Street R. Co. v. McKey, 80 Ill. App. 529 (1898). The
assessment order entered in proceedings against an insolvent mutual fire
insurance company were binding on policyholders of the company and such
policyholders and members are not necessary parties to such a proceeding.
Michigan
Minnesota
Nichol v. Murphy, 145 Mich. 424, 108 N.W.704 (1906). In an action brought by
the receiver against a company member for the collection of an assessment,
the court held that the company's members are not entitled to question the
regularity of an order for a change of venue without notice to the members.
Langworthy v. Garding, 74 Minn. 325, 77 N.W. 207 (1898). The receiver of an
insolvent insurance company sued to recover an assessment made by a decree
of an Illinois court. Members who were not parties to the assessment
proceedings argued that they were not bound thereby. The court held that all
members of the company were parties to the proceedings through
representation by the corporation itself. Thus, the court held that an
assessment made in a state with subject‐matter jurisdiction was conclusive
upon members in Minnesota, until attacked and directly set aside in
appropriate judicial proceedings, even without personal notice to the
members.
Swing v. Cloquet Lumber Co. 121 Minn. 221, 141 N.W. 117 (1913). In an action to
enforce an assessment, the policyholder also argued that it was not properly
served with notice of assessment because such notice was not made publicly.
The policyholder relied on Swing v. Wurst, 75 Minn. 198, 79 N.W. 94 (1899),
which held that an Ohio statute required publication in some manner of the
notice of assessment. The court distinguished Swing by finding that the
statute involved was not applicable to the insurance company here. The court
found a mailing to be sufficient to constitute due notice of the assessment.
New York
Ohio
In re Auto Mutual Indemnity Co., 14 N.Y.S.2d 601 (1939). Notice of the order for
an assessment was published by the insurance commissioner and a copy was
sent to each policyholder. The court held that this notice satisfied the
constitutional requirement of due process, even though the notice failed to
designate the parties.
Keehn v. Hodge Drive‐It‐Yourself, 53 N.E.2d 69, appeal dismissed, 145 Ohio St.
616, 62 N.E.2d 251 (1945). The court held that a member of an insolvent mutual
insurer was not a necessary party to proceedings in Illinois as members were
reinsured in Illinois by the company, and that the Ohio members were liable for
assessments made in the Illinois proceedings even though they were not
personally served and did not appear.
Swing v. Rose, 75 Ohio St. 355, 79 N.E. 757 (1906). In the judicial proceeding
under the statute to dissolve a mutual insurance company and to wind up its
business affairs, the court is authorized, when necessary, to decree an
assessment upon the premium notes executed by policyholders, for the
purpose of paying liabilities of the company which accrued while the policy and
premium notes were enforced, and, such decree and the amount of the
assessment, is binding upon the policyholders, although they, as individuals,
were not parties to the proceeding when the decree was made.
Wisconsin Boyd v. Mutual Fire Association of Eau Claire, 116 Wis. 155, 90 N.W. 1086 (1902)
modified, 116 Wis. 155 94 N.W. 171 (1903). The court noted that the statute of
limitations began to run against the policyholders of the company for
assessments on the date of liquidation. The statute of limitations also runs

against the shareholders of the insolvent corporation until they are made
parties to the proceeding. However, the directors and officers of the insolvent
corporation, are trustees for the benefit of shareholders and creditors and
hence are within the exception that the statute of limitations does not run in
favor of a trustee. On rehearing, the court held that the statute of limitations
would run against those directors and officers who were not made parties to
the action before the statute had expired. Because the voluntary petition for
liquidation was pending for nine years the six year statue of limitations would
have expired.
In re Whitman, 186 Wis. 434, 201 N.W. 812 (1925). A collateral attack by
policyholders of an assessment by the liquidator of an insolvent mutual
insurance company was rejected on the basis that the assessment was proper
even though the policyholders did not receive actual notice of the proceeding.
The insurance corporation represents the policyholders under such
circumstances and hence, the policyholders are bound by the proceeding.
Liability of the Insured
First Circuit
Kansas
Mississippi
New York
B.S. Costello, Inc. v. Meagher, 867 F.2d 722 (1st Cir. 1989). Plaintiff employer
was stevedoring company that had contracted with two insurers for coverage
of employees' claims brought under the Longshoremen's and Harborworkers'
Compensation Act (LHWCA). When both insurers became insolvent, injured
employees sought LHWCA compensation directly from the company. Court
held that under the LHWCA an employer must pay benefits to injured
employee when the employer's insurer becomes insolvent, notwithstanding
the employer's good faith compliance with statutory requirement that it
obtain insurance.
Exploration Place, Inc. v. Midwest Drywall Co., Inc., 89 P.3d 536 (Kan. 2004). The
Supreme Court of Kansas interpreted the Kansas Insurance Guaranty
Association Act, KAN. STAT. ANN. § 40‐2901, to determine whether the Act barred
all subrogation claims. The court held that the plain language of the Act did not
prohibit all subrogation claims. Where an insurer brought subrogation claims
against a subcontractor, the Act did not bar those claims that would have been
“uncovered” by the subcontractor’s insolvent insurer. Such an interpretation is
consistent with the purpose of the Act which is to place policyholders of
insolvent insurers in the same position as they would have been had its
insurance company not become insolvent.
Home Ins. Co. v. Miss. Ins. Guar. Ass’n, 904 So. 2d 95 (Miss. 2004). The primary
carrier of insured, an insolvent insurer, failed to settle a personal injury claim
within policy limits. The insolvent insurer then requested that the Mississippi
Insurance Guaranty Association (“MIGA”) pay the $300,000 statutory maximum
toward the claim for a judgment in excess of the primary insurer/assignor’s own
policy limits. The court held that the assignor’s claim to MIGA was not a
“covered claim” within the meaning of the Insurance Guaranty Act, but rather,
the assignment was a disguised subrogation attempt by the primary
insurer/assignor. The court reasoned that, to be entitled to subrogation, the
assignor would have to show that it paid something that it was not legally
obligated to pay. In this context, the assignor was the primary insurer and, in
failing to settle the claim within policy limits, was obligated to pay in full the sum
of the judgment obtained against it.
In re Liquidation of Galaxy Ins. Co., 710 N.Y.S.2d 72 (App. Div. 2000). The court
reinstated the liquidator’s complaint in an action against an insurance company
that issued certificates of suretyship to policyholders of the insolvent insurer
agreeing to assume obligations to defend and indemnify the policyholders if

their insurer became insolvent. Any ambiguity in the suretyship certificate,
particularly whether evidence of assignment or subrogation was a condition
precedent, must be construed against the insurance company.
Oklahoma Welch v. Union Mut'l Life. Ins. Co. of Providence, 1989 Okla. 117, 776 P.2d 847
(1989). An uninsured motorist insurer was allowed to maintain a claim
against the tortfeasor only for the damage above the limits of the policy that
the insolvent insurer had issued to the tortfeasor.
Texas Nabors Corporate Servs. v. Northfield Ins. Co., 132 S.W.3d 90 (Tex. App. 2004).
The court found that the Texas Oilfield Anti‐Indemnity Act (“TOAIA”), TEX. CIV.
PRAC. & REM. CODE ANN. § 127.001‐.007, did not alter the indemnity obligation of a
company when its insurer became insolvent prior to the settlement of a tort
claim. A pool and petroleum company entered into an indemnity agreement
with a provision to obtain insurance to cover their obligations. When the insurer
of the pool company became insolvent, the pool company argued that the
indemnity agreement became void, and that money it paid in settlement of a
tort action against the petroleum company constituted unjust enrichment. The
court found that TOAIA did not void the indemnity agreement and therefore no
claims for unjust enrichment were present.
Wisconsin
Stewart v. Farmers Ins. Group, 290 Wis.2d 510, 712 N.W.2d 86 (Wis. Ct. App.
2006). Company could not become self‐insured subsequent to insurer’s
insolvency by declaring itself so to a single party in a lawsuit disputing coverage.
Liability of the Excess Insurer
Sixth Circuit
Seventh Circuit
Regents of the University of Michigan v. Employers of Agency Rent‐A‐Car
Hospital Association, 122 F.3d 336 (6 th Cir. 1997). Policy holders, husband and
wife who assigned their interest to the University of Michigan Medical
Center, had separate medical insurance policies, 65 Security Plan and Agency
Rent‐A‐Car Health Care Plan (Agency), through their employers. Each
company, when presented with medical expenses, asserted that the
coordination of benefits clause (COB) contained in ERISA implied that they
were the excess insurer, while the other company maintained primary
insurer status. The district court held that 65 Security Plan was the primary
insurer. When 65 Security Plan subsequently became insolvent, the district
court ordered 65 Security Plan to pay 10% of the medical expenses. Agency
alleged that because 65 Security Plan had never paid the full extent of its
coverage, Agency had no obligation to pay at all. The district court,
however, held that Agency was liable for all medical bills not covered by the
65 Security Plan. The Court of Appeals for the Sixth Circuit affirmed stating
that the language contained in Agency’s COB was not ambiguous and that
any other holding would frustrate ERISA’s underlying purpose to protect
“the interests of participants in employee benefit plans and their
beneficiaries”. The court concluded that Agency’s coverage dropped down
requiring Agency to pay for medical care above and beyond the amount paid
by the insolvent primary insurer.
Hudson Ins. Co. v. Gelman Sciences Inc., 921 F.2d 92 (7th Cir. 1990). Hudson
provided Gelman Sciences with excess coverage for liability in excess of $ 21
million. After an underlying insurer became insolvent and could not cover
the range between $ 1 and $ 5 million, the defendant demanded the plaintiff
"drop down" and cover the uncovered range. Hudson filed a declaratory
judgment action to determine its rights and responsibilities under the
contract. The court held that because the contract expressly called for
Hudson to pay only when the underlying insurers had paid or been held
liable, Hudson's policy was not required to "drop down."

Hartford Accident and Indemnity Company v. Chicago Housing Authority, 12
F.3d 92 (7th Cir. 1993). Insured purchased excess liability coverage from
plaintiff Hartford Accident & Indemnity Company ("Hartford"). Under the
terms of its policy, Hartford agreed to pay claims in excess of $1 million.
When the insured's underlying comprehensive general liability insurer
became insolvent, the insured sought coverage from Hartford for the claims
it began to pay on its own. Hartford made payment, but later realized that
that insured had not paid more that $1 million on any single claim. Hartford
sued insured for return of payment. Insured counterclaimed for additional
payments it alleged were owed to it. The appellate court, applying the plain
meaning of the policies, determined that Hartford was not obliged to pay
claims less than $1 million and need not offer drop down coverage following
the insolvency of general liability insurer. The court was particularly swayed
by the fact that Hartford's policy explicitly disclaimed drop down coverage.
The appellate court thus affirmed the granting of summary judgment in
favor of Hartford.
New Process Baking Co. v. Federal Ins. Co., 923 F.2d 62 (7th Cir. 1991). A
truck owned by an operating division of the plaintiff company collided with a
vehicle driven by a Wisconsin citizen, causing serious neurological injuries to
the Wisconsin citizen. At the time of the accident, plaintiff was insured by
an excess policy issued by Mission National Insurance Company. When
Mission was declared insolvent, plaintiff contended that the insolvency of
Mission obligated defendant, under its third‐level policy with plaintiff, to
"drop down" and provide coverage to plaintiff in excess of its existing
primary coverage. The appellate court affirmed the district court's decision
that the insurer was not required to drop down because the language of the
policy clearly articulates that liability attached for excess coverage only after
the amount of primary and secondary coverage had been exhausted. In the
absence of clear language imposing on defendant the risk of Mission's
insolvency, the appellate court refused to create any "drop down"
obligation for the defendant.
Seventh Circuit
Ninth Circuit
St. Paul Travelers Cos., Inc. v. Corn Island Shipyard, Inc., 437 F.Supp.2d 837 (S.D.
Ind. 2006), aff’d, 495 F.3d 376 (7th Cir. 2007) – Policyholder was covered, in part,
by an Ocean Marine bumbershoot policy, a policy covering multiple liability
coverages in excess of one or more different underlying policies. Under the
Longshore & Harbor Workers’ Compensation Act, policyholder was liable for
claimant’s medical expenses and disability benefits due under the Act after its
primary insurer become insolvent. Subsequently, policyholder sought coverage
under its bumbershoot policy. The Court of Appeals found no coverage,
because the underlying policy, even though provided by an insolvent insurer,
provided full coverage for policyholder’s obligations under the Act, so there was
no excess to cover. The court also found that notice three years after the
accident was late as matter of law, thereby barring coverage.
Federal Ins. Co. v. Scarsella Bros., Inc., 931 F.2d 599 (9th Cir. 1991). The Ninth
Circuit, applying Washington law, determined that an excess carrier had to
"drop down" and provide coverage in place of the insolvent underlying insurer.
The court noted that the excess policy provided coverage when the
underlying insurance was "exhausted." Because the policy did not define the
term "exhausted," the court concluded that it could conceivably include
insolvency of the underlying carrier. Applying the rule that ambiguities in
insurance contracts should be interpreted in a manner most favorable to the
insured, the court concluded that the terms "exhausted" included insolvency
of the underlying carrier.
Tenth Circuit 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.
Arizona
California
Maicopa County v. Federal Insurance Company, 157 Ariz. 308, 757 P.2d 112 (Ct.
App. 1988). The insolvency of the primary liability insurer did not require the
excess liability insurer to pay as the primary insurer. A fixed policy requirement
which must be met before the excess insurer became liable, was exhaustion of
the underlying policy limits. This requirement was not satisfied and therefore
the excess insurer was not held liable for a claim falling within the coverage of
the insolvent primary insurer. Further, the Court held that a statute, making a
policy issued by the insolvent insurer excess coverage, and requiring the
exhaustion of other applicable insurance, would not allow the insured to
interpret excess coverage beyond its plain meaning and transform the
character of other coverage into something other than that clearly expressed
in the policy.
Coca‐Cola Bottling Co. of San Diego v. Columbia Casualty Ins. Co., 11 Cal. App.
4th 1176 (1992). The California Court of Appeal held that an excess carrier was
required to "drop down" and provide coverage when the underlying insurer
was declared insolvent. The court analyzed the excess policy, which required
the excess insurer to pay the "ultimate net loss . . . in excess of the amount
recoverable under the underlying insurance." Following previous decisions by
the California Supreme Court, the court concluded that the term "amount
recoverable" was ambiguous, and should be construed in terms most
favorable to the insured.
Denny's, Inc. v. Chicago Ins. Co., 234 Cal. App. 3d 1786 (1991). The California
Court of Appeal held that an excess insurer did not have to "drop down" and
provide coverage in the event of the insolvency of the underlying insurer. The
court refused to find that the excess policy was ambiguous. The excess policy
provided for coverage if the underlying insurers "have paid or have been held
liable to pay" the full amount of their liability. In addition, the excess policies at
issue provided that the excess insurer's obligation only attached in excess of
the full amount of the underlying insurance coverage.
Span, Inc. v. Associated Int'l Ins. Co., 227 Cal. App. 3d 463 (1991). The California
Court of Appeal held that an excess insurer had no duty to "drop down" and
provide first dollar coverage when the underlying carrier became insolvent.
The court looked to the specific language of the excess policy, which provided
coverage in the event of reduction or exhaustion of the primary policy by
"reason of losses paid thereunder." According to the court, this language
required the payment of the underlying limit before the excess insurer's
liability would arise.
Colorado
Skandia America Reinsurance Corp. v. Barnes, 458 F. Supp. 13 (D. Colo. 1978). A
reinsurer asked the court to resolve conflicting claims for payment of its
obligation to an insolvent Colorado insurer under an excess of loss reinsurance
agreement. The Colorado receiver claimed the payment, as did the California
guarantee fund, which had paid the insolvent insurer's obligation to one of its
insureds. The court held that the insolvent insurer's Colorado receiver was
entitled to the reinsurance contract payment, but that California guaranty
fund's claim could be presented to the Colorado receiver.

Delaware
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 any payments to the plaintiff.
The excess insurer also argued that forcing it to pay although 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 out
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 pay its own layer of coverage.
Georgia Lamb Bros. Lumber Co. v. South Carolina Insurance Co., 186 Ga. App. 51, 366
S.E. 2d 388 (1988). It was determined that an umbrella liability insurer was not
required to provide a Georgia insured with either first‐dollar coverage or a legal
defense after the Georgia insured's primary automobile insurer was declared
insolvent where the excess policy explicitly provided a lower limit of coverage
"[i]n the event there is no recovery available to the insured as a result of
insolvency of an underlying insurer..." The Georgia Insurers Insolvency Pool
provided coverage of only $50,000 to the Georgia insured, and the excess
carrier was not required to provide any coverage to the Georgia insured until a
judgment exceeding the underlying policy limits of $500,000 is rendered
against the insured.
United State Fire Insurance Co., v. Capital Ford Truck Sales, Inc. 257 Ga. 77, 355
S.E. 2d 428 (1987). The insolvency of an underlying insurer does not require an
excess insurer to defend an action brought against the insured or to provide
first‐dollar coverage where the excess policy repeatedly distinguished
between the "underlying insurance policy" and "other insurance," repeatedly
stated that "other insurance" had to be collectible, but did not state the
"underlying insurance" had to be collectible.
Illinois
Illinois Insurance Guaranty Fund v. Farmland Mutual Insurance Co., 274 Ill.
App. 3d 671, 653 N.E.2d 856 (1995). The Illinois Insurance Guaranty Fund
sought a declaratory judgment that Farmland, an excess insurer, was
obligated to defend and indemnify certain defendants in underlying
litigation given that the primary insurer had become insolvent. Farmland, on
the other hand, claimed that the Guaranty Fund had the obligation of
defending and indemnifying the defendants, since the "other insurance"
clause in Farmland's policy stated that it was only liable for sums over "any
other collectable insurance". After noting that the Guaranty Fund was
created to provide protection to the public and not insurance companies,
the court held that the Guaranty Fund proceeds did not constitute "other
collectable insurance" under Illinois statutory and case law.
S.C. Johnson & Son Inc. v. Transcontinental Ins. Co., 1992 U.S. Dist. LEXIS
5227 (N.D. Ill. April 21, 1992). A second‐layer excess liability insurer is not
required to bear the risk of a primary insurer becoming insolvent, and the
court will not oblige the excess liability insurer to "drop down" with its
coverage in the event of insolvency. In this case, the policy language was
clear, and it explicitly limited the excess insurer's coverage obligations to
situations where the primary insurance coverage was exhausted as a result
of a covered occurrence. The court also reasoned that the excess insurer
should not become the guarantor of the primary carrier's solvency.

The Home Insurance Co. v. Hooper, 294 Ill. App. 3d 626, 691 N.E.2d 65 (1998),
appeal denied, 178 Ill.2d 576, 699 N.E.2d 1031 (1998). A company purchased
a $1 million insurance policy under which it self‐insured for the first $250,000
in damages. Shortly after an employee, the defendant Hooper, was injured
on the job, the company went bankrupt. Home filed a declaratory judgment
action seeking an order that the company was required to actually pay the
$250,000 self‐insured retention before Home had any obligation to pay
under its policy. After concluding that the language of the policy did not
include a drop down provision that would require the insurance company to
pay the first $250,000 in liability, the court held that Section 388 of the
Illinois Insurance Code required the insurance company to pay any portion of
an award to the injured worker that was in excess of 250,000, up to the
policy limit. The court's rationale was that the plain language of Section 388
makes clear the legislative intent to prevent insurers from using the
insured's bankrupt condition and resulting inability to make actual payment
to satisfy a judgment or any portion thereof as grounds to avoid payment on
a policy.
Louisiana
Massachusetts
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.
Gulezian v. Lincoln Ins. Co., 399 Mass. 606, 506 N.E. 2d 123 (1987). References
to "applicable limits" and "collectible insurance" in an excess insurance policy
created an ambiguity which would be resolved against the excess insurer, and
excess indemnity coverage dropped down to cover the consequences of the
insolvency of the primary insurer.
Massachusetts Insurers Insolvency Fund v. Continental Casualty Co., 399 Mass.
598, 506 N.E. 2d 118 (1987). Where an excess insurance policy says, without
limitation, that it drops down when the underlying coverage has been
"reduced," that policy provides first dollar coverage if the primary insurer
becomes insolvent and unable to make a payment on a claim.
MBTA v. Allianz Ins. Co., 413 Mass. 473, 597 N.E.2d 439 (1992). A second‐layer
excess policy that provides that its obligation does not attach until underlying
insurers paid or were held liable to pay full amount of underlying coverage
does not create ambiguity to be resolved in favor of the insured and does not
provide drop down coverage to replace coverage uncollected from an
insolvent underlying insurer.
Northmeadow Tennis Club, Inc. v. Northeastern Fire Ins. Co. of Pa., 26 Mass.
App. Ct. 329, 526 N.E. 2d 1333 (1988). The court provided several guidelines to
consider in determining whether excess insurance "drops down" when the
primary insurer is insolvent, including: (1) there is no overriding principle or
policy involved in deciding whether excess coverage insurers against the
insolvency of the primary insurer; (2) the reasonable expectations of the buyer
of the insurance policy can be taken into account but are not decisive; (3) in the

final analysis, the language of the particular insurance policy is determinative;
(4) ambiguities in the policy on the drop‐down issue will be resolved against
the insurer; (5) policies which contain references to "collectible" primary
insurance will be construed to cover the event of insolvency; (6) a policy that
says without limitation that it drops down when primary coverage is reduced
provides first dollar coverage should the primary issuer become insolvent.
Excess policy coverage indicating that an excess insurer's liability would attach
only after a primary carrier paid or had been "held liable to pay," in effect,
protected the insured against the possible insolvency of the primary carrier
and consequently dropped down to provide first dollar coverage upon such
insolvency up to policy limits. An excess coverage policy does not drop down
upon a primary insurer's insolvency when the excess policy unambiguously
states that it presupposes primary insurance to be in force and that if such
coverage is not in force the insured is responsible for the lower level of
damages.
Vickodil v. Lexington Insurance Co., 412 Mass. 132, 587 N.E.2d 777 (1992).
Coverage provided by an excess insurer does not drop down where the
underlying insurer becomes insolvent and cannot pay up to its policy limit
where excess insurer agreed only to pay in excess of "commitments made" by
underlying insurer; no drop down absent language to effect that excess
insurer will pay in excess of what underlying insurer both is obligated to pay
and actually does pay.
Michigan Morbark Industries, Inc. v. Western Employers Insurance, 429 N.W. 2d 213
(Mich. App. 1988). Excess insurers provided umbrella coverage for liability in
excess of $1,000,000. Upon insolvency of primary insurers, insured claimed
that excess insurers were liable for the whole amount. The court disagreed,
holding that liability of excess insurers was only for an amount over
$1,000,000, and not as primary insurance in the case of insolvency.
Mississippi
Caldwell Freight Lines, Inc. v. Lumbermans Mut'l 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 MIGA
assuming its statutory obligation to pay.
New York
Ambassador Assocs. v. Corcoran, N.Y.L.J. May 12, 1989, at 24, col. 4 (N.Y. Sup.
Ct., May 12, 1989). In a declaratory judgment action, the court held that an
insurer providing the second layer of excess coverage did not drop down upon
the insolvency of the insurer providing the first layer of excess coverage. It
reasoned that the insurance clause providing that the insurer shall pay the
"ultimate net loss in excess of the underlying insurance" indicates that the
second layer excess insurer would pay for the loss beyond the amount
provided for by the underlying policies, irrespective of the fact that the first
layer excess insurer was insolvent.
Ambassador Associates v. Corcoran, 143 Misc. 2d 706, 541 N.Y.S.2d 715
(Supreme Court, New York County 1989), aff'd, 168 A.D.2d 281, 562 N.Y.S.2d
507 (1st Dep't 1990), aff'd, 79 N.Y.2d 871, 581 N.Y.S.2d 276, 589 N.E.2d 1258
(1992). The owners of property which suffered extensive fire damage brought
a declaratory judgment action against the Liquidator of its first‐layer excess
insurer, Mission Insurance and against its second‐layer excess insurer, Home
Insurance Company, seeking a determination that Home's coverage should
"drop down" to cover any losses not covered by other carriers. The New York
Court of Appeals affirmed the decisions below that Home's obligations
depended on the terms of the policy and that, based on those unambiguous
terms, Home was not required to "drop down" and afford coverage.
American Re‐Ins. Co. v. SGB Universal Builders Supply Inc., 141 Misc. 2d 375, 532
N.Y.S. 2d 712 (N.Y. Sup. Ct. 1988). An employer brought a declaratory judgment
action to determine who was responsible for paying an insured employee
under an excess umbrella liability policy when the primary insurer became
insolvent. The court held that New York law did not require excess liability
insurer to "drop down" when the primary insurer becomes insolvent,
especially where the excess liability policy indicates that it will provide
coverage in excess of the underlying insurance policies.
Ohio
Revco D.S. Inc. v. Government Employees Ins. Co., 791 F. Supp 1254 (N.D.
Ohio 1991). Insured had multiple levels of excess insurance coverage above
the level provided by a primary insurer. The insured was sued for injuries and
deaths resulting from the use of a drug manufactured by the insured. The
primary insurer paid out its limit; the first layer excess insurer was declared
insolvent before paying out its limit, so the Ohio Insurance Guaranty
Association paid for claims arising from the insolvency of that insurer; one of
the two second layer excess insurers was declared insolvent before paying
out any monies. The level of the third layer excess insurer was not reached.
In a lawsuit brought by the insured against the second and third layer excess
insurers, the district court, analyzing the language in the various insurance
policies, held: (1) unless an excess insurer expressly agrees to provide "drop
down" coverage, that excess insurer does not have a duty to "drop down"
and assume coverage when an underlying insurer becomes insolvent, (2)
unless an excess insurer expressly agrees to do otherwise, that excess
insurer, when sharing an excess layer of insurance coverage with another
excess insurer on a percentage basis (40%‐60%), has no duty to "drop over"
and assume full responsibility (100%) for claims in the layer when the other
excess insurer in the layer becomes insolvent, (3) unless an excess insurer
expressly agrees to do otherwise, that excess insurer does not have a duty
to defend the insured in a lawsuit unless and until its layer of coverage is
reached, and (4) a waiver by an underlying insurer of its right to deny
coverage for a plaintiff's claims against the insured does not bind an excess
insurer that took no action in defending the insured.

Oregon
Pennsylvania
Texas
Wisconsin
Hoffman Construction Co. of Alaska v. Fred S. James & Co. of Oregon, 838 P.2d
703, 313 Or. 464 (1992). The Supreme Court of Oregon held that an umbrella
liability insurer was not obligated to pay a claim on a loss which was less than
the underlying policy limit. The court analyzed the excess policy, which limited
coverage to losses in excess of the "underlying limits." The term "underlying
limits" was defined as the "amount recoverable under the underlying
insurance." The court refused to accept the plaintiff's interpretation that
"amounts recoverable" meant amounts which could have been recovered if
the underlying insurer had not become insolvent. Instead, the court concluded
that the excess coverage only applied to the extent the primary insurance was
exhausted on account of payment of claims.
Strickler v. Desai, M.D., 571 Pa. 621, 813 A.2d 650 (2002). Dr. Desai was sued in a
medical malpractice action. The Doctor’s insurer was declared insolvent and the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
became obligated to cover the claims and defend the Doctor. After the
insolvency, the plaintiffs entered into and a court approved settlement. PPCIGA
refused to fund the settlement because it would allow the plaintiffs to get a
double recovery. The plaintiffs demanded medical expenses in their complaint,
but later admitted they received medical expenses from Aetna, their health
insurer. PPCIGA claimed it was entitled to reduce the amount of its obligation by
the amount the plaintiffs received from Aetna, who already paid medical costs
in excess of the amount PPCIGA was obligated to pay. Since Aetna already
reimbursed the plaintiffs for medical expenses, PPCIGA argued it would result in
duplicate payments for the same expense. The court determined that
“[b]ecause [plaintiffs] sought medical expenses in the complaint and settled all
of the claims in the complaint, we deem the settlement to include amounts
attributable to medical expenses.” Id. at 631. The court affirmed the lower
court’s ruling that PPCIGA was entitled to offset the amount of medical
expenses Aetna paid from the amount of its liability.
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.
In the Matter of the Ancillary Liquidation of Mission Ins. Co., Azco Hennes‐
Sanco, Ltd. v. Wisconsin Ins. Sec. Fund, 177 Wis. 2d 563, 502 N.W.2d 887 (Wis.
Ct. App. 1993). Mission was Azco’s excess liability insurer, and Azco sought
payment from the Wisconsin Insurance Security Fund for its defense costs
when Mission became insolvent. The court rejected the insured’s argument
that because the total amount of the claims against Azco exceeded the
primary insurance limit, Mission became responsible under its policy to
defend the cases against Azco. The court held that the language of the
policy imposed upon Mission a duty to defend suits against Azco stemming
from occurrences under its policy but not covered under the underlying

insurance, and that Mission was not liable for expenses when they were
included in other valid and collectible insurance. Thus, Mission had a duty to
pay defense costs "only if the accident was not covered by underlying
insurance." Moreover, under "ultimate net loss" provisions of the policy, the
court held Mission was not liable for any defense costs until the limits of the
primary insurance policy had been exhausted. "Excess carriers have no
obligation to defend or to contribute to a settlement or judgment where the
final loss figure, whether by judgment or settlement, is within the primary
coverage limit . . . ."
Lechner v. Scharer, 145 Wis. 2d 664, 429 N.W. 2d 491 (Wis. App. 1988). Where
primary insurer became insolvent, the Court of Appeals held that the
insolvency caused the excess insurer to "drop down" and become the primary
coverage.
Seats, Inc. v. Nutmeg Ins. Co., 178 Wis. 2d 219, 504 N.W.2d 613 (Wis. Ct. App.
1993). Nutmeg issued an umbrella liability policy to Seats which provided
coverage in excess of a primary policy issues by Holland‐America. When
Holland‐America became insolvent, Seats argued that the Nutmeg policy
must drop down to occupy the position of the Holland‐America policy. The
court held that the policy language required Seats to maintain underlying
insurance coverage. Thus, the Nutmeg policy did not drop down, and
Nutmeg was not required to pay defense and/or settlement costs.
Reinsurer's Liability
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). In the reinsurer’s action against the liquidator to vacate an arbitration
award denying the reinsurer’s request for rescission and enjoin further
arbitration as to the reinsurer’s liability for environmental claims against the
insured, the court granted the reinsurer’s motion to vacate the arbitration
award. The court held that the insurer’s liquidation in Bermuda could have
affected the arbitration results and impacted equitable principles. On remand,
the court affirmed the arbitration award and found no prejudice as a result of
redomestication to Bermuda.
Third Circuit Taggart v. Keim, 103 F.2d 194 (3rd Cir. 1939). A Pennsylvania insurance
company in liquidation had entered into a reinsurance treaty which obligated
the company to transfer its entire property in return for reinsurance of all its
assets in the event of insolvency. The agreement was approved by the
commissioner of insurance. When the reinsurer in this transaction
subsequently become insolvent, the insurance company's liquidator was not
entitled to equitable rescission of the transfer of assets.
Fourth Circuit
Safeway Trails v. Stuyvesant Ins. Co., 316 F.2d 234 (4th Cir. 1963). The court
affirmed a dismissal of a declaratory judgment against an insolvent insurer
which attempted to have reinsurance proceeds paid directly to claimants
rather than the receiver.
Fifth Circuit 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

einsurance 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.
Seventh Circuit
Cummings Wholesale Electric Company, Inc. v. Homeowner's Insurance
Company, 492 F. 2d 268 (7th Cir. 1974), cert denied, Delphie Community School
Building Corporation v. Northeastern Ins. Co. of Hartford, 419 U.S. 883.
Claimants under surety bonds issued by an Illinois insolvent insurer sought to
recover from three reinsurers of the insolvent company. The obligor under the
surety bonds in question had also gone bankrupt. Under a specific Indiana
statute for surety business, an insurer, including the insolvent Illinois company,
could not write surety bonds that are in excess of 10% of its capital and surplus,
unless the reinsurance that was arranged for the bond specifically named the
obligee or beneficiary of the bond. While recognizing that such a provision
existed in the reinsurance relationship in the current circumstance, the court
held that the Indiana legislature did not intend to give such claimants
preference over the general creditors of an insolvent insurance company, the
court holding that the direct cause of action against reinsurers did not survive
the commencement of liquidation proceedings and the claimants were left to
their claims in the Illinois liquidation proceeding.
Keehn v. Excess Ins. Co. of America, 129 F.2d 503 (7th Cir. 1942). In a suit by the
receiver to recover upon a reinsurance contract, the court held that the
receiver was barred from an action against the reinsurer because the insolvent
insurer failed to give notice of loss in accordance with the reinsurance contract,
and a receiver acquires no greater rights than those had by the insolvent
company at the time of appointment of the receiver.
Eighth Circuit
Ainsworth v. General Reinsurance Corporation, 751 F.2d 962 (8th Cir. 1985). A
reinsurer of an insolvent Missouri insurer was held liable to the receiver for the
amount of the insolvent insurer's liability under the insolvency clause of the
reinsurance agreement, where the reinsurer, although having a right to defend
against a claim, had no right to reduce its obligation by taking advantage of the
insured's willingness to take less because of the insolvency. Although the
reinsurer's claim settlement also released the receiver from any further liability
on the claim, the direct payment by the reinsurer violated the insolvency clause
and reduced the assets in the insolvent insurer's estate.
Gallinger v. North Star Hospital Mutual Assurance Ltd., et al., 64 F.3d 422, (8 th
Cir. 1995). North Star was organized as a Bermuda‐based captive to provide
liability insurance to a group of hospitals in several states. Later, North Star
contracted with Great Global Assurance Company to front the offering of
primary insurance. Great Global was subsequently declared insolvent and
put into receivership. The Receiver sued North Star in its capacity as a
reinsurer and sought to pierce the corporate veil to its member hospitals for
contribution to the insurer. Alternative theories of breach of contract,
conspiracy, promissory estoppel and unjust enrichment were pled. The trial
court granted summary judgment dismissing the claims of the Receiver and
she appealed. The appellate court affirmed the decision of the trial court on
all points.
North River Ins. Co. v. Walker, 65 F.2d 116 (8th Cir. 1933). In a suit for the
recovery of accrued and unpaid losses under a reinsurance arrangement, the
court found that the outstanding policies of the insolvent insurer were
cancelled upon the adjudication of insolvency and the appointment of a
receiver, and thus, a claim for a loss accruing after the insolvency was not a
provable claim against the insurer and nothing was due under the reinsurance

contract. Further, as the parties to the reinsurance policy agreed that the
reinsurance shall be subject to all the conditions and stipulations of the original
policy and to the exact proportion of the original premium which the assured
itself received, the receiver became entitled to collect the unearned premiums
in the hands of the reinsurer on all reinsurance at the time the primary insurer
was adjudicated insolvent.
Ninth Circuit
Tenth Circuit
Excess and Casualty Reinsurance Association v. Insurance Commissioner of
California, 656 F.2d 491 (9th Cir. 1981). When the guaranty fund attempted to
collect reinsurance proceeds directly from the reinsurers of an insolvent
insurer, the court denied the guaranty fund's claim and determined that the
reinsurance contract was between the insolvent insurer and its reinsurer. The
guaranty fund was subrogated to the rights of policyholders, and since the
policyholders had no rights to the proceeds, neither did the guaranty fund.
Grimes v. Crown Life Ins. Co., 857 F.2d 699 (10th Cir. 1988). 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.
Alabama Melco System v. Receivers of Trans‐America Ins. Co., 268 Ala. 152, 105 So. 2d 43
(1958). The receivers of an insurance company petitioned the court in equity
for authority to accept the compromise settlement negotiated with a
reinsurer, and certain creditors of the insurer contested this settlement. The
reinsurer of the insolvent insurer offered to pay an amount in settlement of all
claims arising out of the reinsurance contract. An insured of the insolvent
insurer claimed a status as a third party beneficiary to the reinsurance contract
and sought to sue the reinsurer directly, and questioned whether the proceeds
of the settlement should be treated as general assets of the estate. The
reinsurance contract had an insolvency clause which provided that the
reinsurer would pay directly to the liquidator or the insolvent insurer. The
court held that the receiver was entitled to receive the proceeds of the
reinsurance settlement. Those proceeds are general assets of the estate.
Arizona
Pioneer Annuity Life Insurance Company v. National Equity Life Insurance
Company, 159 Ariz 148; 765 P.2d 550 (Ariz. App. 1988). The Arizona Court of
Appeal held that the common law remedy of constructive trust is available for
an insolvent reinsurer's breach of fiduciary duty to its subsidiary ceding
company. Pioneer Annuity Life Insurance Company ("Pioneer") caused its
subsidiary National Equity Life Insurance Company ("NELIC") to pay a $1.2
million premium for reinsurance of certain annuity obligations. Pioneer used
the proceeds to acquire another insurance company and defaulted on its
reinsurance obligation. After the insolvency of both companies, NELIC's
receiver contended that Pioneer's receiver held the $1.2 million subject to a
constructive trust. Pioneer's receiver contended NELIC had only an unsecured,
junior priority claim. It argued that the Uniform Insurers' Liquidation Act, as
adopted in Arizona, comprehensively enumerates permissible secured claims
and distribution priorities and implicitly bars other common law or equitable
remedies. Rejecting that view, the court held that the statute is "designed to
embrace and to be applied harmoniously with consistent common law and
equitable concepts," and does not preclude the imposition of a constructive
trust. On the facts alleged, NELIC's receiver had stated claim for such relief.

State ex rel. Low v. Imperial Ins. Co. By and Through Ins. Com'r of State of Cal.,
140 Ariz. 426, 682 P.2d 431 (App. 1984). The first issue in this case was whether
a domiciliary receiver in a non‐reciprocal state (California) was entitled to
reinsurance proceeds traceable to a reciprocal state (Arizona). The court held
that the reinsurance proceeds which resulted from the insolvent insurer's
contracts with reinsurers were general assets vested solely in the California
domiciliary liquidator.
California Ascherman v. General Reinsurance Corp., 183 Cal. App. 3d 307, 228 Cal. Rptr. 1
(1986). An insured is not a party to and was not intended to benefit from an
insurer's reinsurance contract. The court held that the insured had no right to
force a reinsurer of his insolvent malpractice insurer to pay the costs of
defending a malpractice action.
Quackenbush v. Mission Ins. Co., 62 Cal. App. 4th 797 (Ct. App. 1998).
Appellate court affirmed lower court order approving the Insurance
Commissioner's amended liquidation plan for Mission Insurance Company,
rejecting the reinsurer's argument that the plan would violate statutory
provisions precluding contingent and unliquidated claims from participating
in distributions of the estate. The plan expressly prohibited requiring
payment from reinsurers for claims until their liability and quantum had been
determined. While claimants were permitted to submit contingent and
unliquidated claims, the Commissioner was required to provide reinsurers
notice and an opportunity to contest the fixing of liability and quantum. The
court rejected the reinsurer's argument that reinsurers would not, as a
practical matter, be provided such notice and opportunity.
Quackenbush v. Mission Ins. Co., 46 Cal. App. 4th 458 (Ct. App. 1996). The
Insurance Commissioner as liquidator of Mission Insurance Company filed a
proposed liquidation plan requiring Mission's reinsurers to pay reinsurance
proceeds in respect of estimated contingent claims, including incurred but
not reported losses (IBNR). The Superior Court approved the plan and the
reinsurers appealed. The California Court of Appeals held that because the
pertinent state insurance statute expressly forbade claimants with
contingent or unliquidated claims from participating in a liquidation plan, the
Commissioner's proposed liquidation plan was not authorized under the
statute. The court further found that absent contrary language in the
reinsurance policy, the reinsurer is not required to pay the original insolvent
insurer's estate unless the claim is certain and allowed by the conservator,
liquidator or statutory successor. The court remanded with instructions to
the trial court to order the Commissioner to submit a new plan that
complied with the statute.
Quackenbush v. Mission Ins. Co., No. C 572 724 (Cal. Sup. Ct. Nov. 13, 1997),
reported in Mealey's Litig. Rep.‐Reinsurance, Vol. 8, No. 14 at A1 (Nov. 26,
1997). A commutation and settlement agreement between the parties
applies to all reinsurance contracts between the parties, including those in
which Allstate assumed reinsurance from the Mission Companies and those
under which Mission assumed reinsurance from Allstate or its wholly‐owned
subsidiary.
Colorado
Benham v. Pryke, 744 P.2d 67 (Colo. 1987). Contracts between participants in
an insurance exchange and underwriters or reinsurers obligated to provide
coverage to participants against assessments by a receivership court are
interpreted in accordance with general contract principals.
Skandia America Reinsurance Corp. v. Barnes, 458 F. Supp. 13 (D. Colo. 1978). A
reinsurer asked the court to resolve conflicting claims for payment of its
obligation to an insolvent Colorado insurer under an excess of loss reinsurance

agreement. The Colorado receiver claimed the payment, as did the California
guarantee fund, which had paid the insolvent insurer's obligation to one of its
insureds. The court held that the insolvent insurer's Colorado receiver was
entitled to the reinsurance contract payment, but that California guaranty
fund's claim could be presented to the Colorado receiver.
Connecticut
Florida
H. and L. Chevrolet, Inc. v. Berkley Ins. Co., 110 Conn. App. 428 (2008). The
insured automobile dealer and its insurer failed to establish probable cause to
sue a reinsurer for breach of contract or fraud following insolvency of the
reinsured warranty insurer. The warranty insurer chose not to exercise its
option to purchase run‐off coverage for unexpired warranties after the period
of reinsurance had ended. Absent run‐off coverage or a separate reinsurance
agreement, the insolvent insurer had no claim for losses, and the dealer and its
insurer had no third‐party beneficiary claims.
Clark & Co., Inc. v. Department of Ins., 436 So.2d 1013 (Fla. App. 1983). A Texas
managing general agent asserted priority to reinsurance proceeds due to an
insolvent insurer. The agent had written policies on behalf of the insurer under
an agreement in which the insurer was to reinsure 90% of the risk on all policies
written by the agent. The agent asserted a priority to the reinsurance
proceeds due on a third party beneficiary theory, for reasons that the insolvent
insurer had procured the reinsurance only on the policies produced by the
agent on the agent's behalf. The court held that the agent was not entitled to
any priority because under the terms of the reinsurance contracts, the agent
was not the insured.
Consumer Super Market Inc. v. Underwriters at Lloyds, 189 So.2d 648 (Fla.
App. 1966), cert. dismissed, 198 So.2d 323 (1967). A claimant against an insurer
in the process of liquidation sought to recover the unpaid portion of its claim
directly from the reinsurer of the insurer being liquidated, based on third party
beneficiary theory. The court held that independent action may not be brought
against reinsurer of company being liquidated. Such action would frustrate
purpose of Florida Uniform Insurers Liquidation Act to secure equal treatment
for all creditors and to avoid multiplicity of suits.
McDonough Construction Corp. v. Pan American Surety Co., 190 So.2d 617 (Fla.
App. 1966). The insolvent insurer had been a surety on construction and
performance bonds. The obligees of the bonds filed a claim in the receivership
proceeding asserting a right of priority to reinsurance proceeds due on the
bonds. The court held that where the contract of reinsurance showed no
intent on the part of the reinsurer to assume any direct liability to the insureds,
the reinsurance proceeds would be paid to the receiver as part of the assets of
the insolvent insurer.
Mitchell v. State ex rel. Williams, 223 So.2d 792 (Fla. App. 1969). Insureds of an
insolvent Florida domestic insurer petitioned the receivership court for priority
to reinsurance proceeds due the insolvent insurer. The reinsurer had bound
itself to all terms and conditions of the original contract. The court found that
under these circumstances the reinsurance contract amounted to an
assumption of the liability of the insolvent insurer to the original insured, and
this would constitute an exception to the general rule that reinsurance
proceeds become assets of the insolvent insurer. As a result, it was held that
original insureds had right to petition for priority to reinsurance proceeds.
Illinois
Baylor v. Highway Ins. Co., 57 Ill. 2d 590 (1974). Policyholders of insolvent
insurance company were prevented from recovering from reinsurer where the
reinsurance agreement created no privity between the reinsurer and the
policyholder and provided that if the reinsured became insolvent, reinsurance
was to be paid to the liquidator or the receiver.

Centaur Ins. Co. v. Safety Nat'l Cas. Corp., 1993 U.S. Dist. LEXIS 14991 (N.D. Ill.
Oct. 22, 1993). Centaur, a company in rehabilitation, sued its reinsurer,
Safety, for breach of a reinsurance agreement. Centaur was the insurer for a
supermarket chain. Safety agreed to reinsure Centaur in the amount of
$500,000 excess of $500,000 per occurrence. One of the conditions in the
reinsurance agreement was that Centaur promptly advise Safety of any
claim and subsequent developments that may involve the reinsurance. A
"slip and fall" claim arose against the supermarket chain, and Centaur
received notice of the claim, which was actually sent to Global Surplus
Insurance Services, Inc., a company that was managing claims for Centaur.
Global was also Safety's agent for some claims, and Centaur claimed Safety
had received notice of the claim because of the notice given to Global. After
the plaintiffs in the "slip and fall" case won a jury verdict in excess of
$1,000,000, Centaur sent a "first notice of loss" to Safety. Safety denied
payment based on untimely notice of the claim, stating that Centaur failed to
disclose information before the verdict that was significant to Safety's
exposure. The court held that even if Safety was to be charged with notice
through Global, the notice did not satisfy Centaur's obligation under the
agreement, as the notice did not disclose that it was likely the claim would
involve Safety's funds. The court evaluated whether the "first notice of loss"
letter satisfied Centaur's notice obligation under an objective standard of
reasonableness. The court found that Centaur was entitled to some
discretion in its notice obligation, and some facts indicated that its exercise
of that discretion was objectively reasonable, while other facts indicated it
was not. The court held that summary judgment was inappropriate on this
issue, and said that while granting unfettered discretion to the ceding
company with regard to giving notice would be unfair to the reinsurer,
always allowing the reinsurer to question that discretion would be equally
unfair to the ceding company.
Evans v. Potts, 204 Ill. App. 212 (1917). The insurance commissioner filed a
petition to intervene to protect the assets of an insolvent insurer. The
commissioner was allowed to intervene but the appointment of the receiver
by the equity court would not be reversed. Furthermore, if assets were
diverted by the receiver to the insurance commissioner as intervener, such
actions could be deemed improvident at some subsequent point in time and
the intervener, as well as the receiver, could be compelled to restore the assets
of the estate.
Foudree v. Sumner, 1989 U.S. Dist. LEXIS 15576 (N.D. Ill. Dec. 27, 1989). The
court denied defendants' motion for summary judgment, finding that there
was no evidence that the defendants maintained Lincoln as a "sham"
reinsurer, as the plaintiffs received Lincoln's annual statements, and
therefore had knowledge of Lincoln's financial state. However, there were
genuine issues of material fact as to whether fraud was committed as a
result of (1) alleged misrepresentation concerning the lag times in
processing claims; (2) the omission of IBNR from reports produced for Iowa
Travelers; and/or (3) setting premiums below reasonable levels.
O'Connor v. Insurance Company of North America, 622 F. Supp. 611 (N.D. Ill.
1985), reconsideration denied, 668 F. Supp. 1183 (1987), appeal granted (1989).
The court held that the reinsurance proceeds due the liquidator could be set
off by the other debts owed to the reinsurers by the insolvent insurer, which
were primarily unearned premiums and the insolvent insurer's share of the
reinsurance pool. The court rejected the holding of Melco System v. Receivers
of Transamerica Ins. Co., 268 Ala. 152, 105 So. 2d 43 (1958) by holding that the
concept of "mutuality" was applicable because the reinsurance proceeds are

preliquidation assets that could be set off against the preliquidation debts of
the insolvent insurer to the reinsurers.
People ex rel. Hershey v. Cosmoplitan Ins. Co., 89 Ill. App. 2d 225 (1967). A
policyholder unsuccessfully brought suit against rehabilitator for collection of
reinsurance proceeds received from reinsurer claiming that the rehabilitator
was only a collecting agent for the policyholder and, in the alternative, that the
reinsurance contract was actually coinsurance. The reinsurance contract
specifically provided that in the event the reinsured became insolvent, claims
to be paid by reinsurer were payable to the liquidator.
Pioneer Life Ins. Co. v. Alliance Life Ins. Co., 374 Ill. 576 (1940). Plaintiff issued
policy on life of individual and entered into a facultative reinsurance contract
(called a reinsurance policy) with Peoria who subsequently went into
receivership. Defendant entered into reinsurance agreement with receiver of
Peoria, for all "reinsurance contracts" of Peoria. Defendant did not renew the
reinsurance treaty between Plaintiff and Peoria. However, court found
assumption of reinsurance treaty not to be a precondition to assumption of
reinsurance policy and found that defendant had assumed and was liable on
reinsurance policy on individual's life.
Indiana D & L Building & Remodeling, Inc. v. Eakin, 546 N.E.2d 858 (Ind. App. 1989).
The trial court held that a general contractor did not have a right of direct
action against reinsurer following insolvency of subcontractor's surety, and
ordered that all reinsurance proceeds be paid to surety's liquidator. General
contractor appealed, on the ground that its contract permitted a direct action,
involving recovery and discharge. The Appellate Court held that state
insolvency statutes and policy prohibit a direct action, because inasmuch as
recovery and discharge exist together or not at all, the corresponding
discharge operates as an improper preference.
D & L Building & Remodeling, Inc. v. Eakin, 546 N.E.2d 858 (Ind. Ct. App.
1989). An insured company cannot maintain a direct right of action against
reinsurer of an insolvent insurer. Rather, all proceeds due to an insolvent
ceding insurer must be paid directly to the Liquidator, so that the
reinsurance proceeds can benefit all creditors to the estate.
State of Florida ex rel. O'Malley v. Department of Insurance of Indiana, 155 Ind.
App. 168, 291 N.E. 2d 907 (1973). The Florida ancillary receiver of an insolvent
insurer challenged the Indiana domiciliary liquidator's handling of a reinsurance
treaty, which ceded 42.5% of the insolvent insurers liability to the assuming
insurer, another Indiana insurer. Pursuant to an Indiana court order, the
assuming insurer was allowed to adjust and pay claims of the insolvent insurer,
with a right to reimbursement from other recoveries by the Indiana liquidator
for the insolvent insurers 57.5% share of the loss. The Florida ancillary receiver
was not entitled to any part of the reinsurance proceeds associated with
Florida risks since such proceeds are general assets of the liquidation estates.
The Florida ancillary receiver had no lawful interest and therefore lacked
standing to challenge the Indiana Court's approval of the reinsurer's proposal.
Iowa Globe Nat. Fire Ins. Co. v. American Bonding & Casualty Co., 217 N.W. 268, 205
Iowa 1085 (1928). A solvent insurer had purchased two policies from an
insurer, who became insolvent. Prior to insolvency, the insurer reinsured its
risk with four other insurers.
The Iowa Supreme Court held that the receivership did not terminate the
insurer's liability and that its two insurance policies were still valid although not
wholly collectible. However, the additional policies constituted co‐insurance
with the insolvent insurer's two policies so as to reduce the insolvent insurer's

liability. The court also rejected the contention that, because of the insurer's
insolvency, no account should be taken of this co‐insurance. The measure of
the liability of the reinsuring companies remains the same whether their
principal continues solvent or insolvent. Finally, the pro rata clause in the
reinsurance policies limits the liability of each insurer to the proportional
amount stipulated in such clause.
In the Matter of the Liquidation of Integrated Resources Life Ins. Co., 562
N.W.2d 179 (Ia. 1997). Integrated and Fidelity Bankers Life Insurance
Company (“Fidelity”) were in receivership in Iowa. A dispute arose with
North American Reassurance (“NAR”) regarding the respective rights of the
entities under an assumption agreement wherein NAR assumed Integrated’s
rights and responsibilities in six reinsurance contracts between Integrated
and Fidelity. The assumption agreement was never signed by Fidelity. The
trial court found that by remitting premium to NAR, Fidelity in effect
released Integrated from future obligations. The Iowa Supreme Court
reversed ruling that the trial court should have applied the principles of
novation which would have had the effect of leaving the original contracts in
force, i.e. Integrated as a reinsurer of Fidelity.
Louisiana
Mississippi
Arrow Trucking Co. v. Continental Ins. Co. 465 So. 2d. 691 (La. 1985). An
insured cannot recover from his insolvent insurer's reinsurer the sum paid by
the insured to an injured accident victim. Nor can the insured sue the reinsurer
under Louisiana's direct action statute or under a third‐party beneficiary
theory.
Estate of Ethel Irene Osborn v. Gerling Global Insurance Company, 529 So. 2d
169 (Miss. 1988). Overturning a decision involving the liquidation of State
Security Life Insurance Company, the court held that a reinsurance agreement
may contain certain provisions which create a liability on the part of the
reinsurer directly to the original insured. The reinsurance agreement
protecting State Security Life Insurance Company was replete with the term
"coinsurance." The court, while recognizing that reinsurance contracts are
normally contracts of indemnity and that insureds are not in privity with a
reinsurer, held that if the reinsurer agrees to pay based on the incurring of
liability rather than the incurring of loss, an original insured may bring a direct
action against the reinsurer.
Gregory v. Cent. Sec. Life Ins. Co., 953 So. 2d 233 (Miss. 2007). Plaintiffs
purchased life insurance policies with “vanishing” premiums from an agent of
an insurer which became insolvent and was placed in liquidation. A second
company (“Assuming Company”) entered an assumption reinsurance
agreement with the National Organization of Life and Health Insurance
Guaranty Associations, to perform certain contractual obligations of the insurer.
Thereafter, Assuming Company notified plaintiffs that they were required to
provide additional premiums on the life insurance policies purchased from
insurer. Plaintiffs filed suit against the agent and Assuming Company, as
successor in interest to the insurer, for making false and misleading statements
in a deliberate attempt to induce them to purchase the subject “vanishing”
premium policies. The plaintiffs argued that when Assuming Company assumed
the obligations of insurer under the policies, Assuming Company also assumed
responsibility for any false and misleading statements made by the insurer. The
Supreme Court of Mississippi held that Assuming Company was not liable to the
plaintiffs because it only assumed certain “Covered Obligations” of the insurer,
which did not include any acts or omissions of the insurer or its agent.
Miss. Ins. Guar. Ass’n v. MS Cas. Ins. Co., 947 So. 2d 865 (Miss. 2006). Two
insurance companies, American Reliable Insurance Company, Inc. (“AR”) and
MS Casualty Insurance Company (“MS”), entered assumption reinsurance

agreements with Legion Insurance Company (“Legion”) whereby Legion would
assume all obligations that AR and MS each owed their respective policyholders.
AR and MS each also transferred to Legion all outstanding net loss and
voluntary unearned premium reserves. At the same time, General Reinsurance
Corporation (“Gen Re”) and American Reinsurance Company (“Am Re”)
transferred to Legion by assignment agreement all obligations that they each
owed AR and MS. The result of the assignment and assumption agreements
were that, as of January 1, 2001, Legion had sole responsibility to the
policyholders and claimants of AR and MS under the policies at issue. Later,
Legion entered rehabilitation and the Mississippi Insurance Guaranty
Association (“MIGA”) acted to protect the interests of Mississippi policyholders
and claimants of Legion. MIGA refused to pay claims made to Legion based on
the underlying policies originally issued by AR and MS that were assumed by
Legion. MIGA reasoned that the assumed polices were not “covered claims
under direct insurance” that MIGA was required to pay under the relevant
statute. The Supreme Court of Mississippi held that the claims were covered
claims under direct insurance because the assumption by Legion of the policies
and obligations from MS and AR accomplished a novation. As such, the debt to
the policyholders of the two companies remained the same – direct insurance
policyholder liabilities – but Legion was substituted for AR and MS. The court
also determined that, to the extent they are unable to seek recovery in their
home states, MIGA would be liable for claims to Legion made by nonresidents
whose policyholders were located in Mississippi at the time of the insured
event.
Missouri
Ainsworth v. Allstate Ins. Co., No. 85‐1209‐CV‐W‐6 (S.D. Mo. Dec. 2, 1985). The
domiciliary liquidator initiated litigation to collect reinsurance proceeds, but
the court held that the reinsurer was entitled to a stay of the litigation, pending
the outcome of arbitration, which was required under its reinsurance contract.
First Am. Ins. Co. v. Commonwealth General Insurance Co. 954 S.W. 2d 460
(Mo. App. 1997). This case centers on the competing claims of the Receiver
for Commonwealth General Insurance Company and First American
Insurance Company for reinsurance proceeds. While it was solvent,
Commonwealth wrote insurance for Williams Trucking. Williams Trucking
was a Georgia based company that operated through the south, including
parts of Texas. Commonwealth was not authorized to issue policies in
Texas, so it entered into a fronting agreement with First American for the
Texas business. Commonwealth agreed to indemnify First American for any
loss resulting from the Texas policies and added First American as a named
insured under two reinsurance treaties.
First American filed a declaratory judgment action against the reinsurer. The
reinsurer was faced with conflicting claims and filed an interpleader action.
The trial court consolidated the declaratory judgment and interpleader
actions and granted summary judgment in favor of the receiver holding that
the reinsurance proceeds were assets of the Commonwealth estate.
The Court of Appeals reversed the decision holding (1) ceding insurer
accepted policy modification by retaining and not objecting to cover notes
adding second insurer as named insured under reinsurance treaties; (2)
insolvency clause, converting policy into one of liability and requiring
payment of reinsurance proceeds to insolvent insurer’s estate, did not come
into play so as to entitle receiver to proceeds, in light of separate, continuing
obligation owed to second insurer to indemnify it for loss resulting from
settlement of insured’s claim; (3) receiver did not have power under statutes
to disaffirm insolvent insurer’s acceptance of policy modification adding
second insurer as named reinsured.

First Nat. Bank of Kansas City v. Higgins, 357 S.W.2d 139 (Mo. 1962). A claimant
against an insured of the insolvent insurer made a claim on its reinsurance
contract. Rejecting the trial court's ruling that only the Missouri insurance
commissioner as the receiver of the insolvent insurer was entitled to judgment
against the reinsurer, the court found that the reinsurance contract, which is
generally paid only to the reinsured company or its receiver in the event of
insolvency, had been worded in such a way that insureds of the insolvent
insurer were third‐party beneficiaries of the reinsurance contract.
General Reinsurance Corporation v. Missouri General Ins. Corp., 458 F. Supp. 1
(W.D. Mo. 1977). An interpleader action was brought to determine whether
the Missouri receiver of an insolvent insurer or the Mississippi guaranty fund
which had paid the insolvent insurer's claims in Mississippi, was entitled to the
proceeds of the reinsurance contract issued to the insolvent insurer. The court
held the proceeds should be paid to the domiciliary liquidator based on the
insolvency clause of the reinsurance agreement and rejected the guaranty
fund's statutory language that the association's "stood in the shoes" of the
insolvent insurer and the argument that "public policy" held that the
reinsurance proceeds should be paid to the guaranty fund.
Green v. American Life and Accident Ins. Co., 112 S.W.2d 924 (Mo. App. 1938). A
reinsurer denied a death claim filed by the beneficiary of policies issued by an
insolvent primary company whose policies were assumed by the reinsurer.
The insolvent insurer's policies were cancelled upon the insolvency and
appointment of the receiver, and although such policies were reinsured, the
assumption of liability was set forth in the reinsurance contract. As a result,
since the original policies had lapsed due to nonpayment of premiums, there
was no reserve available to be applied toward the purchase of coverage under
the reinsurance contract, and the denial was proper.
Homan v. Employer's Reinsurance Corp., 345 Mo. 650, 136 S.W.2d 289 (1939).
Based on the language of the reinsurance contract, the court found that the
claimant of the insolvent insurer could maintain a direct action against the
reinsurer.
O'Hare v. Pursell, 329 S.W.2d 614 (Mo. 1959). In upholding a claimant's action
against the reinsurer of the insolvent insurance company, the court noted that
the reinsurance treaty in question provided for 100% cession of all of the
insolvent insurers liability, that the reinsurer would takeover loss reserves and
service, adjust, and settle claims directly with insureds, that reinsurance should
be payable without diminution to the insolvent insurer's insureds in the event
of insolvency, and the liability of the reinsurer followed the terms and
conditions of the policy. The court ignored the further retrocession and quota
share agreement whereby 50% of the risk was retroceded back to the insolvent
insurer.
New Jersey
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
Curiale v. AIG Multi‐Line Syndicate, Inc., 204 A.D.2d 237, 613 N.Y.S.2d 360 (1st
Dept. 1994). Where the reinsurers of a company in liquidation succeeded in
rescinding their reinsurance contracts with the insolvent company, the
liquidator can recover the premiums for those rescinded contracts from the
reinsurers. The Court rejected the reinsurer’s argument that the liquidator
stands in the shoes of the insolvent insurer and should therefore be
prevented from profiting from the insurer’s fraud by receiving return of
premium. The Court reasoned that the underlying purpose of the liquidation
statute was to preserve the assets of the insolvent insurer for the benefit of
the policyholders and creditors and that to fail to obtain return of premiums
would give the reinsurers an undeserved windfall, thereby punishing
innocent parties – the policyholders and third party claimants.
Curiale v. AIG Multi‐Line Syndicate, Inc. and Hudson Reinsurance Co., Ltd.,
225 A.D. 2d 409, 640 N.Y.S. 2d 18 (1 st Dept 1996). Union Indemnity Insurance
Company in liquidation sought recovery of reinsurance proceeds from a
reinsurer. The court dismissed Union Indemnity’s cause of action for
reinsurance proceeds, but found the reinsurer responsible for the payment
of interest on the returned premiums.
Jurupa Valley Spectrum, LLC v. Nat’l Indem. Co., No. 06 CIV. 4023 (DLC), 2007
WL 1862162 (S.D.N.Y. June 29, 2007). The beneficiary of surety bonds issued by
the insolvent insurer could not directly sue the insolvent insurer’s reinsurer for
payment. Even where the reinsured is insolvent, the insured is not considered a
third party beneficiary and there was no direct cause of action absent a cutthrough
clause.
Nichols v. American Risk Mgmt., Inc., No. 89 CIV. 2999 (JSM), 2002 WL
31556384 (S.D.N.Y. Nov. 18, 2002). In an action by the liquidator for payment
under a reinsurance agreement, the court held that the reinsurer could rescind
the reinsurance contract because the insurer failed to disclose that it was
insolvent when entering into the reinsurance agreement, but the reinsurer must
return premiums with interest.
Prince Carpentry, Inc. v. Cosmopolitan Mutual Ins. Co., 124 Misc.2d 919, 479
N.Y.S.2d 284 (1984). Proceeds owing to an insolvent insurer pursuant to
reinsurance agreements and received by the insurance commissioner were
general assets and as such were to be proportionately applied to the insurer's
creditors. These proceeds were to be applied to paying of the insurer's
creditors, even though the insurer claimed they may have arisen from an
underlying lawsuit and should have been first applied to that claim.
Serio v. Ardra Ins. Co., 761 N.Y.S. 2d 1 (App. Div. 2003). The liquidator of an
insolvent insurer could pierce the corporate veil of the defendant reinsurer in
order to hold the reinsurer’s principals liable to the liquidator, and the court
rejected the reinsurer’s argument that the liquidator, a government agency,
was equitably estopped from asserting that the reinsurer was a controlled
person.
Skandia American Reinsurance Corp. v. Schenck, 441 F. Supp. 715 (S.D.N.Y.
1977). The court found that under both New York and New Jersey law, the
insurance commissioner is a defunct insurer's statutory successor and thus, the
proper recipient of the insurer's reinsurance proceeds. Therefore where the

New Jersey guaranty fund and the New York insurance commissioner each
claimed proceeds of reinsurance treaties issued on an insolvent insurer, the
commissioner, rather than the guaranty fund, was entitled to receive the
reinsurance proceeds.
Zurich‐American Ins. Co. v. Mead Reins. Corp., 161 A.D.2d 403, 555 N.Y.S.2d 333
(1st Dep't). Defendant Mead Reinsurance Corporation's policy provided that it
would apply in excess of reduced underlying insurance, provided that such
reduction was solely the result of "accidents or occurrences happening after
the inception date of this policy." After the underlying insurer, Ambassador
Insurance Company, was declared insolvent, Zurich‐American brought an
action against Mead, claiming that the reinsurer's coverage dropped down
after the underlying carrier's insolvency. The Court granted summary
judgment in favor of Mead, holding that the basis for the reduction in the
underlying coverage ‐‐ Ambassador's insolvency ‐‐ was not the result of
"accidents or occurrences happening after the inception of the policy."
Ohio
Covington v. Ohio Gen. Ins. Co., 99 Ohio St. 3d 117 (Ohio 2003). A reinsurance
company entered into reinsurance contracts with UCM. The reinsurance
company became insolvent and was liquidated. During the liquidation, UCM
filed claims against the reinsurance company’s estate seeking reinsurance
benefits. The Ohio Supreme Court stated that an insurance company seeking
reinsurance benefits qualifies as a Class 5 creditor during the liquidation of a
reinsurance company.
Stickel v. Excess Ins. Co., 136 Ohio St. 49 (Ohio 1939). Interpreting the liability of
a reinsurance company under a reinsurance contract, the Ohio Supreme Court
explained that a reinsurer’s liability must be determined by the terms of the
reinsurance contract. When a reinsurance contract explains that the reinsurer
will not be liable unless there has been an actual payment of a loss by the
reinsured, the payment of that loss is a prerequisite to the liability of the
reinsurer.
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" (does not do business).
Koken v. One Beacon Ins. Co., 911 A.2d 1021 (Pa. Commw. Ct. 2006). The
defendant argued that if it could prove it had a third party beneficiary
relationship it was entitled to a direct claim against its insolvent reinsurer’s
retrocessionaires for losses it had in three separate insurance programs. The
court stated “where a reinsurer: (1) underwrote the insurance policy in question;
(2) undertook 100% of the risk from an insolvent fronting insurer; (3) retained
final authority to negotiate and settle all claims on behalf of the fronting insurer;
and (4) reimbursed the fronting insurer for all payments made under the policy,
the policyholder was determined to be a third party beneficiary to the
reinsurance contract and could proceed directly against the reinsurer upon the
primary insurer’s insolvency.” Id. at 1033.
Price v. Pennsylvania Prop. and Cas. Ins. Guar. Ass’n, 2002 Pa. Super. 74, 795 A.2d
407 (2002). As individual plaintiffs, parents sought compensation for their
daughter’s incurred medical expenses in a negligence action. Doctors’ insurer
was declared insolvent and the Pennsylvania Property and Casualty Insurance

Guaranty Association (“PPCIGA”) assumed its obligations. The parents settled
with PPCIGA and specifically agreed that settlement was intended to cover both
present and future damages. The court held since the parents demanded
personal compensation in the negligence action, the medical expenses sought
were also covered by the settlement. Therefore, PPCIGA was entitled to an
offset up to the amount recovered from the parent’s insurer and to the extent
the father had a claim for coverage.
Puerto Rico
South Dakota
Tennessee
Texas
Karon Bus. Forms, Inc. v. Skandia Ins. Co., Ltd., 80 F.R.D. 501 (D. Puerto Rico
1978). Karon Business Forms, Inc. was insured under a fire insurance policy
issued by Commonwealth Insurance Company. Commonwealth was in the
midst of liquidation proceedings at the time. That policy had been endorsed by
Skandia Insurance Co., Ltd. as guarantor, conditioned on Commonwealth
obtaining an agreement that any payments made pursuant to the
endorsement be proportioned among the reinsurers, including Skandia. That
condition was never fulfilled. Karon made a claim against Commonwealth
under the policy. When Commonwealth could not pay, Karon turned to
Skandia as guarantor. Skandia sought to implead Commonwealth's reinsurers
in order to require them to pay their respective shares of Karon's claim. The
court held that even though Commonwealth, if solvent, would have been able
to claim reinsurance proceed s from the co‐reinsurers, Skandia's claim (based
on breach of a condition precedent) was too tenuous to justify an impleader
against the reinsurers, since Commonwealth's possible liability to Skandia is
entirely distinct from the reinsurer's liability to Commonwealth. By paying
Karon, Skandia stepped into the insured's shoes as a creditor of
Commonwealth, not into Commonwealth's shoes as a creditor of the
reinsurers. Skandia was allowed to implead and to seek recovery from the
Receiver of Commonwealth.
State ex rel. Menning v. Security General Insurance Co., 82 S.D. 47, 140 N.W. 2d
676 (1966). In a proceeding involving receivership of a reinsured insurance
company, the court held that insolvency did not change the nature of the
reinsurance contract where reinsurer's liability followed the liability of the
reinsured in every case. The contractual reinsurance provisions did not vest in
reinsured creditors any right of action against reinsurers. The contract of
reinsurance did not contemplate or indicate any intention of direct liability of
reinsurer to parties suffering the initial loss.
Avondale Mills Inc. v. American Re‐Insurance Co., No. 89‐2514‐HA, 1991 U.S.
Dist. LEXIS 20632 (W.D. Tenn. Aug. 5, 1991). The court, applying New York
law, granted summary judgment against an insured which had brought a
claim against the reinsurer of the insolvent insurance company seeking to
recover reinsurance proceeds. The court reasoned that because the plain
language of the reinsurance contract stated that, in the event of the
insurer's insolvency, the reinsurance payments were to be made to
specifically named payees (the insurance company, its liquidators, receiver
or statutory successor) and because the reinsurance contract did not
provide the insured with a claim against the reinsurer in the event of the
insurer's insolvency, the insured had no direct right of action against the
reinsurer.
Great Atlantic Life Insurance Co. v. Anthony G. Harris, 723 S.W. 2d 329 (Tex.
App. ‐ Austin 1987) reh den., app, dismissed The court held that two
agreements, a reinsurance agreement ceding Great Atlantic Life Insurance Co.
("GAL") business to United Bankers Life ("UBL") and a corresponding
retrocessional agreement ceding 100% of that same business from UBL to
Southern National Life ("SNL") constituted one agreement. Therefore, SNL
must pay its reinsurance proceeds directly to GAL rather than to UBL which
was in liquidation. The court further held that the insolvency clause in the

etrocession agreement did not entitle the receiver of UBL to the reinsurance
proceeds.
McFarling v. Mayfield, 510 S.W. 2d 108 (Tex. Civ. App. 1974), writ ref. n.r.e. The
court held that in absence of language in reinsurance contract creating privity
between the original insured and the reinsurer, proceeds due on reinsurance
contracts become part of the general estate of the insolvent insurer for pro
rata payment of claims.
Wisconsin
Master Plumbers Limited Mutual Liability Co. v. Company & Bird, Inc., 79 Wis.
2d 308, 255 N.E. 2d 533 (1977). As a general rule, an agent or broker which
provides a reinsurance policy in a company which is solvent at the time the
policy is procured is not personally liable for a loss which occurs when the
company subsequently becomes insolvent. Any allegations of negligence must
be considered in light of the facts and circumstances at the time the policy was
issued and not at the time of the loss and failure to pay. Under the facts of this
case, the insurer was solvent at the time the reinsurance treaty was arranged.
Cut‐Through Agreements
Second Circuit In re Bennett Funding Group Inc. Sec. Litig., 270 B.R. 126 (Bankr. S.D.N.Y. 2001),
aff’d, 60 Fed. Appx. 863, 2003 WL 1191171 (2d Cir. 2003). Investors in a bankrupt
funding company had no rights under a reinsurance policy issued to the
company’s insurer, particularly where the company and its insurer considered
and rejected inclusion of a cut‐through provision in the reinsurance contract and
the investors were not named as loss payees in the policy; only the bankrupt
company’s trustee, rather than investors, could pursue an action for reinsurance
policy proceeds.
New York
In re Rehab. Frontier Ins. Co., No. 97‐06 (N.Y. Sup. Ct. Feb. 5, 2008), reported in
19‐11 Mealey’s Litig. Rep. Ins. Insolv. 2 (Mar. 2008). The court approved a
settlement between the rehabilitator and reinsurer of the insurer in
rehabilitation in a case involving cut‐through endorsements issued by the
reinsurer to policyholders, where the rehabilitator alleged that the reinsurer
wrongfully appropriated trust assets provided by the insurer in rehabilitation.
Premiums Owed and Unearned Commissions
Jurupa Valley Spectrum, LLC v. Nat’l Indem. Co., No. 06 CIV. 4023 (DLC), 2007
WL 1862162 (S.D.N.Y. June 29, 2007). The beneficiary of surety bonds issued by
an insolvent insurer in rehabilitation had no direct right of action against the
insolvent insurer’s reinsurer where the reinsurance contract did not contain
express language creating a cut‐through, the contract explicitly excluded thirdparty
beneficiary rights, and there was no relationship or conduct between the
parties permitting assertion of direct liability against the reinsurer.
Fifth Circuit
Crist v. Sharp Electric, Inc., 876 F.2d 379 (5th Cir. 1989). Receiver sued insured
for payment of premiums earned by insurer prior to insolvency. Insured
defended on the grounds that the subsequent failure to provide a defense
pursuant to coverage under the policy was a breach of the insurance contract,
thereby relieving the insured of its contractual obligation to pay premiums.
The court held that the "interlocking web of statutes" governing insurance
insolvency prevails over general principles of basic contract law, and rejected
an argument that because the insurer failed to defend after its insolvency, the
premium was not "earned." The court found that no event occurring after
insolvency could control whether premiums were or were not "earned,"
because the rights and liabilities of the insurer and its creditors are fixed as of
the date of the entry of the liquidation order and because a decree of
dissolution cancels outstanding policies as of that date by operation of law. A

contrary holding would permit these insureds as unfair preference over other
claimants of the same class.
Hershey v. Kennedy & Ely Ins., Inc., 294 F. Supp. 554 (S.D. Fla. 1967) affirmed,
405 F.2d 888 (5th Cir. 1968). The Illinois statutory liquidator brought action
against a Florida insurance agency to recover premiums allegedly owed by the
agency to the insolvent Illinois insurance company. The court held that
because the agency agreement allowed commissions earned to be offset
against premiums collected, the agency would be able to retain commissions
earned prior to the liquidation date. However, the agency was held liable for
all premiums earned up to the liquidation date, including premiums which had
not yet been collected, although the agency might never be able to collect
such premiums. In addition, the agency was held liable for all premiums which
would have been earned by the liquidation date except for the fact that a mass
cancellation of policies had occurred upon policyholders learning of the
pending insolvency of the company. This mass cancellation was forbidden by
Florida law.
Seventh Circuit Fabe v. Facer Insurance Agency, Inc., 588 F. Supp. 1330 (N.D. Ill. 1984),
affirmed, 773 F.2d 142 (7th Cir. 1985), cert, denied, 475 U.S. 1013. The insurance
code prohibits agents from setting off against premiums due to an insolvent
insurer the unearned portion of premium on any cancelled policy unless the
policy was cancelled prior to the entry of order of liquidation and unless the
unearned portion of the premium was refunded or credited prior to entry of
order. Thus, the agent was liable for unearned premiums without setoff for
unearned commissions returned to policyholders upon cancellation of their
policies.
Thacher v. H.C. Baldwin Agency, Inc., 283 F. 2d 857 (7th Cir. 1960). A New York
insurance company's insolvency and order of liquidation did not constitute a
breach of the agency agreement between it and an Indiana agent, and thus
the New York liquidator was not precluded from recovering the premiums due
less the commissions earned by the agent. This appeal followed the district
court's dismissal of the various set‐offs and counterclaims described in prior
trial court holding (140 Supp. 860 (1956)), (the trial court holding upon
reconsideration that the set‐offs and counterclaims could only be prosecuted
in the liquidation proceeding in New York. With the agent's failure to file a
timely proof of claim in the liquidation proceeding for the various alleged
set‐offs, they were barred as late filed.)
Alabama
California
Bushnell v. Mitchell, 160 F. Supp. 608 (S.D. Ala. 1958). The receiver of an
insurance company brought an action against a former agent to recover
premiums not yet remitted to the company and unearned commissions
retained by the agent. Previously, the agent had entered in to a contract with
the insurer to pay return commissions at the same rate as return premiums
including premiums returned by reason of cancellation. When the company
was placed into receivership, the agent used funds in the agent's possession to
purchase alternative policies for his clients. The court found this action to be a
breach of the fiduciary duty owed to the insurer. The court found that the
receiver was entitled to recover premiums owed and unearned commissions
from the agent.
Downey v. Humphreys, 102 Cal. App. 2d 484, 227 P.2d 484 (1951). The liquidator
was permitted to recover unremitted insurance premiums from an insurance
agent working as an agent of the insolvent company.
Garrison v. Edward Brown & Sons, 25 Cal.2d 473, 154 P.2d 377 (1944). The
liquidator of an insurance company brought an action against an agent for
premiums collected and not remitted. The court here stated that an insurer's

liabilities towards its creditors and claims against its debtors became fixed
upon the entry of the order directing the company's liquidation.
Florida Charles W. Virgin Ins. Agency Inc. v. Alabama General Ins. Co., 114 So.2d 524
(Fla. App. 1959). Several insurance agents appealed an order requiring them to
turn over to receiver all assets of the insolvent insurance company, including
unremitted premiums which the agents held on the date of the insolvency.
The agents asserted that the funds in their hands represented unearned
premiums cancelled by reason of the insolvency, other cancellation funds, and
earned commissions from the sale of insurance, which lost their character as
property of the insurer upon insolvency. The agents had used part of such
funds to purchase comparable insurance from a solvent company upon
learning of the insolvency. The court held that absent special contractual or
statutory provisions, all funds in the hands of the agents were assets of the
insolvent insurer, and must be turned over to the receiver. The agents had no
right to offset debts owing them from the company against company funds.
The agents also had no right or obligation to produce insurance coverage for
the policyholders. To hold otherwise would give these policyholders a
preference against other policyholders and creditors.
Malone v. Robertson, 88 F. Supp. 749 (N.D. Fla. 1950), affirmed in part, rev'd in
part, 190 F.2d 756 (5th Cir. 1951). In a suit by the Pennsylvania liquidator of an
insolvent insurer to recover unremitted premiums held by a Florida agent, the
agent filed a counterclaim asserting a right to offset premium amounts owed
to the agent under a separate contract with the insurer. The trial court held
that the counterclaim could only be asserted in the Pennsylvania liquidation
proceeding. On appeal, the court held that the agent had no right to set off
personal debts owing from the insolvent company against funds of the
company held in the capacity as agent. However, the agent's counterclaim
could be asserted in the Florida proceeding because the Pennsylvania
liquidation court had not issued an order staying the assertion of claims against
the liquidator. Any judgment in the Florida proceeding would only serve to
liquidate the agent's claim and entitle the agent to share in the assets of the
insurer pro‐rata in the liquidation proceeding.
Georgia
Pink v. Georgia Stages, 35 F. Supp. 437 (D. Ga. 1940). The holder of automobile
casualty policies issued in Georgia by a New York insurer was not entitled to
offset unpaid premiums against a claim for losses covered by one of the
policies.
Illinois Farmers and Merchants' Ins. Co. v. Smith, 63 Ill. 187 (1872). The insured
procured an insurance policy with a five‐year term, with the annual premium to
be paid in five equal installments. Before the expiration of the second year of
the policy, the insurance company became insolvent and the receiver pursued
the insured for the 3 remaining installments. The court held that nothing was
recoverable against the insured because when the company failed, all
obligations to continue the payment of the installment notes terminated
because with the termination of the consideration for the note and protection
against loss under the insurance policy.
Pastor v. National Republic Bank of Chicago, 56 Ill. App. 3d 421, 371 N.E. 2d 1127
(1977). The court held that the New York liquidator of an insolvent insurer was
entitled to intervene in an injunctive action filed by a former agent of Summit
against a bank that issued an irrevocable letter of credit to secure the agent's
obligations to the insolvent insurer under a general agency agreement. The
Court held that the Uniform Commercial Code's prohibition against assignment
or transfer of rights under a letter of credit unless expressly permitted in the
letter of credit, did not apply to the assignment in a liquidation proceeding to
the liquidator since such assignment was by operation of law.

People ex rel. Bolton v. Progressive General Ins. Co., 44 Ill.2d 392, 256 N.E.2d
338 (1969). The general agent of an insolvent insurer was ordered to give the
receiver certain accounts receivable, including premium trust funds. The agent
refused to produce the records. The court held that because the rehabilitator
stood in the shoes of the insolvent insurer pursuant to the rehabilitation
proceedings, the rehabilitator was entitled to constructive possession of all
property held in trust by the insurer's fiduciaries.
Smith v. Binder, 75 Ill. 492 (1874). Where an insured has paid to an agent of an
insurance company a premium which has not yet been accounted to the
insolvent insurer, the company, which prior to inception of the policy becomes
insolvent, cannot maintain an action for recovery of the premium from the
agent. Although the coverage had been in effect for approximately one
month, the agent had not yet remitted the premium to the company and the
insured has the right to demand the premium back from the agent.
Indiana
Iowa
Kentucky
Bushnell v. Krafft, 133 Ind. App. 474, 183 N.E.2d 340 (1962). In rejecting the
receiver's action to recover from the agents of an insolvent insurer for the
agent's unearned commissions on policies canceled when the insurer was
placed into liquidation, the court held that the insureds were entitled to
unearned premiums and therefore the agents could properly apply their
unearned commission for the insured's replacement insurance. The court
noted that insolvency of an insurance company which results in the
cancellation of policies is a material breach of contract to its policyholders. As
a result, it is not in a position to recover premiums due for future coverage, nor
is it in a position to recover commissions in the hands of agents, and
policyholders are entitled to an unearned premium claim and the insolvent
insurer is devoid of any right to secure the commissions retained by its agents.
The agency agreement in issue also provided that the company made no direct
refunds to policyholders of the "gross" return premium but instead remitted
net to its agents who then added their unearned commission to the return
premium.
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 contacts
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."
Kentucky Home Life Ins. Co. v. Miller, 268 Ky. 271, 104 S.W.2d 997 (1937). The
court held that insolvency of life insurance company did not excuse insured
from paying premiums when receiver was authorized to accept premiums
falling due pending reorganization of the company.
Magnet Coal Co. v. Donaldson, 197 Ky. 831, 248 S.W. 195 (1923). The court held
that policyholders are liable to receiver for amount of premium earned before
insolvency of insurer.
Massachusetts Comm. of Ins. v. Jankowski Ins. Agency, LLC, 61 Mass. App. Ct. 305 (2004).
Where the broker refused to return unearned commissions to the estate of the
insolvent insurer, the court held that unearned commissions are assets of the
insurer’s estate and must be returned to the liquidator.

Missouri
Clark v. Middleton & Riley, 19 Mo. 53 (1853). In rejecting the defense of a
policyholder to payment of premiums to an insolvent insurer, the court stated
that the mere fact of the insolvency of the company at the time of the issuance
of the policy does not render the contract void nor is the policyholder exempt
from the payment of the premium due unless there was actual fraud practiced
on the policyholder. No facts were presented by the policyholder, and further,
16 months had elapsed between effecting the insurance and the petition for
liquidation. Finally, the mere failure to file an annual statement does not
indicate insolvency at the time the policy was written.
Clay v. Eagle Reciprocal Exchange, 368 S.W.2d 344 (Mo. 1963). The receiver
pursued former agents of an insolvent insurer for premiums collected on
policies written prior to insolvency and cancelled as a result of the order of
liquidation. The court held the agents liable to the estate for both unearned
premiums and unearned commissions since to allow the agent to retain such
sums would constitute a preference over policyholders and other creditors.
Clay v. Independence Mutual Ins. Co., 359 S.W.2d 679 (Mo. 1962). The receiver
of an insolvent insurer pursued one of the insurer's former agents to recover
premiums and unearned commission on policies written prior to the
receivership and to recover attorney's fees. In rejecting the award of an
attorney's fee made in favor of the Missouri insurance commissioner as
receiver, it was held that to permit the insurance agency to use unearned
premium resulting from cancellations at the time of the insolvency to give
refunds in full to policyholders creates a preference over other insureds and
creditors, even though the premiums were used to purchase alternative
coverage for the policyholder.
Weese v. Marengo, 469 S.W.2d 873 (Mo. App. 1971). The West Virginia receiver
of and insolvent insurance company brought action against Missouri agents
who owed premiums and unearned commissions. Intervention petitions by an
insured subject to a claim and judgment creditor, were denied since there was
no relationship between the claims of agent and the claims of policyholders.
Nebraska
New Jersey
United Benefit Fire Ins. Co. v. Earl, 181 N.W.2d 841, 186 Neb. 175, (1970). The
court held that unearned premiums and unearned commissions held by an
insurance agent are held in fiduciary capacity for the company and recoverable
for a company in involuntary liquidation.
Central Penn National Bank v. New Jersey Fidelity & Plate Glass Ins. Co., 117 N.J.
Eq. S48, 177, A. 441 (1935). An insurance company does not hold unearned
premiums in trust for the purpose of effecting reinsurance. To rule otherwise
would permit preferential treatment of policyholders over creditors of an
insolvent insurer's estate. Upon the insolvency of an insurer, its assets became
trust funds for the benefit of all creditors and an international reduction of
them is a fraud upon the trust.
Bohlinger v. Ward & Co., 20 N.J. 331, 120 A.2d 1 (1956). In an action by the
liquidator of an insolvent insurance company against an agent of the company
for an accounting of premiums, the evidence did not establish that,
subsequent to the agency agreement, a course of business modified the
agreement to allow the agent to offset net return premiums on cancelled
policies against collected premiums. Nor did the evidence establish that such a
course of business substituted a creditor‐debtor relationship for the principalagent
relationship created by the agreement. Although the insurance
company permitted the agent to deduct unearned premium credits on policies
cancelled in the ordinary course of business at the request of policyholders or
the company, such treatment of unearned premiums would not apply to
policies conditionally surrendered by policyholders at the agent's request

where the solvency of the company, not cancellation, was the issue. To permit
otherwise would give a preference to such policyholders. The liquidator was
entitled to the full amount of collected premiums.
Sheeran v. Sitren, 168 N.J. Super. 402, 403 A.2d 53 (Ch. 1979). The court held
that an agent‐broker of an insurance company in liquidation is required to
remit all earned premiums which in the ordinary course of business would have
been remitted to the company. Allowing the agent‐broker to keep the earned
premiums would be to the disadvantage of others. An agent‐broker, who was
neither a debtor nor a creditor of the liquidated insurer, but was rather an
agent of both the insured and insurer and a mere conduit for premium
payment and refunds, was not entitled to set off premiums which were
unearned against premiums earned by the insurer but not yet paid by the
agent‐broker, where the unearned premiums ultimately belonged to the
insured.
New York
Bohlinger v. Zanger, 306 N.Y. 228, 117 N.E.2d 338 (1953). Unearned premiums
do not constitute an asset for the liquidator of an insurer. Therefore, the
insurance broker is not required to turn over the full premium to the liquidator,
but instead would only be required to turn over only as much as represents the
pro rata premium earned before liquidation. The earned portion of premiums
is held by the broker as a trust fund for the benefit of the insurer or its
successor in interest, here, the liquidator, and not as an offset.
Holz v. M.L. Nathanson & Co., 5 Misc.2d 266, 159 N.Y.S.2d 785 (1957), affirmed,
4 A.D.2d 858, 167 N.Y.S.2d 412. The court held that even though a liquidation
order terminated all the policies of an insolvent insurer, an insurance agency
was not thereby released from its obligation to return a pro rate share of
commissions retained on cancelled policies. The liquidator was entitled to
claim those commissions.
Rohrbaugh v. U.S. Mgmt. Inc., No. 05‐CV‐3486, 2007 U.S. Dist. LEXIS 47978
(E.D.N.Y. June 2, 2007). In the liquidator’s action to recover premiums from
former insureds of two insolvent insurers, the liquidator was not bound by a
forum selection clause contained in a shareholder agreement, which specified
that disputes would be governed by Bermuda law. The clause was not
contained in policies issued by the insolvent insurers. Also, the clause applied
only to the shareholder agreement, and the insurers did not agree to be bound
by the clause. Therefore the liquidator was not required to litigate in Bermuda.
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 court granted the rehabilitator’s motion for
preliminary injunction and ordered the defendant agency to deposit security in
the rehabilitator’s action against the agency to recover premiums owed to the
insolvent insurer; the security requested represented the entire balance of
premiums received by the agency on behalf of the insolvent insurer.
Van Schaick v. Lincoln Dye Works, Inc., 146 Misc. 342, 263 N.Y.S. 114 (1933).
When the liquidator brought an action to recover premiums, the defendant
counterclaimed that the insurer was obligated under its policies to defend
actions pled prior to order of the liquidation and to pay the resulting claims.
The court held the counterclaims could not be maintained where the order of
liquidation enjoined any actions against the insurer or the liquidator. In
liquidation proceedings the amounts due for premiums are absolute debts and
could not be offset against any loss or individual claim due from the insurer in
liquidation.

Oklahoma
Shoup v. Mayerson, 454 P.2d 666 (Okla. 1969). In an action by the receiver of
insolvent insurer against an agent to recover unearned premiums, the court
held that the agent, whose contract provided that the agent shall hold and
keep all premiums as a fiduciary trust, and who after appointment of the
receiver instigated cancellation of certain policies, and who after the court
ordered cancellation of other policies, either refunded unearned premiums to
insureds or expended them in providing insureds with replacement policies,
was liable to receiver for previously collected but unremitted and unearned
premiums both on policies on which agent initiated cancellation and policies
cancelled by court order.
McFarling v. Demco, Inc., 546 P.2d 625 (Okla. 1976). The receiver for an
insolvent insurer sued for the recovery of earned and unearned premiums,
earned and unearned commissions held by an insurance broker and an insured.
The court held that if a principal and agent relationship existed between the
insurer and insurance broker, who was authorized to solicit for and place
policies with insurer, then funds paid to broker by the insured which had not
yet been remitted to insurer prior to its being put into receivership or in
constructive possession of the insurer would be held in trust for insurer.
However, if a debtor‐creditor relationship existed between them, then the
receiver could lawfully recover from funds paid by insured to the broker only
those premiums then earned. As the agreement between the insurer and
insurance broker to retain commissions out of premiums collected for sale of
an insurer's policy, under which premiums were not due the insurer until 45
days from end of month in which the business was written, this implied a
relationship between the insurer and broker that was one of creditor‐debtor,
and thus, the broker's obligation to the insurer and the receiver was to remit
on due date earned premiums minus earned commissions.
Oregon Ainsworth v. Cincotta, 79 Or. App. 574, 721 P.2d 455 (1986). Under ORS 734.370,
a domiciliary receiver of an insolvent insurer is entitled to recover unpaid
premiums held by agents which have not yet been forwarded to the insurer
without allowing the agents to offset against that amount their claims for
commissions and return premiums on cancelled policies.
Pennsylvania Commonwealth v. Guardian Fire Ins. Co. v. Pennsylvania, 65 Pa. Super. 208
(1916). Local agents, possessing premiums paid but not remitted to the
company before it was placed in receivership, could not set them off against
dividends on claims for return premiums due policyholders of which the agents
had become assignees.
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" (does not do business).
Rhode Island
Bohlinger v. Kagan, 147 F. Supp. 910 (D. R.I. 1956). The agent of an insurance
company is required to account for all funds that come into the agent's
possession for the company where the agreement and the course of dealings
between agent and company establish an agent‐principal relationship. Where
the agent presents no evidence to establish an agreement or course of
dealings that created a debtor‐creditor relationship with the company, the
relationship will be found to be agent and principal. Therefore, the statutory
liquidator of a foreign insurance company is entitled to an accounting by the

agent of all premiums collected by the agent on behalf of the company. Under
the agency agreement in question, the agent was permitted to deduct
commissions due from premiums received; therefore, the agent could make
this deduction for premiums collected before the date of the liquidation order.
The agent was also entitled to credit for premiums which had been returned
before the date of the liquidation order to policyholders who had cancelled
their policies. The agent was required to provide a full accounting for
premiums collected after the date of the liquidation order.
South Dakota
Buck v. Ross, 240 N.W. 858, 59 S.D. 492 (1932). The receiver appealed a ruling
that members of an insolvent insurer were not required to pay the balance due
on a premium for employers liability insurance because the receiver had
terminated the policy and all protection which defendants were to receive
under the policy terminated. The South Dakota Supreme Court reversed and
held that, as members of the mutual company, the defendants were liable for
the entire amount of the premium they had agreed to pay, even if benefits
under the policy were terminated by insolvency.
Tennessee McReynolds v. Cherokee Ins. Co., 815 S.W.2d 201 (Tenn. Ct. App. 1990).
Insolvent insurer's estate brought an action against agencies to recover unpaid
premiums. The lower court permitted the agencies to set‐off the insurer's
profit sharing obligations against the agencies' debts for unpaid premiums. In
affirming the lower court's decision, the court of appeals held the following:
(1) that where insurance agencies had a right to their share of the profits on
insurance, even though the amount of such profits were not to be ascertained
until the end of the calendar year, the agencies were entitled to set‐off their
share of profits from the amount of premiums owed to the insolvent insurer;
(2) that the insurance agencies' obligations to insurer to collect and remit
premiums, and insurer's obligation to agencies for share or profit, were mutual
and thus could be offset; and (3) that the insurance agencies' delay in paying
premiums to insolvent insurer in order to assure payment of insurer's profit
sharing obligation did not preclude agencies from offsetting amount owed by
insurer against agencies' debt to insurer regarding unpaid premiums.
Texas
Atkins v. Williamson, 320 S.W.2d 425 (Tex. Civ. App. 1959). In an action by the
receiver of an insolvent insurer to recover amounts collected by an agent of
the insurer, the court found that the agent was liable for the amount of
premiums collected and the return premiums owed on cancelled policies. The
agent was not entitled to an offset for amounts due him.
Bouknight v. Langdeau, 333 S.W.2d 670 (Tex. Civ. App. 1960), affirmed, 162 Tex.
42, 344 S.W.2d 435 (1961). The court held that because there was partial failure
of consideration both as to the policyholders and as to the agent, the receiver
was entitled to recover from the agent unearned commissions, the amount of
earned premiums whether collected or uncollected from the policyholder, and
all collected premiums not yet forwarded to the company, whether earned or
not, less earned commissions, and the receiver was not entitled to unearned,
uncollected premiums and attorney's fees.
The contract between agent and the insurance company held the agent liable
for all premiums, whether or not collected from policyholders, less
commissions. The agent wanted to offset assignments, dated after the
beginning of receivership proceedings, of claims for unearned premiums of the
policyholders against his unearned commissions, uncollected earned premiums
and collected unearned premiums due to the receiver.
Eng v. Wheeler, 302 S.W.2d 263 (Tex. Civ. App. 1957) The court held the agent
was indebted to the receiver for unearned commission, regardless of whether
the policyholders made claim of the receiver for unearned premiums. Because

the agent was under no obligation to refund the unearned premiums to the
policyholders, this action by the agent created no liability on the part of the
insurer to him. The court also held that the policyholders' claims for refund of
unearned premiums were general claims against the receivership, to be
adjusted along with other general creditors.
English Freight Co. v. Knox, 180 S.W.2d 633 (Tex. Civ. App. 1944) writ ref.
w.o.m. This was an action by the receiver of an insolvent casualty company to
recover against a policyholder for additional premiums and debts due on three
policies. The policies had been issued to the defendant as the sole proprietor
of a business prior to the incorporation of the business. The defendant denied
that the corporation had assumed the liabilities of the sole proprietorship. The
court found that there is presumption, in the absence of an express
undertaking, that the takeover of the assets of the predecessor also includes
the assumptions of its liabilities. The defendant was found liable to the
receiver for the amounts due on the earlier policies.
Guardian Consumer Finance Corp. v. Langdeau, 329 S.W.2d 926 (Tex. Civ. App.
1959). Receiver of insurer filed suit against sixteen small loan corporations and
their parent and management organizations to recover commissions
amounting to 85% of the premiums charged on credit life, health and accident
insurance which named the various loan corporations as beneficiaries. The
court held that the receiver's powers exist only for the protection of claimants,
other creditors and policyholders and in this case the receiver needed to
recover no further funds in order to protect them. The retained commissions
were in compliance with the agreement between the insurer and the
corporations so they were not illegally retaining the commissions because the
code allows a corporation in the loan business to become a lender agent and
have an employee life insurance agent. Furthermore, if the retention of
commissions was unlawful, insurer could not recover the commissions because
the insurer's stockholders had approved the division of premiums, and the
receiver, who has no greater powers than the insurer cannot recover the
premiums either unless the receiver is acting as trustee to protect innocent
creditors of the insolvent corporation.
Knox v. Damascus Corporation, 200 S.W.2d 656 (Tex. Civ. App. 1947). When
the receiver sought to recover against policyholder on a balance due for
several workers' compensation policies, the defendant claimed that it had
been released by a compromise agreement regarding these policies. Several
policies were involved and the court found that the release in question only
covered policies issued in the name of Damascus Corporation. The corporation
earlier had been organized under another corporate name, and there was still
an outstanding liability for an advanced deposit due from that corporation.
The receiver only had authority to compromise claims with court approval. It
would have been an abuse of discretion for the receiver to have compromised
a claim which was neither bad nor doubtful. No harm was alleged by the
policyholder because it was contractually obligated pursuant to the
subscriber's agreement for an advance deposit to pay on all policies issued to
the corporation or its predecessor.
Langdeau v. Bouknight, 162 Tex. 42, 344, S.W.2d 435 (1961). The Texas
Supreme Court found the receiver entitled to all unearned premiums and
unearned commissions. The court also denied the award of attorney's fees
and found no error in receiving into evidence documents certified by the
receiver, and found that Art. 21.28 was not local or special legislation but a just
and reasonable classification in light of the situation of liquidation of insurance
companies confronting the legislature. At issue was an agents rights to
commissions and unearned premiums on cancelled policies and noted that the
Texas law prohibits allowance of claims based on obligations transferred

subsequent to institution of delinquency proceedings with a view to their use
as an offset and referred to the agent's contract with the insurer which
provided that the agent was to return unearned commissions on cancelled
policies.
Rosenstock v. Wheeler, 310 S.W.2d 350 (Tex. Civ. App. 1958) writ ref. The
receiver of a reciprocal sought to recover unearned commissions from the
reciprocal's attorney‐in‐fact. The policies of the reciprocal were cancelled
when the receiver was appointed. Because of the action the policyholders
were entitled to a refund of unearned premium. A portion of the amount that
had been paid to the attorney‐in‐fact is also due to policyholders. It is
customary for the insurer to refund the entire unearned premium to the
policyholder and to recover the commission from the agent. The action of the
receiver was upheld.
Wheeler v. Clark, 306 S.W. 2d 158 (Tex. Civ. App. 1957) writ ref. In an action by
the receiver of an insurance company to recover unearned commissions due
from an agent, the agent cross‐claimed for amounts owed by the insurer. The
agent had repaid the policyholders unearned premiums due them or secured
new policies in a different company. The agent then took assignments from
those policyholders for claims they had against the receiver. If the agent were
permitted to offset the sums owed to the agent for unearned commissions
against the claims assigned to the agent, the agent would become a preferred
creditor of the estate. The court found that the agent acted voluntarily in
refunding monies to the policyholders. It also found that the agent was not
entitled to an offset for unearned commissions and that amount due to the
receiver.
Valuation of Assets
Seventh Circuit Daniel v. Layton, 75 F.2d 135 (7th Cir. 1935), cert. denied, 295 U.S. 753 (1935).
When a group of claimants appealed the receivership court's approval of a
reinsurance contract, the court held that in an insurance company receivership,
the court, in determining fairness of distribution, may accept appraisal values
of property instead of resorting to liquidation through sales.
Michigan Gauss, Commissioner of Insurance v. Central West Casualty Co., 289 Mich. 15,
286 N.W. 139 (1939). The court held that the trial court did not abuse its
discretion by accepting a bid for the sale of the assets of the insolvent
insurance company in exchange for the stock of another corporation despite
the objection of creditors holding less than 10% of the aggregate claims against
the insolvent company. The court stated that the sale should be confirmed
even through the value of the assets exchanged exceeded the bid price since
the sale had been properly advertised and there was no showing of
misrepresentation, concealment, or fraud.
New Jersey In re New Jersey Title Guarantee & Trust Co., 133 N.J. Eq. 9, 29 A.2d 719 (1943),
reversed on other grounds, 133 N.J. Eq. 612, 33 A.2d 873. The fair value of
assets securing first mortgage participation certificates issued by a company in
liquidation should be determined as of the date of closing. Evaluation as of
such date would result in more equitable distribution of assets upon liquidation
to all claimants.
New York
In re Lawyers Title & Guaranty Co., 164 Misc. 608, 299 N.Y.S. 704 (1937). The
court held that the insurance commissioner must give consideration to
competing offers claimed to be superior, as a factor in determining the
adequacy and fairness of other offers for assets of a title and guaranty
company in liquidation. Moreover, the insurance commissioner is not justified

in accepting an inadequate offer and thereby sacrificing assets to put a stop to
alleged losses.
In re National Surety Co., 248 A.D. 111, 288 N.Y.S. 1014 (1936). An order
disapproving the acceptance bid by the insurance commission of the highest
for the stock of a new surety company organized under a plan of rehabilitation
on the ground that the bid was inadequate and that acceptance of an
amended bid was in the best interests of the estate of the rehabilitated
company was improper under the insurance code.
In re New York Title Mortgage Company, 277 N.Y. 66, 13 N.E.2d 41 (1938). The
validity of any appraisal of mortgages or other securities entering into the
allowance of claims by holders of mortgage guaranties should be tested by
cross‐examination. A mortgage guaranty company went into liquidation.
There wee claims made by holders of the mortgage guarantees who had not
acquired the underlying realty. The court held that the "security," whose value
had to be deducted from the claim, was the mortgage as a mortgage, not the
realty.
In re New York Title & Mortgage Co., 257 A.D. 19, 11 N.Y.S.2d 828 (1939), motion
denied, 257 A.D. 822, 12 N.Y.S. 2d 1021, appeal dismissed, 281 N.Y. 829, 24 N.E.2d
491. A hearing to fix the valuation of mortgages was deemed essential
because of the following facts: The claims of the guaranty could not be settled
by the commissioner of insurance; the trustees appointed in reorganization
proceedings could not settle discreetly without determining the fair value of
their claims; the claims could not be allowed for a sum greater than the
difference between the value of their share of the security and the amount of
the guaranty.
In re New York Title & Mortgage Co., 21 N.Y.S.2d 575 (1940). A mortgage
guaranty company was ordered into liquidation with appraisals of the value of
mortgages and other securities entering into the allowance of claims by the
holders of mortgage guaranties and entered into evidence as an exhibit of the
policyholders. The court held that this was admissible against the holders and
the appointed trustees. The trier of fact could give the evidence as much
weight as it deemed advisable. Moreover, the referee was not required to
accept the opinions of any of the experts who appraised the mortgages and
other securities of a mortgage guaranty company in liquidation.
Claims Against Regulators
Louisiana
Brown v. ANA Ins. Group, 994 So. 2d 1265 (La. 2008). An insolvent insurance
company, ANA Insurance Group (“ANA”), was found to be a single business
enterprise with United States General Agency (“USGA”) and American Funding
Services, Inc. (“AFSI”), and was placed in receivership. A co‐owner of ANA sued
the commissioner of insurance, as liquidator, for mismanagement of the
receivership estate based on the liquidator’s conduct with respect to the sale of
securities owned by USGA. Overruling the lower appellate court’s reasoning
that a finding of a single business enterprise (“SBE”) makes the liquidator a
fiduciary to the co‐owner of ANA, as if she were an owner of the entire SBE, the
state supreme court held that an SBE makes the liquidator owner of all of the
SBE’s assets, but that the owners of the individual entities of the SBE remain the
same. Therefore, the co‐owner of ANA did not have standing to bring an action
against the liquidator of USGA.
Wooley v. Lucksinger, 961 So. 2d 1228 (La. Ct. App. 2007). Owner of an insolvent
health plan filed a third‐party claim against the Department of Insurance in the
same lawsuit where the Commissioner of Insurance, as liquidator of the same
insolvent health plan, was pursuing causes of action against the owner for

corporate mismanagement and accounting negligence. The owner sought
indemnity, contribution, and governmental tort damages based on the
Department’s alleged negligent enforcement of rules and regulations thereby
allowing the health plan to fall deeper into insolvency. The owner also sought
damages from the Department on the basis of detrimental reliance. The court
of appeals held that, as a matter of law, the Department’s executing and
applying its statutory functions are not promises for the purposes of a Louisiana
statutory detrimental reliance claim or for public contract purposes. Therefore,
the owner’s claim for detrimental reliance on this basis is legally nonexistent.
The owner’s remaining third‐party demands of the Department could not be
sustained because, under Louisiana law, a third‐party plaintiff must allege and
prove that a third‐party defendant is liable to the plaintiff for all or part of the
damage. The joint and divisible nature of negligence under the Louisiana
statutes makes no damage award possible to the owner as co‐obligor.
Therefore, because the Department is not liable to the owner for all or part of
the demand, the owner also has no cause of action for third‐party demand as a
matter of law.
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.
Claims Against the Estate
Plan of Liquidation
Illinois People ex rel. Wilcox v. Equity Funding Life Ins. Co., 61 Ill.2d 303, 335 N.E.2d 448
(1975). The claimants who objected to the plan of liquidation contended that
the amended plan of liquidation, which included a settlement for the
claimants, cannot bar the claims of defrauded claimants who were not given
actual notice of the amended plan of liquidation and settlement. The court
held that the objectors could not raise the point for the first time on appeal as
the appellees would effectively be deprived of the opportunity to refute the
allegation.
New Jersey
Clifford v. Concord Ins. Co., 114 N.J. Super. 168, 275 A.2d 454 (1941), affirmed,
114 N.J. Super. 495, 277 A.2d 400. The court held that the insurance
commissioner does not have power to approve a plan of liquidation in all
cases. This case involved the creation of a new insurance company which
assumed the assets of the insolvent insurer, which would otherwise be sold,
and which eliminated a group of creditors.
Kipp v. Fidelity Title and Mortgage Guaranty Co., 116 N.J. Eq. 409, 174 A. 229
(1934), affirmed, 117 N.J. Eq. 588, 177 A. 83. The statute providing for the
liquidation of mortgage guaranty corporations did not require the consent of
two‐thirds of the stockholders to a plan for liquidation of an insolvent
corporation where the creditors would not receive full payment from the
assets of the company.
New York In re Lawyers Title & Guaranty Co., 254 A.D. 491, 5 N.Y.S.2d 484 (1938),
reargument denied, 9 N.Y.S.2d 126. The insurance commissioner has the
power to negotiate with interested parties, draw up a plan for the liquidation
of an insolvent company, and then submit the plan for court approval.

In re New York Title & Mortgage Co., 168 Misc. 60, 5 N.Y.S.2d 471 (1938). A plan
to reorganize a title and mortgage company in liquidation, developed by the
insurance commissioner, whereby a new mortgage company would be formed
and sell its stock to the former company's assenting creditors at a price fixed
by the commissioner, was held not invalid because of the stockholders'
exclusion from participation.
Matter of Lawyers Mortgage Co., 169 Misc. 802, 9. N.Y.S.2d 127 (1938),
affirmed, 256 A.D. 974, 11 N.Y.S.2d 250. The court concluded that preventing
creditors and stockholders from voluntarily forming syndicates to purchase
assets from the insurance commissioner in a liquidation proceeding could be
discriminatory and injurious to the very persons the liquidation law seeks to
safeguard and assist. Thus, creditors and stockholders can work out a plan of
reorganization for their own company, as long as every creditor or stockholder
can participate in the plan or may opt out and share in the proceeds of the
liquidation.
Pennsylvania Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 61 Dauph. 131
(1950). Only the insurance commissioner is authorized to liquidate a company
and a plan which requires the commissioner's consultation with other parties,
including policyholders, was not valid. Such a plan illegally delegated authority.
Date of Vesting of Rights and Liabilities
Fifth Circuit
Alabama
Arkansas
Crist v. Sharp Electric, Inc., 876 F.2d 379 (5th Cir. 1989). Receiver sued insured
for payment of premiums earned by insurer prior to insolvency. Insured
defended on the grounds that the subsequent failure to provide a defense
pursuant to coverage under the policy was a breach of the insurance contract,
thereby relieving the insured of its contractual obligation to pay premiums.
The court held that the "interlocking web of statutes" governing insurance
insolvency prevails over general principles of basic contract law, and rejected
an argument that because the insurer failed to defend after its insolvency, the
premium was not "earned." The court found that no event occurring after
insolvency could control whether premiums were or were not "earned,"
because the rights and liabilities of the insurer and its creditors are fixed as of
the date of the entry of the liquidation order and because a decree of
dissolution cancels outstanding policies as of that date by operation of law. A
contrary holding would permit these insureds as unfair preference over other
claimants of the same class.
Myers v. Protective Life Ins., 342 So.2d 722 (Ala. App. 1977). Agents' rights to
renewal commissions due from insolvent insurer is decided as of the date the
final order fixing the rights and liabilities of the insolvent insurer is filed in the
clerk's office.
Federal Union Surety Co. v. Flemister, 95 Ark, 389, 130 S.W. 574 (1910). The
court held that where there was no adjudication of the insolvency of a foreign
mutual insurance company, and no decree dissolving the company, but there
was an order of a chancery court in Arkansas appointing a receiver to collect
and distribute the company's assets in Arkansas to the creditors, a policyholder
whose policy has not been cancelled may recover for a loss which accrued
after the receiver's appointment.
Massachusetts Bonding & Insurance Co. v. Home Life & Accident Co., 119 Ark.
102, 178 S.W. 314 (1915). Where a fire insurance company violated a statutory
period within which it was required to pay a loss covered by one of its policies,
is not liable for the penalty therein where demand was made after the time
specified and after a receiver of the insurance company was appointed.

Mendel v. Garner, 283 Ark. 473, 678 S.W.2d 759 (1984). Policyholders of an
insolvent carrier appealed a provision in the rehabilitation plan that cut off
their rights to surrender their policies for the cash surrender value. In
upholding the plan, the Supreme Court of Arkansas held: "The rehabilitation of
insurance companies pursuant to state insolvency statutes does not impair the
obligation of contracts." 678 S.W.2d at 761.
California W.J. Jones & Son v. Independence Indemnity Company, 52 Cal. App. 2d 374, 126
P.2d 463 (1942). Appellant insurer had a claim against the bank, at the same
time the appellant was in receivership. Appellant attempted to levy on the
attached party but the property had been delivered to the International
Reinsurance Corporation. Thereafter, the appellant obtained a judgment
against the reinsurer and filed a writ of execution on any sums or credits due
from the bank. After the appellant filed its writ, a court appointed the
insurance commissioner liquidator for International, the reinsurer. The
appellate court found that appellant's execution had ceased and that its lien of
attachment had ended by the time of the appeal and therefore, appellant had
no claim of International against the bank. Although the insurer had an
attachment lien on the date of the order of liquidation, the attached lien
expired when insurer failed to act on it.
Florida
Bartholomew v. Glens Falls Ins. Group, 241 So.2d 698 (Fla. App. 1970), cert.
dismissed, 262 So.2d 680 (1972). The Arkansas insurance commissioner's
proceedings declaring insurer insolvent and appointing receiver were not
determinative of date of insolvency for purposes of Florida uninsured motorist
coverage, although the Florida commissioner had recognized the same date in
ancillary proceedings. Plaintiff could present proof that the date of actual
insolvency was earlier.
State Farm Mutual Automobile Ins. Co. v. Fass, 243 So.2d 223 (Fla. App. 1971).
The court held that where the statute regulating uninsured motorist coverage
provides for coverage where the liability insurer "becomes insolvent" within
one year after the accident, the date of actual insolvency could be proved to
be different than the date of adjudication of insolvency.
William v. Gottlieb, 249 So.2d 425 (Fla. 1971). When the Florida insurance
commissioner became receiver of an insolvent Florida insurer on April 2, 1969,
the court issued an injunction prohibiting all garnishments, etc., against the
insolvent insurer. The plaintiff had obtained a judgment against the insolvent
insurer's bank account on March 28, 1969. The court held that the significant
judgment date was date of the original judgment, which was four months prior
to institution of the delinquency proceedings and therefore, garnishment was
not barred.
Georgia
Shaw v. Caldwell, 229 Ga. 87, 198 S.E.2d 684 (1972). The provision in the
insurance code fixing the rights and liabilities of an insolvent insurer as of the
date on which the liquidation order is filed did not bar plaintiff's claim, which
was merely unliquidated, and became liquidated and was presented to the
receiver before the last date for filing of claims. Plaintiff's action was filed
before Georgia ancillary receiver obtained injunction prohibiting filing or
prosecuting claims against the insurer. The plaintiff had no notice of the
ancillary proceeding, and the receiver had no notice of the suit and had denied
the claim. This case was later overturned by statute. See, Short v. State, 235
Ga. 394, 219 S.E.2d 728 (1975).
Wright v. Fuller, 148 Ga. 223, 96 S.E. 433 (1918). The court held that where
insurer had an obligation under a disability policy to pay $5,000 in $25.00
monthly installments, this obligation was fixed upon the date of the insolvency

of the company, and the estate of the policy beneficiary would be awarded the
actual cash value of the $5,000 as of the date of the insolvency of the
company.
Maryland
Minnesota
Md. Ins. Guar. Assn. v. Muhl, 66 Md. App. 359, 504 A.2d 637 (1986). State
guaranty fund was not barred from making reimbursement claims against the
insolvent insurer after the date specified in a court order as "the last date' for
filing claims. Thus, the guaranty fund was entitled to retain its statutory
preferred creditor status with regard to the assets of the insolvent insurer.
Gray v. Merriman, 56 Minn. 171, 57 N.W. 463 (1894). The court held that as the
policy had not matured as of the date of dissolution, the policyholder was only
entitled to share in the assets of the company as a member after the payment
of the company's debts and not as a creditor of the company.
New York In re Consolidated Indemnity & Insurance Co., 255 A.D. 501, 8 N.Y.S. 2d 217
(1938). The workers' compensation law states that a payment in whole or in
part of compensation award by an employer or an insurance carrier bars
recovery against the other. The court held that this could not be applied to
recovery after the carrier went into liquidation. The status of the claim on that
date fixed the claimant's rights to share in the distribution of the estate.
In re Lawyers Title & Guaranty Co., 266 A.D. 322, 42 N.Y.S.2d 177 (1943) appeal
denied, 268 A.D. 773, 50 N.Y.S.2d 172, appeal dismissed, 298 N.Y. 675, 56 N.E.2d
293. The court held that the date of the order of liquidation is the date of the
determination of the respective rights attaching to the guaranteed mortgage
participation certificates sold to the general public and certificates of the same
issue retained by the mortgage company and subsequently pledged as
collateral.
Matter of Lawyers Mortgage Co., 163 Misc. 680, 298 N.Y.S. 113 (1937). The
rights of creditors are fixed under the insurance law relating to rehabilitation,
liquidation, conservation, and dissolution of delinquent insurers and thus, a
plan of reorganization of a mortgage company in rehabilitation would not
affect the determination of creditors' claims in a subsequent liquidation
proceeding.
Pennsylvania Commonwealth v. State Ins. Co., 4 Dauph. 104, 25 C.C. 283, 10 Dist. 339 (1901).
The rights of all parties are fixed when the receiver of an insolvent corporation
takes possession of its assets. Each creditor becomes entitled to that portion
of the debtor's estate as the debt due the creditor bears to all of the debts.
Parties who are not creditors have no claim on the insolvent estate and cannot
acquire one by later becoming creditors.
South Carolina Parris v. Carolina Mutual Fire Ins. Co., 91 S.C. 344, 74 S.E. 1010 (1912). All
obligations of a mutual company and of its members become fixed on the date
the company is placed in the hands of a receiver, and a court taking charge of
the company through the institution of receivership proceedings is to enforce
these obligations and adjust all the equities of the parties.
Tennessee State ex rel. Williams v. Cosmopolitan Ins. Co., 217 Tenn. 8, 394 S.W.2d 643
(1965). The Tennessee Supreme Court found that some rights and liabilities
can be fixed at a date earlier than the decree ordering liquidation, which, in this
case, was the date of adjudication of insolvency by an Illinois court and an
order of rehabilitation. In this case, a general agent in Tennessee filed a claim
in Tennessee against an insolvent insurer for the agent's costs in obtaining
substitute coverage for the insurer's policyholders upon the agent's learning
that the company's authority to do business in Tennessee had been revoked.

The lower court denied the claim because the order of liquidation cancelled all
policies, and the expenses were incurred prior to that time.
Texas
Durish v. Channelview Bank, 809 S.W.2d 273 (Tex. App.‐‐Austin 1991). Prior to
insolvency, insurer issued surety bond in favor of defendant bank, which made
demand under the bond to no avail. Thereafter, the insurer was placed in
receivership, and the ancillary Texas receiver found the insolvent insurer had
insufficient assets to satisfy its Texas obligations. The receiver then rejected
the bank's claim for reimbursement under the Texas Property and Casualty
Insurance Guaranty Association Act, finding it was not a "covered claim" under
the Act. The Act had been amended to delete coverage for surety bonds after
a certain date, and the court held that no surety bond coverage was provided
under the Act for any insurer which was declared to be "impaired" after that
date. Because this insurer was declared impaired after that date, the bank's
claim was not a "covered claim," and judgment was entered for the receiver.
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.
Langdeau v. Dick, 356 S.W.2d 945 (Tex. Civ. App. 1962), writ ref. n.r.e. Among
other defenses in a suit by a receiver on promissory notes given in payment for
insurer's debentures and to foreclose a deed of trust that had been given as
security for the note, the defendants asserted that they had exercised their
right to cancel and terminate the bond purchase agreement on December 1,
1954. However, the court held that their rights and liabilities under the
debenture purchase contract had become fixed on June 17, 1954, the day the
receiver took control of the insurer. As a result, they could not cancel or
rescind the purchase contract. On motion for rehearing, court noted that
while the applicable provisions of the insurance code were not in effect in
1954, the same result would be obtained under the existing Texas insurance
code.
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.
Filing of Claims

Alaska
Williams v. Wainscott, 974 P.2d 975 (Alaska 1999). The receiver's decision to
deny as untimely a ceding company's claims against an insolvent reinsurer
was not upheld when notice of the deadline to file claims had not been
properly served upon ceding company.
Arkansas Propak Logistics, Inc. v. Foundation Ins. Co., 2007 WL 2302466 (W.D. Ark. 2007).
Plaintiff insured commenced a lawsuit alleging a draw‐down on a letter of
credit constituted a violation of a risk sharing agreement entered into between
insolvent insurer Foundation Insurance Company and Plaintiff. On summary
judgment brought by Foundation’s liquidator, the United States District Court
held that Plaintiff failed to submit a claim against the liquidation to the estate,
and was barred from obtaining relief against Foundation under both South
Carolina and Arkansas law.
California
Abraugh v. Gillespie, 203 Cal. App. 3d 462, 250 Cal. Rptr. 21 (1988). The court
held that absent a showing of failure to receive statutory notice by a claimant
or any showing that the Insurance Commissioner was responsible for late filing
of a claim, a court cannot grant relief from provisions of the Insurance Code
requiring a claim against an insolvent insurer to be filed within six months.
Carpenter v. Eureka Casualty Company, 14 Cal. App. 2d 533, 59 P.2d 682 (1936).
Since the liquidation law contained no exception, the appellate court
concluded there was no exception based on minority to the requirements of
notice and timely filing of claims.
Garamendi v. Mission Ins. Co., 15 Cal. App. 4th 1277 (Ct. App. 1993). The court
held that California law permits the acceptance of "notice" or "policyholder
protection" claims filed within six months of the filing deadline to preserve
the long‐tail effect of liability policies written on an occurrence basis.
Kinder v. Pacific Public Carriers Co‐op Inc., 105 Cal. App. 3d 657, 164 Cal. Rptr.
567 (1980). The court of appeals affirmed the insurance commissioner's denial
of an unliquidated liability claim filed seven months after the date for filing had
expired. The court also held that no estoppel resulted from the
commissioner's letter to the plaintiff's attorney erroneously stating that the
taxi company's insurance did not cover claims based on assault and battery,
since the inquiry by the plaintiff's attorney was also not made until 35 days
after the claim filing date had expired.
Colorado Alexander v. Indus. Claim Appeals Office, 42 P.3d 46 (Colo. Ct. App. 2001).
Alexander, a workers’ compensation insurance claimant whose employer’s
insurer became insolvent, submitted a claim in 1998 which was denied because
the receivership court established a July 31, 1995, deadline for filing proofs of
claim. In this suit, Alexander contended that COLO. REV. STAT. § 10‐4‐508 (1)(a),
which limits claims the Colorado Insurance Guaranty Association (“CIGA”) must
pay, violated his constitutional rights to due process and equal protection and
also denied him access to the courts in violation of the Colorado Constitution.
The Colorado Court of Appeals disagreed, and found that one of the “purposes
of the [CIGA] Act is ‘to avoid excessive delay in payment and financial loss to
claimants or policyholders because of the insolvency of an insurer . . . .’” and
that the “exclusion of late claims serves that purpose.” Thus, “a limitation
provision such as that in § 10‐4‐508 (1)(a) serves legitimate governmental
purposes, such as ensuring finality and the prompt recovery of reimbursement
by the guaranty association from the estates of insolvent insurers, and is
reasonably related to such purposes.” Accordingly, the contention that such
exclusion of late claims violates equal protection or substantive due process
was rejected. Moreover, the court held that because Alexander did not file a
timely claim in the receivership proceeding, his claim against CIGA was not, by

definition, a “covered claim,” and he had no cognizable legal basis to recover
from CIGA.
Colaiannia v. Aspen Indem. Corp., 885 P.2d 337 (Colo. App. 1994). Tennessee
insurance guaranty association moved for allowance of late‐filed proof of
claim in liquidation proceedings of Colorado insurer. The Uniform Act, in
effect in both Colorado and Tennessee, explicitly requires all such claims to
be “filed on or before the last date fixed for the filing of claims in the
domiciliary delinquency proceedings.” C.R.S. § 10‐3‐505(1). Therefore, the
court held that untimely proof of claim filed by insurance guaranty
association, for any sums it was ultimately required to pay as a result of
insurer’s insolvency, was properly disallowed by the trial court.
Delaware Delaware Ins. Guar. Ass’n v. WHX Corp., 2008 WL 495865 (Del. Super. 2008).
Action brought by the Delaware Insurance Guaranty Association (“DIGA”)
seeking a declaratory judgment requiring WHX Corp. (“WHX”) to reimburse it
for workers’ compensation benefits that DIGA paid to the defendants’
employees. The payments were made after WHX’s workers’ compensation
insurer became insolvent. DIGA made the claim pursuant to 18 Del. C. §
4211(a)(2)(a), the “Net Worth Statute,” which allows DIGA the right to obtain
reimbursement from an insured with a new worth of $25 million or more when
its insurer becomes insolvent. Defendant countered that the action is barred by
the three year statute of limitations. The court held that “a worker has five
years, starting from the date of the last workers’ compensation payment, in
which to make a claim; and . . . DIGA then has three years, starting from the end
of the five year statute of limitations . . . in which to pursue an action for
reimbursement.” Id. at *1. As a result, the court found that DIGA’s claims were
within the allotted time period and it denied the defendant’s motion for
summary judgment.
Florida
Ramos v. Jackson, 510 So.2d 1241 (Fla. Dist. Ct. App. 1987). Provision of the
Insurer's Rehabilitation and Liquidation Act in Florida which releases an insured
from liability to a claimant who elects to seek relief under the Act by filing a
claim does not amount to a denial of access to courts even if the election to file
a claim may not be withdrawn. The injured party has the right to either seek
relief against alleged tortfeasors or waive this option and seek relief from the
receiver of the insolvent insurer, and once a claimant elects to seek relief under
the Act and release the insured, the claimant's election may not be withdrawn.
Georgia Georgia Insurers Insolvency Pool v. Moore, 183 Ga. App. 66, 357 S.E.2d 823
(1987). An insured who waited 15 months after a court‐ordered deadline for
filing claims against an insolvent automobile insurer before seeking to
retroactively purchase personal injury protection benefits from the insolvent
insurer was not barred from participating in distribution of the insolvent
insurer's assets due to the evidence showing that statutory and court‐ordered
notice requirements had not been complied with by the ancillary receiver of
the insolvent insurer.
Illinois
Matter of Fidelity General Ins. Co., 79 Ill. App. 3d 539, 398 N.E.2d 1091 (1979). A
creditor of the insolvent insurer was in federal bankruptcy proceeding, and
filed its claim against the insurer after the last day set by the insurer's liquidator
but within two years of its federal bankruptcy petition as provided by federal
law. The court held, however, that the last date for filing claims against the
insolvent insurer was not a period of limitation fixed by federal or state law
upon any claim within the meaning of the Federal Bankruptcy Act. Since the
last date for filing claims against the insurer was more than 60 days
subsequent to the plaintiff's bankruptcy petition, the Bankruptcy Act did not
extend the time for filing claims and the plaintiff's claim was properly denied.

Urban v. Louis Loham and Theodore Lowe, 227 Ill. App. 3d 772, 592 N.E.2d, 292
(1992). Section 546(a) of the Illinois Insurance Code, Ill. Rev. Stat. ch. 73, par.
1065.96(a), requiring any insured or claimant having a covered claim against
the Guaranty Fund to first exhaust any remedies available under other
insurance policies which may be applicable to the claim, is met when any
insured or claimant makes a claim under such a policy regardless of the
amount, if anything, actually received. A plaintiff who knowingly fails to
exhaust the limits of another policy, shall be assumed to have received that
policy's limits of coverage, and only amounts in excess of that amount may be
recovered from the Fund. Compliance with Section 546(a) is not a condition to
maintaining an action against a tortfeasor, as section 546(a) is relevant in
determining only recovery from the fund, not the liability of a tortfeasor to a
plaintiff.
Indiana
Kansas
Michigan
Holz v. H.C. Baldwin Agency, 140 F. Supp. 860 (S.D. Ind. 1956). A New York
insurance liquidator brought suit to recover premiums collected, and the
defendant agent counterclaimed for sums due from the insurer, but the period
for filing claims had elapsed. The court concluded that it was not precluded
from liquidating those claims because the insurance code now authorized the
filing of proofs of claims against insurers in liquidation subsequent to the date
specified in the notice to creditors.
Hudson v. Ketchum, 156 Kan. 332, 133 P.2d 171 (1943). Plaintiff, before suing
motor carrier operating truck and truck driver for injuries sustained in highway
collision with the truck, properly filed a claim in the receivership action of the
motor carrier's insolvent insurer for such injury, where the insurer's maximum
liability was limited to $5,000, and plaintiff sought $25,000 from operator and
driver.
Monical Mach. Co. v. Michigan Property & Casualty Guar. Assoc., 189 Mich.
App. 694, 473 N.W.2d 808 (1991). A "blanket claim" (that is, a claim for
unknown liabilities) is not a "covered claim" (that is, a claim made on or before
the deadline set for filing claims at an insurer's insolvency proceedings) under
the Michigan Property and Casualty Guaranty Association Act. Thus, the court
held that if a blanket claim is initially timely filed, but is later amended after the
expiration of the deadline to reflect an actual claim, that claim will not qualify
as a covered claim under the Act. The court reasoned that to permit a blanket
claim to qualify as a covered claim would render the statutory filing deadline
meaningless.
Sensing v. Union Indem. Ins. Co., 468 N.W.2d 525 (Mich. Ct. App. 1990). The
court held that compliance with the statute detailing notice requirements
under the Uniform Insurers Liquidation Act does not obligate the Michigan
Property and Casualty Guarantee Association (MPCGA) to pay and discharge
claims; rather, the MPCGA is obligated to pay only "covered claims," which
must be presented to a receiver in Michigan or to the MPCGA before the last
date fixed for the filing of claims in the domiciliary delinquency proceedings.
Minnesota
In re St. Paul German Ins. Co., 58 Minn. 163, 59 N.W. 996 (1894). When a policy
required the insured to enforce any claim for loss within one year from the
time of the loss, and the policyholder failed to do so, the lower court held the
claim was barred by the one year limitation. The insurance company however,
became insolvent in the period occurring after the policyholder had suffered
the loss but before the last date for the policyholder to file a claim. The court
allowed the policyholder's claim stating that the limits for enforcing a claim
found in the insurance contract were waived by the insurer by its assignment
of assets for the benefit of its creditors, including this policyholder.

Missouri
MSEJ, LLC, v. Transit Cas. Co., 2008 WL 2572664 (Mo. Ct. App. 2008 ). An
assignee of a insured’s claims against insolvent insurer filed additional claims
with insurer’s receiver. The receiver rejected these claims on the grounds that
the assignee did not provide sufficient evidence to support them. The circuit
court overseeing the receivership appointed a referee who affirmed the
receiver’s denial of these additional claims because the deadline for submitting
claims had expired and the assignee was barred from presenting additional
evidence to support these claims. On appeal, the Court of Appeal of Missouri
determined that under the rules the circuit court had adopted to oversee the
receivership, the assignee had a right to produce supplemental evidence to the
referee when the referee reviewed the receiver’s denial of the assignee’s
claims. Thus, the referee was allowed to consider supplemental information
because the assignee had met its deadline to submit claims to the receiver. The
court further held that the assignee was not estopped from submitting
additional claims.
New Jersey Fred L. Emmons, Inc. v. Union Indemnity Co., 121 N.J. Eq. 267, 189 A. 630 (1937).
A party which takes from an insurance company on assignment of a debt
owing to the company does not have a claim against the insurance company
which must be filed with the receiver by the date barring further claims if the
company becomes insolvent. The debt is no longer an asset of the company
and if it is later paid to the receiver, such payment is made under a mistake of
fact.
New York B.D. Cooke & Partners Ltd. v. Nationwide Mut'l Ins. Co., 791 N.Y.S.2d 103
(App. Div. 2005). The court held that the judicially approved petition to close
liquidation of the reinsurer and the liquidator’s assignment to the plaintiff of
the right to collect reinsurance receivables owed to the insolvent reinsurer
unambiguously provided that the plaintiff’s claim survived closing of the
estate, but affirmative defenses alleging offset did not survive the
liquidation proceeding or encumber the plaintiff’s assignment.
Gentile v. Fid. Mut'l Life Ins. Co., No. 1995‐5209, 2007 WL 686505 (N.Y. Sup.
2007). The court upheld disclaimers of coverage under a life insurance policy
where, among other things, the life insurer had been placed into rehabilitation
and the policy beneficiary failed to file a proof of claim for denial of death
benefits within the date set by the rehabilitator.
In re Bond & Mortgage Guarantee Co., 271 N.Y. 452, 3 N.E.2d 591 (1936). In the
rehabilitation proceedings of a mortgage guaranty company, a claim for actual
loss on a liquidated claim can be made when it becomes due.
In re Concord Casualty & Surety Co., 171 Misc. 893, 14 N.Y.S.2d 94 (1937). A
claimant who filed a claim after the deadline had no standing in the
proceedings.
In re Lawyers Title & Guaranty Co., 162 Misc. 188, 294 N.Y.S. 381 (1937). Trust
claims against a title company which could be traced to specific property or
into mingled company assets were not subject to the filing requirements
imposed by the insurance code even though the insolvent company
improperly paid itself from funds owned by holders of mortgages and
mortgage certificates.
In Re the Drexel Burnham Lambert Group, Inc., et al. Debtors. Florida
Department of Insurance, as Receiver of the Estate of Guaranty Security Life
Insurance Company v. The Drexel Burnham Lambert Group Inc., et al., 148
B.R. 1002 (S.D.N.Y. 1993). The Florida Department of Insurance, as Receiver
of the insolvent Guaranty Insurance Company, moved to extend the bar date
for filing a claim in the Chapter 11 bankruptcy of Drexel Burnham Lambert

(“Drexel”). The motion was denied by the Bankruptcy Judge and the
Receiver appealed to the United States District Court for the Southern
District of New York. The court stated that Guaranty Security Life supported
its high costs and above market yields by investing a large portion of its
premium in junk bonds purchased by or through Drexel. Nine months after a
Bar Date for filing claims was set in the Drexel bankruptcy, Guaranty Security
was declared insolvent. Seven months later, more than fifteen months after
the Bar Date and after a global settlement of claims against Drexel had been
reached, the Receiver asserted a $175 million claim in the Drexel bankruptcy
for violation of federal securities laws.
In affirming the decision of the Bankruptcy Judge that the Receiver had
failed to show excusable neglect as a cause for the late filing of the claim,
the court observed that excusable neglect is found only where failure to
timely file is due to “unique or extraordinary” circumstances beyond the
reasonable control of the delinquent party. Such circumstances could not be
shown by the Receiver because the Receiver had already asserted claims in
other lawsuits of improper junk bond purchasing and had failed to obtain
leave to file a protective proof of claim while conducting investigations. The
court balanced the equities between the 56,000 policyholders of Guaranty
Security Life who were the “unwitting victims” of unfaithful corporate
officers of the insurer against the interests of the many creditors of Drexel
who worked out the global settlement before the Receiver asserted his
claim. The court found that the Bankruptcy Judge did not abuse his
discretion in rejecting the Receiver’s effort to extend the Bar Date.
In re Liquidation of U.S. Capital Ins. Co., 724 N.Y.S.2d 311 (App. Div. 2001). After
upholding the liquidator’s claim to possession of a disputed security deposit, the
court rejected the defendant’s counterclaims which were not filed within four
months after entry of the liquidation order.
Jason v. Superintendent of Insurance, 67 A.D.2d 850, 413 N.Y.S.2d 17 (1979),
affirmed, 49 N.Y.2d 716, 425 N.Y.S.2d 804, 402 N.E.2d 143. The court held that
when an insured doctor filed a late proof of claim, the doctor was not entitled
to an order nunc pro tunc deeming it to have been timely filed even if the
doctor could not have filed any information concerning a claim against the
doctor by the deadline.
Ohio
Kentucky Med. Ins. Co. v. Jones, 2003 Ohio 3301 (Ct. App. 2003). Insureds, a
physician and her employer, told a prior insurer that a former patient was
investigating legal action against them. This insurer became insolvent. The
insureds sought coverage from the insurer. The appellate court held, under the
insurer’s policy, that a wrongful death claim filed by the patient’s widow was
not covered, as it was not separate from the claim reported to the prior insurer.
The claim reported to the prior insurer was not made during the insurer’s policy
period. The Ohio Insurance Guaranty Association was prohibited, by Ohio
Revised Code § 3955.08(A), from paying claims on behalf of the insolvent prior
insurer for a claim not filed before the final date set by the liquidating court.
While the insureds gave notice of the patient’s investigation, they had to file
substantiating information. The claim was contingent, and they were not
entitled to a share of the prior insurer’s assets. The trial court could not
circumvent Ohio Revised Code § 3955.08(A) by invoking the equitable doctrine
of unconscionability.
Lake Hosp. Sys. v. Ohio Ins. Guar. Ass’n, 69 Ohio St. 3d 521 (1994). Insurer, based
in Indiana, provided malpractice insurance for the company. The insurer was
later deemed insolvent, and the Indiana liquidating court established a final date
on which the insurer’s creditors would be permitted to file claims. One year
after this final date, the Company was named as a new party defendant in a

medical malpractice action, which it settled. The Company filed a claim with the
Ohio Insurance Guaranty Association (“OIGA”), seeking reimbursement for the
settlement payment. Although the company’s claim was filed more than two
years after the bar date, the Indiana liquidating court accepted the company’s
claim as “timely filed.” OIGA, however, rejected the Company’s claim on the
ground that it was not timely filed. The trial court granted OIGA’s motion for
summary judgment. The appellate court affirmed the judgment, holding that
OIGA was obligated to observe the finality of the bar date, pursuant to Ohio
Revised Code § 3955.08(A)(1). The fact that the foreign jurisdiction allowed its
domestic receiver to accept the untimely claim did not control the liability of
OIGA.
Lorain County Bd. of Comm'rs v. United States Fire Ins. Co., C.A. NO.
91CA005090, 1992 Ohio App. LEXIS 225 (Jan. 22, 1992). A New York court in a
liquidation proceeding involving an insolvent insurer ordered that all claims
against the insurer be submitted within one year. Over two years after the
expiration of that one‐year period, an insured demanded coverage from the
Ohio Insurance Guaranty Association ("OIGA") based on the insolvency of its
insurers, one of which was the subject of the New York liquidation proceeding.
On appeal, the Ohio court of appeals not only reversed the trial court's order
granting summary judgment in favor of the insured, but also granted OIGA's
motion for summary judgment because the claim was filed with the OIGA after
the final date set by the New York court for filing claims in the liquidation
proceeding involving the insurer. The court declined to use equitable
principles in order to circumvent the statute providing that OIGA is not liable
for late claims.
Ohio Insurance Guarantee Association v. Berea Roll & Bowl, Inc., 19 Ohio
Misc.2d 3, 482 N.E.2d 995 (1984). The Ohio statute which permits the court to
set the final date for the filing claims in liquidation proceedings of an insolvent
insurer, superseded the two‐year statute of limitations for personal injury
actions, and thus, precluded claims against the insurance guaranty fund arising
out of personal injury actions against insureds which were not brought until
after the last day for filing claims, as the statute benefits claimants and
policyholders of insolvent companies in that without such a provision,
liquidation or distribution would not be effected until all potential statutes of
limitations have run.
Ratchford v. Proprietors Insurance Company, Ohio Ct. of Appeals, Docket No.
84 AP‐911 (Slip Op. 1985). After date is set by court as deadline for filing claims
against insolvent insurance company, the court will not modify the cut‐off date
to consider the claims as timely filed. The court held that pursuant to the Ohio
statute governing proofs of claims, the court has no discretion to consider
claims to have been timely filed because of equitable considerations.
Oklahoma
Pennsylvania
Homeland Ins. Co. v. Rankin, 1993 Okla. 19, 848 P.2d 587 (Ct. App. 1993). In
order to satisfy due process notice requirements in cases where identities of
interested persons are known or reasonably ascertainable, publication
notice is not sufficient. Therefore, a claim for compensation from the
Oklahoma Guaranty Fund was not barred even though the claimant did not
file it before the deadline specified by the Insurance Commissioner.
Commonwealth ex rel. Woodside v. Seaboard Mutual Casualty Co., 30 D.& C.2d
705, 80 Dauph. 289 (1963), exceptions dismissed, 83 Dauph. 373 (1965). After a
decree of dissolution has been entered, a pending suit against an insurance
company could not be maintained. The plaintiffs were required to present their
claims to the commissioner of insurance as liquidator.

Hall v. MPH Transp. Inc., 58 Pa. D. & C. 4th 482, 2002 WL 31989010 (Pa. Commw.
Ct. 2002). An agent of the MPH sued in his capacity as an employee of MPH.
Despite several attempts to have MPH’s insurer (Reliance) represent the agent
in the action, a default action was entered against him. Four months after the
entry of the default judgment Reliance had counsel enter an appearance on the
behalf of the agent. Shortly after, Reliance was placed into rehabilitation and all
actions involving Reliance were stayed. After the stay expired, the Pennsylvania
Property and Casualty Insurance Guaranty Association (“PPCIGA”) substituted
as counsel for the agent and filed a petition to open default judgment. The
court noted that PPCIGA shall have the rights, duties, and obligations of the
insolvent insurer as if the insurer never became insolvent. It held that since
PPCIGA stepped into the shoes of the insolvent insurer it could not belatedly
open the default judgment without considering the insolvent insurer’s prerehabilitation
conduct of failing to file. Therefore, PPCIGA could not open the
default judgment.
Tennessee Flowers v. Universal Care of Tennessee, Inc., 2007 Tenn. App. LEXIS 643 (2007).
Court concluded that there was excusable neglect for the creditor’s late filing of
claims. The court found that throughout the liquidation, the liquidator was
aware that the creditor was attempting to comply with procedure and submit a
timely claim. Moreover, long before the deadline, the liquidator had
independently determined the amount of the claim that was ultimately
submitted by the creditor. Therefore, the late filing of the creditor’s claim did
not prejudice the health care company or delay the liquidation proceedings, the
creditor acted in good faith, the relevant and confusing circumstances in play
were not entirely under the creditor’s control, and the creditor had a number of
responsible employees and representatives paying appropriate attention to the
matter in light of the circumstances.
McReynolds v. United Physicians Insurance Risk Retention Group, 921 S.W.2d
176 (Tenn. 1996). The Supreme Court of Tennessee concluded that statutory
authority to terminate coverage, the Insurer’s Rehabilitation and Liquidation
Act, implicitly authorized the receiver to require performance of all acts
within a shortened coverage period, including submitting a notice of a
medical incident. The court held that the claim was properly barred as
plaintiff had failed to comply with the time requirements for filing set forth
by the receiver, which was considerably less than authorized by the terms of
the policy.
Sizemore v. United Physicians Ins. Risk Retention Group, 56 S.W.3d 557, 2001
Tenn. App. LEXIS 242 (2001). Appellate court found that there was no excusable
neglect for failure to file a claim when the deadline was unambiguous and
known by the claimant.
Texas
Holt v. Wheeler, 301 S.W.2d 678 (Tex. Civ. App. 1957), writ dismissed w.o.j. The
court held that under the insurance code, the filing of a claim against the
receiver is a prerequisite to bringing any cause of action upon the claim, and
that the insurance code places venue exclusively in the county of receiver's
residence, and will be applied retroactively, since a matter of procedural rather
than substantive law.
Wheeler v. Metteaner, 283 S.W.2d 95 (Tex. Civ. App. 1955). The court held that
filing a claim with receiver was not prerequisite to bringing action when
receiver had previously notified the claimant that the claim would not be
allowed.
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.
Utah Wells, Ins. Com’r v. Guardian Cas. & Guar. Co., 60 Utah 353, 208 P. 497 (1922).
A court under whose supervision a receiver of an insolvent insurance
company operates has the discretionary power to fix the time within which
claims shall be filed and to fix a reasonable time within which the filed claims
shall be fixed and liquidated. The court is not bound to give preference to
those whose claims were filed, ascertained, and liquidated at and prior to
the date of appointment of a receiver.
Virginia
Andrews v. Cahoon, 196 Va. 790, 86 S.E.2d 173 (1955). A Virginia resident with a
claim against an insolvent New York insurer could proceed to enforce a lien
against the insurer's statutory deposit in Virginia, although the claimant had
made no attempt to prove the claim in the New York liquidation proceeding.
The statutory deposit provisions of the insurance code provide an alternative
mode of recovery for Virginia residents. The insured's failure to forward notice
of the suit pending against the insured to the insurer, in compliance with the
terms of the policy, was excused where the actions of the receiver showed
that such compliance would have been useless.
Uninsured Employer’s Fund v. Mounts, 24 Va. App. 550, 484 S.E.2d 140
(1997). The decision in this case was upheld by the Supreme Court of Virginia
in Uninsured Employer’s Fund v. Mounts, 255 Va. 254, 497 S.E.2d 464 (1998).
The Court of Appeals also held, and it was not addressed by the Supreme
Court, that a tentative diagnosis that an employee may have
pneumoconiosis will not trigger the running of the statute of limitations and
the employer, whose employment the employee was in when last injuriously
exposed to the hazards of the disease, and the employer’s insurance carrier
shall alone be liable. The Court further held that the Property and Casualty
Insurance Guaranty Association had no responsibilities for the claim since
the claim was made after the bar date for “covered claims” under the
Guaranty Association Statute.
West Virginia West Virginia v. Blue Cross Blue Shield, 195 W.Va. 537, 466 S.E.2d 388 (1995).
Logan Medical Foundation filed an appeal with the Supreme Court of
Appeals of West Virginia after it was classified as a Class VI late‐filed claim,
for which no distribution was expected, due to untimely filing. Strict
compliance with all filing requirements is required in insurance insolvency
cases. W.Va. Code § 33‐24‐25.
The court held where a proof of claim complies with the statutory
requirements of W.Va. Code § 33‐24‐25 (1992), but is filed after the claims bar
date provided for by statute has elapsed, the proof of claim is properly
classified as a Class VI late‐filed claim as directed by the statute. The court
held the appellant’s proof of claim was not timely filed and failed to comply
with the relevant statutory provisions.
Wisconsin In the Matter of the Liquidation of Wisconsin Surety Corp., 112 Wis.2d 396, 332
N.W.2d 860 (1983). In an appeal from the denial of a claim under a surety

ond, the court found the claim was "excused late filed" claim under the
applicable Wisconsin statute for distribution from the estate.
Court Approval or Rejection of Claims ‐ Adequate Proof
California Carpenter v. Coast Surety Corporation, 25 Cal. App. 2d 209, 77 P.2d 294 (1938).
The court concluded that the county was entitled to allowance of claim on a
bail bond of an insurance company where the bond was forfeited and
judgment thereon was entered during the period allowed for filing of claims.
Garamendi v. Golden Eagle Ins. 128 Cal. App. 4th 452 (Ct. App. 2005). The trial
court may use evidence that was not before the commissioner in determining
extrinsic issues such as the fairness and thoroughness of the commissioner’s
procedures. It may not use evidence not used by the commissioner to review
the commissioners ruling on the merits of a claim.
District of
Columbia Hemisphere National Bank v. District of Columbia Ins. Guar. Corp., 412 A.2d 31
(D.C. 1980). The D.C. Court of Appeals held that under the District of Columbia
insurance guaranty fund law, which provides a mechanism for the payment of
covered claims under certain insurance policies, a claimant did not have to first
establish the validity of a claim in a liquidation proceeding, but merely had to
establish the validity of the claim before the guaranty fund itself.
Georgia
Collins v. Dacus, 211 Ga. 779, 89 S.E.2d 198 (1955). The court held that obtaining
a judgment against the insolvent insurer was not a prerequisite to proving the
validity of plaintiff's claim in the liquidation proceeding, since judgment against
insured was valid, and since the policy provided that liability of the insurer
accrued on the date of the injury. The plaintiff had obtained a judgment
against an insured of an insolvent insurer after the initiation of receivership for
injuries that occurred before the institution of the receivership.
Illinois People ex rel. Palmer v. Fort Dearborn Ins. Co., 307 Ill. App. 194, 30 N.E.2d 139
(1940). Claimants appealed from the disallowance of their claims, which were
initiated prior to an order of liquidation, but had not been reduced to
judgments prior to that time on the basis there was no direct claim in favor of
the claimants until after judgment against the insured. The court held that
since sufficient evidence was presented in the claimants' proof of claim filed
with the receiver, and no objection was made to the quantum of proof or that
the judgments were not valid, equitable considerations dictated that such
claims should have been allowed.
Indiana
Holz v. H.C. Baldwin Agency, 140 F. Supp. 860 (S.D. Ind. 1956). A New York
insurance liquidator brought suit to recover premiums collected, and the
defendant agent counterclaimed for sums due from the insurer, but the period
for filing claims had elapsed. The court concluded that it was not precluded
from liquidating those claims because the insurance code now authorized the
filing of proofs of claims against insurers in liquidation subsequent to the date
specified in the notice to creditors.
Michigan Ploy v. Lapeer Farmers Mutual Fire Ins. Ass'n, 295 Mich. 218, 294 N.W. 160
(1940). In an appeal from a denial of a claim, the court held that evidence at
trial of a claim for a fire loss warranted allowance of the mortgagors' claim on
ground they were the insured and the policy, as reduced in amount, was in
force at time of loss.
Mississippi
Home Ins. Co. v. Miss. Ins. Guar. Ass’n, 904 So. 2d 95 (Miss. 2004). The primary
carrier of insured, an insolvent insurer, failed to settle a personal injury claim

within policy limits. The insolvent insurer then requested that the Mississippi
Insurance Guaranty Association (“MIGA”) pay the $300,000 statutory maximum
toward the claim for a judgment in excess of the primary insurer/assignor’s own
policy limits. The court held that the assignor’s claim to MIGA was not a
“covered claim” within the meaning of the Insurance Guaranty Act, but rather,
the assignment was a disguised subrogation attempt by the primary
insurer/assignor. The court reasoned that, to be entitled to subrogation, the
assignor would have to show that it paid something that it was not legally
obligated to pay. In this context, the assignor was the primary insurer and, in
failing to settle the claim within policy limits, was obligated to pay in full the sum
of the judgment obtained against it.
New York
Armienti & Brooks, P.C. v. Acceleration Nat’l Ins. Co., 710 N.Y.S.2d 74 (App. Div.
2000). The court dismissed an action filed by a law firm seeking to recover fees,
incurred in defending insureds of an insolvent insurer, from the insolvent
insurer’s close affiliate. The court held that the affiliated insurer was not
contractually bound to pay the firm, and there was no evidence the insolvent
insurer had agreed to amounts claimed by the law firm.
In re Liquidation of Midland Ins. Co., No. 41294/1986, 2008 WL 151786 (N.Y. Sup.
Jan. 14, 2008). The liquidator’s procedure for allowance of claims did not take
into account contractual provisions of the reinsurance agreements between the
insolvent insurer and the reinsurer, although the reinsurer failed to demonstrate
that the permanent injunction entered in the liquidation proceeding should be
lifted to allow the reinsurer to sue the insolvent insurer or the liquidator and it
remained to be shown whether the reinsurer had viable defenses to payment of
reinsurance claims based on the liquidator’s alleged claims mishandling. The
reinsurer would have opportunity to litigate defenses as to any claim not yet
judicially approved during the court approval process in a hearing before a
referee and the court would direct certain changes to the liquidator’s
procedures for allowance of claims where existing procedures might conflict
with reinsurance agreements.
Jason v. Superintendent of Insurance, 67 A.D.2d 850, 413 N.Y.S.2d 17 (1979),
affirmed, 49 N.Y.2d 716, 425 N.Y.S.2d 804, 402 N.E.2d 143. The court held that
when an insured doctor filed a late proof of claim, the doctor was not entitled
to an order nunc pro tunc deeming it to have been timely filed even if the
doctor could not have filed any information concerning a claim against the
doctor by the deadline.
Matter of Allcity Ins. Co., 66 A.D.2d 531, 413 N.Y.S.2d 929 (N.Y. A.D. 1979),
motion dismissed, 48 N.Y.2d 629, 421 N.Y.S.2d 192, 396 N.E.2d 474. The
insurance code provides that those owed wages by an insolvent insurer are to
be paid before payment of every other debt or claim, and also that preferred
creditors and secured creditors are to be paid to the extent of their security.
The court held that these sections are in regard to priority of payment and not
to procedure for proof and resolution of claims.
People v. Grand Lodge, 70 Hun. 439, 24 N.Y.S. 376 (1893). An administrator of
a deceased policyholder should not have been permitted to intervene and sue
the receiver of an assessment company to collect monies owing under the
policy in an attorney‐general's suit for dissolution of the company, but rather
should have proved the claim before the referee appointed for that particular
purpose.
Oregon Averill v. Halman, 155 Or. 125, 60 P.2d 968 (1936), rehearing denied, 62 P.2d 939
(1936). The Oregon Supreme Court held that the claimant had not met the
requirements of the law outlining the procedure in a case of this nature and
that the claim must be proved to the satisfaction of the insurance

commissioner and approved by the court. When the commissioner
recommended disallowing the claim and the court entered an order
disallowing it on the grounds of insufficient evidence, it became incumbent on
the appellant to present evidence proving the claim. The claim was attacked
by the commissioner and the court held that a verified statement of claim,
standing alone, was not sufficient proof of the validity of the claim.
Pennsylvania
Tennessee
Pennsylvania Ins. Guar. Ass'n. v. Charter Abstract corp., 790 F. Supp. 82 (E.D.
Pa. 1992). Insurance company brought action seeking declaration that it was
not obligated to defend or indemnify insurance agency and its employee under
professional liability insurance policy with respect to claim of foreign title
insurer. When insurance company was liquidated, Pennsylvania Insurance
Guaranty Association was substituted as plaintiff and title insurer intervened as
defendant. The district court held that the foreign title insurer was not a
resident of Pennsylvania under the Pennsylvania Insurance Guaranty
Association Act and, therefore, could not assert a "covered" claim. In a
footnote, the court explained that even if the foreign title insurer had been
deemed a resident of Pennsylvania, it nonetheless could not maintain a
covered claim because it was an "insurer."
McReynolds v. Petroleum Marketers Mut'l Ins. Co., 1994 Tenn. App. LEXIS
595 (Tenn. Ct. App. 1994). Court affirmed receiver’s decision to disallow a
late filed claim. Policyholder asserted excusable neglect due to a belief that
no further action was required after the original claim was filed. However,
policyholder did not submit any substantial explanation for failure to comply
with the filing deadline.
McReynolds v. United Physicians Ins. Risk Retention Group (In re Valdez), 914
S.W.2d 491, 1995 Tenn. App. LEXIS 162 (Tenn. Ct. App. 1995). Insurer was placed
into receivership after the insured notified his insurer of malpractice claims
against him. The receiver mailed notices of the liquidation order to the insured,
informing him that he was required to fill out and return a proof of claim form.
After the insured failed to do so, coverage of the malpractice claims were
denied and the insured failed to object within the statutory time period. The
chancery court allowed the insured to file the proof of claim, but the court
reversed. The court rejected the insured’s argument that he, in good faith,
believed that his original filing was all that was legally required from him. The
prior filing of a claim with an insurer did not by itself justify a waiver of the proof
of claim requirement found in Tennessee Code § 56‐9‐311. The court found that
there were no special facts or circumstances surrounding the insured’s failure to
submit a proof of claim form or in his failure to timely object to the receiver’s
denial of his claims, sufficient to justify the chancery court’s decision to allow
him to file a proof of claim.
Texas
Khalaf v. Odiorne, 767 S.W.2d 856 (Tex. App. ‐‐ Austin 1989, writ denied).
Plaintiff filed proof of claim in receivership proceeding, but inadvertently
stated an incorrect return address. The rejection letter was returned to
receiver undelivered, marked "no such number." More than three months
after the rejection was mailed, plaintiff filed suit. The court affirmed a takenothing
judgment in favor of the receiver, finding that the insurance code
section governing the receiver's notification of potential claimants should be
read in pari materia with the section governing notice of rejection of claims,
and that proof of mailing of the letter was sufficient to constitute notice,
actual receipt of notice was not required. Accordingly, the receiver's rejection
of the claim had become final by claimant's failure to file suit within three
months, as provided in the insurance code.
Langdeau v. Pittman, 337 S.W. 2d 343 (Tex. Civ. App. 1960), writ ref. n.r.e.
Upon receiver's denial of their claim for damages for injuries caused by the

alleged negligence of an insured of a company in receivership, the injured
parties brought suit against the receiver, and the court ordered that their
claims be approved and paid pro‐rata from the distribution of assets. The
court held that: 1) the receiver had the right to bring an appeal without
obtaining approval of the receivership court; 2) where a "no action" clause in
policy, which required a judgment establishing the insured's liability as
condition precedent to bringing an action was in conflict with the insurance
code providing that a judgment against an insured obtained after institution of
delinquency proceedings is not evidence of liability, non‐compliance with the
clause would be excused; 3) the receiver's discretion to approve and reject
claims vests the receiver with purely ministerial or administrative discretion,
and the law does not require that the receiver give any reason for rejecting a
claim; 4) actions on rejected claims are not a review of receiver's decision, they
are a trial de novo as if originally filed in the court; and 5) where the attorney
employed by the insurer to represent its insured withdrew upon the insurer's
insolvency and the receiver did not provide counsel, and insured was found not
guilty, but plaintiff was granted new trial, the insurer could not be used to void
new trial order because action was not "pending by or against a delinquent
insurer."
Lloyds Investment Co. v. State, 158 S.W.2d 98 (Tex. Civ. App. 1941), writ ref.
w.o.m. On appeal, where the report and findings in an insurance receivership
case were accredited based on the contracts on which they rested and were
approved by the court, and no countervailing evidence was in the record, they
were not equivalent to a special verdict of a jury, but would be given force and
effect of a final judgment and carry usual presumptions in favor of court's
action.
Court Approval or Rejection of Claims ‐‐ Notice and Hearing
Michigan Toy v. Lapeer Farmers Mutual Fire Ins. Ass'n, 295 Mich. 218, 294 N.W. 160
(1940). In a claim for fire or loss on realty covered by a mortgage, the
mortgagors were able to recover an amount, with interest, from the time of
the loss, less credits for payments made, since they remained covered under
their insurance policy as evidenced by the payment of assessments and the
reduction of policy coverage.
New Mexico Aztec Well Servicing Co. v. Property & Cas. Ins. Guar. Assoc. of the State, 115
N.M. 475, 853 P.2d 726 (1993). Insured, which paid claim of claimant under
excess liability policy issued by insurer which became insolvent, amply
notified insurer’s conservator in its proof of claim form of claimant’s
personal injury claim precipitating coverage under the policy. Therefore,
statutory notice requirement for claim against property and casualty
insurance guaranty association respecting insolvent insurer was met, despite
fact that proof of claim form did not specifically denote claimant. The form
substantially complied with statute.
New York In re New York Title & Mortgage Co., 170 Misc. 109, 9 N.Y.S.2d 994 (1939).
Non‐objecting certificate holders were deemed to have consented to claim
compromises and to distributions to the trustees of the respective issues
because notice was given of the application of the insurance commissioner for
approval of those claim compromises filed by the trustees.
Oklahoma
State ex rel. Crawford v. Indemnity Underwriters Ins. Co., 943 P.2d 167 (Okla.
Ct. App. 1997). Claimant filed objection to disallowance of her claim by
receiver for insolvent automobile insurer that had insured her husband’s
truck tractor. The court held that claims allowance procedure inside
liquidation proceedings for automobile insurer complied with requirements

of due process of law where interested persons, including claimant, received
timely specific instructions from the court and receiver concerning when,
where and how to file objections to disallowance of claim.
Tennessee Sizemore v. United Physicians Ins. Risk Retention Group, 958 S.W.2d 348, 1997
Tenn. App. LEXIS 372 (1997). Receiver of the liability carrier denied patient’s
claim due to patient filing late, although the patient was not informed of the
receiver’s deadline for claims. Court held that the patient’s right under
Tennessee Code § 56‐9‐311 to file a claim in the receivership proceedings
included the right to receive notice of the claim deadline. The liability insurer
was in liquidation under a statute that specifically provided for notice to and
claims of all persons reasonably expected to have claims against the insurer.
Also, the receiver obtained correspondence and records that reasonably
notified him of the patient’s claim. The patient obtained judgment in a separate
action against the insured doctor; hence the patient’s right in the insured
doctor’s liability coverage became an enforceable right.
Texas
Great American Investment Co. v. McFarling, 416 S.W.2d 479 (Tex. Civ. App.
1967), writ ref. n.r.e. The plaintiffs filed claim with receiver which was rejected
and the receivership proceedings was then closed. Plaintiffs sought to have
the order closing the receivership set aside on the ground that their claims had
not been properly rejected and the receivership should therefore not have
been closed. The court held that the provision requiring the receiver to notify
claimants of rejection allows the receiver's attorney to make such notice, and
requires any action upon a rejected claim to be brought within three months of
the rejection.
Claims Against the Estate ‐ In General
Phinney v. Langdeau, 337 S.W.2d 393 (Tex. Civ. App. 1960), writ ref. n.r.e. The
District Director of Internal Revenue filed claims against three insolvent
insurers, and the receiver rejected such claims. The District Director brought
action on the rejected claims, but court held that such action was barred by the
three month time limitation in the liquidation provisions in the insurance code.
On appeal, it was held that: 1) receiver's written notice of rejection was not
proper notice of rejection because it was not addressed to the district director,
who had signed the proof of claim; 2) the court order authorizing the rejection
of the claims did not constitute written notice of rejection; and 3) because of
improper notice of rejection, the three month time limitation never began to
run.
Eighth Circuit
Arizona
Beale v. Connecticut Fire Ins. of Hartford, Conn., 120 F. 790 (8th Cir. 1903). The
court rejected a claim by an assignee of an insolvent insurer against another
solvent insurer because the assignee could not take title which would support
a suit to recover assets claimed to have been wrongfully diverted by the
insolvent insurer's directors and officers from the solvent insurer, which had
assumed the business of the insolvent insurer, since such insurer had nothing
to assign due to its supervision by the Missouri insurance commissioner due to
insolvency.
Academy Life Ins. Co. v. Odiorne, 797 P.2d 727, 165 Ariz. 188 (1990). The
Arizona Court of Appeals held that: (1) a receivership claimant had standing to
challenge another claimant's claim by raising defenses personal to the debtor,
if the receiver had not raised them; (2) the four‐month proof of claim filing
period did not constitute a statute of limitations, and does not revive a claim
that is otherwise time barred; and (3) a claim arising in another state that is
valid in that state may be asserted in an Arizona receivership even if the
Arizona statute of limitations would bar that claim.

Arkansas
Colorado
Florida
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.
Colonial Penn Ins. Co. v. Colorado Ins. Guar. Assoc., 799 P.2d 448 (Colo. App.
1990). Colonial Penn, an insolvent excess insurer’s successor, brought action
against Insurance Guaranty Association seeking declaratory relief after
Association denied its claim. The court held that C.R.S. § 10‐4‐503 is
unambiguous, and that its application is limited to the coverage of
“person[s] insured under a policy issued by an insurer which has become
insolvent…” Colonial Penn is not such a person, nor is Colonial Penn’s claim
one “asserted against a person insured under a policy issued by an insolvent
insurer.” Therefore, its claim can not be considered a “covered claim.”
Fla. Dep't. Fin. Serv. v. Midwest Merger Mgmt., LLC, No. 4:07cv207‐
SPM/WCS, 2008 WL 3259045 (N.D. Fla. Aug. 6, 2008). There is a distinction
under Florida law between property that belongs to an insurer and property
contended by the receiver to be the assets of the insurer. 2008 WL 3259045
at 3 (citing Nova Ins. Group. Inc., v. Fla. Dep't of Ins., 606 So.2d 429, 433 (Fla.
1st DCA 1992). The former constitutes part of the receivership estate and any
claims to the property must be made before the Leon County Circuit Court
as part of the receivership proceeding. Id. (citing Nova at 433). Section
631.154(1), Fla. Stat. authorizes the receiver to demand delivery of funds,
assets, or property that is rightfully the estate of the impaired insurance
company. 2008 WL 3259045 at 3.
Imagine Ins. Co. v. State of Florida ex rel. the Dep't of Financial Serv., 999 So. 2d
693 (Fla. 1st DCA 2008). Funds in trust account set up to secure insurer's
obligations to reinsurer were not part of insurer's receivership estate. 999 So.
2d at 701 (citations omitted). If the receiver determines that funds, assets, or
property in the possession of another person are rightfully the property of the
estate, the receiver shall deliver to such person a written demand for immediate
delivery of the funds, assets, or property to the receiver, referencing this section
by number, referencing the court and docket number of the receivership action,
and notifying the person that any claim of right to the funds, assets, or property
by her or him must be presented to the court within 20 days after the date of
the written demand. Any person who holds funds, assets, or other property
belonging to an entity placed in receivership under this chapter shall deliver the
funds, assets, or other property to the receiver on demand...999 So. 2d at 695
n.* (citing s. 631.154(1), Fla. Stat. (2004)).
Shear Homes, Inc. v. Sheppard, 764 So. 2d 705 (Fla. 1st DCA 2000). Section
631.929, Florida Statutes mandates claimant's waiver any right to recover
attorney fees and costs from it when the claimant elected to seek benefits from
the Florida Workers' Compensation Insurance Guaranty Association (FWCIGA)
after the self‐insured workers' compensation fund which had insured the
employer became insolvent. 764 So. 2d 706.
Iowa
State ex rel. Hager v. Iowa National Mutual Ins. Co., 430 N.W.2d 420 (Iowa
1988). Several officers of an insolvent mutual insurance company in liquidation

filed claims seeking recovery of their deferred compensation benefits as Class
3 claims under the liquidation provisions of the Iowa Code which are patterned
after the NAIC Model Act. In denying the claims, the Supreme Court of Iowa
found that the third‐priority status "is aimed at the insolvent insurance
company's obligation to its insureds and not to employee claims." 430 N.W.2d
at 422. The Court also found that the officers of the Company were prohibited
from invoking a second‐priority (claims of employees) status. The Court
concluded that the officers' deferred compensation benefits were Class 4,
general creditor claims.
State v. American Bonding & Cas. Co., 238 N.W. 726, 213 Iowa 200 (1931). An
insolvent Illinois insurer consolidated with a solvent Iowa insurer, which later
became insolvent. Creditors of the former Illinois insurer, who had not been
paid in full in the Illinois proceeding, filed for balances owed to them in the
second receivership in Iowa. The Iowa receiver argued that by filing their
claims in the Illinois receivership the claimants were now precluded from
relying on the Iowa company, although it was the successor company. The
Supreme Court of Iowa held that the creditors of the former Illinois insurer did
not waive their rights against the consolidated company. The consolidated
Iowa insurer assumed the liabilities of the Illinois insurer and thus took with it
notice of the claims of the creditors to the original deposits with the Iowa
commissioner.
Kansas
Bartee v. R.T.C. Transp., Inc. v. Kansas Fire & Cas. Co., 245 Kan. 499, 781 P.2d
1084. Automobile occupants injured in collision with truck sued driver and
owner of truck. Insurer of driver and truck became insolvent and Georgia
Insurers Insolvency Pool assumed defense. The court concluded that the
existence of a state insolvency fund for protection of its insureds did not
prevent a motorist from being uninsured. Therefore, plaintiffs are required
to exhaust their uninsured motorist coverage from their insurer before
insurer may enforce an obligation of the insolvency pool. Then the fund is
liable only for the difference between the limits of a plaintiff’s uninsured
motorist coverage and the limits of a defendant’s policy issued by the
insolvent insurer.
Hetzel v. Clarkin, 244 Kan. 698, 772 P.2d 800 (1989). An injured motorist
exhausts his rights under the uninsured motorist provisions of his insurance
policy, so as to be entitled to make claim against Guaranty Association,
whenever he makes a claim against his own insurer. However, the
motorist’s recovery from Guaranty Association is limited to the difference
between the Association’s liability limits and policy limits of the motorist’s
uninsured motorist coverage, regardless of the motorist’s good faith in
settling with uninsured motorist carrier for a sum less than policy limit.
Louisiana LeBlanc v. Bernard, 554 So.2d 1378 (La. App. 1st Cir. 1989), writ denied, 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.
Michigan Borman's, Inc. v. Michigan Property & Casualty Guar. Ass'n., 717 F. Supp. 468
(E.D. Mich. 1989). The court held that a provision of the state property &
casualty guaranty association act which denied reimbursement of claims filed
by a person having a net worth greater than 1/10th of 1% of the aggregate
premiums written by member insurers in the state in the preceding calendar
year denied claimant its right to equal protection under the law, holding that
the criteria of net worth as a means to identify claimants entitled to
reimbursement was not rationally related to the legislative purpose of
allocating loss to those best able to absorb loss.
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 her 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.
New Mexico Aztec Well Servicing Co. v. Property & Cas. Ins. Guar. Assoc. of the State, 115
N.M. 475, 853 P.2d 726 (1993). Claimant under policy issued by excess
liability insurer which subsequently became insolvent was entitled to award
of $100,000 from property and casualty insurance guaranty association.
Although the claimant had already recovered more than that amount from
solvent primary insurer, depletion of proceeds from the primary liability
policy triggered excess insurance policy and, if excess insurer were solvent,
it would have been liable to claimant under its policy for $298,000.
In re Mission Ins. Co., 112 N.M. 433, 816 P.2d 502. Policy issued to pay
workers’ compensation claims against insured employer that exceeded
specific retention on an individual claim or all amounts that exceeded
employer’s aggregate retention for that year, was “direct insurance” within
the meaning of a statute governing property and casualty insurance
guaranty association’s obligation to pay covered claims against insolvent
insurers. Therefore, a self‐insured employer with a claim against insolvent
insurer for excess workers’ compensation coverage had a “covered claim”
within the meaning of property and casualty insurance guaranty law.
New York
Finkelstein v. Van Schaick, 149 Misc. 101, 267 N.Y.S. 471 (1933). An attorney
should apply for a contingent fee, sought for obtaining settlements of claims
against an insurer, as part of the liquidation proceedings.
In re 24‐52 Forty‐Fourth St., Long Island City, 175 Misc. 249, 26 N.Y.S. 2d 265
(1941). An assignment of participating interest in a bond and mortgage after
an order for the liquidation of a guaranty company was held to be a transfer of
all rights arising from the guaranty itself. The court further held that this
divested the original holder of the right to payment of principal and interest
since there was no express reservation of the right and no other proof to the
contrary.
In re Empire State Surety Co., 214 N.Y. 553, 108 N.E. 825 (1915). A surety
company was ordered liquidated under the provisions of Section 63 of the
insurance code of 1909. Those policyholders who fell into one of the following
categories had claims mature enough to entitle them to share in company
assets: 1) those who had judgments rendered against them before the entry of

the liquidation order; 2) those who had made settlements of claims brought
against them after the entry of the liquidation order if the causes of action
against them arose prior to that date and the defense of such actions had been
assumed by the surety company; and 3) those who had made settlements of
claims brought against them or had judgments rendered against them after
the date of the entry of the order, even though the accidents upon which they
were sued happened before the entry of the order.
In re National Surety Co., 286 N.Y. 216, 36 N.E.2d 119 (1941). Only the court may
allow or forbid claims on the assets of a dissolved insurance company.
In re New York Title & Mortgage Co., 170 Misc. 109, 9 N.Y.S.2d 994 (1939). The
insurance commissioner need only show that there is a reasonable possibility
that trust claimants will recover an amount considerably greater than that
proposed under the terms of a settlement to justify the compromise of trust
claims against an insolvent insurance company.
In re New York Title & Mortgage Co., Series C‐2, F‐1, B‐K, 257 A.D. 19, 11 N.Y.S.2d
828 (1939), motion denied, 257 A.D. 933, 12 N.Y.S.2d 853, reargument denied,
257 A.D. 822, 12 N.Y.S.2d 1021, appeals dismissed, 281 N.Y. 829, 24 N.E.2d 491.
Damage claims for misconduct on the part of a company in liquidation and its
officers were considered "doubtful claims" in a liquidation proceeding because
of questions as to their validity and amount. The "doubtful claims" were
within the power of the insurance commissioner to settle by agreement.
In re Serio, 769 N.Y.S.2d 530 (App. Div. 2003). The court held that funds
withdrawn by the insolvent insurer from a trust account established by the
reinsurer had been converted, and the reinsurer was entitled to immediate
return of the funds, rather than an order directing the Superintendent as
liquidator to segregate the funds in a separate account. Also, by consenting to
an evidentiary hearing and discovery, the Superintendent waived the argument
that the court should not have permitted the reinsurer to bring a separate
action.
Matter of Knickerbocker Life Ins. Co., 199 A.D. 503, 191 N.Y.S. 780 (1922). On
the application of the administrator of the estate of a beneficiary of a policy,
the court refused to appoint a receiver of the assets an property of an
insolvent life insurance company in the possession of the insurance
commissioner. If the claimant was entitled to receive any portion of the fund
in the commissioner's possession, the claimant could apply to the
commissioner or the court and obtain speedy relief.
North Carolina
State ex rel. Long v. American Security Life Assurance Company of North
Carolina, 109 N.C. App. 530, 428 S.E.2d 200 (1993). Petition was brought to
have estate of insolvent insurer pay expenses of legal fees incurred in
connection with defending against petition for liquidation. The court
concluded that the directors of an insolvent company are not, as a matter of
law, disallowed from defending against a Petition for Liquidation. Rather,
the court noted that all the facts and circumstances of a particular case
should be examined in determining whether the defense to liquidation was
brought in good faith, with the solvency of the company examined as one of
many factors, and not as the sole factor, in the ultimate decision to award
fees and costs. The court also concluded that even though major creditor
had rejected plan for reorganization of insured, directors of insolvent insurer
acted in good faith in defending against petition against liquidation, so as to
permit payment of legal fees out of insurer’s estate. The Court supported
the aforementioned conclusion by noting that evidence tended to show that
although the plan had originally been rejected, it could be put into effect
with the support of Petitioner.

Ohio
Covington v. Ind. Dep’t of Natural Res., 2002 Ohio 2874 (Ct. App. 2002). Prior to
being declared insolvent, the insurance company issued performance bonds to
Indiana surface mining companies. The mining companies failed to perform the
required mine reclamation. The Department, pursuant to Indiana law,
undertook the mine reclamations after the mining companies defaulted.
Indiana law required the mining companies to forfeit their performance bonds if
the Department determined the surface mining operator failed to properly
reclaim the land. The Department sought to obtain funds from the
superintendent based upon the mining companies’ performance bonds
purchased from the insurance company in order to compensate the
Department for its reclamation activities. The Department argued that it should
be given a Class 2 classification under Ohio Revised Code § 3903.42 as “claims
under policies for losses incurred.” On appeal, the court found that pursuant to
the statute the trial court did not err when it affirmed the superintendent’s
classification of the Department’s claim as a Class 6 claim (“claims of any local or
state government”) for the purpose of claim distributions of the liquidated
insurance company’s property and assets.
Oklahoma Oglesby v. Liberty Mut’l Ins. Co., 1992 Okla. 61, 832 P.2d 834 (1992). A
claimant must exhaust all other claims he might have against an insolvent
insurer under an insurance policy before recovering from the Guaranty
Association, and any amount payable under the Guaranty Act is reduced by
the amount recovered from the insurer. Additionally, any recovery received
for workers’ compensation benefits under the Guaranty Act must be
reduced by amount of recovery received from any other Insurance Guaranty
Association.
Welch v. Union Mut’l Life. Ins. Co. of Providence, 1989 Okla. 117, 776 P.2d 847
(1989). Prior to amendment that excluded uninsured motorist coverage,
provision of the Property and Casualty Guaranty Association Act required
claimants to exhaust all other covered claims against insurers, including
uninsured motorist claims, before making claim against guaranty
association.
Pennsylvania
Commonwealth ex rel. Sheppard v. Central Penn National Bank, 31 Pa. Cmwlth.
190, 375 A.2d 874 (1977). The insurance commissioner, as statutory liquidator
of an insurance company, stood in the shoes of the company, which had an
account in the defendant's bank and had the same contract rights as the
company. However, commissioner was immune from counterclaims asserted
by the bank because of a specific statutory provision (stays) prohibiting any
action at law or equity from being commenced or prosecuted after the date of
the suspension order issued by the commissioner. This section (now repealed)
was to freeze the rights of creditors and policyholders and prevent prejudicial
preferences.
Pennsylvania Ins. Guar. Ass'n. v. Charter Abstract corp., 790 F. Supp. 82 (E.D.
Pa. 1992). Insurance company brought action seeking declaration that it was
not obligated to defend or indemnify insurance agency and its employee under
professional liability insurance policy with respect to claim of foreign title
insurer. When insurance company was liquidated, Pennsylvania Insurance
Guaranty Association was substituted as plaintiff and title insurer intervened as
defendant. The district court held that the foreign title insurer was not a
resident of Pennsylvania under the Pennsylvania Insurance Guaranty
Association Act and, therefore, could not assert a "covered" claim. In a
footnote, the court explained that even if the foreign title insurer had been
deemed a resident of Pennsylvania, it nonetheless could not maintain a
covered claim because it was an "insurer."

Texas
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.
Gibbs v. Wheeler, 306 S.W.2d 929 (Tex. Civ. App. 1957), writ ref. n.r.e. The
court held that the receiver received the promissory note from the insolvent
insurer subject to any equities and defenses available against the note in the
hands of the insurer.
Wisconsin In re Liquidation of Inter‐State Exchange, 211 Wis. 258, 247 N.W. 839 (1933).
Subscribers to the stock of a voluntary association challenged the disallowance
of their claims for the return of the securities they had posted to comply with
Wisconsin's statutes regarding the incorporation and formation of a voluntary
association. The court held that the securities posted by these claimants with
the attorney‐in‐fact of the association were not obligations of the association
nor would the policyholders of the association be assessed for the claims of
these stockholders.
In Re The Ancillary Liquidation of Mission Ins. Co., Before the Wisconsin
Insurance Security Fund, WISF #71‐2025. A claim for attorney fees against the
Wisconsin Insurance Security Fund was denied because the duty of an excess
insurance carrier to defend and indemnify its insured arises only where: (1) the
occurrence which is the subject matter of the lawsuit is within the excess
policy's coverage; and (2) the primary insurer's policy limits are exhausted or
the primary insurer refuses to provide a defense.
Policyholders' Claims
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. 1 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Fifth Circuit
Alabama
New Orleans Assets L.L.C. v. Woodward, 363 F.3d 372 (5th Cir. 2004). The Fifth
Circuit addressed the make whole indemnity theory and a contractual clause in a
property insurance contract. When contractual language suggests a right of
reimbursement, but also contains subrogation rights, the Fifth Circuit stated
that subrogation principles are superior. Furthermore, the make whole doctrine
applies to subrogation agreements. The Fifth Circuit then reversed the lower
court’s granting of summary judgment to a state receiver and remanded the
case. The insured was entitled to keep its recovery from third parties until it was
made entirely whole.
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.
In re United Equitable Life Insurance Company, 595 So. 2d 1373 (Ala. 1992). The
entry of a rehabilitation order prohibiting the insolvent insurer from paying any
claims to its policyholders stayed a separate action by a policyholder for
benefits under an insurance contract. The Alabama Uniform Insurers'
Liquidation Act is intended to protect the interests of all policyholders; the
issuance of a judgment in favor of one policyholder would unfairly give that
policyholder priority over others.
Arkansas
Johnson & Cotnam v. Baxter, 108 Ark. 350, 157 S.W. 387 (1913). Where a fire
insurance agent presented a policyholder's claim for allowance in insolvency
proceedings after a receiver had been appointed for the insurer and notified
insured of the disallowance of the claim and reasons therefore, it was the duty
of the policyholder and not the insurance agent to appeal from such
disallowance if desired to further urge the claim.
Mendel v. Garner, 283 Ark. 473, 678 S.W.2d 759 (1984). Policyholders of an
insolvent carrier appealed a provision in the rehabilitation plan that cut off
their rights to surrender their policies for the cash surrender value. In
upholding the plan, the Supreme Court of Arkansas held: "The rehabilitation of
insurance companies pursuant to state insolvency statues does not impair the
obligation of contracts." 678 S.W.2d at 761.
California
Caminetti v. Manierre, 23 Cal.2d 94, 142 P.2d 741 (1943). The main issue was the
proper measure of damages due to holders of non‐cancellable policies because
of the insurer's breach. The court held that the insurer's insolvency resulted in
a termination of the policies which was tantamount to a breach of the policy
furnishing the basis for a claim for damages by the insured as a creditor of the
insurer. The court then concluded that the measure of damages adopted by
the commissioner was the correct measure.
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).

Denny's Inc. v. Workers' Comp. Appeals Bd., 104 Cal. App. 4th 1433 (Ct. App.
2003). Restaurant argued CIGA was obligated to contribute to an employee’s
disability obligation when a self insured employer is jointly and severally liable
for a claim. Restaurant employee was injured during a period in which
restaurant had self insured and obtained insurance from an insurer that became
insolvent. The Workers' Compensation Appeals Board dismissed CIGA as a
party to a workers' compensation claim. The California Court of Appeal
affirmed holding CIGA may not guarantee a disability claim when a solvent
workers compensation insurer is jointly and severally liable for the claim. The
court concluded that because Labor Code 3211 defined an employer that
receives a self insurance certificate as an “insurer” under California law, the selfinsurance
was “other insurance” by an insurer which had to be exhausted
before coverage had to be provided by CIGA .
Ins Commis v. Golden Eagle, No. A100514, 2004 Cal. App. Unpub. LEXIS 2187 (Ct.
App. Mar. 9, 2004). The amount due from lost rent depends on fair market
rental value and therefore presents a question of fact and is reviewed on the
equivalent of a substantial evidence test. Experts may base their conclusion of
fair rental value on any information commonly used by professionals in their
fields, even if the information is hearsay or inadmissible.
Kortmeyer v. California Ins. Guarantee Assn., 9 Cal. App. 4th 1285 (1992). The
California Court of Appeal held that the insolvency of an insured's automobile
insurer did not absolve the insured of its duty to preserve her cause of action in
the manner required by § 11580.2 of the Insurance Code. Section 11580.2
provides that an insured has no cause of action against an insurer under an
uninsured motorist policy unless the insured takes certain specific actions.
Because the insured failed to take any of the prescribed actions, it had no claim
against he insolvent insurer. Consequently, the insured had no claim against
the guaranty association.
Low v. Golden Eagle Ins. Co. 110 Cal. App. 4th 1532 (Ct. App. 2003). Insured was
sued for construction defects. Insured tendered defense and then without
informing insurer, settled with the injured party in violation of the insurance
policy’s no voluntary payments provision. The court held insured’s post tender
breach relieved insurer of post tender costs and settlement.
Low v. Golden Eagle, No. A099535, 2003 Cal. App. Unpub LEXIS 8881 (Ct. App.
Sept. 18, 2003). Cal. Ins. Code § 533, which excludes losses caused by the willful
act of the insured, bared a claim where insured acted deliberately for the
express purpose of causing damage or intentionally performed with knowledge
that damage is highly probably or substantially certain to result.
McConnell v. Pacific Mutual Life Ins. Co., 205 Cal. App. 2d 469, 24 Cal. Rptr. 5
(1962). The court concluded that holders of non‐cancellable disability
insurance policies who declined to accept reinsurance in the reorganized
company were entitled to damages bearing interest, and the interest began to
accumulate from the date of the breach. The court also held that claims of
holders of noncancellable policies were not unliquidated.
Roth v. L.A. Door Company, 115 Cal. App. 4th 1249 (2004). An employee was
injured at work by a falling overhead door. The employer was a certified self
insurer for its worker’s compensation exposure (it self insured up to $250,000)
and employee brought suit against the manufacturer of the door. The
manufacturer’s insurer became insolvent. Employer intervened in the suit to
seek contribution for the workers compensation payment. The employee
settled the claim and the only remaining issues was whether the employer was
entitled to reimbursement from CIGA and if not whether it could proceed

directly against manufacturer. The Court of Appeal held an employer providing
workers’ compensation benefits through self‐insurance was an insurer
providing “other insurance” under § 1063.1 and thus was not entitled to
compensation. The court also held the employer could not proceed against the
manufacturer as it would be an indirect conduit to indemnity it is not entitled to.
Colorado
Barr v. Colorado Ins. Guar. Ass’n and W. Guar. Fund Serv., 926 P.2d 102 (Colo.
App.1995). Under Colorado Insurance Guaranty Association (CIGA) Act,
“covered claim” is claim that should have been paid by insurer pursuant to
insurance policy but for insurer’s insolvency. Subject to statutory limits,
CIGA steps into insolvent insurer’s shoes as to claims within insurance
policy’s coverage and limits. CIGA was obligated to pay statutory limits for
only one claim on behalf of insolvent insurer, where policy clearly stated that
only single loss resulted from losses arising out of same wrongful act or
interrelated wrongful acts.
Colorado Ins. Guar. Ass’n v. Harris, 827 P.2d 1139 (Colo. 1992). Claimant’s
settlement for less than full amount of policy coverage did not preclude
further action against Association, because settlement for $2,500 less than
policy limit allowed claimant a greater recovery than if she arbitrated or
litigated uninsured motorist claim and received full policy amount but had to
pay attorney fees. Therefore, she had exhausted her rights as required
under C.R.S. § 10‐4‐512(1) and could assert a claim against the Colorado
Insurance Guaranty Association.
Fontenot v. Haight, 764 P.2d 378 (Colo. App. 1988). The guaranty insurance
association steps into shoes of insolvent insurance company as to claims
within coverage and limits of its insurance policy, subject to statutory
$50,000 maximum. Therefore, automobile accident victim who was
awarded judgment in excess of $145,000 against insured covered by
insolvent insurer was entitled only to statutory $50,000, because only one
covered claim was involved.
Mosley v. Indus. Claim Appeals Office, 119 P.3d 576 (Colo. Ct. App. 2005).
Mosley, a workers’ compensation insurance claimant whose employer’s insurer
became insolvent, sought penalties against the Colorado Insurance Guaranty
Association (“CIGA”) for its alleged misconduct in delaying payment of benefits
after the date of the insurer’s insolvency. The Colorado Court of Appeals held
that “the plain and unambiguous language of [COLO. REV. STAT.] § 10‐4‐517
provides absolute immunity to CIGA from liability of any kind for any action
taken by CIGA in the performance of its powers and duties, including the
handling of claims.” The court observed that this interpretation of the statute
“furthers, rather than hampers, the legislative purpose of § 10‐4‐502, which is to
avoid ‘excessive delay in payment and financial loss to claimants or
policyholders because of the insolvency of an insurer.’” To adopt Mosley’s view
would be directly contrary to the purposes of the CIGA Act, because “requiring
CIGA to pay penalties for post insolvency acts would result in increased
premiums for individual policyholders and depletion of CIGA funds to pay for
covered claims of all claimants whose insurers had become insolvent.”
Northwestern Nat. Ins. Co. v. Kezer, 812 P.2d 688 (Colo. App. 1990). The
Colorado statute classifying claims for preference purposes is specific,
comprehensive and leaves no room for the judiciary to add to the types of
claims to be preferred or to establish a method of preference not created by
statute. Where a reinsurance contract provides that the reinsurer would
become subrogated to "any and all rights of the insured in reference to any
and all payments [the reinsurer] made," the reinsurer does not attain the
status of the Guaranty Association and does not "step into the shoes" of the

insureds paid by the reinsurer after the date of liquidation for the purpose of
attaining "class 3" status as a policyholder, beneficiary or insured.
Delaware
District of Columbia
Reliance v. Plum Creek Timber Co., L.P., 2004 WL 838634 (Del. Super. 2004). An
action was brought by Plum Creek on behalf of its 65,000 beneficial owners
against the Washington Insurance Guaranty Association (“WIGA”). Plum Creek
had a directors’ and officers’ insurance policy issued by Reliance Insurance
Company (“Reliance”). An action was brought against Plum Creek and Reliance
assumed its defense. Two years later Reliance was declared insolvent and the
insurance guaranty associations of the states where the claims arose assumed
Plum Creek’s defense. At issue was the amount WIGA was obligated to cover
for Plum Creek’s outstanding liabilities. WIGA contended that its liability to Plum
Creek was limited to a total of $299,000. The court held that “WIGA [wa]s
obligated to satisfy the claims of each of Plum Creek’s approximately 65,000
Unitholders, up to the total policy limits of $25,000,000 prorated among the
individual Unitholders, with no individual Unitholder receiving an amount in
excess of the statutory cap of $299,000.” Id. at *4.
Zhou v. Jennifer Mall Restaurant, Inc., 699 A.2d 348 (D.C. 1997). Plaintiffs the
Zhous were injured by drunk driver overserved by defendant Jennifer Mall
Restaurant. The driver’s carrier settled for $200,000. The restaurant’s liquor
liability carrier was the insolvent Union Indemnity; the policy had limits of
$300,000. The Zhous’ injuries were stipulated to be in excess of that
amount. The District of Columbia Insurance Guaranty Association took the
position that its maximum statutory liability of $300,000 was met by the
payment of $100,000 to the Zhous since it should get credit for the $200,000
paid by the driver’s insurer. The Zhous argued that the DC Insurance
Guaranty Act should be liberally construed as a “remedial” statute. Held, the
Act would be construed according to its plain meaning. The Zhous demand
for $200,000 additional from the DCIGA was a “covered claim” because it
was a “claim” or “cause of action”; DCIGA’s interpretation read the work
claim as a “loss” and the insurance professionals who drafted the statute are
deemed to know the difference between the words “claim” and “loss.” The
“nonduplication of recovery” and “exhaustion” requirements of the Act did
not apply because the Zhous “claim” against the drunk driver (for the
negligence of the driver) was not the same as their “claim” against the
restaurant (for its negligence in serving the driver). Although there was one
“loss” in this instance (the Zhous’ injuries), there were two “claims.” The
claim against the drunk driver was not a “covered claim” but the claim
against the restaurant was a covered claim. Thus there would be only one
payment for a covered claim when DCIGA paid the entire $300,000.
Florida Gibson v. Resolution Trust Corporation, 750 F. Supp. 1565 (S.D. Fla. 1990).
Premiums paid to an insurance company are not held in trust for the benefit of
the insured, but are assets of the insurance company available to satisfy the
insurance company's general debts. Accordingly, an insolvent insurer cannot
hold paid premiums in trust for an insured; rather, the premiums are assets of
the estate and are subject to general creditors.
Westcott v. Thompson, 819 F. Supp. 1056 (M.D. Fla. 1993). A Multiple‐
Employer Welfare Arrangement was placed into liquidation in Florida. The
claim of a beneficiary of the plan was denied by the receiver, and such denial
was approved by the liquidation court. The federal court held that the
participant’s ERISA claims were barred by the failure to pursue the state
claims process.
Illinois
O'Brien v. General American Life Ins. Co., 345 Ill. App. 264, 103 N.E.2d 193 (Ill.
App. Ct. 1951). Plaintiffs sued the balance of a claim for total disability under
for policy issued by an insolvent Missouri life insurance company. The Missouri

insurance commissioner entered into a contract with a solvent insurer
whereby the latter purchased the assets and business of the insolvent insurer,
and the agreement contained the provision that all payments of installment
disability benefits and monthly income disability benefits shall be reduced to a
sum equal to 50% thereof. The contract was mailed to the insured, with a letter
from the president of the insolvent insurer containing language that the
policies and benefits remained unchanged. When plaintiffs received only 50%
of the disability claim, this action was instituted alleging that the terms of the
letter should be interpreted to obligate the assuming insurer to pay stated
benefits in full. The court held that the letter signed by assuming insurer's
president could not be interpreted as requiring defendant to pay full amount
of disability benefit, especially where insured had been put on notice that the
policy was being assumed by another insurer subject to provisions of purchase
agreement.
Washington v. Merit Mutual Ins. Co., 5 Ill. App. 3d 742, 284 N.E.2d 304 (Ill. App.
1972). Plaintiff sought to recover under the uninsured motorists provisions of
plaintiff's auto policy as the insurer of the other motorist was placed in
liquidation. However, the court held that the order of liquidation by merely
ordering liquidation, did not constitute a denial of the policyholder's coverage.
Although, pro rata distribution of assets from the insurer may produce less
than full satisfaction of the claims cannot be deemed an absolute denial,
especially as of the date of liquidation order, since at that time the extent of
the recovery has not yet been determined.
Kentucky
Casteel v. Kentucky Home Life Ins. Co., 258 Ky. 304, 79 S.W.2d 941 (1935). The
court held that an adjudication of insolvency of an insurer cancels its
outstanding policies as a matter of law, and policyholder is entitled to share
with other creditors in the assets of the insolvent insurer. But where another
insurer purchases the assets of the insolvent insurer and assumes its
obligations, the insured has rights against the purchaser as granted in the sales
contract, if the insured accepts the contract. If not, the policyholder is entitled
to a portion of the reserve as a general rule.
Kentucky Home Life Ins. Co. v. Miller, 268 Ky. 271, 104 S.W.2d 997 (1937). The
court held that a policyholder of an insolvent life insurer is entitled to a
proportionate share in the reserve or cash value of the policy during the
policyholder's lifetime against the insolvent insurer's estate, if the policyholder
desires to proceed as a creditor rather than continuing such insurance
coverage with a successor company in the plan of reorganization.
Louisiana
Alerion Bank v. La. Ins. Guar. Ass’n, 753 So. 2d 369 (La. Ct. App. 2000). The
Louisiana Insurance Guaranty Association (“LIGA”) appealed a finding of
liability to the holder in due course (“Holder”) of certain financial guaranty
bonds issued by an insolvent insurer (“Issuer”). LIGA argued that Holder
manipulated the situation to force the borrowers to default on the bonds
within the thirty‐day grace period after Holder learned of the insolvency of
Issuer. LIGA submitted that, in the normal course of business, default would
not have occurred but for Holder’s interference because payment was not
yet due on the bonds and because the Issuer would have an additional thirty
days under the bonds to cure upon notice of default. LIGA argued, if
payment was not yet due because the time period for cure had not yet
expired, and without the interference of Holder to force default, then there
would have been no default on the bonds within the thirty‐day grace period.
The court of appeals rejected LIGA’s arguments reasoning that the
appropriate time for accrual of LIGA’s obligation is the time of the
occurrence that caused the loss – the insolvency of Issuer. Therefore, the
court held LIGA is legally obligated to pay Holder on its claim(s) submitted

under the Issuer’s financial guaranty bonds without regard to whether Issuer
could have cured if not insolvent.
La. Ins. Guar. Ass’n v. Johnson Controls, Inc., 905 So. 2d 444 (La. Ct. App. 2005).
The appellate court addressed a challenge to the Louisiana Insurance Guaranty
Association’s (“LIGA”) denial of a claim based on the net worth exclusion in the
guaranty association statute. The court explained that the “Powers and duties
of the association” section of the statute, La. R.S. § 1382, contains a
typographical error in referring to the net worth exclusion as applying to any
claimant with a net worth of $25 million or greater in the year “immediately
preceding the determination of insolvency of the insured.” The court of appeals
held that the statute, properly written, should be read with “insurer” replacing
“insured.” With that explanation, the court of appeals denied the appeal of the
insured of the insolvent insurer.
La. Safety Ass’n of Timberman–Self‐Insurers Fund v. La. Ins. Guar. Ass’n, 998 So.
2d 817 (La. Ct. App. 2008). The court of appeals rejected both arguments
presented by the Louisiana Insurance Guaranty Fund (“LIGA”) in asserting that
it was not liable for claims made to it by a self‐insurance fund. First, LIGA’s
argument that any amount due a self‐insurance fund is not a “covered claim”
under La. R.S. 22:1379(3)(b), was without merit. The court reasoned that, where
the self‐insured fund makes a claim to LIGA that would otherwise be covered by
its insolvent excess of loss insurance carrier, such claim is a “covered claim”
made by the insured of an insolvent insurer for purposes of the Louisiana
statute. In explaining its reasoning, the court distinguished between claims
made by a self‐insurer to LIGA, which may be allowed in some cases, and claims
that are excluded because they fall within the coverage provided by selfinsurance.
Second, the court of appeals rejected LIGA’s argument that
members of a self‐insurance fund are “affiliates” whose aggregate net worth
excludes guaranty fund coverage for purposes of application of the statutory
$25 million net worth exclusion. In rejecting the second argument, the appellate
court reasoned that the members of the self‐insurance fund were not
“affiliates,” because they were not a single economic unit for accounting
purposes, and because the fund is a separate trust that is required to file its own
financial statements and reports with the Department of Insurance.
Massachusetts Commissioner of Insurance v. Massachusetts Accident Co., 318 Mass. 238, 61
N.E.2d 137 (1945). The court held that the value of non‐cancellable accident
and health policies with level premiums was the value at the date of the
liquidation decree of the total estimated benefits which policyholders would
have received had their policies been continued, minus the total present value
of future gross premiums. If no equivalent insurance coverage could be
obtained as of the date of the decree, the cost of obtaining other policies
would not be the method of evaluating the amount of the policyholders'
claims. The calculation of dividends on proved claims must include the value of
the company's cancellable policies, the agency organization, and good will.
Minnesota Smith v. National Credit Ins., 65 Minn. 283, 68 N.W. 28 (1896). The case
involved five different claims under various credit insurance policies. The first
claim involved an annual policy which had expired several months before the
insurance company failed. The court found that the losses incurred after
application of the 15% deductible during the full year were to be paid from the
insolvent insurance company's assets. The policy in the second claim had run
only for ten months and seven days before the insurer failed. The court held
that the insolvency of the insurer had the effect of cancelling the policy, and
the policyholder was only entitled to a return of its unearned premium. The
third policy had run ten months and twenty‐two days when the insurer failed.
The court held that the policyholder was not entitled to recover for losses
which occurred after the company's insolvency. The fourth policy at issue had

un ten months and twenty‐six days at the time of the insolvency. Although the
policyholder had incurred no losses during this time, it argued that it had the
right to elect to rescind the insurance contract and recover the whole year's
premium. The court held that the policyholder did have a right to a return of
the unearned premium, but did not have any claim for the return of entire
premium because the insurer had partly performed the contract by incurring
risk on the policy for more than ten months. The final policy had run a full year
and had expired nine days before the insurance company was declared
insolvent. The policy required the policyholder to notify the insurer of any loss
within 10 days of the loss and to make a final proof of such loss within 30 days.
The policyholder at issue failed to make such final proof under the terms of the
contract. The court found that at the time of the breach of contract by the
insolvent insurer, the insured was not itself in default because the time to file a
final proof of loss did not expire until after the insurance company had been
declared insolvent. The court thus allowed the insured to recover on quantum
merit for breach of contract, the measure of damages being substantially the
same as if the policyholder had fully performed by furnishing the final proof of
loss before the insolvency.
Taylor v. North Star Mutual Ins. Co., 46 Minn. 198, 48 N.W. 772 (1891). The
court found that when losses have occurred after the adjudication of
insolvency, the only claim open to the policyholder is for breach of contract
and the measure of damages is the surrender value of the policy.
Vetter, et al. v. Security Continental Ins. Co., et al., 567 N.W. 2d 516, (Minn.
1997). Plaintiffs, residents of Minnesota, purchased group insurance
contracts from Security, a Delaware company, and later those contracts
were transferred to Inter‐American Illinois, a subsidiary of Security. The
Illinois company was subsequently declared insolvent and ordered into
liquidation by the Illinois Department of Insurance. The Plaintiffs later filed
suit seeking to enforce contractual rights against Security. The trial court
granted partial summary judgment holding Security liable under the original
contracts. The Court of Appeals reversed finding that under choice of law
rules, Illinois law rather than the laws of Minnesota should control. Under
Illinois law, the appellate court found that the facts supported the position
that a novation had occurred following the transfer of risk from Security to
Inter‐American Illinois. Consequently, Plaintiffs’ recourse was against the
insolvent estate of Inter‐American Illinois. Plaintiffs appealed and the
Minnesota Supreme Court reversed and reinstated the summary judgment in
their favor. The court determined that the standard of evidence for a
novation was the same under either Illinois or Minnesota law and that the
burden of proving a novation had not been met. Therefore, Security
remained liable on the contracts.
Mississippi Gregory v. Cent. Sec. Life Ins. Co., 953 So. 2d 233 (Miss. 2007). Plaintiffs
purchased life insurance policies with “vanishing” premiums from an agent of
an insurer which became insolvent and was placed in liquidation. A second
company (“Assuming Company”) entered an assumption reinsurance
agreement with the National Organization of Life and Health Insurance
Guaranty Associations, to perform certain contractual obligations of the insurer.
Thereafter, Assuming Company notified plaintiffs that they were required to
provide additional premiums on the life insurance policies purchased from
insurer. Plaintiffs filed suit against the agent and Assuming Company, as
successor in interest to the insurer, for making false and misleading statements
in a deliberate attempt to induce them to purchase the subject “vanishing”
premium policies. The plaintiffs argued that when Assuming Company assumed
the obligations of insurer under the policies, Assuming Company also assumed
responsibility for any false and misleading statements made by the insurer. The
Supreme Court of Mississippi held that Assuming Company was not liable to the

plaintiffs because it only assumed certain “Covered Obligations” of the insurer,
which did not include any acts or omissions of the insurer or its agent.
Miss. Ins. Guar. Ass’n v. Cole, 954 So. 2d 407 (Miss. 2007). The Supreme Court of
Mississippi addressed the question of whether “insolvent insurer,” as defined in
the Mississippi Guaranty Association Act (“Act”), includes a foreign insolvent
surplus lines insurer that was never licensed in Mississippi and was never a
Mississippi Insurance Guaranty Association (“MIGA”) member. The court held
that “insolvent insurer” does not include non‐members of MIGA – such as the
insolvent surplus lines insurer at issue – and therefore, claims to non‐members
are not “Covered Claims” under the Act.
Miss. Ins. Guar. Ass’n v. Goldin Props., Inc., 893 So. 2d 1062 (Miss. Ct. App. 2004).
The court of appeals addressed whether the Mississippi Insurance Guaranty
Association (“MIGA”) was required to pay a claim on a policy issued by a nonmember
insurer whose policies were assumed when it merged with a member
insolvent insurer. At all relevant times (including the policy issue date, the event
date, and the merger date) issuing insurer was a surplus lines company and nonmember
of MIGA. Therefore, none of its premiums were assessed to be
included into MIGA’s fund. The court held that it would be inequitable for the
claimant to recover from MIGA when no assessment from the policy issued to
him was ever collected by MIGA.
Owens Corning v. Miss. Ins. Guar. Ass’n, 947 So. 2d 944 (Miss. 2007). Owens
Corning challenged the ruling of the trial court on a motion for summary
judgment in favor of the Mississippi Insurance Guaranty Association (“MIGA”),
which denied coverage to Owens Corning on a claim covered by its policy with
Southern, its insolvent insurer. On appeal, MIGA asserted that it is a state
agency whose interpretation of the Insurance Guaranty Act is entitled to
deference. The Supreme Court of Mississippi dismissed this argument because,
MIGA was not an administrative agency, but rather a nonprofit, unincorporated
legal entity of which all licensed insurers are required to be members. The court
nonetheless upheld summary judgment in favor of MIGA, because Owens
Corning was not a resident of Mississippi at the time of the insured event, which
is required for coverage of a claim by MIGA.
Missouri
Barden v. St. Louis Mutual Life Ins. Co., 3 Mo. App. 248 (1877). The assets and
liabilities of an insolvent insurer were assumed prior to insolvency pursuant to
a reinsurance contract. The reinsurance contract was ultimately held void in
another proceeding. Therefore, any alleged breach of the policies held by the
policyholders in this action to justify return of premiums paid was not proper
since there had been no breach of the policies due to the invalidity of the
reinsurance contract. See also: Baried v. St. Louis Mutual Life Ins. Co., 3 Mo.
App. 590 (1877); Grunn v. St. Louis Mutual Life Ins. Co., 3 Mo. App. 590 (1877);
Dyer v. St. Louis Mutual Life Ins. Co., 3 Mo. App. 590 (1877); Richman v. St.
Louis Mutual Life Ins. Co., 3 Mo. App. 590 (1877); Kurtzeborn v. St. Louis Mutual
Life Ins. Co., 3 Mo. App. 590 (1877); Lee v. St. Louis Mutual Life Ins. Co., 3 Mo.
App. 590 (1877); Montgomery v. St. Louis Mutual Life Ins. Co., 3 Mo. App. 590
(1877); Sherman v. St. Louis Mutual Life Ins. Co., 3 Mo. App. 590 (1877); Gentry
v. St. Louis Mutual Life Ins. Co., 3 Mo. App. 590 (1877); Airey v. St. Louis Mutual
Life Ins. Co., 4 Mo. App. 5 (1877); Erving v. St. Louis Mutual Life Ins. Co., 4 Mo.
App. 572 (1877); Rives v. St. Louis Mutual Ins. Co., 4 Mo. App. 572 (1877); and
Evans v. St. Louis Mutual Life Ins. Co., 4 Mo. App. 572 (1877).
Viacom, Inc., as Successor‐In‐Interest to Westinghouse Elec. Corp. v. Transit Cas.
Co., in Receivership, 138 S.W.3d 723 (Mo. 2004) (en banc), as modified on denial
of reh’g, (Aug. 3, 2004). An insured manufacturer, Asbestos Products, filed
claims under two excess liability policies issued by the insurer in receivership.
The Court held that the law of Pennsylvania, the state where the excess liability

policies were delivered, the state where the insured was incorporated and the
state where the policies were negotiated, rather than Missouri, where the
insurer was in receivership, govern the receivership court’s allocation of
asbestos‐related claims against insured amongst the policies. Under
Pennsylvania law, the “all sums” method was a proper method by which to
allocate among excess liability policies. Further, the court held that insurance
insolvency statutes prevail over any general statutes or common law; however,
where the insurance insolvency code is silent, courts apply the general statutes
and common law.
New Jersey
Failach v. New Jersey Prop. Liab. Ins. Guar. Ass’n, 2007 WL 2262907 (App. Div.
2007) The defendant, the New Jersey Property‐Liability Insurance Guaranty
Association (“NJPLIGA”), appealed a summary judgment order holding
NJPLIGA liable and stating the co‐defendant, Allstate, did not owe the plaintiff
underinsured motorist (“UIM”) benefits or personal injury protection (“PIP”).
Plaintiff was insured by a company who went insolvent after the plaintiff
presented UIM and PIP benefit claims to it. The plaintiff’s father had a policy
with Allstate, but on a different car than the plaintiff was in when the accident
occurred. NJPLIGA argued that the plaintiff must first exhaust Allstate’s policy
before NJPLIGA pays. This argument was denied by the court. The court
reasoned that at the time of the accident, plaintiff was covered by the insolvent
insurer’s policy. Since the company was declared insolvent, NJPLIGA was
deemed the insurer under the NJPLIGA Act and had the responsibility to pay,
subject to the statutory limits on NJPLIGA’s liability amount.
Hudson Env’t. Services, Inc. v. New Jersey Prop. Liab. Ins. Guar. Ass’n, 372 N.J.
Super. 284, 858 A.2d 39 (Law Div. 2004). The insured had a policy with an insurer
that was declared insolvent. The insured brought an action against the New
Jersey Property‐Liability Insurance Guaranty Association (“NJPLIGA”) seeking a
declaratory judgment that NJPLIGA must pay for past and future environmental
clean‐up costs associated with the covered claim. At issue was whether
NJPLIGA had immunity from causes of action, alleging that NJPLIGA acted in
bad faith in processing and/or paying the insurance claim under an insolvent
insurance company’s policies. The court held that NJPLIGA was immune as a
matter of law under the Guaranty Association Act and the immunity only affects
potential liability outside the obligation to pay covered claims, such as
negligence in claims adjustment, processing, and payment.
In the Matter of the Liquidation of Integrity Insurance Company, 231 N.J. Super.
143 (Ch. Div. 1988). Integrity's creditors sought a policyholders' committee to
enable the policyholders to protect their interests in the liquidation of the
company. The policyholders claimed that they had not been informed as to
the progress of the liquidation nor had they been given the opportunity to
participate in negotiations and were unaware of the status of commutations.
The court held that it is empowered and authorized to create a policyholders'
committee pursuant to its equitable powers as a Chancery Court and the
Uniform Insurers Liquidation Act. The court, however, concluded that
policyholders had no right to notice of all the proceedings regarding the
liquidation of Integrity under the Uniform Insurers Liquidation Act. Moreover,
the court concluded that the creation of a policyholders' committee would
inevitably result in the inefficient administration of the Integrity estate,
increased litigation, depletion of the assets of Integrity's estate and would
have an adverse impact upon the interests of all other creditors. Thus, the
court denied the motion to appoint a policyholders' committee.
Newman v. Hatfield Wire & Cable Co., 113 N.J. 484, 174 A. 491 (1934). When an
insurance company's policies are cancelled upon its insolvency, unearned
premiums paid on the policies are properly set‐off against the receiver's claims
for premiums due from an insured on other policies. However, an insured's

counterclaim for estimated damages it might have to pay its employees for
injuries sustained before the insurer's insolvency was properly stricken as
unliquidated and presently unprovable losses in an action by the insurer's
receiver for premiums due on the policies other than those covering liability for
such damages.
Smith v. Hunterdon Co. Mutual Fire Ins. Co., 41 N.J. Eq. 473, 4 A. 652 (1886). A
mutual fire insurance company reinsured all its risks and had a large sum of
money remaining which consisted of cash payments made by policyholders,
past and present, and the interest on the investments of those payments. The
court held that policyholders who had contributed to the sum were entitled to
a portion of it, ratably according to their payments, regardless of whether they
were policyholders at the time of distribution.
New York
Atty. General v. Continental Life Ins. Co., 91 N.Y. 647 (1883). Policyholders
surrendered their policies in exchange for new ones of equal amount at
reduced premiums. At the time of the exchange, they released the company
of all claims against it under the old policies. The company then became
insolvent. The court held that the policyholders should have been allowed the
value of the new policies as claims against the company's assets held by the
receiver.
In re First Cent. Ins. Co., 791 N.Y.S. 2d 123 (App. Div. 2005). Where the insurer
received timely notice of the policyholder’s claim, acknowledged receipt of the
claim, and agreed to provide a defense before liquidation proceedings were
instituted, the Superintendent of Insurance as liquidator failed to demonstrate a
sufficient basis to disclaim coverage for defense of claims for lead poisoning
injuries alleged by tenants of the insured apartment owners.
In re General Indemnity Corporation of American, 256 A.D. 172, 8 N.Y.S.2d 952
(1939). An automobile liability insurer went into liquidation. By so doing, it
failed to fulfill its contractual obligation to assume the defense of a suit against
an insured. The insured was entitled to an allowance of a claim in the
liquidation proceeding equal to the amount it paid in the defense of the suit
against it.
In re Liquidation of Ideal Mut’l Ins. Co., 663 N.Y.S.2d 173 (App. Div. 1997). A New
York statute denying interest to creditors of an insolvent insurer for delay in
paying dividends did not preclude an insured from recovering interest from the
insolvent insurer which the insured paid on a judgment in the underlying action,
as provided in the liability insurance policy.
In re Liquidation of Midland Ins. Co., 861 N.Y.S. 2d 922 (N.Y. Sup. Ct. 2008).
Policyholders of an insolvent multi‐line carrier were not bound under either
state court decisions or the law of the case doctrine by a prior decision on
appeal in the insurance liquidation proceeding which held that New York law
applied to all claims in the liquidation proceedings, where the policyholders had
not been parties to the liquidation proceeding and did not have a full and fair
opportunity to be heard.
Paramount Communications, Inc. v. Gibraltar Casualty Company, 90 N.Y.2d
507, 663 N.Y.S.2d 133, 685 N.E. 2d 1214 (1997). This case involved a claim
against the New York Property/Casualty Insurance Security Fund. A
manufacturing subsidiary of Paramount Communications sold valves to a
power company. The valves were built in Rhode Island but were delivered
and installed at a power plant in New York. When the valves did not
function properly, a products liability action was brought against the
manufacturer. The action was settled, but one of the manufacturer’s excess
liability carriers, Integrity Insurance Company, had been declared insolvent.

Accordingly, the manufacturer sought coverage of Integrity’s portion of the
settlement by the Fund. The New York Superintendent of Insurance decided
that the valves had left the possession and control of the manufacturer in
Rhode Island and for that reason, rejected coverage of the claim by the
Fund.
The Court overruled the Superintendent, finding that the key issue was
whether control of the valves was relinquished in Rhode Island when they
were delivered to a carrier. There was no dispute that the valves were
located in New York when the defects became evident. The Court found
that because the claim arose from the product’s physical presence in New
York, coverage of the claim by the Fund should not depend on manner of
delivery of the product. In ruling that the claim was covered by the Fund,
the Court overturned the New York Superintendent’s analysis of the New
York Insurance Law that the location where the insured relinquished
possession and control of the product was the determinative factor. The
Court took the opportunity to reiterate the standards to be followed by a
court in overruling the Superintendent. The Superintendent has broad
authority to interpret the Insurance Law and has statutory power under
Insurance Law § 7613 to enforce reasonable rules and regulations for the
proper administration of the Fund. Once it is determined that an agency’s
conclusion has a sound basis in reason, the review process is at an end and
the court may not substitute its judgment for that of the agency. If a court
determines, however, that an agency has made an irrational determination,
that determination requires no deference and may properly be annulled. In
this case, the Court rejected the Superintendent’s conclusion that the
manner of delivery of a product, rather than its eventual physical location, is
the determinative factor in deciding whether a claim is covered by the Fund.
Reese v. Smith, 95 N.Y. 645 (1884). The receiver of an insolvent New York life
insurance company entered into a contract with a Connecticut company,
whereby the latter agreed to undertake the former's outstanding policy
liabilities. Certain policyholders in the New York company surrendered their
policies to the Connecticut company, receiving its policies in exchange. The
court held that the Connecticut company did not thereby become a
policyholder in the New York company and was not entitled to share in the
distribution as such.
Serio v. U.S. Fire Ins. Co., 837 N.Y.S. 2d 294 (App. Div. 2007). Where the
insolvent insurer failed to reserve rights in disclaiming coverage for an additional
insured in a personal injury action, and the insured was prejudiced by the
receiver’s coverage disclaimer after liability had been established, the receiver
was estopped from denying coverage.
Ohio
Bailey v. Reithmiller, 46 Ohio App.3d 27 (1989). The court observed that the
purpose of Ohio Revised Chapter 3955 is to afford an insured protection
against an insolvent insurer and not to provide protection against claims
beyond the limits of a tortfeasor's policy. Consequently, an insurer is only
prohibited from attempting to recover against an insured to the extent of the
insured's rights against his insolvent insurer. To hold otherwise would put a
tortfeasor in a better position if his insurer became insolvent.
Downwyn Farms v. Ohio Ins. Guar. Ass'n, No. 89CA004593, 1990 Ohio App.
LEXIS 363 (Ohio Ct. App. Jan. 31, 1990). The court held that attorneys' fees
incurred prior to the declaration of insolvency by an insurer are not "covered
claims" within the meaning of Ohio Revised Code Section 3955.01(B) where (1)
the attorneys' fees arose from a contract between the insurer and the
attorney and (2) the attorney performed services for the insurer prior to the
insurer's insolvency. The court suggests that attorneys' fees incurred by the

insured in litigation covered by the insurance policy fall within the meaning of
the term "covered claim" referred to in Ohio Revised Code Section 3955.01(B).
Maytag v. Tennessee Ins. Guar. Ass'n., Nos. 91AP‐1115, 91AP‐1157, 1992 Ohio
App. LEXIS 2387 (Ohio Ct. App. May 5, 1992). The court held that the term
"covered claim," as used in the Tennessee Insurance Guaranty Association Act,
includes future medical expenses as well as amounts for permanent physical
impairment.
Oklahoma
Little v. Gould Investment Ins. Co., 103 Okla. 173, 229 P. 616 (1924). It was error
to deny the claims of beneficiaries of policies issued by an insolvent insurance
company, whose rights under the policies matured prior to the appointment of
the first agent to manage the affairs of the company, even though maturity
occurred after the institution of the injunction proceedings. Stockholders of
such company will not be heard to complain against payment of claims on any
contracts of insurance issued by company, particularly on the basis of
mismanagement and other wrongs by the company.
Oglesby v. Liberty Mut'l Ins. Co., 1992 Okla. 61, 832 P.2d 834 (1992). The
Oklahoma Guaranty Association is obligated to pay individual claims of each
victim up to statutory maximum of $150,000 upon insolvency of insurer in
wrongful death action, rather than an aggregated total of $150,000 to all of
the victims.
Pennsylvania
Univ. Health Services, Inc. v. Pennsylvania Prop. and Cas. Ins. Guar. Ass’n, 67 Pa.
D. & C. 4th 56, 2004 WL 1005011 (Pa. Commw. Ct. 2004). University Health
Services, Inc. (“UHS”) had a claims‐made policy with PHICO Insurance Company
(“PHICO”) with a reporting tail option. The reporting tail option provided
coverage after the policy expired for claims‐made relating to events that took
place during the policy period. PHICO was declared insolvent and the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
assumed PHICO’s coverage obligations. UHS received several claims that took
place during the policy period, but were not reported until more than thirty days
after the determination of PHICO’s insolvency. PPCIGA denied coverage of the
claims, reasoning that its obligations extended no further than claims that arose
within thirty days after the determination of the insolvency. The court found
that since the policy was a claims‐made policy, the occurrences happened
during the policy period, and prior to the insolvency, the claims were covered
claims and PPCIGA was obligated to provide coverage for the reporting tail
claims.
Tennessee McReynolds v. Petroleum Marketers Mut’l Ins. Co., 1994 Tenn. App. LEXIS 595
(1994). Court affirmed receiver’s decision to disallow a late filed claim.
Policyholder asserted excusable neglect due to a belief that no further action
was required after the original claim was filed. However, policyholder did not
submit any substantial explanation for failure to comply with the filing deadline.
McReynolds v. United Physicians Ins. Risk Retention Group (In re Valdez), 914
S.W.2d 491, 1995 Tenn. App. LEXIS 162 (1995). A policyholder had an insurance
claim but filed proof of his claim with the receiver late. A special master found
that the policyholder was entitled to the same priority as those who had filed
timely proofs of claim, but the trial court overturned the special master’s
findings under the Act. The court affirmed the trial court’s judgment, finding
that the Act established an order of distribution of claims with a specific class
created for claims filed late. Also, the court found that, while the receiver had
arguably agreed to undertake a defense of the policyholder, it, unlike an insurer,
could step away from that position in these proceedings.

Sizemore v. United Physicians Ins. Risk Retention Group, 1997 Tenn. App. LEXIS
253 (1997). Policyholder’s proof of claim failed to be timely filed under the
Tennessee Insurance Rehabilitation and Liquidation Act (Act) and was denied by
the receiver of the insurance company. The chancery court held that it had no
more authority under the Act to have excused the late filing than had the
receiver. The appellate court held that the chancery court applied an
unnecessarily restricted interpretation of its powers under the Act.
The Terminix Int'l. Co. v. Tennessee Ins. Guar. Ass’n., 845 S.W.2d 772 (Tenn. Ct.
App. 1992). The court held that the term "covered claim, " as used in the
Tennessee Insurance Guaranty Association Act, includes medical expenses and
lost wages actually incurred but does not include future medical expenses or
loss of earning capacity.
Texas
Utah
Global Santa Fe Corp. v. Tex. Prop. & Cas. Ins. Guar. Ass’n, 153 S.W.3d 150 (Tex.
App. 2004). The court held that the Texas Property and Casualty Insurance
Guaranty Association (“TPCIGA”) is not required to apportion a payment made
on behalf of multiple insureds covered under a single insurance policy in order
to seek recoupment from a net worth insured under the TEX. INS. CODE ANN. art.
21.28‐C, § 11(b) (Supp. 2004‐05). The TPCIGA sought recoupment from a
corporation based on a contribution the TPCIGA made to settle a suit filed
against the corporation after its insurance provider became impaired. The
corporation refused to pay arguing that there was no evidence of how much
contribution was paid solely on behalf of the insured, because the TPCIGA failed
to properly apportion its contribution among the multiple insureds. The court
held that if the legislature wanted such a requirement, it would have included
the relevant language in TEX. INS. CODE ANN. art. 21.28‐C, § 11(b) (Supp. 2004‐05).
R&R Indus. Park, L.L.C. v. Utah Prop. & Cas. Ins. Guar. Ass’n, 199 P.3d 917 (Utah
2008). A fire was caused by material stored by CDR, the insured, at an industrial
park. CDR’s insurance company entered receivership and the Utah Property
and Casualty Insurance Guaranty Association (“UPCIGA”) assumed the role of
insurer of CDR. Other parties, R&R and AlumaTek, were damaged by the fire
caused by CDR, and each collected insurance from their own (third party)
insurance carriers. R&R collected insurance for both lost profits and property
damage. R&R, AlumaTek, and UPCIGA attended a mediation to resolve what
portions of the claims UPCIGA would pay. The three parties sought a
declaratory judgment to determine whether, in settling the claims, UPCIGA
would only be required to pay “one covered claim per claimant” and whether
UPCIGA would be entitled to offset the amounts that R&R and AlumaTek’s own
insurers had paid for the damages suffered. The supreme court held that the
Guaranty Act in Utah applies to multiple claims because to allow for only one
claim out of a single occurrence would defeat the remedial nature of the Act.
The court further held that UPCIGA could not offset amounts that R&R and
AlumaTek recovered from third‐party insurers.
Virginia Universal Life Ins. Co. v. Binford, 76 Va. 103 (1882). It was held that a
policyholder is entitled to be restored to the status quo‐‐the amount necessary
to purchase the same coverage from a solvent company.
Washington Seattle‐First National Bank v. Washington Insurance Guaranty Association, 972
P.2d 1282 (Wash. Ct. App. 1999). Where out‐of‐state insurer became insolvent,
WIGA was required to cover claims that became due within 30 day of the
insurer’s insolvency and refund unearned premiums.
Agent's Claims for Commissions and in General

Fifth Circuit 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.
Seventh Circuit
Connecticut
Florida
Illinois
Layton v. Illinois Life Ins. Co., 83 F.2d 277 (7th Cir. 1936). When a life insurance
agency contract provided for post‐agency renewal commissions to be paid
only so long as there remained in force a certain amount of insurance upon
which renewal premiums were being paid, parties succeeding to the rights of
agents, on statutory receivership of the insolvent life insurance company, were
not entitled to recover present value of renewal commissions, since the
contract was subject to insurer remaining in business and collecting premiums.
Reider v. First Conn. Life Ins. Co., No. CV960559513S, 2001 WL 837933 (Conn.
Super. June 27, 2001). The rehabilitator entered into a settlement with owners
of the insolvent insurer’s parent company, and subsequently sought an order
allowing claims to be paid out of the settlement on a pro rata basis to small
agents, who sold policies during the months before the insurer went into
liquidation but did not file proof of claims in the liquidation proceedings. The
court rejected objections to the rehabilitator’s motion and held that the
settlement was clear and unambiguous with regard to payment of the agents’
claims, and the rehabilitator was not required to remit the balance of the
settlement to the owners.
D.R. Mertens, Inc. v. State ex rel. Department of Insurance, 478 So. 2d 1132 (Fla.
Dist. Ct. App. 1985). An insurance agent's contractual right to prospective
commissions from renewal premiums is implicitly conditioned on the insurance
company's continuation of business, and, as a result, generally an agency's
representative will not be paid commissions based on the present value of
renewals which would have occurred after the insolvent insurer is placed in
receivership.
O'Hern v. De Long, 298 Ill. App. 375, 19 N.E.2d 214 (Ill. App. 1939). The agents of
an insolvent insurer were denied a setoff by way of counterclaim in mortgage
foreclosure proceeding for future renewal commissions due defendants under
agency contracts with insolvent insurer. The court noted that the continued
solvency of the company and its ability to collect and receive future premiums
was one of the conditions contemplated by the agents in entering into the
agency contracts.
People v. Peoria Life Ins. Co., 376 Ill. 517, 34 N.E.2d 829 (1941). The court held
that agents of an insolvent insurer may not recover commissions on renewal
premiums paid to the liquidator from the time of the liquidator's appointment
to the date of execution of an assumption reinsurance agreement.
Louisiana
Scarborough v. Nelson, 371 So.2d 1261 (La. App. 3rd Cir. 1979). Plaintiff surplus
lines broker sued defendant insurance agent for premium payments made by
plaintiff to an insurer which was subsequently declared insolvent. Defendant
had received the funds from the policyholders, but used the funds to procure
replacement insurance after the initial policies were cancelled due to the

insolvency. The court found for plaintiff and required defendant to make his
claim for reimbursement of unearned premium in the liquidation proceeding.
A claim that the plaintiff broker was negligent in placing the insurance with an
insolvent carrier was rejected for lack of evidence.
Massachusetts
Missouri
Comm. of Ins. v. Jankowski Ins. Agency, LLC, 61 Mass. App. Ct. 305 (App. Ct.
2004). Where the broker refused to return unearned commissions to the estate
of the insolvent insurer, the court held that unearned commissions are assets of
the insurer’s estate and must be returned to the liquidator.
Paisley v. Lucas, 346 Mo. 827, 143 S.W.2d 262 (1940). In an action to recover
commissions and bonuses alleged to be due under a general agency contract
from an insolvent insurance company, the court held that the agent was not
entitled to commissions on policies written in "open territory" and that the
agent did not have a perpetual employment contract since the contract was
for an indefinite period and was thus, terminable at will by either party.
New York Harnett v. National Motorcycle Plan, Inc., 59 A.D.2d 870, 399 N.Y.S.2d 242
(1977). An agent named as a defendant in an action brought by the liquidator
cannot set off a claim for damages for alleged breaches of contract by the
insolvent insurer against the agent's obligations to the insurer. The agent's
claim had not matured at the time of insolvency. The concept of "mutuality"
depends on whether the debts to be offset are due to, and from, the same
persons in the same capacity.
Oklahoma Cockrell v. Grimes, 740 P.2d 746 (Okla. App. 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.
Rouch v. National Old Line Ins. Co., 453 F. Supp. 247 (W.D. Okla. 1978). In an
action by a former general agent of an insurance company to impose a
constructive trust on monies held by another company as renewal premiums
pursuant to a contract whereby the receiver for the first company had
assigned the policies to the second company under an agreement that the
latter would assume no liability for payment of any agents' commissions or
service fees, and in which Texas law was applicable and it appeared that the
agent had not filed a claim against the receiver and waited over six years
before bringing this action, there existed material issues, including latches,
precluding summary judgment for agent.
Oregon
Pennsylvania
Ainsworth v. Cincotta, 79 Or. App. 574, 721 P.2d 455 (1986). The Oregon Court
of Appeals held that a domiciliary receiver of an insolvent insurer was entitled
to recover unearned commission on cancelled policies from those agents who,
by entering into a managing general agent's agreement, had agreed to
conduct business in accordance with industry customs and standards.
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

evocation 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.
Tennessee McReynolds v. Cherokee Ins. Co., 815 S.W.2d 201 (Tenn. Ct. App. 1990).
Insolvent insurer's estate brought an action against agencies to recover unpaid
premiums. The lower court permitted the agencies to set‐off the insurer's
profit sharing obligations against the agencies' debts for unpaid premiums. In
affirming the lower court's decision, the court of appeals held the following:
(1) that where insurance agencies had a right to their share of the profits on
insurance, even though the amount of such profits were not to be ascertained
until the end of the calendar year, the agencies were entitled to set‐off their
share of profits from the amount of premiums owed to the insolvent insurer;
(2) that the insurance agencies' obligations to insurer to collect and remit
premiums, and insurer's obligation to agencies for share or profit, were mutual
and thus could be offset; and (3) that the insurance agencies' delay in paying
premiums to insolvent insurer in order to assure payment of insurer's profit
sharing obligation did not preclude agencies from offsetting amount owed by
insurer against agencies' debt to insurer regarding unpaid premiums.
State ex rel. Williams v. Cosmopolitan Ins. Co., 217 Tenn. 8, 394 S.W.2d 643
(1965). The Tennessee Supreme Court found that some rights and liabilities
can be fixed at a date earlier than the decree ordering liquidation, which, in this
case, was the date of adjudication of insolvency by an Illinois court and an
order of rehabilitation. In this case, a general agent in Tennessee filed a claim
in Tennessee against an insolvent insurer for the agent's costs in obtaining
substitute coverage for the insurer's policyholders upon the agent's learning
that the company's authority to do business in Tennessee had been revoked.
The lower court denied the claim because the order of liquidation cancelled all
policies, and the expenses were incurred prior to that time.
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

equires 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.
Wheeler v. Clark, 306 S.W. 2d 158 (Tex. Civ. App. 1957) writ ref. In an action by
the receiver of an insurance company to recover unearned commissions due
from an agent, the agent cross‐claimed for amounts owed by the insurer. The
agent had repaid the policyholders unearned premiums due them or secured
new policies in a different company. The agent then took assignments from
those policyholders for claims they had against the receiver. If the agent were
permitted to offset the sums owed to the agent for unearned commissions
against the claims assigned to the agent, the agent would become a preferred
creditor of the estate. The court found that the agent acted voluntarily in
refunding monies to the policyholders. It also found that the agent was not
entitled to an offset for unearned commissions and that amount was due to
the receiver.
Virginia
Johnson v. Button, 120 Va. 339, 91 S.E. 151 (1917). The court held that the
insolvency of the company automatically cancelled the outstanding policies
and thus return premiums would be calculated upon the pro‐rata basis, and
that because this cancellation was without any fault on the part of the agents,
the agents had no obligation to return any part of the commissions received on
the policies cancelled. The receiver of the insolvent company asserted that as
the policies had not been cancelled by the company, but had rather been
replaced by agents for their clients, the short‐rate premium schedule should
apply, and also that the amount due the agents should be offset by the
commissions the agents had earned on the premiums.
Wisconsin In the Matter of Liquidation of All‐Star Insurance Corporation, 112 Wis. 2d 329,
332 N.W.2d 828 (1983). In insurance liquidation proceedings, liquidator stands
in the shoes of the insolvent company and the liquidation order terminates the
company's existence. The liquidator was entitled to receive unearned
premiums from agent pursuant to agency agreement, because agent had
proper notice of liquidation proceedings and was not entitled to set‐off against
the unpaid premiums pursuant to agreement.
Claims for Unearned Premiums
Fifth Circuit
Sixth Circuit
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). Insurance broker brought action as subrogee
against insolvent insurer and its president and chairman of the board to
recover unearned premiums paid after insolvency. Citing the McCarran‐
Ferguson Act, 15 U.S.C. § 1011, the court affirmed an administrative stay
pending resolution of all proceedings in the state liquidation court on the
grounds of Burford abstention. Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098
(1943). The action against the president and chairman of the board individually
for mismanagement and undercapitalization was also properly stayed,
because the derivative claim involved the same assets which the Commissioner
was required to collect and distribute in the liquidation proceeding. Pursuit of
those claims in federal court would "usurp" Louisiana's control over the
liquidation proceeding, permit plaintiff to obtain an unfair advantage over
other claimants, and "encroach" into the Commissioner's exclusive power as
liquidator.
McDonough Caperton Shepherd Group, Inc. v. Academy of Medicine, Cleveland,
888 F.2d 1392 (6th Cir. 1989). Interpleader claimants sought review of the

district court judgment, claiming the lower court erred in the distribution of the
interpleader funds between Ohio and New York entities. The court found that,
under both Ohio and New York law, the insureds should be entitled to a return
on all unearned premiums. The court reasoned that Ohio Revised Code §
3903.33 applied to proceedings brought by Ohio’s superintendent of insurance
and also to liquidation proceedings in a reciprocal state in which Ohio claimants
file claims with Ohio’s ancillary receiver. The insolvent insurer is entitled to that
portion of the premium which is “earned” and the other claimant is entitled to a
refund, from the interpleader fund, of the unearned portion.
Eighth Circuit
Tenth Circuit
Indiana
Gallinger v. Vaaler Insurance Inc., et al., 62 F.3d 250, (8 th Cir. 1995). Great
Global Assurance Company acted as a fronting insurer for North Star
Hospital Mutual Assurance Ltd., a Bermuda‐based captive which provided
liability insurance for a group of hospitals. Defendant acted as an agent to
market the North Star program to member hospitals of the North Dakota
Hospital Association. Defendant had no written agency agreement with
Great Global and no binding authority although Vaaler was empowered to
countersign policies as a North Dakota registered agent. Great Global was
subsequently found insolvent and order liquidated in Minnesota. At the time
of the insolvency, Defendant held earned and unearned premium in its trust
account. The earned premium was transferred to the Receiver and the
unearned premiums were sent to the respective hospitals whose policies
had been cancelled by the Receiver. The Receiver sued seeking the return of
the unearned premium and the U.S. District Court granted summary
judgment to Defendant. The Receiver appealed and the Eighth Circuit
remanded in order that a determination of Defendant’s agency be made. At
trial, a jury determined that Defendant was acting as a broker for the insured
hospitals, not as an agent for Great Global and the case was dismissed. The
Receiver appealed and the appellate court affirmed the factual finding.
Inland Empire Ins. Co. v. Blair, 246 F.2d 505 (10th Cir. 1957). When prior to the
insurer's insolvency, an agent had effected the mass cancellation of policies
issued by such insurer, and because insureds ratified this action by accepting
the new policies of insurance placed with a solvent insurer, it could not be said
that the mass cancellation was the result of insolvency of the insurer. Thus,
the court held that under these circumstances, cancellation would be
considered a cancellation on part of the insured, and premium refund would
be computed on short‐rate cancellation schedule rather than pro‐rata refund
of unearned premium.
Bushnell v. Kraft, 133 Ind. App. 474, 183 N.E.2d 340 (1962). In rejecting the
receiver's action to recover from the agents of an insolvent insurer for the
agent's unearned commissions on policies cancelled when the insurer was
placed into liquidation, the court held that the insureds were entitled to
unearned premiums and, therefore, the agents could properly apply their
unearned commission for the insured's replacement insurance. The court
noted that insolvency of an insurance company which results in the
cancellation of policies is a material breach of contract to its policyholders. As
a result, it is not in a position to recover premiums due for future coverage, nor
is it in a position to recover commissions in the hands of agents, and
policyholders are entitled to an unearned premium claim and the insolvent
insurer is devoid of any right to secure the commissions retained by its agents.
The agency agreement in issue also provided that the company made no direct
refunds to policyholders of the "gross" return premium but instead remitted
net to its agents who then added their unearned commission to the return
premium.
Clark v. Manufacturers' Mutual Fire Ins. Co., 130 Ind. 332, 30 N.E. 212 (1892).
Where all policies of an insolvent mutual fire insurance company were

cancelled by order of the court, the holders of "all cash" policies had valid
claims against the company for unearned returned premiums.
Iowa State v. American Bonding & Cas. Co., 206 Iowa 988, 221 N.W. 585 (1928).
Funds deposited with the Iowa insurance commissioner by an insolvent insurer
under the erroneous belief that such deposit was required by statute did not
lose their trust character by virtue of such mistake. Consequently, the deposit
passed into the hands of the receiver as a trust fund, and holders of claims for
unearned premiums were entitled to have their claims established against the
trust fund.
Kentucky
Michigan
Minnesota
Moren v. Ohio Valley Fire & Marine Ins. Co.'s Receiver, 224 Ky. 643, 6 S.W.2d
1091 (1928). The court held that an agent contracted with the insolvent
insurer's receiver to refund unearned premiums and secure other policies at
agent's own risk, and found that while agent had a valid claim against the
estate for unearned premiums refunded, the agent did not have a preferred
claim due to the contract with the receiver.
Berry v. Dehnke, 302 Mich. 614, 5 N.W.2d 505 (1942). Where a mutual fire
insurance company issued farm risk policies and cash premium stock plan
policies, both of which were void because issued in violation of statute, the
holders, on the insolvency of the insurance company, were entitled to a return
of the unearned premium, under the equitable rule that where a contract is
invalid and the parties acted in good faith, they should be placed as near as
possible to status quo.
In re Minneapolis Mutual Fire Ins. Co., 49 Minn. 291, 51 N.W. 921 (1892). The
assignees of the claims of several holders of all‐cash policies in an insolvent
mutual life insurance company sought to recover unearned premiums paid.
The receiver disallowed the claims on the ground that the holders of the allcash
policies were members of the mutual insurance company and liable for all
its losses and were required to have their claims subordinated to the claims of
those not standing in such a relationship. The court held that after the capital
of a mutual insurance company reached a specified amount, the policyholders
were no longer members, but merely contract claimants with the company.
The court found that the all‐cash policies at issue were merely claimants as the
insurance company's by‐laws explicitly declared that the holders as all‐cash
policies would not be members of the company. Thus, the court allowed the
assignees to recover the unearned premiums.
State ex rel. Schaefer v. Minnesota Title Insurance and Trust Company, 104
Minn. 447, 116 N.W. 944 (1908). The court held that the policyholder of a title
insurance company adjudged insolvent is entitled to a return of the unearned
part of the premium paid less a proportionate amount which the insurance
company may retain for services rendered in examining the title prior to the
policy's issuance.
Missouri
New Jersey
Relfe v. Commercial Ins. Co., 10 Mo. App. 393 (1881). The receiver calculated
unearned premium claims on the basis of date of the filing of the petition, but
for fire loss claims, used the date of the order of liquidation. The court rejected
the receiver's calculation of unearned premium claims dates, and instead, held
it should be tied to the date of the entry of the order not the filing of the
petition.
Tuttle v. State Mutual Liability Ins. Co., 2 N.J. Misc. 973, 127 A. 682 (1925). When
a mutual insurance company is liquidated, policyholders are entitled to a return
of unearned premiums, but the receiver should not permit a set‐off of such
claims against assessments levied or to be levied by the receiver.

New Mexico
South Carolina
Insurance Inc. v. Furneaux, 62 N.M. 249, 308 P.2d 577 (1957). A local agent
sued the managing general agent of an insolvent Texas insurer for the return
of unearned premiums. The general agent asserted that if there was any
liability for return of premiums, the insolvent insurer would be the responsible
party, so that such an action should be brought against the receiver of the
company. The court held that where there was no evidence of any contractual
relationship between the local agent and the insolvent company, and the only
evidence of contractual relationship was between local agent and general
agent, action would lie against general agent.
Gambrell v. Cox, 250 S.C. 228, 157 S.E.2d 233 (1967). It was held that unearned
premiums collected by an agency are, upon the insolvency of the company,
owed to the policyholders and not to the agency.
Op. Att'y. Gen. 158 (S.C. 1917). Insolvency is a breach of contract by the insurer.
As a result, policyholders are entitled to recover a portion of their unearned
premium.
Tennessee Davis v. Amra Grotto M.O.V.P.E.R., 169 Tenn. (5 Beeler) 564, 89 S.W.2d 754
(1936). The court held that policyholders of insolvent company are entitled to
recover the value of their policy, as opposed to the amount of premiums paid.
Gleason v. Prudential Fire Ins. Co., 127 Tenn. 8, 151 S.W. 1030 (1912). It was held
that the appointment of a receiver for an insolvent mutual fire insurance
company terminates all of its contracts and members of the company, as both
insurers and insureds, have no right to the return of premium until all creditors
have been paid.
Virginia
Johnson v. Button, 120 Va. 339, 91 S.E. 151 (1917). The court held that the
insolvency of the company automatically cancelled the outstanding policies
and thus return premiums would be calculated upon the pro‐rata basis, and
that because this cancellation was without any fault on the part of the agents,
the agents had no obligation to return any part of the commissions received on
the policies cancelled. The receiver of the insolvent company asserted that as
the policies had not been cancelled by the company, but had rather been
replaced by agents for their clients, the short‐rate premium schedule should
apply, and also that the amount due the agents should be offset by the
commissions the agents had earned on the premiums.
Universal Life Ins. Co. v. Cogbill, 71 Va. (30 Gratt.) 72 (1878). A foreign life
insurance company became insolvent. The plaintiff had purchased policy for
benefit of his wife. The court held that the plaintiff could sue in his own name
to recover premiums paid, and that claims could be paid out of bonds of the
insurer held by the state treasurer.
Wisconsin
Atlas Paper Company v. Seamans, 82 Wis. 504, 52 N.W. 775 (1892). The court
held that an unearned premium claim against an insolvent mutual insurance
company should be disallowed because the policy was cancelled by the
insolvency of the company and not pursuant to the actions of either the
insurance company or the insured.
Cheese Makers Mutual Casualty Co. v. Duel, 247 Wis. 485, 19 N.W.2d 889
(1945). One insurer filed a claim against the estate of an insolvent insurer for
unearned premiums due on a reinsurance contract terminated by the
liquidation order. The court upheld the disallowance of the claim because the
contract was cancelled by operation of law, rather than by either the insured
or insurer.

Dewey v. Davis, 82 Wis. 500, N.W. 774 (1892). The court held that the unearned
premium claim of a policyholder of an insolvent insurer was properly denied
because there was no right to recover an unearned premium on the
termination of a policy, because the termination was caused by the liquidation
of the company in contrast to an act by the company or the insured. Further,
the assessments that have been made can only be used to pay losses and
expenses.
Secured Creditors
Colorado
District of Columbia
Louisiana
Balzano v. United Bank of Denver National Association, 761 P.2d 229 (Colo.
App. 1988). The receiver in liquidation of an insurance company and its agent
brought a conversion action against the defendant who froze the accounts of
the insurance company and agent upon appointment of a conservator for the
insurance company and agent upon appointment of a conservator for the
insurer. The Court of Appeals held that the bank, which had issued several
irrevocable letters of credit to the insurer, had a perfected security interest in
the accounts of both the insurer, and the agent which had guaranteed the
insurer's obligations. Further, the Court held that the letters of credit were
actual liabilities of the bank, and therefore the bank was not required to wait
until demand was made on the letters of credit before freezing the accounts of
both the insolvent insurer and agent.
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.
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.
New York
G.C. Murphy Co. v. Reserve Ins. Co., 54 N.Y.2d 69, 444 N.Y.S.2d 592, 429 N.E.2d
111 (1981). The court held that the insurance code does not deal with how the
owner of a secured claim is to file that claim, but rather solely with the priority
of secured claims and whether its owner wishes either to surrender the
security and file the claim as a general creditor or proceed against the security
itself.
G.C. Murphy Co. v. Reserve Ins. Co., 101 Misc.2d 729, 421 N.Y.S.2d 1006 (1979).
The court held that the bond put up by the insurer as required by law, made
the insured the owner of a secured claim.
Hamberg v. Guaranteed Mortgage Co., of New York, 180 Misc. 276, 38 N.Y.S.2d
165 (1942). The court held that the term "secured creditor" as used in the
insurance code had a wider meaning than under the Federal Bankruptcy Law.
It is not limited only to those creditors who have corporate property as
security. It includes those who hold other security as well.
In re Empire State Surety Co., 115 Misc. 745, 190 N.Y.S. 209 (1920). The court
held that the insurance code was a restatement of the bankruptcy rule and
under this rule, secured creditors were allowed to prove the balance of their
claims above the value of their security. The insurance code was not a
statement of the "chancery rule", under which secured creditors were allowed
to prove their claims in full, without regard to their security.
In Re National Mortgage Corporation, 172 Misc. 419 15 N.Y.S.2d 545 (1939). A
motion by the secured creditor of an insolvent insurer was denied because it
was made after the final date fixed for the filing of claims. Then the creditor
made a motion to surrender the security to the insurance commissioner and to
be allowed the full amount of its claim without any deduction for security.
In re N.Y. Title & Mortgage Co., 160 Misc. 67, 289 N.Y.S. 771 (1936). The terms
"secured claimant" and "security" in the statute were not defined. Therefore,
it was up to the court to construe the words according to their commonly
understood meaning.
In re Southern Surety Co. of New York, 282 N.Y. 54, 24 N.E.2d 845, reargument
denied, 282 N.Y. 678, 26 N.E.2d 809 (1939). When a New York insurance
company deposited securities in Ohio with the insurance commissioner in trust
for the benefit of its policyholders, the court held that an Ohio policyholder
was a secured creditor and was therefore entitled to prove its claim for the
difference between the original debt and the amount realized from the Ohio
fund.
Oklahoma
Joplin Corp. v. State ex rel. Grimes, 570 P.2d 1161 (Okla. 1977). Where
delinquency proceedings against an insurer under the Uniform Insurers'
Liquidation Act were commenced by the insurance commissioner on April 4,
where a creditor took judgment against the insurer in Missouri on April 14,
where an order enjoining all persons from seeking or obtaining preferences or
attachments or other liens against the insurer was entered in Oklahoma on
April 16, and where the creditor's Missouri judgment was filed in Oklahoma on

April 18, the filing of the Missouri judgment did not create a lien in favor of the
creditor so as to make it a secured creditor for purposes of the Act.
Claims of Surety
Second Circuit
Arkansas
California
Home Indemnity Co. of New York v. O'Brien, 104 F.2d 413 (2nd Cir. 1939). A
New York compensation insurer filed a surety bond as a prerequisite to the
right to do business in Michigan. The company was later liquidated by the
New York courts. The surety then became indebted under the bond to all
those entitled to compensation benefits under Michigan's compensation
laws.
Forte v. Chamberlain, 93 Ark. 112, 124 S.W. 234 (1910). Where a mutual fire
insurance company placed in the hands of a receiver because of insolvency,
and the company had filed an indemnity bond with sureties (condition for the
payment of all claims under any policy issued on property in Arkansas if the
company shall not reserve 50% of its premium for the payment of losses), and
there had never been any improper use of the reserve fund, the liability of the
sureties is not an asset of the company which passed to the receiver, so that
the receiver is disallowed from maintaining an action to restrain policyholders
from suing on the bond.
Golden Eagle v. Millard Tong Construction Company, No. A095228, 2002 Cal.
App. Unpub. LEXIS 5947 (Ct. App. June 26, 2002). The California Court of Appeal
held that Cal. Ins. Code § 1028, which prevents courts from considering default
judgments in determining whether a claim may be recovered in a liquidation
proceeding, applies to defaults arising from surety bonds.
Kentucky Louisville Title Co. v. Crab Orchard Banking Co., 249 Ky. 736, 61 S.W.2d 615
(1933). An insolvent corporation, which engaged in real estate mortgage bond
business, guaranteed such bonds and held some of its own bonds, would not
be entitled to a share in the proceeds from the mortgaged property until all
other bondholders were fully paid.
Title Ins. & Trust Co. v. Louisville Presbyterian Theological Seminary, 270 Ky.
442, 109 S.W.2d 814 (1937). A title insurance company had sold thirteen bonds
and retained the remainder of twenty‐five bonds guaranteed by it and secured
by a real estate mortgage. The company went insolvent and the bondholders
sued to obtain priority in the distribution of the proceeds of the mortgaged
property and any payments made on the bonds by the makers. The court of
appeals affirmed that the purchasers of the thirteen bonds were entitled to
priority over the bonds retained by the company. The bondholders did not
forfeit their rights to the receiver by participating in the plan of reorganization.
The title company's plea that its twelve bonds were part of its statutorily
required guarantee fund was not supported by its allegations. Furthermore,
there was no common law pledge of the twelve bonds because the company
did not deliver the bonds to the insurance commissioner but retained control
over them.
Missouri
Allen v. Surety Life Ins. Co., 230 Mo. App. 402, 92 S.W.2d 956 (1936). A life
insurance company filed an appeal from a judgment against it on two life
insurance policies. The Missouri insurance commissioner then secured a
liquidation order against the insurer, and the insurer defaulted on the appeal.
The judgment creditors on the two life insurance policies tried to recover on
the appeal bonds posted. The court held the judgment against the insolvent
insurance was proper because it was the duty of the Missouri commissioner to
defend such actions upon appointment. The sureties on posted by the
insolvent insurer were thus liable.

New Jersey Matter of the Liquidation of Integrity Ins. Co., 251 N.J. Super. 501 (Ch. Div. 1991).
Surety bonds are "insurance policies and insurance contracts" within the
meaning of the New Jersey Insurers Liquidation Act at N.J.S.A. 17:30C‐1 et seq.
Thus, holders of surety bonds were entitled to a higher priority (4th priority) in
the distribution of assets of Integrity, an insolvent insurer in liquidation, than
that afforded to holders of "all other claims" (5th priority) under the priority
distribution provision at N.J.S.A. 17:30C‐26.
New York In re National Surety Co., 29 N.Y.S.2d 1011 (1939), affirmed, 261 A.D. 811, 26
N.Y.S.2d 509, affirmed, 286 N.Y. 611, 36 N.E.2d 453. Two surety companies
agreed to limit between themselves their liabilities under a bond under which
they agreed to perform under a contract in the event of the contractor's
default. They agreed to share equally all claims, demands, losses and
expenses. The contractor defaulted, and one surety company went into
liquidation. The second company was allowed to recover a proportional
amount of the expenses incurred in the default as an absolute unliquidated
claim.
Matter of Empire State Surety Co., 216 N.Y. 273, 110 N.E. 610 (1915). Certain
claims arose under bonds given by a surety company to contractors who
furnished labor and materials for public works. These claims were held to be
provable against the surety company where they had accrued and actions had
been started before the entry of the liquidation order.
Matter of Erlanger, 153 Misc. 573, 275 N.Y.S. 594 (1934). The legislature did not
have the power to abrogate existing contracts made by sureties for the benefit
of the party who was insured against the risk of dishonesty. Thus, the entry of
a liquidation order did not automatically end the liabilities of sureties on a bond
covering the temporary administration of an estate.
Ohio
Hogan v. Empire State Surety Co., 26 Ohio Dec. 424 (1915). Under a bond by a
foreign surety company, guaranteeing the performance of a contract and
payment of all claims for labor and materials furnished the contractor, the
deposit is for the benefit of all who have claims against the contractor, and the
right of such claimants is superior to that of the insurance commissioner in the
surety company's home state.
Holben v. Interstate Motor Freight System, 31 Ohio St. 3d 152 (Ohio 1987). The
court held that a surety for an insolvent self‐insurer who bears the ultimate
financial responsibility for benefit payments made from the statutory surplus
fund is included within the definition of “employer” found in the Ohio Revised
Code for the limited purpose of participating in workers compensation benefit
determination proceedings. The surety may therefore bring an appeal.
Ti‐Bert Systems, Inc. v. Union Indem. Ins. Co. of New York, 1990 Ohio App. LEXIS
2160 (Ohio Ct. App. 1990). A corporation brought an action against a
construction company for breach of a construction contract. An insurer acted as
the surety of the construction company’s performance under the contract. The
construction company then filed an action against the insurer, who later
became insolvent. The trial court entered an order of liquidation and stayed all
proceedings against the insurer and its successor in interest. The court affirmed
the lower court, holding that the liquidation and the stay of proceedings against
the insurer and its successor were properly recognized by the lower court. The
court found that the record was clear that the insurer was a party to the actions
as a surety of the construction company’s performance. Finally, the court
concluded that a surety bond was not a contract of insurance.

Texas
Buckner v. Lloyd's Ins. Co. of American et al., 99 S.W.2d 331 (Tex. Civ. App.
1936). One claimant filed three claims with the New York liquidator of an
insolvent insurer. The claims were referred to the Texas ancillary receiver who
approved one claim and rejected the other two. Prior to the insolvency, the
company was formed by the merger of three separate corporations. The
surviving corporation assumed the liabilities and obligations of all three
companies. The claims were based on three surety bonds issued serially as
surety for various aspects of the same cause of action. The court determined
that allowing the claimant to combine all of three claims would provide a larger
ratable share of the assets in comparison with other creditors.
Durish v. Channelview Bank, 809 S.W.2d 273 (Tex. App.‐‐Austin 1991). Prior to
insolvency, insurer issued surety bond in favor of defendant bank, which made
demand under the bond to no avail. Thereafter, the insurer was placed in
receivership, and the ancillary Texas receiver found the insolvent insurer had
insufficient assets to satisfy its Texas obligations. The receiver then rejected
the bank's claim for reimbursement under the Texas Property and Casualty
Insurance Guaranty Association Act, finding it was not a "covered claim" under
the Act. The Act had been amended to delete coverage for surety bonds after
a certain date, and the court held that no surety bond coverage was provided
under the Act for any insurer which was declared to be "impaired" after that
date. Because this insurer was declared impaired after that date, the bank's
claim was not a "covered claim," and judgment was entered for the receiver.
Great American Ins. Co. v. Langdeau, 379 S.W.2d 62 (Tex. 1964), reversed, 369
S.W.2d 944 (Tex. Civ. App. 1963). In a suit against a surety company by a
receiver of an insolvent insurer to recover on a fidelity bond issued to cover the
insurer's the secretary‐treasurer as the officer responsible for handling the
insurer's funds, the court noted that the fidelity bond provided protection for
acts of fraud and dishonesty and other specified crimes, not for "faithful
performance of duties" as was required by statute for some other types of
insurers. Under this type of bond, mere negligence, carelessness or
incompetence is insufficient to constitute fraud. The court found that the
evidence of the officer's conduct did not establish participation in the
wrongdoing or knowledge of the wrongdoing and, thus, the
secretary‐treasurer did not commit any acts of misconduct insured against.
Wisconsin
Duel v. National Surety Corp., 64 F. Supp. 961 (E.D. Wis. 1945). The liquidator of
an insolvent insurer sued the issuer of a $10,000 fidelity bond insuring the
insolvent insurer's employees. The primary incident involved the conversion by
an employee/general agent/director/secretary of approximately $20,000 in net
premiums written by the insolvent insurer. In rejecting the various grounds
raised for denial of the claim by the surety company, the court noted that the
bond was originally required by the commissioner of insurance during a prior
liquidation process which was dismissed following a contribution of surplus
and the furnishing of the bond in question. Thus, the surety company was
aware of the circumstances for the original issuance of the bond and that the
general agent among others was to be covered under the fidelity bond.
In the Matter of the Liquidation of Wisconsin Surety Corp., 112 Wis. 2d 396, 332
N.W.2d (1983). A surety bond was found to not be a truly contingent claim as
defined under the Wisconsin Liquidation Act, but a technically contingent claim
that could be allowed as excused late filing.
Claims of Guaranty Funds
Eighth Circuit
Liberty State Bank v. Minnesota Life and Health Insurance Guaranty Assoc.,
149 F.3d 832 (8 th Cir. 1998). Liberty State Bank invested in municipal bonds

acked by Executive Life Insurance Co.’s municipal guaranteed investment
contracts (muni‐GICs). Executive had sold the muni‐GICs to the trustees of
municipal bond issuers in Minnesota. When Executive became insolvent,
Liberty sought reimbursement from the Minnesota Life and Health
Insurance Guaranty Association. The Association denied the claim under the
grounds that the Minnesota Life and Health Insurance Guaranty Association
Act did not cover municipal bond funding agreements.
Liberty filed an administrative appeal. While the appeal was pending, the
Minnesota legislature applied a retroactive amendment to the Guaranty Act
which expressly denied coverage for muni‐GICs. Liberty appealed the denial
of coverage to the state appeals court. The Guaranty Association
subsequently removed to federal court.
The District Court rejected Liberty’s claim that the retroactive application of
the amendment violated substantive due process. On appeal, Liberty
asserted that the retroactive application of the amendment violated the
Contracts Clause of the U.S. Constitution, Article I, Section 10 because the
amendment relieves the Guaranty Association of the contractual obligation
to guaranty such payments. Further, Liberty argued that the amendment
arbitrarily eliminates coverage for muni‐GICs without furthering any
legitimate state interest. The Eighth Circuit held that because Liberty did not
assert these claims at the District Court level, they could not be heard on
appeal. The Court further noted that because the funding agreements were
not sold in the state when the Guaranty Act was enacted, the state
legislature may not have considered how the Guaranty Act specifically
applied to such agreements. Therefore, retroactive application of the
amendment to the Guaranty Act excluding coverage for muni‐GICs was
appropriate for the protection of limited Association funds.
Arizona
Betancourt v. Arizona Property & Casualty Ins. Fund, 823 P.2d 1304, 170 Ariz.
296 (1991). The Arizona Court of Appeal held that the fund was bound by a
settlement reached between an insolvent insurer and a third party prior to the
insurer's insolvency. The court noted that the fund is "deemed" to be the
insurer to the extent of its statutory obligations. Because the insurer was
bound by the settlement, and the settlement qualified as a "covered claim,"
the fund was liable for paying the settlement.
Bills v. Arizona Property and Casualty Insurance Guaranty Fund, 984 P.2d 574
(Ariz. Ct. App. 1999). The Arizona Court of Appeals held the Arizona Property
and Casualty Insurance Guaranty Fund is not subject to common law tort claims
in connection with covered claims.
Wells Fargo Credit Corp. v. Arizona Property and Casualty Ins. Guaranty Fund,
799 P.2d 908, 165 Ariz. 567 (1990). The Arizona Court of Appeal concluded that
the property and casualty guaranty fund was immune from tort liability. The
court analyzed the legislative intent of the guaranty fund statutes and
concluded that the fund should not be liable for bad faith and
misrepresentation claims against it.
California
Berger v. California Insurance Guarantee Assn., 128 Cal. App. 4th 989 (Ct.
App. 2005). CIGA could not rely on the contractual one‐year limitation in the
policy to deny claim because Cal. Ins. Code § 340.9 (extending deadline for
1994 Northridge earthquake victims) for superseded the policy’s limitation
provision.
California Insurance Guarantee Assn. v. Argonaut Ins. Co., 227 Cal. App. 3d 624;
278 Cal. Rptr. 23 (1991). Subrogation claim of a workers' compensation insurer
against a tortfeasor's insolvent insurer is not a "covered claim" qualified for

payment by the California Insurance Guarantee Association ("CIGA").
Argonaut Insurance Company ("Argonaut") sought reimbursement from a
tortfeasor's insurer of workers' compensation benefits paid by Argonaut to an
injured employee. When the tortfeasor's insurer became insolvent, CIGA
sought a declaratory judgment that it could not be required to reimburse
Argonaut, because California Insurance Code Section 1063.1 explicitly excludes
both claims of insurers and claims for subrogation from "covered claims"
which CIGA is required to pay. Relying on Burrow v. Pike, 190 Cal. App.3d 384
(1987), the trial court sustained a demurrer and dismissed CIGA's complaint on
the grounds that special policy considerations weighing in favor of the
reimbursement of workers' compensation benefits created an implicit
exception to the statutory exclusions. The Court of Appeal declined to follow
Burrow v. Pike, ruling that the definition of "covered claims" in Section 1063.1 is
unambiguous and therefore not susceptible to the creation of implicit
exceptions by judicial construction.
California Insurance Guarantee Assn. v. Workers Comp. App. Bd., No. B189208,
2006 Cal. App. Unpub LEXIS 11252 (Ct. App. December 14, 2006). UC Medical
center provided health care to disabled worker and filed a lien for
reimbursement with the Workers' Compensation Appeals Board (WCAB). The
worker’s compensation insurer became insolvent and WCAB sought to recover
the lien from CIGA. The Court held that a University of California lien is an
obligation to the state under Cal Ins. Code § 1063.1(c)(4) and thus CIGA is not
obligated to pay the lien as UC is an agency of the State of California.
California Insurance Guarantee Assn. v. Workers’ Comp. App. Bd., 112 Cal. App.
4th 358 (Ct. App. 2003). The court held that, under Cal. Ins. Code § 1063.1, CIGA
was entitled to credit for payments claimant received from underinsured
motorist benefits.
CD Investment Co. v. California Insurance Guarantee Assn., 84 Cal. App. 4th 1410
(Ct. App. 2000). Insured had five insurers; two became insolvent. Upon settling
a claim, the solvent insurers paid insured $500,000 towards the settlement and
insured paid the remainder include legal costs. Insured attempted to recover in
the insolvency proceedings and was rejected by CIGA on the grounds that the
amount sought, when combined with the amounts paid by the solvent insurers,
exceeded the $500,000 statutory cap. The California Court of Appeal held
where insured had multiple insurers, the statutory cap applied separately to
each policy.
Cole v. California Insurance Guarantee Association, 122 Cal. App. 4th 552 (Ct.
App. 2004). The California Court of Appeal held that Social Security Disability
Insurance (SSDI) and unemployment compensation insurance (UCI) benefits
should not offset insurance recovery when the insured’s disability was a
consequence of injury in the same accident.
In re Imperial Ins. Co., 157 Cal. App. 3d 290, 203 Cal. Rptr. 664 (1984). The court
held that the deductibles paid to the insurers by policyholders, with respect to
claims against them, were held in trust for the insureds and were not available
to the insurance commissioner to satisfy the claims of the insurer's general
creditors. Furthermore, the court held that the deductibles were not merely
disguised premiums and that the guaranty fund was therefore entitled to the
deductibles in accordance with its statutory duty to administer the claims of
the insolvent companies' insureds.
Parkwood Community Assoc. v. California Insurance Guarantee Association, 141
Cal. App. 4th 1362 (2006). Five subcontractors were insured by insolvent
insurer. CIGA assumed their defense for construction defects, which ultimately
was resolved by a settlement whereby payments were made to the injured

party exhausting the subcontractors’ primary commercial general liability
coverage and included a contribution from excess liability carrier that did not
exhaust the excess coverage. CIGA argued that the remaining excess was
“other insurance” which relieved CIGA of its obligation to pay into the
settlement. The court of appeals held that in the absence of the settlement the
unexhausted excess policy would have been available to pay the claims, was
other insurance under Cal. Ins. Code § 1063.1 and thus CIGA was not obligated to
pay.
Sensation Leather v. California Insurance Guarantee Association , No. B203086,
2008 Cal. App. Unpub. LEXIS 8729 (Ct. App. Nov. 14, 2008). The court held a
third party claimant cannot directly recover interest from a judgment against
the insured because the interest was generated as a result of the insurer’s
breach of duty to defend, and the right to recover belongs to the insured alone.
Moreover, under Cal Ins. Code § 1063.1, a third party cannot assert an assigned
claim against CIGA.
Woodliff v. California Insurance Guarantee Assn., 110 Cal. App. 4th 1690 (2003).
When insured won a judgment for attorney fees against insurer that later
became insolvent, CIGA was obligated to pay the judgment because the
exclusion for “covered claim” in Cal. Ins. Code § 1063.2 (h) did not apply
because the fees were not a loss adjusted expense (expense incurred by the
insurer to investigate and settle a claim).
Colorado
Connecticut
Stephens v. Colaiannia, 942 P.2d 1374 (Colo. App. 1997). Colorado and
Louisiana are “reciprocal” states under their respective statutory schemes.
Thus, under the law of both states, Louisiana Insurance Guaranty
Association’s (LIGA) settlement of the claimants’ claims and payments to
them entitled it to subrogation of those claimants. The receiver, therefore,
became bound to recognize and address those rights.
Connecticut Ins. Guar. Assoc. v. D'Addio, No. 329322, 1992 WL 111054 (Conn.
Super. May 7, 1992). Connecticut Insurance Guaranty Association ("CIGA") was
statutorily created to pay claims of policyholders of insolvent insurers. If an
appropriate reference to section 38‐175a‐6(d) of the Regulations of
Connecticut State Agencies appears in the policy, then the original insurer
would be, and CIGA is, entitled to limit its exposure by deducting from its
payment to an injured policyholder the amount that the policyholder has
received from other coverage.
Covenant Ins. Co. v. Motor Appliance Corp., No. 35 58 13, 1990 Conn. Super.
LEXIS 1241 (September 20, 1990). Covenant Insurance Company, after paying
its insured's fire claim, sued defendant Met Pro Corporation as subrogee. After
Met Pro's liability insurer was declared insolvent, Met Pro moved for summary
judgment, arguing that under Connecticut law, a claimant's rights against a
policyholder whose carrier has become insolvent may be asserted only against
the Connecticut Insurance Guaranty Association and not against the insured.
The Connecticut Superior Court concurred and dismissed Covenant's claims
against Met Pro.
Doucette v. Pomes, 247 Conn. 442, 724 A. 2d 481 (1999). In a case of first
impression, the Supreme Court of Connecticut allowed a claim against the
Connecticut Insurance Guaranty Association by an employer who, as a selfinsurer,
had paid workers compensation benefits to an employee injured in a
vehicular accident during the course of his employment. The liability insurer
of the tortfeasors had become insolvent, and therefore the Connecticut
Insurance Guaranty Association became liable for covered claims. Having
paid the claimant’s medical expenses and compensation benefits, the
claimant’s employer sought to intervene as a plaintiff in the action against

the tortfeasors to recover its payments. The court held that the employer
was not an insurer under the Connecticut Insurance Guaranty Association
Act, and therefore the employer’s claim was a “covered claim” within the
meaning of the Act. In so ruling, the court relied upon a 1983 NAIC Study
Committee Report permitting self‐insurers to recover from insurance
guaranty funds in certain circumstances.
Eastern Press, Inc. v. Peterson Eng. Co., Inc., No. 25 60 63, 1991 Conn. Super.
LEXIS 3002 (December 4, 1991). An insurance company may not exercise its
rights of subrogation against a defendant directly when the defendant's
insurer has become insolvent, because such action would be in contravention
of the general legislative intent to protect Connecticut residents from loss
associated with insolvent insurance carriers. The Connecticut Insurance
Guaranty Association ("CIGA") was created to provide a resource for persons
insured by or with claims against policies issued by an insurance company that
has become insolvent. The CIGA, which was intended to protect insolvent
insurers and their insureds, therefore provides a substantive alternative to
subrogation right which have been eliminated.
Massa v. American Mutual Ins. Co., No. 30 88 20, 1990 Conn. Super. LEXIS 104
(May 29, 1990). The entry of an insolvency decree "triggers" the obligations of
the various guaranty funds. The guaranty funds are thereupon obligated to
honor certain unpaid claims arising from the insurance policies of the insolvent
insurer, including claims for unearned premiums, subject to certain deductibles
and per‐claim limits which vary by state.
District of Columbia District of Columbia Insurance Guaranty Association v. Algernon Blair, Inc., 565
A.2d 564 (D.C. 1989). The District of Columbia Insurance Guaranty Association
is statutorily required to pay claims covered by a policy of an insolvent
Guaranty Association member where the claim arises from property located in
the District of Columbia. The D.C. Court of Appeals held that claims "arising
from" property permanently located in the District of Columbia included the
claimed losses of a nonresident contractor under surety bonds executed by an
insolvent Guaranty Association member on behalf of a subcontractor.
(Although excluded by the Guaranty Association Model Act, the D.C. Insurance
Guaranty Association Act covers surety business.) The contractor's losses
resulted from the subcontractor's failure to perform its contractual obligations
to the contractor at a construction project on land located in the District. The
court interpreted "claims arising from" as including claims substantially
connected with the contract work on another's property located in the District,
even if the property itself was not the insured object. Direct causation was not
required; it was sufficient that the loss would not have occurred but for the
contractor's participation in the project in the District of Columbia.
District of Columbia Insurance Guaranty Association v. National Railroad
Passenger Corporation, 721 F. Supp. 1378 (D.D.C. 1989), aff'd, App. D.C., 925
F.2d 488 (1991). Before the District of Columbia Insurance Guaranty
Association is statutorily required to pay claims under a policy issued by an
insolvent member, a claimant must exhaust his right to recovery under other
insurance policies covering the same loss. Any amounts recovered from the
other insurers will reduce the amount to be paid by the Guaranty Association.
Relying on the wording of the policies and the purposes of the District of
Columbia Insurance Guaranty Association Act, the U.S. District Court held that
the claimant had exhausted its right to recover under other insurance policies,
where insurers under those policies had paid their contractually‐determined
pro rata share of the claimant's losses in excess of primary insurance coverage
on a several but not joint basis. The court also held that because the primary
insurance policies covered a different loss than the excess policies (in that the
primary layer had to be exhausted before there was a loss under the terms of

the excess layer), and because each excess insurer was only responsible for a
pro rata share of the excess loss, the Guaranty Association could not use
amounts paid by the primary insurers or the excess insurers to reduce the
insolvent insurer's portion of the total loss.
Mosley v. Welch, 830 A.2d 1246 (D.C. App. 2003). Under the Property and
Liability Insurance Guaranty Association Act of 1993 (the “IGA Act”), codified
as D.C. Code §§ 31‐5501 to 31‐5515 (2001), the District of Columbia Insurance
Guaranty Association (“DCIGA”) may require a claimant with an alternative
source of insurance coverage for a covered claim to first seek exhaustion of
that source before seeking compensation from DCIGA. Specifically, pursuant
to Section 31‐5509(a), if DCIGA requires a claimant to pursue an alternative
source of insurance, DCIGA would be entitled to a credit for any payments
made to the claimant from the alternative source. Alternatively, DCIGA may
pursue reimbursement by invoking its rights under the statute after having
made payment. However, a defendant may not use the statute to reduce its
liability. In this case, Mosley (a taxi driver who struck and injured Welch, a
pedestrian) argued that, as a policy holder of an insolvent insurer, he had the
same rights as DCIGA to credits/offsets from alternative sources of
insurance. In affirming the trial court’s judgment against Mosley, the D.C.
Court of Appeals held that “[t]he purpose of D.C. Code § 31‐5509(a) is to
avoid duplicate insurance recoveries and protect the funds of the DCIGA, not
to reduce the liability of insureds or provide them with more asset
protection than if their insurers had not become insolvent.”
Florida
Corcoran v. State ex rel. Department of Insurance, 502 So. 2d 966 (Fla. Dist. Ct.
App. 1987). Claims handling expenses of the Florida Insurance Guaranty
Association constitute "necessary expenses of the proceeding" under the
Florida statute and thus were afforded administrative priority.
Florida Ins. Guar. Ass’n, Inc. v. Johnson, 654 So. 2d 239 (Fla. Dist. Ct. App.
1995). The Florida Insurance Guaranty Association (“FIGA”) was liable for an
award of court costs in favor of a plaintiff under supplementary payment
provisions of an insurance policy. FIGA stands in the shoes of the insolvent
insurer and is liable for all payments for which the insolvent insurer would be
liable under the policy.
Rosen v. Florida Ins. Guar. Ass’n, 734 So. 2d 491 (Fla. Dist. Ct. App. 1999).
Client sued a law firm whose professional liability insurer became insolvent
while providing a defense. Florida Insurance Guaranty Association (“FIGA”)
assumed the law firm’s defense. The policy had limits of $1 million from
which defense costs were deducted. FIGA took the position that these
defense costs were deducted from FIGA’s coverage limit of $3 million, most
of which had been spent on attorney’s fees. The client then released the law
firm as part of a settlement with the law firm. FIGA then claimed that it was
released by operation of law, and the Court agreed.
Georgia G & MSS Trucking, Inc. v. Rich, 224 Ga. App. 130, 479 S.E.2d 761 (1996).
Plaintiff sought compensation for personal injury and property damage
claims. Over two years later, the tortfeasor’s insurer was placed into
insolvency proceedings. The Court held that the plaintiff could recover for
personal injuries from the Georgia Insurers’ Insolvency Pool, because the
period for suing under his uninsured motorist coverage for personal injuries
had expired through no fault of his own. Conversely, the plaintiff’s property
damage claim was properly rejected by the Pool because the plaintiff
allowed the period for seeking uninsured motorist property damage
coverage to expire.
Georgia Insurers’ Insolvency Pool v. Southeast Atlanta Cargo Operators, 211

Ga. App. 660, 440 S.E.2d 254 (1994). The Georgia Insurers’ Insolvency Pool
Act (the “Act”) denies coverage for obligations to parties with a net worth
of $3 million or greater. While the Act contemplates third‐party claims, and in
some cases the assets of the third party will determine coverage, where the
third party has already recovered and the insured is the party filing the claim,
the insured’s assets will determine whether the Pool provides coverage.
J. Transp., Inc. v. Georgia Insurers’ Insolvency Pool, 209 Ga. App. 748, 434
S.E.2d 552 (1993). The Georgia Insurers’ Insolvency Pool is not relieved of its
statutory duty to pay a claim just because the insured assigns its right to
recover from the insolvent insurer. The assignee is entitled to the same
benefits previously owed to the insured.
Reimbursement Consultants, Inc. v. Georgia Insurers’ Insolvency Pool, 207
Ga. App. 230, 427 S.E.2d 519 (1993). Consultant provided services to insurer
that became insolvent. Some of the insurer’s obligations to insureds were
assumed by the Georgia Insurers’ Insolvency Pool. The Court rejected the
consultant’s argument that its efforts aided the Pool and that, therefore, the
Pool should pay its claim in quantum merit. The Court held that the Pool is
obligated to pay only statutorily covered claims.
Hawaii Mendes v. Hawaii Insurance Guaranty Association, 950 P.2d 1214 (Haw. 1998).
Insured was injured in car accident and sought to recover underinsured
motorists benefits under her policy with insurer. Insurer became insolvent and
HIGA assumed her claims and rejected them. Insured brought suit for
underinsured motorist benefits, breach of duty of good faith and fair dealing,
and tortious breach of contract. In rejecting insured’s claims for breach of duty
and tortious breach, the Hawaiian supreme court held HIGA was not liable for
the breach of duty and tort claims because they do not arise under the policy of
insurance and HIGA is only amenable to suit to compel it to cover claims under
the insurance policy issued by the insolvent insurer.
Illinois
Beukema v. Yomac, Inc., 284 Ill. App. 3d 790, 672 N.E.2d 755 (Ill. App. Ct.
1996). The plaintiff was injured in a barroom brawl, and sued the bar
asserting two negligence claims and a dram shop liability claim. The bar was
insured under two policies, a Travelers policy for general liability and an
additional policy for dram shop liability. The dram shop insurer was declared
insolvent, and the Illinois Insurance Guaranty Fund ("IIGF") assumed the
obligation to defend the dram shop claim. Plaintiff settled the negligence
claims, but reserved all claims relative to the dram shop claim. The IIGF
moved to dismiss that count, arguing that a non‐duplication of recovery
provision disallowed further recovery. The Illinois Insurance Guaranty Fund
Act states that claimants with covered claims are required first to exhaust
rights under any other insurance policy which may be applicable to the claim,
and that any amount payable on a covered claim will be reduced by the
amount of such recovery from the other policy. Interpreting the Guaranty
Fund Act, the trial court found that "claim" meant "injury," and concluded
that since the Travelers policy was applicable to plaintiff's injury, it was
applicable to plaintiff's claim. The trial court then held that the plaintiff was
required to exhaust his rights under the Travelers policy before seeking
recovery from IIGF. Because plaintiff had settled with Travelers for less than
the policy limit, the trial court found he had not exhausted his rights, and
was thus barred from pursuing his action against IIGF. The appellate court
disagreed, and held the plain language of the Guaranty Fund Act supported
plaintiff's argument. The dram shop claim was a claim separate and
distinguishable from the negligence claim and the only policy applicable to
the dram shop claim was the one issued by the insolvent insurer. Because
the Traveler’s policy was not applicable to the dram shop claim, the non‐

duplication provision did not apply to plaintiff's claim against the fund for
the dram shop liability.
Iowa Townsend Engineering Co. v. Iowa Ins. Guar. Ass’n., Slip Op., CL No. 104‐
58921 (Ia. Dist. Ct. Polk Co., December 1994). Townsend held a policy with
CUL, an insurance company that was an Indiana corporation not authorized
to do business in Iowa. CUL later became insolvent, and when Townsend
filed a claim arising out of a settlement, Townsend then turned to the Iowa
Guaranty Fund (IGF). Townsend argued that a sister company of CUL that
was licensed in Iowa had handled its policy (AUC), and that the state
Guaranty Fund statute should allow recovery from IGF. For IGF to cover the
claim, the original policy had to have been “issued by an insurer.” CUL was
not considered an insurer within the meaning of the statue. The nowinsolvent
sister insurer (AUC) was, and Townsend argued that AUC had
assumed the role and obligation of insurer by allegedly helping to handle
their policy.
The court held that AUC did not assume the liability of its unauthorized sister
company CUL. The relationship between the companies was characterized
by the Court as one of reinsurer and insured. The court found that the policy
at all times remained a CUL policy, and because CUL was not licensed in
Iowa, Townsend could not recover from IGF.
Kansas Kansas Dep’t of Health and Env’t v. Kansas Ins. Guar. Assoc., 254 Kan. 863,
869 P.2d 692 (1994). Kansas Insurance Guaranty Association (KIGA) was not
entitled to recover the $300,000 it had paid to the Department of Health and
Environment. Although the insolvent insurer made a partial payment of the
claim to the Department, this payment should not alter KIGA’s liability where
the aggregate of the insurer’s partial payment of the claim and KIGA’s
maximum statutory liability still leaves claimant with a shortfall on its claim.
Louisiana
Maryland
Morris v. E. Baton Rouge Parish Sch. Bd., 826 So. 2d 46 (La. Ct. App. 2002). The
court of appeals addressed the issue of whether the Louisiana Insurance
Guaranty Association (“LIGA”) was required to prove liability of a settling party
in order to be entitled to the dollar‐for‐dollar statutory credit under the state’s
guaranty association law. The court held that, to the extent that a plaintiff
settles for less than policy limits with a defendant for whose fault LIGA would
not be responsible, then LIGA is entitled to at least a dollar‐for‐dollar credit
within policy limits. Although LIGA is not required to prove liability at trial, it may
prove liability of the settling party in order to further increase the credit to
which it is entitled.
Board of Trustees of Maryland Teachers & State Employees Supplemental
Retirement Plans v. Life and Health Insurance Guaranty Corporation, 335 Md.
176, 642 A.2d 856 (1994). Board of Trustees of the Maryland Teachers and
State Employees Supplemental retirement Plans brought action against Life
and Health Insurance Guaranty Corporation to recover under Guaranty Act
following insolvency of insurance company from which board had purchased
unallocated guaranteed investment contracts. The question presented to
the Court of Appeals was whether the two guaranteed investment contracts
issued to the Board of Trustees of the Maryland Teachers and State
Employees Supplemental Retirement Plans by Executive Life Insurance
Company constituted “covered policies” under the Life and Health Insurance
Guaranty Corporation Act. The answer to the question presented turned on
the definition of the phrase “annuity contracts.” The Court of Appeals of
Maryland concluded that the unallocated guaranteed investment contracts,
which provided for the option to obtain individual policies specifying lifecontingent
periodic payments, qualified as “annuity contracts” within the
meaning of the Maryland Life and Health Insurance Guaranty Corporation

Act. The Court also noted that whether option was actually exercised, or
anticipated to be exercised, was immaterial to validity of the guaranteed
investment contracts as “annuity contracts.”
Md. Life & Health Ins. Guar. Assn. v. Perrott, 306 Md. 78, 482 A.2d 9 (1984).
Maryland Life and Health Insurance Guaranty Association assumed the
handling of claims for the liquidated American Centennial Life Insurance
Company. The Association, as a preferred creditor, sought certain financial
information concerning American Centennial and the receivership. The
receiver for American Centennial denied the Association access to that
information. The Court held that since the Association was not a mere
creditor, it had a right to examine the financial statements of the insolvent
insurance company to enable the Association to protect its interests and the
interests of the policyholders.
Md. Ins. Guar. Assn. v. Muhl, 66 Md. App. 359, 504 A.2d 637 (1986). The
statutory scheme which gave priority in liquidation proceedings to
reimbursement of claims by the guaranty fund was properly applied
retroactively to liquidation proceedings instituted prior to the priority statute's
effective date. The guaranty fund preferred creditor status with regard to the
assets of the insolvent insurance company equivalent to the amount of claims
it paid, regardless of the timing of such payments.
Motor Vehicle Security Fund v. All Coverage Underwriters, Inc., 22 Md. App.
586, 325 A.2d 115 (Ct. of Spec. Appeals 1974). Where the claims of the guaranty
fund conflicted with those of another solvent insurer for the remaining assets
of an insolvent insurer, the court found that the guaranty fund was entitled to
equitable subrogation of the rights of claimants who had filed timely claims.
The solvent insurer had filed its claim by the date specified in the liquidation
order for asserting claims, but the guaranty fund had not. The court held that
while the guaranty fund had neither statutory nor contractual subrogation
rights, the fund was acting neither gratuitously nor as a volunteer in paying
claimants but out of the good faith belief that it was required to do so by
statute. That belief was mistaken because insurer was insolvent when the
guaranty fund was created and therefore, not within the coverage of the fund.
The guaranty fund's belief was supported by an Attorney General's opinion.
The court held, therefore, that the guaranty fund was equitably subrogated to
the claims of any of the claimants who had filed before the last day specified in
the liquidation order.
Massachusetts Commissioner of Insurance v. Massachusetts Insurers Insolvency Fund, 373
Mass. 798, 370 N.E.2d 1353 (1977). The Massachusetts guaranty fund is not
obligated to pay the pre‐insolvency creditors of an insolvent insurer other than
those which have covered claims arising under policies issued by the insurer.
Contrary to the contentions of the insurance commissioner, as the receiver of
the insurer, the guaranty fund had no duty to pay for goods and services
furnished to the insurer prior to insolvency, even though the fund used the
products of such goods and services in handling claims. The guaranty fund was
also not liable for pre‐insolvency obligations incurred by the commissioner as
temporary receiver.
Massachusetts Motor Vehicle Reinsurance Facility v. Commissioner of
Insurance, 379 Mass. 527, 400 N.E.2d 221 (1980). The proceeds of a statecreated
reinsurance facility are payable to the Massachusetts Insurers
Insolvency Fund, rather than to the commissioner of insurance as receiver of
the insolvent insurer, when the reinsurance facility owes such proceeds to the
insurer.
Minnesota In Re Liquidation of Excalibur Ins. Co., 519 N.W.2d. 494 (Minn. Ct. App. 1994).

Two guaranty associations agreed to provide coverage and defense for an
insured (in an underlying action) of the insolvent insurer Excalibur Insurance
Co. That insured’s claim for defense and indemnity in the underlying action
was denied, and the court in that case found they had no duty to indemnify
the insured. The two guaranty associations attempted to subrogate and to
recover defense costs, but the lower court denied their motions. In the
present case on appeal, the court affirmed the lower court’s findings that
there was no coverage for the insured under the policy. The appellants also
were unsuccessful in their argument that the Minnesota Commerce
Commissioner was estopped from recommending the denial of their
reimbursement claim. The Court found that public policy compelled no such
application of estoppel, because the ultimate determination of coverage
belonged to the trial court, not the Commissioner.
Maxwell Communications, et al. v. Webb Publishing Co., 518 N.W.2d 830
(Minn. 1994). Four employees sustained compensable injuries and received
workers’ compensation from their employers’ insurance carriers. Each
employee had also been injured previously during another period in which
his or her employer had been covered by a carrier that became insolvent.
The solvent carriers sought reimbursement or contribution for the claims
they covered. The Supreme Court found that all claims in the appeal were
made after a 1988 amendment to the state’s guaranty statute. The statute
excluded from the definition of “covered claim” those claims due to a
reinsurer, insurer, insurance pool, or underwriting association. The Court
found that the amounts claimed as reimbursement or contribution were also
excluded from the statute.
Wirth, et al. v. M.A. Mortenson/Shal Associates., 520 S.W.2d 173 (Minn. Ct.
App. 1994). The Plaintiff in the trial action was injured while on a work site.
His subcontractor‐employer was covered by an insurer who became
insolvent. A second insurer assumed the carrier’s obligations. The Plaintiff
later sued the general contract of the work sit where he was injured for
negligence. The new insurer intervened and asserted a subrogation claim
against the contractor. The Defendant‐Appellant later filed a third‐party
contribution/indemnity action against the original subcontractor‐employer.
Because the subcontractor’s initial insurer was insolvent, the Minnesota
Insurance Guaranty Association assumed the insurer’s defense and won
summary judgment against the Defendant‐Appellant.
The Court, in this appeal by the Defendant, found that the Guaranty
Association had the statutory right to pursue subrogation claims and that
the district court did not err in allowing them to do so in the present case.
Furthermore, the Court found that federal and state due process
requirements were met and there was no violation of Defendant’s equitable
rights.
Missouri
Alvey Inc. v. Missouri Ins. Guar. Ass’n, 922 S.W. 2d 804 (Mo. Ct. App. E.D.
1996). The insured of insolvent insurer Integrity Insurance Company was not
barred from settling a claim and seeking recovery from the Missouri
Insurance Guaranty Association. The court held that the Integrity policy
provision requiring the Integrity’s consent to settlement of the claim did not
bar the insured from settling and seeking reimbursement from MIGA from
the portion of the settlement for which MIGA is liable. The court held that
“where the potential for liability of the insured has differed from MIGA’s
obligations under the statute so that no reasonable person could expect
MIGA to effect a settlement, the underlying provision of the policy which
requires consent of the insurer to settle does not provide a policy defense to
MIGA on a claim arising from a settlement so long as the claim has been
presented to MIGA prior to settlement and it has been afforded the

opportunity to settle.” The court further held that no amount of the
workers’ compensation payment could be recouped and affirmed an award
of defense costs to the insured relating to an entirely separate claim.
Flipps Nine, Inc. v. Missouri Property and Cas. Ins. Guar. Ass’n., 941 S.W.2d
564 (Mo.App. E.D. 1997). Certain purchasing groups bought insurance from
an insurer that later became insolvent. The purchasing groups maintained
residence in Missouri, but the insureds under the policies did not. Missouri
Property and Casualty Insurance Guaranty Association (MIGA) denied the
later claims of the insureds, arguing that nonresidents were not covered
under the state guaranty statute.
The trial court sustained MIGA’s motion to dismiss the insured’s complaint
because the term “insured,” within the meaning of the applicable statute,
meant those parties against whom a claim is being made and not the
purchasing group. On appeal, the Court of Appeals affirmed and held that
the claims of nonresident insureds are not covered under the applicable
statute. The purchasing group would have been covered, but they were not
filing the claim in the present case.
The trial court sustained the insurer’s motion to dismiss because the term
“insured,” within the meaning of the applicable statute, meant those parties
against whom a claim is being made and not the purchasing group. On
appeal, the Court of Appeals affirmed and held that the claims of
nonresident insureds are not covered under the applicable statute.
Garrett v. Overland Garage & Parts Inc., 882 S.W.2d 188 (Mo. Ct. App. E.D.
1994). The court held that the Missouri Insurance Guaranty Association
(MIGA) prohibits recovery from an insured tortfeasor of an insolvent insurer
for any amount due a compensation carrier as subrogation. The court
looked to the plain meaning of the statute to find that: (1) when a
tortfeasor’s insurer is insolvent, any insurer who has paid a claim that would
usually entitle it to subrogation will not be reimbursed by MIGA; and (2) no
one may recover the subrogation amount from the tortfeasor of the
insolvent insurer. The general right of subrogation of the worker’s
compensation statute is limited to cases where the insurer is solvent.
Havens Steel Co. v. Missouri Property and Cas. Ins. Guar. Ass’n., 956 S.W.2d
906 (Mo. 1997). The Supreme Court held that the state Guaranty Fund
should reimburse the claimant for a settlement because the insurer’s liability
was not limited to unpaid claims by injured third‐party claimants, and instead
extended to unpaid claims of an insolvent carrier’s insured. The Missouri
statute does not draw any distinction between claimants and insureds as to
unpaid claims, and thus the state insurer here was liable for the full amount
of the policy minus a small deductible per covered claim.
Henry Mikel v. Pott Industries/St. Louis Ship, 896 S.W.2d 624 (Mo. 1995).
The Labor and Industrial Relations Commission entered a ruling that the
state Guaranty Fund was liable to the insured for a claim that was unpaid by
insured’s primary (but insolvent) insurer. The Guaranty Fund appealed,
arguing the Commission lacked subject matter jurisdiction to determine
whether the case involves a covered claim and that judicial determination of
the issue was required. The Supreme Court held that the Commission has
only such jurisdiction conferred upon it by statute, which included those
powers necessary to properly discharge its duties under the applicable
worker’s compensation statute. Because the Commission was deciding legal
issues in the course of performing its core function of determining liability,
the Commission had subject matter jurisdiction to decide the issue.

Upon transfer of the case back to the Court of Appeals for review of the
Commission’s award amount, the Court affirmed the award in Henry Mikel v.
Pott Industries/St. Louis Ship, 910 S.W.2d 323 (Mo. Ct. App. E.D. 1995).
Missouri Property & Cas. Ins. Guar. Ass’n v. Brown, 900 S.W.2d 268 (Mo. Ct.
App. W.D. 1995). The proper venue for a declaratory judgment
action against the Missouri Property & Casualty Insurance Guaranty
Association (MIGA) is not the site of the liquidation proceeding of the
insurance company whose policy is at issue. The proper venue for a suit
against an unincorporated association such as MIGA is governed by RSMo
§508.040, the general corporate venue statute. That statute provides that
venue is only proper in the county where the cause of action accrued, or in
the county the corporation has an office or agent. Here, both the office and
agent are located in St. Louis County, therefore that shall be the proper
venue.
Missouri Property & Cas. Ins. Guar. Ass’n v. Petrolite Corp., 918 S.W.2d 869
(Mo. Ct. App. E.D. 1996). Defendant Petrolite was insured under a
commercial catastrophe policy issued by now‐insolvent Integrity Insurance
Co., which provided for coverage of $5 million per occurrence, $5 million
annual aggregate, with a retained limit of $10,000. When a former employee
sued Petrolite for a discrimination claim, MIGA provided the defense and
settled with the employee for $11,000. MIGA then sought reimbursement of
the $10,000 retained limit under the Integrity policy from Petrolite. Petrolite
was sued a second time for age discrimination by another employee. MIGA
withdrew its defense of Petrolite after the court awarded substantial
damages to the plaintiff in the second case because it claimed that the
damages would not have been covered under the Integrity policy because it
was an “intentional act.”
On appeal, the court found that the Integrity policy was ambiguous with
regard to the coverage of intentional torts, and therefore construed it in
favor of the insured. Moreover, the court held that MIGA was responsible
for actual damages up to the statutory coverage limit plus attorney fees
incurred by an insured of an insolvent carrier in defending a discrimination
claim.
Williams v. Missouri Property & Casualty Guaranty Assoc., 904 S.W.2d 10
(Mo. Ct. App. W.D. 1995). Williams was injured when he was struck
by a truck driven by an employee of a trucking company insured by the nowinsolvent
Transit Casualty Company. Williams received $181,987 in worker’s
compensation benefits, and sought the remaining balance of his damages,
$83,491, from the guaranty association statute as a “covered claim.” The
statute, however, has a statutory maximum of $50,000. The court held that
a claimant who received worker’s compensation benefits which were less
than the amount of the damages, but more than the statutory maximum
recoverable from MIGA, may pursue a “covered claim” against the
association for the difference.
Nebraska Nebraska Life & Health Ins. Guar. Ass’n v. Dobias, 531 S.W.2d 217 (Neb. 1995).
Defendant insureds were insured under a health policy issued by primary
insurer, who refused to pay certain medical expenses. After obtaining a
judgment against the primary insurer, the insureds attempted to collect, but
the primary insurer had been reorganized and eventually became insolvent.
Insureds filed a claim with the Plaintiff Guaranty Association, who paid for
the primary claim but refused to pay interest, costs, and attorney fees. The
Supreme Court held that insurer was not liable for interest, costs, and
attorney’s fees awarded on the earlier judgment. The Court noted that

jurisdictions that did find associations liable for such funds would allocate
such liability only under a statutory provision or specific policy language.
New York
Frialtor v. Guaranty Fund Management Services, 590 N.Y.S. 989 (Sup. Ct. Erie
County 1992). Defendants, a New Hampshire Guaranty Association and its
managers, moved to dismiss claims against it by plaintiff, the insured of an
insolvent insurer, on the basis of a lack of personal jurisdiction. The New
York Supreme Court found that jurisdiction did not exist because the
guaranty association had not "transacted business" under New York's long
arm statute, even if the insolvent insurer had been transacting business in
New York.
Gold Fields American Corporation v. Aetna Casualty and Surety Company,
(Sup. Ct. N.Y. Cty. 1997). In an action in New York, plaintiffs who were found
liable by the United States Environmental Protection Agency for
environmental damage involving property in Oklahoma, Kansas, Illinois and
Missouri named the Insurance Guaranty Funds of those four states in this
action on the basis of the plaintiffs’ claim that the Funds stand in the shoes
of two insolvent insurance companies for which the Funds may be obligated
to pay claims. The court granted the Funds’ motion to dismiss for lack of
personal jurisdiction, finding that Guaranty Funds such as the defendants do
not transact business within the State of New York and do not contract to
supply goods or services in New York and ruling that “(e)ven though the
Funds had members which did business in New York that does not allow a
finding that the Funds themselves did business in New York.”
In The Matter of the Liquidation of Midland Insurance Company, Bayly,
Martin & Fay v. Curiale, 199 A.D.2d 207, 605 N.Y.S.2d 300 (1st Dept. 1993). As
part of an unusual program of liability insurance for the County of
Westchester, the insurance broker agreed to pay the County’s attorneys
fees and carried its own “attorney‐fee‐only” insurance policy issued by
Midland to cover the fees. The broker, Bayly, Martin & Fay, filed a claim with
the New York Superintendent of Insurance as Administrator of the New York
Property/Casualty Insurance Security Fund, seeking coverage from the Fund.
The Court found, however, that the “attorney‐fee‐only” policy is not a
liability policy of the type covered by the Property/Casualty Insurance
Security Fund, which covers “legal liability of the insured and . . . loss,
damage, or expense incident to a claim of such liability.” The court upheld
dismissal of the claim against the Fund.
In the Matter of the Liquidation of Union Indemnity Insurance Company of
New York‐ Manufacturers and Traders Trust Company v. Superintendent of
Insurance, 234 A.D.2d 70, 650 N.Y.S.2d 227 (1 st Dept.1996). In a claim against
the New York Property/Casualty Insurance. Security Fund, the court found
that bonds issued by an insolvent insurer to secure loans by the plaintiff
bank were to secure loans to companies that were not located or resident in
New York. The Fund was found not liable because none of the defaulting
parties resided in New York. Plaintiff Manufacturers Traders and Trust
company made loans to two out of state companies and to an individual
residing out of state. Union Indemnity Insurance Company issued a bond on
each loan. After all three principals had defaulted on their loans,
Manufacturers made a timely demand on Union Indemnity for payment as
surety. By then, an Order of Liquidation had been issued as to Union
Indemnity. The court ruled that under Insurance Law § 7602(g), both the
insured risk and the covered risk had to be located or resident in New York
for the claims against the Fund to be allowed. Although the “covered risk”,
the making of loan payments in New York was located in New York, the
court found that the “insured risk”, the failure to make payment was not

located in New York because all the borrowers were neither located or
resident in New York. Therefore, they could not have paid the notes from
New York and the Superintendent properly refused to find that
Manufacturer’s claims were allowable.
In the Matter of Liquidation of Union Indemnity Insurance Company of New
York, the Royal Bank & Trust Company. v. The Superintendent of Insurance
of the State of New York, 92 N.Y. 2d 107, 677 N.Y. S. 2d 228, 699 N.E. 2d 852
(1998). The Court of Appeals of New York concluded that the
Property/Casualty Insurance Security Fund (the “Fund”) was liable for postlitigation
interest and attorney’s fees which, the court reasoned, were an
“allowed claim” by an insured against the Fund. New York insurance law
states that a creditor is not entitled to interest on any dividend by reason of
delay in payment, but the court ruled this principle applies only to claims
against liquidation estates of insurance companies and is not applicable to
reimbursement sought under the Fund. Also, the phrase “limit of liability”
within the statute was not limited to the principal amount of financial
guaranty bonds. Therefore, the Fund was not precluded from paying postlitigation
interest and attorney’s fees as provided by the bonds.
North Carolina Hales v. North Carolina Insurance Guaranty Association, 337 N.C. 329, 445
S.E.2d 590 (1994). Action was brought on behalf of minor passenger injured
in automobile accident to recover under automobile liability policy from
Insurance Guaranty Association, which had assumed all rights and
obligations of insolvent insurer. Prior to the accident, the insurer had
attempted to terminate the policy due to non‐payment of the renewal
premium. Minor’s action was seeking declaration that policy was in effect
on date of accident. Minor’s father had earlier brought an unsuccessful
declaratory judgment action against the insurer seeking to establish
coverage, but the minor and his guardian were not parties to that action.
The court ruled that minor was not precluded from bringing action by the
doctrines of res judicata or collateral estoppel and that the court would not
adopt doctrine of virtual representation. In addition, the court concluded
that an entry of summary judgment in favor of the plaintiffs would be
inappropriate when a number of genuine issues of material fact remained
with regard to whether the plaintiffs possessed a “covered claim” within the
meaning of the Insurance Guaranty Association Act. The court noted that
the premium notice, which was sent by insurance agency and not by insurer,
stating that automobile liability policy was up for renewal and requesting
policyholder to pay premium amount before renewal date to avoid lapse in
coverage did not satisfy statutory requirements for a cancellation or refusal
to renew policy to be effective.
North Carolina Insurance Guaranty Association v. Burnette, 508 S.E.2d 837
(1998). North Carolina Insurance Guaranty Association sought declaratory
judgment that Catawba County Board of Education’s (“Board”) alleged
liability for collision between student and car was not covered claim under
Board’s primary and excess liability policies. Student answered seeking
declaratory judgment that claims were covered, and Board filed cross‐claim
alleging that it had not waived governmental immunity. The court held that
even though insolvent insurer provided the primary and excess coverage of
the Board under separate policies, the North Carolina Insurance Guaranty
Association’s responsibility is limited to the statutorily set amount of
coverage of $300,000 less the set‐off. In addition, the court concluded that
the Board’s waiver of governmental immunity was limited to the North
Carolina Insurance Guaranty Association’s obligation to pay the statutorily
set amount of coverage less the set‐off. Thus, the waiver was effective only
to the amount that the Board was indemnified.

Ohio
Lake Hospital System, Inc. v. Ohio Insurance Guaranty Association, 69 Ohio
St.3d 521, 634 N.E.2d 611 (1994). The issue under consideration by the
Supreme Court of Ohio was whether R.C. 3955.08(A)(1), obligating the Ohio
Insurance Guaranty Association (OIGA) to cover existing claims of an
insolvent insurer, prohibited OIGA from honoring a claim that had been filed
after the final date set. Appellant urged that the liquidating court’s decision
to accept the claim as timely filed bound OIGA from reaching the opposite
conclusion. Appellant further claimed that Indiana law and R.C. 3955.08
gave the liquidating court the responsibility of establishing deadlines and the
power to allow exceptions to those deadlines. The court rejected these
arguments stating that R.C. 3955.08(A)(1) specifically absolved OIGA of
liability for claims filed “after the final date set by a court for filing claims”.
The court explained that participating in the distribution of an insolvent
insurer’s assets and submitting a claim with OIGA are distinct activities
governed by different requirements. The mere fact that a statute in a
foreign jurisdiction allows a domestic receiver to accept an untimely claim
neither affected, nor controlled the liability of the OIGA. The court
referenced to other jurisdictions with similar guaranty funds that have also
held that insurance guaranty associations need not honor a claim presented
after the filing deadline set by a liquidating court, thus, acknowledging the
importance of placing reasonable limits on an association’s liability.
Rushdan v. Baringer, 2001 Ohio App. LEXIS 3827 (2001). Defendant doctor had a
primary malpractice insurance policy, with coverage of $1,000,000, and an
excess policy of an additional $1,000,000. Both policies were with the same
carrier, who became insolvent. The Ohio Insurance Guaranty Association
(“OIGA”) assumed the doctor’s defense. The patient and OIGA settled,
agreeing that the value of the patient’s claims was $1,300,000. The patient
agreed to accept a $300,000 payment from OIGA, which is its statutory limit.
The patient, however, contended that she was entitled to a second payment of
$300,000 as there was a second covered claim under the excess policy. The
court held that under the Ohio Revised Code, if the insured had coverage under
more than one policy and if that coverage had been triggered under the
policies’ terms, then that same plaintiff had a covered claim against OIGA under
each policy. Therefore, here, where the parties had determined that the
patient’s claims exceeded the limit on the primary policy, a separate covered
claim arose under the excess policy. Plaintiff was therefore entitled to a second
$300,000 payment.
Stanich v. Ohio Ins. Guar. Ass’n, 2002 Ohio 5198; 2002 Ohio App. LEXIS 5236
(2002). Defendant doctor had primary and excess professional liability
insurance policies, each with limits of $1,000,000 for claims related to the injury
or death of any one person. The Ohio Insurance Guaranty Association (“OIGA”)
stepped in after the doctor’s insurer became insolvent. The Ohio Revised Code
provides that a claim covered by OIGA will not include amounts over $300,000
on a claim. The doctor claimed that because the coverage was divided between
two policies—primary and excess—the medical malpractice claim actually
asserted two claims. Consequently, the doctor claimed that he had two claims
against OIGA and should be entitled to recover twice the statutory limit. The
court held that because all claims in the malpractice suit related to the same
patient and the amount claimed did not exceed that of the primary policy, there
was only one claim for purposes of OIGA’s duty of coverage.
Oklahoma
State ex rel. Grimes v. Okl. Prop. & Cas., 796 P.2d 352 (Okla. App. 1990). The
Oklahoma Supreme Court held that the Guaranty Association belonged in a
class superior to the general creditors. In so finding, the court determined that
the Guaranty Association belonged to the class of "policyholders, beneficiaries
or insureds" as those terms are defined under the Oklahoma liquidation
statute. This case effectively renders Hunt v. Community National Life

Insurance Company, 560 P.2d 560 (Okla. 1977) no longer dispositive on the
priority of claims issue.
South Carolina South Carolina Property and Casualty Insurance guaranty Association v.
Carolinas Roofing and Sheet Metal Contractors Self‐Insurance Fund, 315 S.C.
555, 446 S.E.2d 422 (1994). Guaranty Association sought declaratory
judgment that it was not obligated to cover claim submitted by group selfinsurer.
The Supreme Court of South Carolina held that a group self‐insurer
that engages in a “kind of insurance” is an “insurer under the Guaranty Act
and therefore its claim, following insolvency of its catastrophic insurer, is not
covered by the act. The court reasoned that South Carolina defines
insurance as “a contract whereby one undertakes to indemnify another or
pay a specified amount upon determinable contingencies...” The court
noted that both the arrangement between the group self‐insurer and its
members, and between the group self‐insurer and its catastrophic insurer,
meet the aforementioned statutory definition of insurance. Furthermore,
the Guaranty Association was not estopped from denying partial payment of
the claim, in view of evidence that group self‐insurer repeatedly failed to
disclose relevant facts within its control to the Guaranty Association.
Tennessee McReynolds v. Cont’l Bankers Life Ins. Co., 1993 Tenn. App. LEXIS 465 (1993).
After insurance company was placed into receivership for purposes of
liquidation, the guaranty association filed a claim for administrative expenses.
Because the receiver approved only a portion of administrative expenses, the
guaranty association filed a claim with the chancery court to be paid in full.
While the claim was pending, the receiver filed a motion to authorize final
distribution which was later granted. Then the guaranty association filed a
second claim for expenses and was denied. The court held that the motion to
set aside judgment of the association was properly denied because the
guaranty association was not a party to an insolvency action of an insurance
company of which it claimed it had a right to notice and thus failed to establish a
right to notice.
Virginia
H. Bennet v. Virginia Life, Accident and Sickness Insurance Guaranty
Association, 251 Va. 382, 468 S.E.2d 910 (1996). Trustees for Dynamic
Systems, Inc. Savings Enhancement Plan filed a petition against the Virginia
Life, Accident and Sickness Insurance Guaranty Association (the
“Association”) for declaration that guaranteed interest contracts (“GICs”)
issued by a ember insurer were “annuity contracts” and entitled to coverage
under the Association when insurer became insolvent. The GICs purchased
by the trustees were neither issued to nor owned by individuals.
The Supreme Court of Virginia concluded that GICs with beneficial or
equitable owners were not policies protected by statute from insolvent
insurers because the GICs did not satisfy the “issued to” or “owned by” an
individual requirement of Va. Code § 38.2‐1700(c)(5) (1950), nor did they
provide annuity benefits to individuals.
The Uninsured Employer’s Fund v. Flanary, 27 Va. App. 201, 497 S.E.2d 912
(1998). Albert Flanary was originally awarded weekly compensation
disability benefits for 300 weeks. Upon a change in his condition, he was
awarded lifetime benefits. Mr. Flanary’s employer was required by statute,
Va. Code § 65.2‐801 (1950), to continually maintain liability insurance because
its employees were susceptible to pneumoconiosis. Both of the employer’s
insurance carriers became insolvent. The Virginia Property and Casualty
Insurance Guaranty Association became liable for “covered claims” against
Rockwood Insurance and the Uninsured Employer’s Fund became liable for
claims against the Coal Producers Group. Rockwood Insurance was solvent
when compensation was first awarded and paid its share of the original

award. It became insolvent, however, prior to the entry of the award based
upon the claimant’s change in condition.
The Uninsured Employer’s Fund is a statutorily created “governmental
insurance or guaranty program,” which is financed by taxes levied upon
insurers and functions as the workers’ compensation insurer of last resort
under statutorily limited circumstances. The Court of Appeals of Virginia held
that statute requires individuals having a claim against the Fund, which is
also a “covered claim” under the policy of an insolvent insurer, to exhaust
first his rights under the Fund before bringing a claim against the Property
and Casualty Insurance Guaranty Association. Further, the court held when
there has been a failure to maintain the statutorily required liability
insurance, the Fund will be liable because the employer has violated its
statutory duty. The Virginia Property and Casualty Insurance Guaranty
Association would only become liable for payment if the Fund were to be
unable to fully satisfy the award.
Virginia Property and Casualty Insurance Guaranty Association v. Robinson,
246 Va. 97, 431 S.E.2d 45 (1993). The plaintiff was injured in an accident and
sued the Virginia Property and Casualty Insurance Association to recover the
portion of his judgment that he was unable to collect because the Maislin
Transport Company and its excess liability insurance carrier, United Canada
Insurance Company (“United”), were insolvent. United, who was not
licensed to do business in Virginia, was the only insurance company
described in the policy. The plaintiff argued that Carriers Insurance Company
(“Carriers”), who was licensed to do business in Virginia, was the parent
corporation of United and it “adopted” Maislin’s policy by changing the
policy number and filing it with the Interstate Commerce Commission for
United.
The Supreme Court of Virginia concluded that there was an intercorporate
agreement between Carriers, the parent corporation, and United, its
subsidiary, to adjust each other’s claims arising in the jurisdictions where
each was authorized to do business. The court held that this does not
support the conclusion that Carriers “issued” United’s policy within the
context of the former Va. Code § 38.1‐760(4)(1950) (Repealed). Therefore,
the plaintiff had no “covered claim” against Virginia Property and Casualty
Insurance Association.
Washington
Gallagher v. Sidhu, 109 P.3d 840 (Wash. Ct. App. 2005). A claimant was injured
by a defendant insured by an insolvent insurance company. WIGA was entitled
to offset claimant’s recovery of underinsured motorist insurance from
claimant’s insurer.
Seattle‐First Nat'l Bank v. Washington Ins. Guaranty Assn., 804 P.2d 1263, 116
Wash. 2d 398 (1991). The Washington Supreme Court held that WIGA was
liable for an insured's attorney fees in an action on a policy that contains an
attorney fee provision.
Washington Ins. Guaranty Assn. v. McKinstry Co., 784 P.2d 190, 56 Wash. App.
545 (1990). The Court of Appeals of Washington held that the guaranty
association was not authorized to reduce the amount of excess proceeds
payable to an insured on behalf of an insolvent insurer by the amount paid to
the insured by his primary carrier. The guaranty association relied on the
prohibition in the Insurance Code against double recovery to support its claim
that it had no liability to the insured. The court rejected WIGA's argument,
concluding that the claimant purchased two layers of protection, and was in no
better position than if the excess insurer had remained solvent.

West Virginia Cannelton Indus. v. Aetna Casualty & Sur., 194 W.Va. 203, 460 S.E.2d 18
(1994). Cannelton Industries, Inc. (“Cannelton”) sought relief from the West
Virginia Insurance Guaranty Association (“WVIGA”) after two of its insurance
carriers became insolvent. Pursuant to W.Va. Code § 33‐26‐8 (1)(a) (1985),
the state guaranty association is obligated for “covered claims” against
insolvent insurers existing prior to insolvency and claims arising within 30
days after determination of insolvency. Cannelton claimed that because it
was not aware of the insolvencies of the two companies and it did not
receive notice from the WVIGA, who was aware of the insolvencies, the
WVIGA is liable for the unpaid claims even if they were filed past the final
date for filing claims.
After reviewing West Virginia State law and other jurisdictions, the court
held that WVIGA is not required to notify insureds of insolvent insurers
unless the Insurance Commissioner requires that such notice be given
pursuant to statute W.Va. Code, 33‐26‐10(2)(a) (1970). Therefore, the Circuit
Court of Kanawha County’s dismissal of Cannelton’s claim was affirmed.
Devane v. Kennedy, 1999 WL 166084 (W.Va. 1999). West Virginia Insurance
Guaranty Association (“WVIGA”) appealed an order by the Circuit Court of
Jefferson County enforcing a pre‐insolvency settlement agreement entered
into by the plaintiff, defendant, and defendant’s liability insurance carrier.
The settlement required a release of all claims by the plaintiff and the
defendant’s liability insurer to pay $220,000. The liability insurer became
insolvent before payment to the plaintiff was made, and WVIGA became
liable for “covered claims” pending against the insurer, including the
plaintiff’s claim. The court ruled that the Circuit Court for Jefferson County
did not err in enforcing against the WVIGA the pre‐insolvency settlement
agreement. The court held that W.Va. Code § 33‐12 (1) (1970) (Repl. Vol.
1996) requires the exhaustion of all solvent insurance which provides
coverage for the “covered claim” asserted against the Association. Once the
coverage is exhausted or, as in this case, there is no solvent insurance
available, the settlement agreement is to be enforced and, in this case,
WVIGA is ordered to pay the claim.
Further, the court held that for WVIGA to escape liability for a pre‐insolvency
settlement, the Association would have to contest the settlement, pursuant
to W.Va. Code § 33‐26‐8 (1)(d) (1985) (Repl. Vol. 1996), by demonstrating the
existence of collateral solvent insurance applicable to the claim or by
asserting any defense which would enable it to escape such liability. The
Association’s claim that it had not been included in the settlement
negotiations was not such a defense.
Wyoming Wyoming Ins. Guar. Assoc. v. Allstate Indem. Co., 844 P.2d 464 (Wyo. 1992).
Wyoming Insurance Guaranty Association (WIGA) brought action against
permissive user’s automobile insurer, Allstate, to require the insurer to
defend and indemnify in lawsuit against user. The Supreme Court held that
the policy of the insolvent insurer was “collectible insurance” within the
meaning of permissive user’s policy stating that insurance with respect to
temporary substitute or nonowned automobile is excess over any other
collectible insurance. Therefore, WIGA not Allstate was required to defend
and pay any loss arising from the accident.
Third Party Claims
Second Circuit Rhulen Agency, Inc. v. Alabama Ins. Guar. Ass'n, 896 F.2d 674 (2d Cir. 1990).
Rhulen, a New York corporation, was the broker and program manager for
Transit Casualty Company. When Transit was ordered into liquidation in 1985,

Rhulen advanced claim payments to Transit customers in return for claim
assignments. Rhulen then brought suit against various state guaranty
associations for reimbursement on advanced claims. The Second Circuit
affirmed a dismissal based on lack of subject matter jurisdiction, finding that
since the guaranty associations were unincorporated associations, their
citizenship was deemed the same as the citizenship of their members. The
Second Circuit found that since at least one insurance company member of
each guaranty association was a New York citizen, subject matter jurisdiction
did not exist due to the incomplete diversity of the parties.
Third Circuit
Arkansas
Colorado
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.
Larey v. Morris, 432 S.W.2d 861 (Ark. 1968). The court noted the Arkansas
insurance commissioner had made a mistake in stating that the insolvent
insurer was "not obligated to pay the judgment" against the former insured.
The court noted that the claimant against the insured motorist could always
attempt to collect a judgment directly from the insured or pursue the claim in
the insolvent insurance company's estate.
Benham v. Manufacturers & Wholesalers Indem. 685 P.2d 249 (Colo. App.
1984). The court held that although an alleged impropriety by the Insurance
Commissioner may justify a third party action against the Commissioner, the
subscriber is still responsible for payment of the assessment.
Connecticut Connecticut Ins. Guar. Assoc. v. Raymark Corp., 215 Conn. 224, 575 A.2d 693
(1990). Connecticut Insurance Guaranty Association ("CIGA") was statutorily
created to pay claims of policyholders of insolvent insurers. Consequently,
CIGA serves as a resource for persons injured by asbestos manufacturers,
many of whose insurers have been declared insolvent. An injured party having
a claim against an insured tortfeasor has a legal interest in a coverage dispute
with the tortfeasor's insurer and must be either notified or joined in a
declaratory judgment action to decide the coverage question. Accordingly, in
the absence of some representative of those having a personal injury claim,
the court lacked subject matter jurisdiction in a declaratory judgment action
brought by CIGA, which was acting in place of the insolvent insurer of an
asbestos manufacturer.
Connecticut Ins. Guar. Assoc. v. Union Carbide Corp., 217 Conn. 371, 585 A.2d
1216 (1991). The Connecticut Insurance Guaranty Association ("CIGA") became
obligated to pay claims arising from a Union Carbide plant disaster in Bhopal,
India after some of the Union Carbide's carriers became insolvent. The
Connecticut Supreme Court held that, under the statutory definition of
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).

"covered claim," CIGA was obligated to pay the claim of each Bhopal victim.
Further, CIGA's $300,000 liability limit applied to each claim of the Bhopal
victims, not to the aggregate of their claims. Pursuant to Connecticut General
Statute section 38‐282(1), "any amount payable on a covered claim . . . shall be
reduced by the amount of any recovery under such insurance policy." This
section was intended to apply only to prevent duplicative or windfall
recoveries from losses sustained by an insured or a claimant as a result of
insurer insolvency. Accordingly, CIGA was entitled only to offset its obligation
as guarantor of insolvent insurers by amounts actually paid by insolvent
insurers.
District of Columbia
Consumers United Insurance Company v. Smith, 644 A.2d 1328 (D.C. App.
1994). A Delaware domiciled insurance company became embroiled in a
dispute with its landlord in the District of Columbia. After a jury verdict in its
favor in the amount of $2,500,000, the landlord, unaware that a few days
earlier the insurance company transferred a building it owned in the District
to its parent company, attempted to recover on its judgment by recording a
lien on the building in the District; the landlord also attempted to garnish the
insurance company’s funds in a District of Columbia bank. Shortly
thereafter, the Delaware Insurance Commissioner seized the insurance
company’s assets under an order which enjoined all persons (including the
District of Columbia landlord) from asserting any claim against the insurance
company’s property. The landlord thereafter filed motions in the Superior
Court of the District of Columbia to recover the funds it had garnished and to
pierce the corporate veil and execute on the building in the District. The
landlord’s motions were granted, and the insurance company appealed.
On appeal, the Court ruled that the landlord had priority over the Delaware
Insurance Commissioner in claiming the bank accounts and building. The
Court also ruled that the Full Faith and Credit Clause did not require the
landlord to obtain permission from the Delaware receivership court in order
to proceed further in the adjustment of its judgment liens in the District of
Columbia.
Georgia
Illinois
United States v. Rutland, Inc., 849 F. Supp. 806 (S.D. Ga. 1994). The Court
held that the insolvency of a tortfeasor’s insurer is no defense to the tort
claim. The Court also held that the United States may be considered a
“person” with a net worth in excess of $3 million in determining whether the
Georgia Insurers’ Insolvency Pool covered the United States’ third‐party
claim.
Hasemann v. White, 177 Ill.2d 414, 686 N.E.2d 571 (1997). After the plaintiffs
sued the defendants to recover damages sustained in an automobile
accident, defendants' insurer became insolvent. Plaintiffs then settled with
their uninsured‐motorist carrier for less than their policy limits. The court
held that a claimant who settles with his insurer for less than his policy limits
has "exhausted" his rights for purposes of the Illinois Guaranty Fund Act, but
that the Fund's liability should be offset by the amount that the claimant
could have recovered under his uninsured‐motorist policy, i.e. the policy
limits, without regard to the amount that the claimant actually received from
his own carrier.
Illinois Life & Health Insurance Guaranty Assoc. v. Boozell, 289 Ill. App. 3d
621, 682 N.E.2d 291 (1997). The court held that the Illinois Life and Health
Insurance Guaranty Law defines the residence of a non‐natural person to be
the state in which it has its principal place of business at the time of the
insurer's insolvency. Thus, despite the fact that a company had formerly
been a resident of Illinois, the fact that it was no longer a resident of the
state when its insurance company became insolvent prevented it from being

entitled to coverage from the Illinois Life and Health Guaranty Association.
In addition, the court held that because the company did not argue or
present any evidence to the Association that it fell within the nonresident
exception to the Guaranty Law, the Association was not required to
determine whether the company was a qualified nonresident or in which
state outside Illinois it was a resident.
Lonigro v. Lockett, 253 Ill. App. 3d 308, 625 N.E.2d 265 (1993). The plaintiff
sued three defendants to recover for personal injuries he sustained in an
automobile collision. At the time of the accident, two of the defendants
were insured by an insurance company which became insolvent after the
complaint was filed, and thus by operation of law, the defendants became
uninsured motorists. The Illinois Insurance Guaranty Fund undertook
defense of the claim. On appeal, defendants alleged that plaintiff failed to
exhaust the uninsured motorist coverage available to him through the third
trial court defendant's ("Benecke's") insurance policy prior to proceeding
against them and the Fund. The appellate court found that the plaintiff was
put on notice by the Fund that he was obliged to take some steps to pursue
a claim under the uninsured motorist provision of Benecke's policy prior to
proceeding against the defendants and the Fund. Because a factual
determination of when the plaintiff received that notification from the Fund
was not resolved at the trial court level, the appellate court reversed and
remanded the case.
Moses v. Coronet Ins. Co., 192 Ill. App. 3d 921, 549 N.E.2d 739 (1989).
Defendant argued that when the tortfeasor's insurance company has
become insolvent, the one‐year limitation period to pursue an uninsured
motorist claim was not against public policy provided that the provision did
not begin to run until the claimant knew or should have known of the
insolvency. The appellate court affirmed the trial court's determination that
the one‐year limitation was against public policy, and thus was
unenforceable, because it served no purpose other than to limit the
defendant's liability.
Tralmer v. Soztneps, Inc., 283 Ill. App. 3d 677, 670 N.E.2d 811 (1996). Due to
her injuries sustained in a collision involving a drunk driver, the plaintiff sued
the driver under a theory of common‐law negligence and the establishments
that provided the alcohol under the Illinois Dramshop Act. The plaintiff
settled with the driver, but the drinking establishments' insurance company
became insolvent before any adjudication of the statutory claim. The Illinois
Insurance Guaranty Fund then subrogated to the rights and obligations of
the insolvent carrier. Defendants argued that the non‐duplication of
recovery provision under Section 546(a) of the Illinois Insurance Code on
summary judgment precluded plaintiff's claim against the Guaranty Fund,
since plaintiff had already recovered more than the $30,000 maximum under
the limitations of Section 546(a). On appeal after summary judgment was
entered in favor of defendants, the plaintiff argued that the fact that she
settled common‐law claim of negligence should not preclude her right to
recover from her statutory Dramshop claim. The court held that because the
settled automobile policy did not provide coverage for the plaintiff's
Dramshop claim and only the insolvent insurer’s policy provided such
coverage, Section 546(a) did not forbid the plaintiff's claim.
Urban v. Loham, 227 Ill. App. 3d 772, 592 N.E.2d 292 (1992). After the plaintiff
filed suit for injuries allegedly sustained in an automobile collision, the
defendants' insurance company was placed into liquidation. Once in
liquidation, the Illinois Insurance Guaranty Fund notified the plaintiff that the
Fund required a claimant to first "exhaust" all rights they may have under
their uninsured motorist coverage before recovering from the Fund. The

plaintiff, however, failed to follow the procedure for the timely filing of an
uninsured motorist coverage claim and therefore did not receive the policy's
coverage. The trial court granted the defendant's motion to dismiss
because the plaintiff's failure to seek uninsured motorist coverage in a
timely manner demonstrated that the plaintiff did not exhaust other
insurance rights as required by the Illinois Insurance Code. The appellate
court disagreed and determined that a plaintiff exhausts other insurance
rights by making a claim, regardless of what coverage amount they receive
as a result. Therefore, the plaintiff could seek coverage from the Fund for
that amount originally covered by the defendant's insurance policy, but the
amount sought must be less the amount the plaintiff could have recovered
from their own uninsured motorist coverage policy.
Kentucky
Minnesota
Montana
New Hampshire
Plaza B.V. v. Stephens, 913 S.W.2d 319 (Ky. 1996). Nonvoting shareholders have
no standing to appeal the actions of the Liquidator.
Minnesota Mining & Manufacturing Co., et al. v. H&W Motor Express Co.,
Slip Op., No. C8‐93‐778 (Minn. Ct. App. Nov. 2, 1994). Following a traffic
accident, the insured Defendant attempted to recover from its insolvent
insurer. Because that insurer was insolvent, the other party to the accident
(Plaintiff) attempted to recover from its insurer. That insurer paid Plaintiff,
but Plaintiff sued Defendant to also recover under the Defendant’s policy
with the initial insolvent insurer. The Court of Appeals denied review of its
earlier decision holding that the retained limit of the insured of an insolvent
insurer is not insurance coverage. The Court held that a solvent uninsured
motorist carrier’s claim for the retained limit is not barred by the Minnesota
Insurance Guaranty Association.
In re Claim of Kowalski, 860 P.2d 104 (Mont. 1993). A third party claimant
obtained a consent judgment against the insured after an order of
liquidation was entered for the insurer. The claimant subsequently filed a
claim in the insurer's liquidation that was larger than the consent judgment.
The liquidator denied the claim and appealed, arguing that its liability was
limited to the amount the insured was legally obligated to pay (i.e., the
amount of the judgment). The Supreme Court ruled that the under the
Insurers Supervision, Rehabilitation and Liquidation Act, judgments obtained
after entry of an order of liquidation do not limit or determine the liability or
damages for which the insolvent insurer is responsible.
Gonya v. Commissioner, NH Ins. Dept., 153 N.H 521 (2006). A third party claimant
sought to declare unconstitutional the statute requiring the third party claimant
to release the insured as part of its proof of claim in the insurer’s liquidation.
The Court held that the statute did not violate the doctrine of unconstitutional
conditions or the equal protection clause of the state constitution. In each case,
the statute met the required standard because it reasonably related to the
Legislature’s goal of fairly apportioning unavoidable loss. The Court also held
that the notice of the statutory release on the proof of claim form was sufficient
to satisfy due process requirements.
New Jersey New Jersey Prop. Liab. Ins. Guar. Ass’n v. Hill Int., Inc., 395 N.J. Super. 196, 928
A.2d 836 (App. Div. 2007). The court considered whether the New Jersey
Property‐Liability Insurance Guaranty Association (“NJPLIGA”) was liable for a
claim filed by the issuer of a surety bond who served as the guarantor of the
performance of a subcontractor. The issuer of the bond was insured under a
liability policy. The insurer assumed the issuer’s defense regarding a negligence
claim against it, but was declared insolvent during the litigation and NJPLIGA
assumed its obligations. NJPLIGA filed a declaratory action seeking a judicial
declaration that it was not required to indemnify the issuer because the claim
was not a claim NJPLIGA was statutorily obligated to cover. The court held that

the negligence claim, brought by the surety, was a covered claim under the
policy issued by the insolvent insurer. It was also covered by the statute
defining what NJPLIGA must cover. Accordingly, the court found NJPLIGA was
liable.
New York Aetna Casualty & Sur. v. Ohio Ins. Guar. Assoc., 175 A.D.2d 621, 573 N.Y.S.2d 942
(4th Dep't 1991). A New York appellate court held that the Ohio Insurance
Guaranty Association ("OIGA") is obligated to indemnify only (1) the insureds
of an insolvent insurer; and (2) parties possessing "covered claims," which are
claims against the insured of the insolvent insurer that come within the scope
of the policy issued by the insolvent carrier. The Court also found that because
OIGA indemnifies only loss recoverable from no other source, claimants must
exhaust all other avenues of insurance coverage (e.g., uninsured motorist
protection, policies held by other tortfeasors) before pursuing claims against
OIGA.
Curiale v. DR Ins. Co., No. 91194/83, 1992 N .Y. Misc. LEXIS 588 (Sup. Ct. N.Y.
County, Dec. 23, 1992). The Liquidator of Ideal Mutual Insurance Company
sought reinsurance recoveries from defendant DR Insurance Company, a
successor to Elkhorn Re Insurance Company, which was alleged to have acted
as a "front" for a reinsurance syndicate. In a lengthy analysis, the Supreme
Court of New York found that the fact that Elkhorn's name was on the
reinsurance contract was consistent with Elkhorn's having acted as a "front"
and therefore DR Insurance, as successor, was liable under the contract.
Holmes v. Skil Corp., 166 A.D.2d 304, 564 N.Y.S.2d 125 (1st Dep't. 1990).
Plaintiffs commenced a personal injury action against defendant Skil
Corporation. After discovering that Skil was insured by its parent company,
plaintiffs filed a proof of claim with the parent's insurer, the insolvent Integrity
Insurance Company. The claim was referred to the Missouri Insurance
Guaranty Association ("MIGA"), which notified plaintiffs that, pursuant to the
MIGA governing statute, the filing of a claim with Integrity would constitute an
unconditional general release of all liability of the defendant in connection with
such claim. Informed that the statute permitted them to withdraw their claim,
plaintiffs chose instead to continue their claim with Integrity. In plaintiffs'
action against the insured corporation, the Court held that plaintiffs, by
maintaining the proof of claim with Integrity, knowingly released their claim
against the insured. Accordingly, the Court dismissed plaintiffs' complaint
against the Skil on the ground of release.
In re Liquidation of Midland Ins. Co., 709 N.Y.S.2d 24 (App. Div. 2000). Public
policy requires that all creditors receive equal treatment in a liquidation
proceeding. To assure equal treatment to all creditors of the insolvent excess
insurer, the court considered conflict of law principles and applied New York law
in ascertaining under a liability insurance policy whether an occurrence was
triggered by exposure to asbestos; the court was not bound by a federal district
court’s decision applying New Jersey law.
Oklahoma
Cleveland Trust Co. v. State ex rel. Hunt, 555 P.2d 594 (Okla. 1976). Assignees
of purportedly paid up, single premium life policies took assignments of such
policies as security for loans, but the policies had been fraudulently issued
without consideration. Therefore, assignees filed claims in liquidation
proceedings involving the insurance company based on the doctrine of
equitable estoppel, because the insurance company had assured assignees
that the polices were valid when in fact they were not. The Supreme Court
held that the assignees’ gross claims would be limited to amount of loans for
which policies had been assigned as security rather than on greater cash
surrender value of the life policies that were used as collateral.

State ex rel. Crawford v. Indemnity Underwriters Ins. Co., 943 P.2d 1102
(Okla. Ct. App. 1997). Accident victims filed objection to receiver’s
recommendation that their claim against automobile insurer be denied in
liquidation proceedings of an insolvent insurer. The court held that the
agreed upon judgment between the insured and the accident victims that
could only be executed against insurer was not entitled to conclusive effect
in liquidation proceedings, because the judgment had been secured by
collusion.
Pirkov‐Middaugh v. Gillette Children’s Hospital, 495 N.W.2d 608 (Minn.
1993). Minor patient brought a medical malpractice action against several
doctors and a state hospital. The trial court entered a judgment for the
patient and the hospital appealed. The Court of Appeals affirmed holding
that the statutory cap on tort liability for the hospital had been waived to
the extent the hospital had secured insurance in excess of the cap even
though the insurance was not collectible because of the insolvency of the
insurer. The hospital appealed to the Supreme Court which reversed holding
that the waiver applied only to the extent that any insurance coverage was
collectible.
Texas
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.
Ratner v. Wheeler, 301 S.W.2d 268 (Tex. Civ. App. 1957), writ ref. n.r.e. In an
action brought against receiver of insurance company to establish a claim for
the amount of a personal injury judgment previously obtained against the
insurer and the insured, the lower court approved the claim to the amount of
the insurance policy and the Court of Civil Appeals affirmed the trial court's
judgment based on the provision in the Texas insurance code which provides
that no judgment against an insured taken after the date of the beginning of
delinquency proceedings is evidence of liability or the amount of damages.
The court held this statute to be procedural and remedial and a valid
enactment insofar as it deals with the mode or manner of establishing claims
against a receiver.
Webb v. Tex. Prop. & Cas. Ins. Guar. Ass’n, No. 03‐03‐00764‐CV, 2005 Tex. App.
LEXIS 10020 (Tex. App. Dec. 2, 2005). The court held that under the Texas
Property and Casualty Insurance Guaranty Act, a third party involved in a car
accident had no standing to bring suit against the Texas Property and Casualty
Insurance Guaranty Association until liability was established against the insurer.
Wisconsin
Alianz Underwriters Ins. Co. v. Crescent Garage Ins., 145 Wis. 2d 287, 426 N.W.
2d 104 (1988). The plaintiff and its insurer brought action against defendants
and their insolvent insurer. The plaintiff's insurer also filed a claim with the
foreign liquidator of the defendants' insurer. The court held the plaintiff's

insurer did not thereby release from liability defendant because pursuant to
Wisconsin statute, only the filing of a claim with the liquidator of a domestic
insurer or a foreign insurer domiciled in Wisconsin will release defendant's
liability.
In the Matter of the Ancillary Liquidation of Midland Ins. Co., Belongia v. Wis.
Ins. Sec. Fund, 195 Wis. 2d 835, 537 N.W.2d 51 (Wis. Ct. App. 1995). The court
held that the fund hearing examiner's erroneous determination that a
claimant exhaust all collateral sources before seeking recovery from the
Wisconsin Insurance Security Fund ("WISF") did not deprive the WISF
hearing examiner or the courts of jurisdiction and competency, as Wisconsin
has a statutory appeals process to cure such errors. The court also upheld
the WISF's reasonable determination of damages for the claimant's pain and
suffering. The court found that the WISF hearing officer correctly
interpreted the Wisconsin statute in holding that the amount a claimant may
collect from the WISF is determined according to "the amount of
indemnification 'provided' by other sources," and not amounts actually
collected or recovered from other sources.
Class Action Claims
New York Matter of Consolidated Mutual Ins. Co., 110 A.D.2d 698, 488 N.Y.S.2d 19 (1985).
Claimants against an insurance company in liquidation may maintain a class
action against the company, provided they satisfy the statutory prerequisites
for a class action suit. Nothing in the insurance code prevents a class action
claim as long as a notice of claim has been filed on behalf of the class.
Shareholder's Claims
Illinois In re Liquidation of Security Casualty Co., ___ Ill. 2d ___, 1989 Ill. Lexis 39
(March 29, 1989). Shareholders of liquidating insurance company could not
recover outside of the statutory distribution scheme funds paid in violation of
Federal securities law. Section 205 of the Illinois Insurance Code places
shareholders in the lowest priority for distribution and the imposition of a
constructive trust in favor of shareholders would undermine legislative
determination of priorities.
In Re Security Cas. Co., 127 Ill. 2d 434, 537 N.E.2d 775 (Ill. Sup. Ct. 1989). The
Illinois Insurance Code provides the liquidator of an insurance company
exclusive control over all assets of that company, including the proceeds of an
allegedly fraudulent stock offering. The liquidators exclusive control over
determining the priority in distribution of such assets precluded the imposition
of a constructive trust on stock proceeds in favor of defrauded shareholders,
because such assets are subject to distribution as "general assets." Creation of
comprehensive claims priority provisions evidences legislative intent that such
provisions be deemed exclusive, precluding application of inconsistent
equitable remedies such as constructive trust.
Madigan, Inc. v. Goodman, 357 F. Supp. 1331 (N.D. Ill. 1973), affirmed in part,
rev'd in part on other grounds 498 F.2d 233 (7th Cir. 1974). Shareholders of
insolvent insurance company sought damages against the company and
sought indemnification or contribution for any liability to which they were
exposed as a result of the insolvency proceedings. The court held that the
shareholders were not entitled to certain specified damages but they would be
afforded an opportunity to prove their right to indemnification or contribution
and other consequential damages.

Kentucky Minor v. Stephens, 898 S.W.2d 71 (Ky. 1995). Statutes do not authorize
appointment of a shareholder’s committee, although the trial court may, under
extraordinary conditions, grant such a request. The board of directors advanced
the cause of both the company and the shareholders in its arguments and thus
the shareholders had no ability to dispute the process.
Plaza B.V. v. Stephens, 913 S.W.2d 319 (Ky. 1996). Nonvoting shareholders have
no standing to appeal the actions of the Liquidator.
Louisiana
Green v. Champion Insurance Co., 600 So.2d 894 (La. App. 1st Cir. 1992), writ
not considered. Counsel for a former owner of the insolvent Champion sued
the ad hoc liquidator seeking reimbursement for legal fees expended in
defending his client in civil and criminal matters arising out of the insolvency.
The Supreme Court had previously ordered the release of impounded funds to
reimburse an attorney who had defended corporations affiliated with
Champion. See: 577 So.2d 249. Based on the "scant" record before it, the
court denied the requested funds, finding the requested payment of an
individual's legal fees did not inure to the benefit of the Champion
corporations, and thus the earlier Supreme Court order was distinguishable.
Contingent Claims
Alabama Hilgeman v. State ex rel. Payne, 374 So.2d 1327 (Ala. 1979). While the
provisions of the liquidation law bar contingent and unliquidated claims, these
provisions were not applicable because insurance code §27‐1‐14 preserves
rights accruing before January 1, 1972.
California Quackenbush v. Mission Ins. Co., 62 Cal. App. 4th 797 (Ct. App. 1998).
Appellate court affirmed lower court order approving the Insurance
Commissioner's amended liquidation plan for Mission Insurance Company,
rejecting the reinsurer's argument that the plan would violate statutory
provisions precluding contingent and unliquidated claims from participating
in distributions of the estate. The plan expressly prohibited requiring
payment from reinsurers for claims until their liability and quantum had been
determined. While claimants were permitted to submit contingent and
unliquidated claims, the Commissioner was required to provide reinsurers
notice and an opportunity to contest the fixing of liability and quantum. The
court rejected the reinsurer's argument that reinsurers would not, as a
practical matter, be provided such notice and opportunity.
Quackenbush v. Mission Ins. Co., 46 Cal. App. 4th 458 (Ct. App. 1996). The
Insurance Commissioner as liquidator of Mission Insurance Company filed a
proposed liquidation plan requiring Mission's reinsurers to pay reinsurance
proceeds in respect of estimated contingent claims, including incurred but
not reported losses (IBNR). The Superior Court approved the plan and the
reinsurers appealed. The California Court of Appeals held that because the
pertinent state insurance statute expressly forbade claimants with
contingent or unliquidated claims from participating in a liquidation plan, the
Commissioner's proposed liquidation plan was not authorized under the
statute. The court further found that absent contrary language in the
reinsurance policy, the reinsurer is not required to pay the original insolvent
insurer's estate unless the claim is certain and allowed by the conservator,
liquidator or statutory successor. The court remanded with instructions to
the trial court to order the Commissioner to submit a new plan that
complied with the statute.
Illinois
Evans v. Illinois Surety Co., 298 Ill. 101, 131 N.E. 262 (1921). The court noted that
in order to distribute the assets of an insolvent company a time must be fixed

when contingent claims must necessarily be excluded and the two‐year period
fixed by the provision of the general act for the incorporation of companies for
pecuniary profit is applicable to the dissolution of insurance companies.
Evans v. Illinois Surety Co., 220 Ill. App. 216 (Ill. App. Ct. 1920). The court held
that a claim was improperly disallowed because of the mistaken theory that
the appointment of a receiver had the effect of cancelling the contracts of an
insolvent company because the claims under the contract were not absolute
or liquidated.
In re Ancillary Receivership of Ideal Mutual Ins. Co., 218 Ill. App. 3d 1039, 578
N.E.2d 1235 (Ill. App. Ct. 1991). Midwest Steel Erection Company's insurer
was declared insolvent in New York, and the New York court set February 7,
1986 as a cut‐off date for filing proofs of claim. Midwest filed a proof of
claim by the cut‐off date, but was served with three complaints after the cutoff
date, but while its policy with the insolvent insurer was active. Midwest
asked the Illinois Insurance Guaranty Fund ("IIGF") for fund protection for
the later claims, but the fund refused, stating that the claims were not timely
filed. Midwest amended its proof of claim with the New York Insurance
Department, and again asked the fund for protection on the later claims, but
the fund refused. The court agreed with the IIGF's actions, and stated that
the three later claims were not covered under the Illinois Insurance Guaranty
Fund Act ("the Act"), as they were contingent claims not filed before the
cut‐off date. While an insured may file contingent claims, they must be
timely filed to be covered claims. The court said that the amendment to the
proof of claim form filed in New York was not an amendment at all, but
instead added new and distinct claims. The court ruled that the New York
liquidator's acceptance of Midwest's claim as a covered claim was not
binding on the IIGF. The court interpreted Section 221.4 of the Insurance
Code to mean that if a Illinois claimant chooses to prove his or her claim
against an insurer domiciled in another state in an Illinois court, the decisions
of the Illinois courts would be binding on the other state's liquidator.
In Re Ideal Mutual Ins. Co., 218 Ill. App. 3d 1039, 578 N.E.2d 1235 (1st Dist. 1991).
Contingent, unliquidated claims against an insolvent insurer, are not covered
claims under the Illinois Insurance Guaranty Fund Act, Ill. Rev. Stat. ch. 73, par.
1065.90‐5(a), where notice of the specific claims are not given prior to the filing
deadline. A contingent claim will not make timely specific claims filed after the
statutory deadline, even though those claims arose while the policy was in
effect.
Union Gesellschaft Fur Metal Industrie Co. v. Illinois Ins. Guaranty Fund, 190 Ill.
App. 3d 696, 546 N.E.2d 1076 (5th Dist. 1989). The filing of a contingent claim
which does not identify a specific claim is not sufficient under the Illinois
Insurance Guaranty Fund Act to make timely specific claims made after the
statutory filing deadline. "Covered claims" under the Act include only those
specific claims made before the statutory filing deadline, and a contingent
claim will not make timely specific claims filed after such time.
Union Gesellschaft Fur Metal Industrie Co. v. Illinois Ins. Guaranty Fund, 190 Ill.
App. 3d 696, 546 N.E.2d 1076 (Ill. App. Ct. 1989). The plaintiff had filed a
contingent claim before the final date for the filing of proofs of claim and then
submitted two specific claims after the final date. The plaintiff argued that the
contingent claim gave the appropriate notice to the defendant and therefore
the specific claims should be considered covered claims for the Fund. The court
held that in order to be considered a covered claim under the Illinois Insurance
Guaranty Fund's authorizing statute, notice of specific claims must be given to
the Liquidator prior to the final date set for the timely filing of proofs. The court
concluded that the legislative intent of the timely filing requirement would have

no meaning if they held that a contingent claim filed before the final date gave
notice for untimely specific claims. The court reasoned that the legislature
intended to have a specific cut‐off date for the filing of claims because if they
failed to have a final date, the "liquidation and distribution of an insolvent
company's assets could not be effected until all potential statutes of limitation
had run."
Massachusetts Commissioner of Insurance v. Massachusetts Accident Co., 318 Mass. 238, 61
N.E.2d 137 (1945). The court held that the term "contingent claims" does not
apply to the claims of policyholders as of the date of the liquidation order as
long as the claims were provable in nature and the policies at that date had a
reasonably ascertainable value and policyholders suffered a loss of such value.
The court held that these claims were noncontingent whether or not disability
policyholders were disabled as of the date of the order and whether or not
they had cancellable or noncancellable policies. The court also held that claims
of policyholders for rights of indemnity for disability which they might
experience after the date of the liquidation order were not "contingent" and
were, therefore, provable against the company's estate.
Missouri
State ex rel. Hyde v. Falkenhaniner, 309 Mo. 381, 274 S.W. 722 (1925). Following
the entry of an order of liquidation against an insolvent insurer, the court
allowed a five‐year time frame for filing claims on the surety bonds issued by it.
Upon the conclusion of the five‐year period, the court distributed assets to
those claims which had been approved and allowed in the proceeding. In
rejecting a challenge by other surety holders, the court noted that the estate
could not wait until all claims had ripened into liquidated claims and thus,
contingent claims would not be allowed to participate in the distribution.
"Provable" claims were those that are no longer contingent and merely need
to fix the amount of the claim prior to the last date allowed for such claims.
New Jersey In the Matter of the Liquidation of Integrity Ins. Co., 193 N.J. 86, 935 A.2d 1184
(2007). This was an appeal from the Appellate Division’s holding that IBNR
claims did not qualify for participation in the final distribution of an insolvent
insurer’s liquidated estate. The Supreme Court affirmed the Appellate court’s
decision. It held that incurred, but not reported claims against an insolvent
insurer are not absolute within the meaning of N.J.S.A. 17:30C‐28(a), which
prohibits distribution of insolvent insurer’s assets to pay contingent claims
unless they become absolute on or before the deadline. It reasoned that the
legislative intent of the statute in using “absolute” was to bar any contingent
claims except when a claim becomes absolute against the insurer on or before
the last day fixed for filing of proofs of claims against the assets of an insurer.
Further, since the Liquidator proposed to estimate IBNR claims of necessity by
looking outside of each claim to other similar claims, IBNR claims failed to satisfy
the basic definition of “absolute”.
In the Matter of the Liquidation of Integrity Ins. Co., No. C‐7022‐86 (N.J. Super.
Ct. June 20, 2008). Following the invalidation of the final dividend plan by the
Supreme Court of New Jersey in In the Matter of the Liquidation of Integrity Ins.
Co., 193 NJ 86, 935 A.2d 1184 (NJ 2007), the Integrity liquidator developed and
proposed a different estate closing plan known as the Liquidation Closing Plan
(“LCP”) which was designed to permit an early closing of the estate without
reference to the contingent claims discussed in the above case. The LCP utilized
a more traditional approach to closing an insolvent estate whereby contingent
claims are not cognizable and a bar date is imposed on the submission of
liquidated claims. Thus, the LCP necessarily imposed a new bar date of June 30,
2009. The LCP required that, for a claim to be considered for payment in must
be absolute by June 30, 2009 and must be filed with the liquidator by Sept. 30,
2009.

In Matter of Liquidation Of Integrity Ins. Co., No. AM‐000739‐07T3 (N.J. Super.
A.D. August 13, 2008). Following the approval of the liquidation plan by the trial
court, certain appellants sought interlocutory appellant review of the bar date
provision contained in the LCP, arguing that there should be a retroactive return
to the earlier Final Dividend Plan bar date. By order dated Aug. 13, 2008, a
motion for interlocutory appellate review was denied and in commentary to the
order, a stay of distribution of funds from the estate for claims made between
Sept. 30, 2004 (the final dividend plan bar date) and June 30, 2009 (LCP bar
date) was entered pending completion of trial court proceedings. Respondents,
the Commissioner as Liquidator of Integrity Insurance Company, and the New
Jersey Property‐Liability Insurance Guaranty Association (“NJPLIGA”) moved for
reconsideration of the stay aspect of the Aug. 13 order, which motion was
granted by the App. Div. by order dated October 3, 2008. The original parties
that sought leave to intervene sought reconsideration of denial of that motion,
and various parties including the liquidator and NJPLIGA opposed this motion
for reconsideration. The matter is still pending Appellate review.
Kipp v. Fidelity Title & Mortgage Guaranty Co., 116 N.J. Eq. 409, 174 A. 229
(1934), affirmed, 117 N.J. Eq. 588, 117 A. 83. The court held that a title
policyholder of an insolvent title insurance corporation held a contingent claim
until some loss was suffered under the policy. The holder of a contingent claim
against an insolvent insurer may not demand that liquidation of the company's
estate be delayed because of the possibility of a future debt.
New York
Conway v. Plank, 136 Misc. 403, 243 N.Y.S. 215 (1930). The insurance code was
not intended to accelerate rights of an action which had not yet fully accrued.
It governs the rights and liabilities of the corporation, its policyholders and all
those interested in its assets as of the date of the entry of the liquidation
order.
In re Concord Casualty & Surety Co., 163 Misc. 108, 297 N.Y.S. 391 (1937). An
automobile collided with a taxicab. The automobile passenger's claims against
the surety company were deemed contingent because judgment had not been
obtained against the auto's owner before the expiration of the time allotted
for the filing of claims in the surety company's liquidation proceeding.
In re Lexington Surety & Indemnity Co., 272 N.Y. 210, 5 N.E.2d 204 (1936),
reargument and amendment of remittitur denied, 273 N.Y. 635, 7 N.E.2d 731.
After the execution of a bail bond, a surety company was ordered liquidated
and claims were required to be filed by a certain date. After this order, the
bond was forfeited. The court held that the state, which filed a claim on the
bond within the required period, was entitled to recover because the insurance
code permitted contingent claims to be filed.
In re National Surety Co., 29 N.Y.S.2d 1011 (1939), affirmed, 261 A.D. 811, 26
N.Y.S.2d 509, affirmed, 286 N.Y. 611, 36 N.E.2d 453. Two surety companies
agreed to limit between themselves their liabilities under a bond under which
they agreed to perform under a contract in the event of the contractor's
default. They agreed to share equally all claims, demands, losses and
expenses. The contractor defaulted, and one surety company went into
liquidation. The second company was allowed to recover a proportional
amount of the expenses incurred in the default as an absolute unliquidated
claim.
In re New York Title & Mortgage Co., 160 Misc. 67, 289 N.Y.S. 771 (1936). The
order of liquidation of a mortgage guaranty company did not specify a time by
which claims had to be determined. The provability of claims therefore
depended upon their status at the time the order was entered. No claims

which remain contingent on that date could be allowed unless they became
absolute before the last day fixed for filing proofs of claim.
In re Southern Surety Co. of New York, 251 A.D. 360 (1937). The court held that
a guardian's liability under a bond was not established by the Michigan probate
court until after the time for filing claims had expired. The ward's claim was
therefore contingent.
Rehab. of Contractors Cas. & Surety Co. v. Hollander & Associates, P.C., 715
N.Y.S.2d 8 (App. Div. 2000). In a liquidation proceeding, the Superintendent of
Insurance sought to require a law firm to turn over case files the firm was
handling on behalf of the insolvent insurer, while the firm argued that its
claimed charging liens should be immediately enforced. The court ordered the
files to be turned over regardless of any retaining liens, because the cases the
firm brought on behalf of the insurer had not been concluded.
Wisconsin In the Matter of the Liquidation of Wisconsin Surety Corp., 112 Wis.2d 396, 332
N.W.2d 860 (1983). A surety bond was found to not be a truly contingent claim
as defined under the Wisconsin Liquidation Act but a technically contingent
claim that could be allowed as excused late filing.
Estimation Schemes
New Jersey In the Matter of the Liquidation of Integrity Ins. Co., 193 N.J. 86, 935 A.2d 1184
(2007). This was an appeal from the Appellate Division’s holding that IBNR
claims did not qualify for participation in the final distribution of an insolvent
insurer’s liquidated estate. The Supreme Court affirmed the Appellate court’s
decision. It held that incurred, but not reported claims against an insolvent
insurer are not absolute within the meaning of N.J.S.A. 17:30C‐28(a), which
prohibits distribution of insolvent insurer’s assets to pay contingent claims
unless they become absolute on or before the deadline. It reasoned that the
legislative intent of the statute in using “absolute” was to bar any contingent
claims except when a claim becomes absolute against the insurer on or before
the last day fixed for filing of proofs of claims against the assets of an insurer.
Further, since the Liquidator proposed to estimate IBNR claims of necessity by
looking outside of each claim to other similar claims, IBNR claims failed to satisfy
the basic definition of “absolute”.
Claims For Interest
California
Garamendi v. Golden Eagle, No. A106820, 2005 Cal. App. Unpub LEXIS 7082 (Ct.
App. Aug. 10, 2005). Third party claimant appealed from partial granting of
order to show cause. The California Court of Appeal upheld an order that
accrual of prejudgment interest could not commence before date of trial court’s
decision because the amount of the defense contribution owed by insurer was
not reasonably calculable until the claims administrator selected an appropriate
method for allocating the cost to the defense. It noted where a party obligated
to pay damages cannot ascertain how much is owed prejudgment interest is not
required.
Garamendi v. Golden Eagle, A104667, 2004 Cal. App. Unpub LEXIS 8930 (Ct.
App. Sept. 30, 2004). Insured sought reimbursement for out‐of pocket legal
fees and costs from insurer that became insolvent. Insurer was found to have
wrongly denied defense. The issue arose of whether insured was entitled to
pre‐judgment interest. The Court of Appeals upheld an award of prejudgment
interest, explaining that prejudgment interest may be granted in an insolvency
case because Cal Civil Code § 3287 requires that prejudgment interest be paid

from the time damages are certain or may be made certain by calculation. Here
insured’s defense costs were ascertainable. The court noted that insurer never
contested the amount of defense costs and fees Cal. Ins. Code. § 1019 (which
fixes the date of rights and liabilities of persons interested in its assets, including
the State of California) does not affect this outcome because it does not
expressly preclude prejudgment interest.
McConnell v. Pacific Mutual Life Ins. Co., 205 Cal. App. 2d 469, 24 Cal. Rptr. 5
(1962). The court concluded that holders of non‐cancellable disability
insurance policies who declined to accept reinsurance in the reorganized
company were entitled to damages bearing interest, and the interest began to
accumulate from the date of the breach. The court also held that claims of
holders of noncancellable policies were not unliquidated.
Colorado
Illinois
Mississippi
Stephens v. Colaiannia, 942 P.2d 1374 (Colo. App. 1997). Claimants were not
entitled to post‐insolvency filing interest from receiver of insolvent insurer.
There was no agreement between the parties for actual payment of the
interest. The settlement agreement merely reserved the claimants’ right to
claim their share if the receiver determined such interest should be paid.
The receiver did not agree to pay it. Additionally, there is no statute that
provided for the payment of post‐insolvency filing interest. The right to
interest, absent an agreement to pay it, is statutory; therefore, the receiver
lacked the authority to pay the interest. Finally, preferential treatment of
post‐insolvency interest to the claimants and the fact that payment of the
interest could be construed as a penalty to other creditors would have
violated the legislative purpose of establishing a system for equitable and
orderly liquidation of domiciliary insurance companies.
In re liquidation of Pine Top Ins. Co., 322 Ill.App.3d 693, 749 N.E.2d 1011 (Ill. App.
Ct. 2001). Petitioner sought post‐allowance interest on claim against insolvent
insurance company in liquidation at the same priority level as its claim. Under
215 Ill. Comp. Stat. 5/194(a), which fixes the rights of a creditor of an insolvent
insurer as the date of the order to liquidation or rehabilitation, the court found
the “fixing provision” stops the running of any debts, including post‐judgment
interest, in order to allow liquidator to manage the insurer’s assets and debts.
The noted that the necessary delay in payment, administrative convenience,
and fairness to other creditors supported its denial of the petition.
Bank of Miss. v. Miss. Life & Health Ins. Guar. Ass’n, 850 So. 2d 127 (Miss. Ct. App.
2003). An annuity purchased by a pension plan was assigned to a liquidating
trust for the benefit of the beneficiaries of the pension plan upon the insolvency
of the insurance company that sold the annuity. The trustee of the liquidating
trust participated in the rehabilitation plan of the insolvent insurer and accepted
a lower interest rate from a second insurance company that assumed the
annuity. The trustee filed a claim with the Mississippi Life and Health Insurance
Guaranty Association (“MLHIGA”) for reimbursement of the losses resulting
from the insolvent insurer’s default. MLHIGA denied the claim because the
pension plan had been protected by the Pension Benefit Guaranty Corporation.
The trustee challenged the denial and, ultimately, the Supreme Court of
Mississippi agreed with the trustee that the losses were covered by MLHIGA.
On remand, two disputes again arose between the parties. First, the trustee
argued that MLHIGA was required to pay to the trust interest accruing after the
original annuity contract’s maturity date at the rate contracted for in the original
annuity (issued by the insolvent insurance company), or alternatively, the
slightly lower legal statutory interest rate. MLHIGA argued that the interest rate
should be an even lower interest rate than that stated in the agreement with
the second insurance company that assumed the annuity under the
rehabilitation plan. The court held that the rehabilitation plan’s lower interest
rate should be applied, reasoning that the relationship with the insolvent insurer

ended at insolvency. By participating in the rehabilitation plan, the trust sought
to mitigate its losses. To award the interest rate in the original contract, or at
the statutory rate, would give the trust greater damages than if it were to
recover from the insolvent insurer directly. In the same appeal, the court
rejected the trust’s request that it be awarded attorney fees and expenses
because such an award would be punitive in nature in this context.
Missouri
Wenzel v. Holland‐America Ins. Co. Trust, 13 S.W.3d 643 (2000). The receiver of
two Mission insurance companies asked the trial court to approve, and the trial
court approved, a plan for distributing assets of the trust, including assessing
statutory interest on claims allowed against the trust calculated for the period
beginning on the date of insolvency through the date of payment of each claim.
In affirming the trial court, the Supreme Court of Missouri held that because the
liquidation statute authorizes the receiver to request the payment of
prejudgment interest as part of the “compounding,” “compromising,” and
“negotiating” settlement of claims against an insolvent insurer, the trial court
was authorized to approve the receiver's proposed settlement.
New Mexico Aztec Well Servicing Co. v. Property & Cas. Ins. Guar. Assoc. of the State, 115
N.M. 475, 853 P.2d 726 (1993). The term “unpaid claim” in statute limiting
“covered claims” against property and casualty insurance guaranty
association to $100,000 refers to the amount that claimant seeks to recover
from insolvent insurer and subsequently against the association. It does not
preclude prejudgment interest.
New York
In the Matter of the Application of the People of New York for an Order re
Norske Lloyd Ins. Co., Ltd., 249 N.Y. 140, 163 N.E. 129 (1928). The rule that
interest is not allowed after the property of an insolvent has passed into the
hands of an official liquidator applies only to the distribution of the proceeds of
the property by the liquidator where the proceeds are insufficient to pay all
creditors in full. Interest continues to run against the debtor during liquidation
and if the fund proves sufficient to pay all claims in full with interest, then
interest accruing during liquidation is allowed.
In the Matter of the Application of the People of New York for an Order re the
Second Russian Ins. Co., 231 A.D. 303, 247 N.Y.S. 160 (1931), reversed on other
grounds, 256 N.Y. 177, 176 N.E. 133 reargument denied, 256 N.Y. 600, 177 N.E.
191, cert denied, 284 U.S. 678. The court held that the alien custodian was
entitled to payments due to the insurer and subsequent commissions. The
New York insurance commissioner, as liquidator, was required to pay only such
interest as had been received.
In the Matter of the Liquidation of the U.S. Branch of the Sumitomo Marine
and Fire Ins. Co., Ltd., 133 N.Y.S.2d 342 (1954). The court held that where
sufficient funds existed to pay all claims with interest, the allowance of interest
on claims was proper. The court also ruled that such interest should run from
the time at which demand for payment was made by the claimant to the
liquidator.
In re Liquidation of Union Indem. Ins. Co., 687 N.Y.S.2d 132 (App. Div. 1999). In a
liquidation proceeding, the holder of bonds issued by the insolvent insurer
argued it was entitled to the contract rate of interest post‐liquidation. The court
agreed, and ruled that the contract rate of interest should have been applied
both pre‐liquidation and post‐liquidation; the plaintiff’s claim to the contract
rate of interest was not governed by the rule that all claims be fixed as of the
date of the liquidation order. The court held that post‐liquidation interest may
appropriately constitute an allowed claim by the Security Fund.

In re N.Y. Surety Co., 723 N.Y.S.2d 201 (App. Div. 2001). In a liquidation
proceeding, the city economic development corporation could not recover
interest representing the penal sum of a contract bid bond where the bond in
this case, unlike certain financial surety guaranty bonds, expressly limited the
surety’s liability to the principal amount of the bond.
Oklahoma Oglesby v. Liberty Mut’l Ins. Co., 1992 Okla. 61, 832 P.2d 834 (1992). A
claimant may be entitled to prejudgment interest incurred after the
determination of insolvency if the coverage is contained in the insolvent
insurer’s policy. However, while the Oklahoma Guaranty Association may be
assessed prejudgment interest and costs accruing after the insolvency of an
insurance company, its liability may not exceed the statutorily imposed limit
of $150,000.
Professional Construction Consultants, Inc. v. State ex rel. Grimes, 646 P.2d
1262 (Okla. 1982). Applying New York law, under the Uniform Insurers
Liquidation Act, where distributable assets of insurance company in
delinquency proceedings are insufficient to pay allowable claims of all of
general creditor claimants, each claim bears interest only to day on which
order directing liquidation of the insurer is filed in the office of the clerk of the
court which made the order under the Act. No interest was allowable beyond
that accrued to the date set by district court and the domiciliary receivership
court as last day for filing creditor claims.
Tax Claims
Fourth Circuit North Carolina v. United States, 139 F.3d 892, 1998 WL 178374 (4 th Cir. 1998).
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.

Alabama State v. Forrester, 419 So.3d 231 (Ala. App. 1982). The court held that §40‐14‐56,
which establishes liability of corporate receiver for franchise taxes, takes
precedence over Insurance Code §27‐32‐26, which governs receivership debts
in general.
Georgia
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.
Iowa State ex rel. Mitchell v. National Life Ins. Co. of U.S., 275 N.W. 26, 223 Iowa 1301
(1937). An insolvent Illinois company had done business in Iowa and paid
Iowa's premium tax each year. When the insurer was liquidated in Illinois, Iowa
attempted to secure the insurer's assets in Iowa as a claim against premium
taxes owed. The Illinois liquidator objected to paying the tax on several
grounds, the chief being that the tax was payable in advance for the privilege
of doing business in the following year and since the insurer had paid through
the year in which it became insolvent, no additional tax was due. Iowa
contended the tax was imposed for the privilege of doing business
prospectively in the nature of a renewal of its license. The court upheld Iowa's
claim because the tax is not imposed for the privilege of continuing in business,
but for the privilege of engaging in business. Therefore the state's claim was a
sufficient basis to support a claim against the receivership and the property
and assets of the insolvent insurer in Iowa.
Missouri
Ohio
Texas
In re Life Association of American, 12 Mo. App. 40 (1882). The petition of the
St. Louis tax collector to intervene in the insolvency proceedings was upheld
such that the tax collector could present a claim for real estate taxes on
property which had been sold, regardless of the fact that the tax collector had
a lien on the real estate itself which could be enforced instead of pursuing a
claim in the estate, and regardless of the equities which may exist between the
subsequent purchaser of the real estate and the creditors against the insolvent
insurance company. It was also noted that under the priority of distribution
statute, taxes were a preferred claim over the policyholders and general
creditors.
State ex rel. Bricker v. American Insurance Union, 27 O.L.A. 53 (1938). Where
the state appeals court, and not the trial court, appointed receivers for an
insurance company in quo warranto proceedings, and the receivers brought to
the attention of the court an alleged illegality of tax claims, the appeals court
had jurisdiction to pass upon the legality of such claims.
Langdeau v. United States, 363 S.W.2d 327 (Tex. Civ. App. 1962). The United
States sued for priority for its tax claims against an insolvent insurer. The trial
court gave priority to its tax claims with interest and the Court of Civil Appeals
affirmed, stating that the provisions in the insurance code giving priority to
wage claims of employees and disallowing interest on claims after delinquency
proceedings are instituted are not the regulation of insurance business
reserved to the states by the McCarran‐Ferguson Act. The court found that
the debts due to the United States must be satisfied first, and provisions in the
insurance code creating a lien for taxes and interest, prevail over the priority
sections of the insurance code.

Governmental/Superpriority Claims
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.
Assignment of Claims
Mississippi
Home Ins. Co. v. Miss. Ins. Guar. Ass’n, 904 So. 2d 95 (Miss. 2004). The primary
carrier of insured, an insolvent insurer, failed to settle a personal injury claim
within policy limits. The insolvent insurer then requested that the Mississippi

Insurance Guaranty Association (“MIGA”) pay the $300,000 statutory maximum
toward the claim for a judgment in excess of the primary insurer/assignor’s own
policy limits. The court held that the assignor’s claim to MIGA was not a
“covered claim” within the meaning of the Insurance Guaranty Act, but rather,
the assignment was a disguised subrogation attempt by the primary
insurer/assignor. The court reasoned that, to be entitled to subrogation, the
assignor would have to show that it paid something that it was not legally
obligated to pay. In this context, the assignor was the primary insurer and, in
failing to settle the claim within policy limits, was obligated to pay in full the sum
of the judgment obtained against it.
Distribution of the Assets
Priorities in Allowance of Claims ‐ In General
Fourth Circuit
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.
Seventh Circuit
Cullom v. Traders Ins. Co. 163 F. 45 (7th Cir. 1908). Plaintiff and other general
agents of insolvent insurance company (resulting from the San Francisco
earthquake of 1906), challenged the appointment of a receiver with a view to
secure a right to the insolvent company's unearned premium reserve on the
theory that the agents, in paying unearned premium claims on behalf of the
company, were entitled to a priority claim to this "trust fund". The court held
constitutional the statute under which dissolutions was authorized and the
general agents' petition for intervention was rejected.

Reliance Ins. Co. v. Shriver, Inc., 224 F.3d 641 (7th Cir. 2000). Fronting insurer
sued liquidated in‐state insurer’s agent to recover portions of premiums from
insureds after agent set‐off unearned premiums owed to it by in‐state insurer
against premiums agent owed to in‐state insurer. Under default rule 215 Ill.
Comp. Stat. 5/508.1, which provides that money that an insurance produce
receives for policies shall be held in a fiduciary capacity, contractual agreement
precluded fiduciary duty and direct relationship between fronting insurer and instate
insurer’s agent. Because 215 Ill. Comp. Stat. 5/206 contemplates an agent’s
ability to set‐off unearned premiums on a canceled policy against the insurance
company, it necessarily implies that a pre‐liquidation agency or fiduciary relation
between agent and insurance company does not disable agent from setting off
reciprocal pre‐liquidation debts.
Ninth Circuit State of Idaho ex rel. Soward v. United States Internal Revenue Service, 858
F.2d 445 (9th Cir. 1988). The State of Idaho brought an interpleader action on
behalf of the director of the Idaho Department of Insurance to challenge the
priority of the Internal Revenue Service's claim against insurers in liquidation.
The United States District Court for the District of Idaho found that the Idaho
priority statute was not superseded by the federal priority of government
claims statute, because the Idaho statute was enacted for the purpose of
regulating the business of insurance. On appeal, the court reversed and found
that the Idaho statute did not regulate the business of insurance within the
meaning of the McCarran‐Ferguson Act, but instead was primarily addressed
to the relationship between debtor and creditor. Therefore, the Court held
that the priority of the federal government's claim against the insolvent
insurers would be determined by the federal insolvency statute and not the
Idaho priority statute.
Alabama
Galloway v. State ex rel. Payne, 371 So.2d 48, (Ala. 1979). When a creditor
obtained a judgment against the insurer before the institution of delinquency
proceedings but failed to file and record it, the court held that the creditor was
a general creditor with no lien or preferences over policyholders.
Arkansas Combs v. Haddock, 408 S.W.2d 861 (Ark. 1966). In rejecting a claimant's
petition for priority against $50,000 special deposit filed by the insolvent
insurer with the Arkansas insurance commissioner, the court noted the special
deposit was for the benefit of all Arkansas residents and the lien held by the
claimant did not entitle the claimant to be paid in full prior to other Arkansas
residents.
California American National Insurance co. v. Low, 84 Cal. App. 4th 914 (Ct. App. 2000).
Insurance companies bought policies from an insurer that became insolvent.
The liquidator assigned the claimant insurance companies general creditor
status rather than policy holder status under Cal. Ins. Code § 1033 on the theory
that claims of an insurer against an insolvent insurance company are entitled to
general creditor status. The court of appeal held that an insurance company
that was a policy holder of an insolvent insurer was entitled to priority for its
claims as a policy holder, despite the fact that they were insurance companies
and distinguished such claims from claims where insurers are seeking
reimbursement based on subrogation or contribution.
In re Executive Life Ins. Co., 32 Cal. App. 4th 344 (Ct. App. 1995). On appeal
from lower court's approval of plan of rehabilitation, court determined that
agreements to fund municipal bonds were properly accorded Class 6
priority. Additionally, the court found that the Insurance Commissioner had
discretion to settle disputes among claimants with respect to the priority of
claims.

McConnell v. Industrial Indemnity Co. 219 Cal. App. 2d 809, 333 Cal. Rptr. 418
(1963). The insurance commissioner persuaded a group of insurance
companies to execute an agreement providing for the reinsurance and
assumption of liabilities of an insolvent insurer's worker compensation policies.
The court concluded that the receiver of the insolvent insurer was obligated
first to transfer to the reinsurers, which had undertaken such workman's
compensation obligations, the funds collected in liquidation, to the extent of
the liabilities under the workers' compensation policies. This was to be done
before the claims of general creditors of the defunct insurer were satisfied.
Texas Commerce Bank v. Garamendi, 28 Cal. App. 4th 1234 (Ct. App. 1994).
As prevailing parties in a declaratory judgment action challenging the
Commissioner's failure to designate their priority status as that of
policyholders, the appellants were entitled to an award of attorney fees and
costs as provided for in their investment contracts with the insurance
company.
W. J. Jones & Son v. Independence Indemnity Co., 52 Cal. App. 2d 374, 126 P.2d
463 (1942). Under the insurance code, the commissioner has the duty to
collect the assets and distribute them ratably among the creditors subject to
certain priorities which appear in the code.
Colorado
District of Columbia
H.M.O. Systems, Inc. v. Choicecare Health Services, Inc., 665 P.2d 635 (Colo.
App. 1983). This case involved a judgment for breach of lease and breach of
contract against an insurer put into receivership because of insolvency. The
court held that the money judgment in favor of the creditor was a "class IV"
claim of a general creditor since the creditor did not have an ownership
interest in the leased equipment.
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.

Georgia
Boyd v. Wright, 148 Ga. 216, 96 S.E. 388 (1918). The court held that claims of
policyholders of an insolvent life insurance company are in the nature of
damages for breach of contract, and that as a general rule these policyholders
all stand as creditors on an equal basis. Policyholders who are suing upon the
death of an insured are not entitled to any preference or priority out of the
assets of the insolvent company over living policyholders.
Oxendine v. Commissioner of Ins. of North Carolina, 229 Ga. App. 604, 494
S.E.2d 545 (1997). Under a plan of rehabilitation, rehabilitator agreed that
delinquent insurer would pay certain pre‐rehabilitation claims over several
years. The rehabilitation plan failed, and the insurer was placed into
liquidation. The claimants argued that these claims must be paid without
regard to priorities in liquidation or, in any event, that because of the postrehabilitation
settlement, these claims should be accorded an administrative
priority. The appellate court rejected both contentions, holding that all
claims are subject to prioritization in liquidation and that settlements by the
rehabilitator do not affect a debt’s priority in the event of a subsequent
liquidation.
Illinois
In re Liquidation of Reserve Insurance Company, 122 Ill. 2d 547 (1988). Claims
arising from reinsurance agreements with insolvent insurance companies are
not claims of "policyholders, beneficiaries [or] insureds ... under insurance
policies and insurance contract," and therefore, are not given policyholder
priority under Illinois Insurance Code §205(1)(c), but rather are treated as
general creditors under §205(1)(d).
In re Liquidation of Security Casualty Co., ___ Ill. 2d ___, 1989 Ill. Lexis 39
(March 29, 1989). Shareholders of liquidating insurance company could not
recover outside of the statutory distribution scheme funds paid in violation of
Federal securities law. Section 205 of the Illinois Insurance Code places
shareholders in the lowest priority for distribution and the imposition of a
constructive trust in favor of shareholders would undermine legislative
determination of priorities.
In re Liquidation of Security Casualty Co., 127 Ill.2d 434, 537 N.E.2d 775 (Ill.
1989). Under the Illinois Insurance Code a constructive trust cannot be
imposed for the benefit of defrauded shareholders. The Insurance Code
accords claims of shareholders the lowest priority and mandates that no
subordinate class of claimants may share in the distribution of assets until
the allowed claims of all senior interests have been satisfied in full. Since a
constructive trust for the benefit of the shareholder class would grant
shareholders super‐priority ahead of all other claimants in the liquidation
process, a trust would unjustly enrich shareholders in violation of the
Insurance Code.
Illinois
Reliance Ins. Co. v. Shriver, Inc., 38 F.Supp.2d 684 (N.D. Ill. 1999). Fronting
insurer sold insurance through in‐state insurer that, in turn, used agent to place
policies. When in‐state insurer cancelled the policy of an insured issued by agent
via in‐state insurer on a third party’s paper to issue a new policy on the fronting
insurer’s paper, in‐state insurer owed agent for unearned premiums and agent
owed in‐state insurer for premiums on the new policy. Agent then set‐off instate
insurer’s debt to it against its debt to in‐state insurer and credited the
returned premium to insured. When in‐state insurer became insolvent, fronting
insurer revoked its authorization to act on its behalf. Fronting insurer then filed
suit to invalidate agent’s set‐off, arguing agent improperly withheld the funds it
possessed in a fiduciary capacity under 215 Ill. Comp. Stat. 5/508.1. Agent argued
the set‐off was proper because it only owed a duty and debt to in‐state insurer
and the set‐off occurred before fronting insurer revoked in‐state insurer’s
authority. In absence of evidence of a fiduciary or contractual relationship with

a third party, mutual debts, or debt from each party to the other that arise at
the same time, between an insurance company and another person prior to the
insurance company’s liquidation must be set‐off under 215 Ill. Comp. Stat. 5/206.
Indiana Foremost Life Ins. Co. v. Indiana Department of Insurance, 274 Ind. 181, 409
N.E. 2d 1092 (1980). The plaintiff insurer was reinsured by an insolvent Indiana
company. The solvent insurer alleged that it had a preferred status over
general creditors under the priority of distribution statute of the Indiana
insurance code. The Indiana statute recognized as a class 3 priority those
claims of policyholders and insureds, and class 4 was limited to general
creditors. The insurer argued that it should fit between the class 3 and class 4
priorities. That is, after all policyholders' claims were paid, it would be paid
next with general creditors' claims being paid thereafter (pro rata). The
Indiana Supreme Court rejected this position. The enactment of a statutory
priority system eliminated the old rule that policyholders, insureds, re‐insureds,
and general creditors, were all accorded the same priority of distribution. In
examining the new Indiana priority provision, the Indiana Supreme Court
found it was clearly the intention of the legislature to protect the ordinary
insurance consumer. The failure to include reinsureds in the class 3 listing
showed the legislature's intent to exclude reinsurance from class 3.
Iowa
Maryland
State ex rel. Hager v. Iowa National Mutual Ins. Co., 430 N.W.2d 420 (Iowa
1988). Several officers of an insolvent mutual insurance company in liquidation
filed claims seeking recovery of their deferred compensation benefits as Class
3 claims under the liquidation provisions of the Iowa Code which are patterned
after the NAIC Model Act. In denying the claims, the Supreme Court of Iowa
found that the third‐priority status "is aimed at the insolvent insurance
company's obligation to its insureds and not to employee claims." 430 N.W.2d
at 422. The Court also found that the officers of the Company were prohibited
from invoking a second‐priority (claims of employees) status. The Court
concluded that the officers' deferred compensation benefits were Class 4,
general creditor claims.
Md. Ins. Guar. Assn. v. Muhl, 66 Md. App. 359, 504 A.2d 637 (1986). State
guaranty fund was not barred from making reimbursement claims against the
insolvent insurer after the date specified in a court order as "the last date" for
filing claims. Thus, the guaranty fund was entitled to retain its statutory
preferred creditor status with regard to the assets of the insolvent insurer.
Massachusetts Commissioner of Insurance v. Massachusetts Accident Co., 318 Mass. 238, 61
N.E.2d 137 (1945). The court held that when the receiver paid in full other
claims filed but not disputed up until the date of the liquidation order, disputed
claims filed before the order which were ultimately reduced to judgment were
entitled to payment in full insofar as they were the same type of claims which
the receiver had been paying in full. The court also held that a disabled
policyholder has no priority over a nondisabled policyholder or over an
ordinary creditor.
In re: The Liquidation of American Mut’l Liab. Ins. Co., 434 Mass. 272 (2001). In
connection with the approval of a liquidation plan, the Court held that a statute
giving preference to workers compensation claims over other policyholder
claims, which was enacted after the entry of the liquidation order, did not
violate other policyholders’ due process rights, but was simply the priority
scheme chosen by the Legislature.
Michigan
Fletcher v. State Treasurer, 16 Mich. App. 87, 167 N.W.2d 594 (1969). Since
trust deposit of securities made by a domestic casualty insurer was not made
for benefit of limited class of persons, and was general asset for benefit of all

policyholders, judgment creditors of policyholders did not have priority over
general creditors in the statutory trust fund.
Minnesota
Missouri
Gray v. Merriman, 56 Minn. 171, 57 N.W. 463 (1894). The court held that since a
policy which provided for payments to the beneficiary upon reaching the age
of fourteen had not matured as of the date of dissolution, the policyholder
must share in assets of the insolvent insurer as a member after payment of the
company's debts and not as a creditor of the company.
Carr v. Union Mutual Fire Co., 33 Mo. App. 291 (1888). Upon dissolution of a
mutual fire insurance company there was a small fund for distribution. Upon
the petition of a creditor, who was owed a debt larger than the entire
remaining fund, the court ordered the fund to be paid over to such creditor. A
large number of policyholders appealed. The court of appeals reversed, noting
that Missouri had enacted a specific statute putting members of the insurance
association on equal footing with general creditors. Furthermore, the contract
explicitly recognized the existence of a surrender value. The policyholders
were, therefore, entitled to pro‐rata reimbursement.
Ellerbe v. Farmers' and Mechanics' Mutual Aids Association, 106 Mo. 13 (1891)
and Ellerbe v. United Masonic Benefit Association, 114 Mo. 501, 21 S.W. 843
(1893). Where an assessment insurance company becomes insolvent, death
claims must be paid pro‐rata out of the assets of the estate and are not
accorded a priority even though an assessment had been made for the
particular death loss and collected but not paid prior to insolvency.
Herman v. Britton, 88 Mo. 549 (1885). A life insurance company became
insolvent and arranged for the providing of a fund based on certain deposits
with the state of Missouri and to make a distribution of the remaining assets to
its stockholders through three trustees. Ultimately, its reinsurer also became
insolvent and was unable to fulfill its obligation to the insolvent insurers
policyholders, which in part was guaranteed by bond. The dispute arose over
the bond proceeds as well as the assets distributed to the insolvent insurer's
stockholders. The court held that the stockholders had the right to the fund
and bond established for the payment of their rights and that those were
amounts that the receiver had no interest in.
O'Malley v. Prudential Casualty & Surety Co., 230 Mo. App. 935 80 S.W.2d 896
(1935). In upholding the Missouri insurance commissioner's treatment of a
claim for wages by a former employee of an insolvent company, the court
discussed the distinction between the liquidation provisions of the Missouri
insurance code and general provision dealing with the bankruptcy of a
Missouri corporation. The court noted that the insurance code provisions
govern the distribution of assets from an insolvent insurance company and the
subsequently enacted general provision does not overrule the insurance code
provision.
Relfe v. Columbia Life Ins. Co., 76 Mo. 594 (1882). The court held that claims
based on deaths occurring prior to the dissolution of an insolvent insurance
company are not entitled to a priority of payment over claims for the surrender
values of policies in force at the date of dissolution. In the absence of a
statutory priority, death claims are not entitled to a preference in the
distribution of assets.
Relfe v. St. Louis Mutual Life Ins. Co., 13 Mo. App. 184 (1883). The court rejected
a claim by a judgment creditor who had no lien upon the property of an
insolvent insurance company for a priority of distribution out of the estate.
The creditor was found to merely be a general creditor even though the

creditor had secured a court judgment which had not yet been executed
against the property.
New Jersey
Central Penn National Bank v. New Jersey Fidelity & Plate Glass Ins. Co., 119 N.J.
Eq. 265, 182 A. 262 (1936). When general creditors of an insurance company
and judgment creditors sued to set aside a transfer by an insolvent insurance
company as a fraudulent conveyance, they were not entitled to a preference
over other creditors as to assets recovered. Even when a debtor's estate has
not been taken into legal custody, a creditor cannot exercise for the creditor's
sole benefit rights which exist for the equal benefit of creditors as a class.
Central Penn National Bank v. New Jersey Fidelity & Plate Glass Ins. Co., 117 N.J.
Eq. S48, 177 A. 441 (1935). An insurance company does not hold unearned
premiums in trust for the purpose of effecting reinsurance. To rule otherwise
would permit preferential treatment of policyholders over creditors of an
insolvent insurer's estate. Upon the insolvency of an insurer, its assets become
trust funds for the benefit of all creditors and an intentional reduction of them
is a fraud upon the trust.
Matter of the Liquidation of Integrity Ins. Co., 251 N.J. Super. 501 (Ch. Div. 1991).
Surety bonds are "insurance policies and insurance contracts" within the
meaning of the New Jersey Insurers Liquidation Act at N.J.S.A. 17:30C‐1 et seq.
Thus, holders of surety bonds were entitled to a higher priority (4th priority) in
the distribution of assets of Integrity, an insolvent insurer in liquidation, than
that afforded to holders of "all other claims" (5th priority) under the priority
distribution provision at N.J.S.A. 17:30C‐26.
New York Curiale v. United States, 216 A.D. 2d 48, 627 N.Y.S. 2d 655 (1 st Dept. 1995).
The court interpreted Department of Treasury v. Fabe (508 U.S. 491, 113 S.
Ct. 2202, 124 L. Ed . 2d 449) and New York Insurance Law Article 74
(Rehabilitation and Liquidation of Insurers)to give administrative costs and
expenses of a property/casualty insurer priority over claims by the Internal
Revenue Service (IRS). The court ruled that the IRS claims have priority over
all other claims except policyholder claims, with which the IRS claim shall
have equal priority. The Court stated, however, that if the insolvent were a
life insurance company, the IRS would, under New York law, have a lower
priority than policyholders.
1933 Op. N.Y. Att'y Gen. 552. All monies deposited in domestic banks by the
insurance commissioner, when acting as liquidator of an insurer, are entitled to
priority of payment on an equal footing with any other priority given by the
banking law of this state. Although monies deposited in national banks are also
granted the same priority by the language of the insurance code, no such
priority may be given to such deposits since Davis v. Elmira Savings Bank, 161
U.S. 275, holds that there can be no preference in the distribution of funds of
an insolvent national bank except as provided for by the National Banking Act.
In re Lawyers Title & Mortgage Co., (Mortgage N. 424421), 266 A.D. 322, 42
N.Y.S.2d 177 (1943), appeal denied, 268 A.D. 773, 50 N.Y.S.2d 172, appeal
dismissed, 293 N.Y. 655, 56 N.E.2d 293. The court held that guaranteed
mortgage participation certificates sold to the general public by a mortgage
company were entitled to priority as against pledged certificates upon the
liquidation of the mortgage company, since the bank's rights at the time of the
liquidation order were the same as those of the company.
In re New York Title & Mortgage Co., 163 Misc. 454, 297 N.Y.S. 524 (1937). Trust
claims are not entitled to preference in insolvency proceedings merely because
of their trust nature and without tracing the trust funds into remaining assets.
Trust funds are only deemed to have been traced, and a preference allowed,

when it appears that such funds or property of the insolvent insurer which
remains for distribution include proceeds of the trust estate, even though
specificity as to time and manner of investment is lacking or is impossible to
provide.
In the Matter of the Application of the People of New York for an Order re the
First Russian Ins. Co., 255 N.Y. 428, 175 N.E. 119 (1931). The court held that a
liquidator may be required to consider the claims of creditors arising out of
foreign business, and to pay them, if allowed, before distributing the surplus.
Matter of Allcity Ins. Co., 66 A.D.2d 531, 413 N.Y.S.2d 929 (N.Y. A.D. 1979),
motion dismissed, 48 N.Y.2d 629, 421 N.Y.S.2d 192, 396 N.E.2d 474. The
insurance code provides that those owed wages by an insolvent insurer are to
be paid before payment of every other debt or claim, and also that preferred
creditors and secured creditors are to be paid to the extent of their security.
The court held that these sections are in regard to priority of payment and not
procedure for resolution of claims.
North Carolina
Long v. Beacon Insurance Company, 360 S.E.2d 134 (N.C. App. 1987). In a
proceeding to rehabilitate an insolvent insurance company, the claims of
reinsurers and reinsureds were placed in the least favored group under the
statute. The reinsurer and reinsureds argued that their claims should have
been placed in a higher class. The court denied their claim citing to State, ex re.
Long v. Beacon Insurance Co., 359 S.E.2nd 508 (N.C. App. 1987), and the
reasons stated therein.
State ex rel. Long v. Beacon Insurance Co., 87 N.C. App. 72, 359 S.E.2d 508
(1987). Even though the statutory priority scheme included within Class 3
"claims ... for benefits under policies and for losses incurred ... but excluding
claims of ... reinsurers," making no explicit mention of claims of reinsureds,
claims of reinsured arising out of contracts of reinsurance with an insolent
insurer were entitled to no higher priority than claims of general creditors
under the priority provision adopted by the North Carolina General Assembly.
As a result, the court‐approved plan of rehabilitation for an insolvent insurer
which classified claims of reinsured as Class 5 claims was upheld by the North
Carolina Court of Appeals.
Oklahoma
Cleveland Trust Co. v. State ex rel. Hunt, 555 P.2d 594 (Okla. 1976). Assignees
of purportedly paid up, single premium life policies took assignments of such
policies as security for loans, but the policies had been fraudulently issued
without consideration. Therefore, assignees filed claims in liquidation
proceedings involving the insurance company based on the doctrine of
equitable estoppel, because the insurance company had assured assignees
that the polices were valid when in fact they were not. The Supreme Court
held that, as a class, a group of similarly situated creditors of an insolvent
debtor may have rights as against some other groups. However, no creditor
may exercise rights that will secure to himself a larger percentage of the
indebtedness than the percentage of indebtedness due to fellow creditors
of the same class. Equity requires a pro rata distribution of the assets
available for the satisfaction of claims to all members of the class, and,
among creditors of the same priority equality is equity.
State ex rel. Grimes v. Okl. Prop. & Cas., 796 P.2d 352 (Okla. App. 1990). The
Oklahoma Supreme Court held that the Guaranty Association belonged in a
class superior to the general creditors. In so finding, the court determined that
the Guaranty Association belonged to the class of "policyholders, beneficiaries
or insureds" as those terms are defined under the Oklahoma liquidation
statute. This case effectively renders Hunt v. Community National Life

Insurance Company, 560 P.2d 560 (Okla. 1977) no longer dispositive on the
priority of claims issue.
State ex rel. Hunt v. Community National Life Ins. Co., 560 P.2d 560 (Okla.
1977). In receivership proceedings against an insurance company, a beneficiary
of a paid‐up life insurance policy was not a preferred creditor entitled to
priority as to assets of the insurance company in the hands of the receiver on
the theory that an unfunded insurance trust was created at the time of death
of the insured because the amount due to the beneficiary under the policy was
held by the company and paid to the beneficiary as provided in the policy,
rather than being paid in lump sums. Rather, the beneficiary was a general
unsecured creditor, entitled to share pro rata as to the allowed claim. The
court cited Cleveland Trust Company v. State ex rel. Hunt, 555 P.2d 594 (Okla.
1976). The claims of assignees of paid‐up policies, who took such policies as
security for loans, would be limited to the amount of the loans for which the
policies were assigned as security, rather than the greater cash surrender value
of the life policies, as no creditor may exercise rights which will secure a larger
part of the percentage of the indebtedness than the percentage of
indebtedness due to fellow creditors of the same class because equity requires
a pro rata distribution of the available assets.
South Carolina Insurance Commissioner v. New South Life Ins. Co., 270 S.C. 612, 244 S.E.2d 289
(1978), on remand, 272 S.C. 438, 248 S.E.2d 591 (1978). On remand for
determination of a better plan of rehabilitation, the court noted that
policyholders are the equivalent of creditors in an ordinary bankruptcy
proceeding, and must be paid before stockholders can receive any benefits in
an insolvency proceeding.
Op. Att'y Gen. 1229, (S.C. 1909). "Certification" issued by two Georgia insurers
were similar in nature to stock certificates. As a result, holders had no claim
against the assets of the company until all claims of policyholders were
satisfied.
Tennessee
Gleason v. Prudential Fire Ins. Co., 127 Tenn. 8, 151 S.W. 1030 (1912). It was held
that the appointment of a receiver for an insolvent mutual fire insurance
company terminates all of its contracts and members of the company, as both
insurers and insureds, have no right to the return of premium until all creditors
have been paid.
McReynolds v. United Physicians Ins. Risk Retention Group, 914 S.W.2d 491,
1995 Tenn. App. LEXIS 162 (1995). Policyholder was a doctor with a malpractice
claim against him. The insurer hired defense counsel to represent him. Then the
insurer was placed into receivership for purposes of rehabilitation. Policyholder
failed to file proof of claim with the receiver and was denied coverage. A special
master found that the policyholder was entitled to the same priority as those
who had filed timely proofs of claim, but the trial court overturned the special
master’s findings under the Act. The court affirmed the trial court’s judgment,
finding that the Act established an order of distribution of claims with a specific
class created for claims filed late.
McReynolds v. Weed, 1993 Tenn. App. LEXIS 321 (Tenn. Ct. App. 1993). Court
held that two claimants, classified as general creditors of the insurer, had a
lower priority to the assets of the receivership than those persons entitled to
benefits under the insurance policies did. Because distribution of receivership
assets to priority claimants required all available funds, claimants, the issue was
moot.
Neff v. Cherokee Insurance Co., 704 S.W.2d 1 (Tenn. 1986). The Supreme Court
of Tennessee held that a contract of reinsurance is not an insurance policy

within the insurance statutes. Creditors under reinsurance contracts shall be
general creditors under the statutory priority scheme for an insurance
company in rehabilitation and therefore have a lower priority than
policyholders.
Sizemore v. United Physicians Ins. Risk Retention Group, 56 S.W.3d 557, 2001
Tenn. App. LEXIS 242 (Tenn. Ct. App. 2001). Where there was no excusable
neglect in failure to timely file a proof of claim form, the court found that the
insured was an unexcused late filer under Tennessee Code § 56‐9‐326(b) and
was at best a Class 7 claim in the liquidation proceeding. Class 7 has priority only
over claims of the defunct company’s shareholders and other capital
contributors. Had the insured filed a timely proof of claim or had the claim been
allowed, the insured would have been a Class 2 claimant whose claim would
have had priority over all the other clams save administration expenses.
Texas
Empire Life & Hospital Ins. Co. v. Harris, 95 S.W. 2d 904 (Tex. Civ. App. 1980). A
creditor of an insolvent insurer sued the receiver for discontinuing payments
under a debenture given by the insolvent insurer. The debenture was provided
as consideration for the assumption of certain policies from the creditor. The
receiver terminated payments when the company was placed in receivership.
There was no segregated fund established in order to pay off the debenture.
The court determined that the debenture was subordinate to the rights of the
claimants under the insurance code, which requires that insurance companies
maintain free and unencumbered assets in an amount equal to their reserve
liabilities. Insurers are restricted in their ability to pledge or hypothecate these
assets. Claimants under the code are given a prior and preferential claim to all
assets of the insurer that have not been pledged hypothecated or
encumbered. The code was passed after the date that the debenture was
executed. The court found that the statute did not impair the creditors' right
to contract, and found the debenture as subordinated to the rights of
policyholders.
Vermont In re Ambassador Ins. Co., Inc., No. 2007‐232, 2008 WL 3490600 (Vt. Aug. 14,
2008). Assignment of liability insurance claims did not change their priority
status from priority four to priority five under the Vermont statute and, being
post‐loss, the assignment was not affected by a consent to assignment clause in
the policy. Assignment of the claims to a third‐party in exchange for payment
did not fundamentally change the insurer‐insured relationship because the
insured continued to manage and be liable for claims. Claims by an insured are
classified as priority four under Vermont priority statute; although the statute
does not specifically list assignees of policyholders under fourth priority,
common law generally presumes that an assignee takes whatever interest the
assignor possessed, and the priority four classification did not conflict with the
statute.
Virginia Swiss Re Life Company America v. Gross, 253 Va. 139, 479 S.E.2d 857 (1997).
Protective Life Insurance Company (“Protective”), Fidelity Bankers Life
Insurance Company (“Fidelity”), and North American Reassurance Company,
now known as Swiss Re Life Company of America (“Swiss Re”), entered into
reciprocal treaties of reinsurance. Swiss Re agreed to indemnify Protective
for any payments above levels established in schedules and interest for the
policies acquired from Fidelity and Fidelity agreed to indemnify Swiss Re for
the payments. Fidelity went into receivership and the Commissioner of
Insurance was appointed deputy receiver.
Swiss Re made payments to Protective and filed a claim with the deputy
receiver seeking administrative priority for the sum due it under the
reciprocal treaty as an administrative expense under Va. Code § 38.2‐1509

(1950). The deputy receiver classified Swiss Re as an unsecured creditor of
Fidelity and disavowed the reciprocal treaty. Later, the deputy retracted his
disavowal of the treaty. Swiss Re asserted that the reciprocal treaty was an
executory contract and the deputy receiver’s retraction of his disavowment
was a de facto assumption of it. Swiss Re also acquired various reinsurance
treaties from Integrated Resources Life Insurance Company where Fidelity
was the indemnified party. Further, Swiss Re held some reinsurance treaties
which predated the Fidelity and Protective treaties where Fidelity was the
protected party. Swiss Re sought to set‐off its claims against Fidelity with
the monies owed to Fidelity under these treaties.
The Supreme Court of Virginia held that Swiss Re was not entitled to
administrative priority over the claims of policyholders on the theory that
the deputy receiver’s retraction of his prior disavowment of Fidelity’s treaty
constituted an assumption of the contract. Rather, the reinsurer was an
unsecured creditor of the insurance company for both prior and succeeding
claims under the treaty. The Supreme Court also denied Swiss Re’s attempt
to claim a set‐off on the Integrated Resources claims for lack of mutuality,
but the Court did find sufficient mutuality for the set‐off on the other
treaties.
Virgin Islands
In the Matter of Dome Ins. Co., 592 F. Supp. 1219 (D. V.I. 1984). The Governor of
the Virgin Islands signed legislation which amended the Uniform Insurers'
Liquidation Act to provide for eight different classes of creditors. However,
since the legislation was signed after Dome Insurance Company was placed in
receivership, the amendment did not apply in this case, and it was up to the
discretion of the Court to establish the order of priority for payments of claims
among general creditors of Dome.
West Virginia West Virginia v. Blue Cross Blue Shield, 195 W.Va. 537, 466 S.E.2d 388 (1995).
Logan Medical Foundation filed an appeal with the Supreme Court of
Appeals of West Virginia after it was classified as a Class VI late‐filed claim,
for which no distribution was expected, due to untimely filing. Strict
compliance with all filing requirements is required in insurance insolvency
cases. W.Va. Code § 33‐24‐25.
The court held where a proof of claim complies with the statutory
requirements of W.Va. Code § 33‐24‐25 (1992), but is filed after the claims bar
date provided for by statute has elapsed, the proof of claim is properly
classified as a Class VI late‐filed claim as directed by the statute. The court
held the appellant’s proof of claim was not timely filed and failed to comply
with the relevant statutory provisions.
Wisconsin
In re Mid‐Continent Mutual Ins. Co., 246 Wis. 460, 17 N.W.2d 602 (1945). The
claims of holders of surplus notes were properly denied and such holders were
not entitled to the excess funds that remained in the estate from an
assessment of the insolvent mutual insurance company's policyholders. The
court held that the payment of a surplus note was only to be made from
surplus earnings of the company and not from excess funds generated from
the assessment of policyholders.
Kahn v. Fulton, 101 Wis. 1, 76 N.W. 775 (1898). An insolvent insurer had
established two funds known as the policy fund and the reserve fund. The
policy fund was composed of assessments and the reserve fund consisted of
certain fees and the earnings of the company. In the event of a shortfall in the
policy fund, monies in the reserve could be transferred to the policy fund to be
used to pay death claims. In holding that members had no vested right against
the reserve fund, the court held that members have a claim only to the surplus
over and above the debts of the insolvent company.

Priorities ‐ Federal
U.S. Supreme United States v. Knott, 298 U.S. 544 (1936). The New Jersey receiver of
domiciliary surety company sought to enjoin the Florida Treasurer from
disposing of any securities of the company held by the Florida Treasurer.
When the New Jersey liquidation proceeding began, there were no
outstanding judgments against the insolvent insurer in Florida. A Florida
statute gave power to a Florida court to sell the securities and distribute the
proceeds to Florida claimants. The U.S. Supreme Court held that this statute
did not perfect a lien on the securities in favor of the Florida creditors, and
therefore, claims of the United States would take priority.
First Circuit 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.
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 Untied 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.
Sixth Circuit
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).
Ninth Circuit 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

eceive full payment of the insurer's obligations prior to satisfaction of the
obligations of other creditors.
California Federal Home Loan Mortgage Corp. v. Superior Court, 224 Cal. App. 3d 218
(1990). After TMIC Insurance Company became insolvent, Freddie Mac filed a
claim for amounts which represented insured loans in default. Freddie Mac
asserted that its claim was entitled to a priority above both general creditors
and policyholders. Specifically, Freddie Mac argued that it was entitled to Class
4 status as a claim "having preference by the laws of the United States."
Freddie Mac based its argument on the Federal Insolvency Statute (31 U.S.C. §
3713). The Court of Appeal held that Freddie Mac was not entitled to a priority
under § 3713 because that section only applies when Treasury funds are at risk.
Because no Treasury funds are at risk when Freddie Mac guarantees a loan,
there was no priority under § 3713. Therefore, Freddie Mac's claim was only
entitled to priority as a general creditor.
Sunburst Bank v. Executive Life Ins. Co., 24 Cal. App. 4th 1156 (Ct. App. 1994),
cert. denied sub nom., NationsBank v. Executive Life Ins. Co., 513 U.S. 1147
(1995). Claims against an insolvent insurer arising from contracts issued by
the insurer and obtained by two banks from the FDIC, which had obtained
the contracts from a failed bank, were not entitled to priority under federal
statute providing that claims of the U.S. government are to be paid first. The
court did not decide, but assumed arguendo, that the FDIC would have such
priority. Nonetheless, the court found that because the FDIC failed to assign
to the banks any rights of its own (as opposed to the rights of the failed
banks), the assignment did not expressly or implicitly confer on the banks
any claim of priority the FDIC might have had.
Texas Commerce Bank v. Garamendi, 11 Cal. App. 4th 460 (1992). The
conservator of Executive Life Insurance Company determined that certain
guaranteed investment contracts ("Muni GICs") sold in connection with
municipal bond issues did not constitute insurance contracts for purposes of
the liquidation priority statutes. Thus, holders of such contracts would be
relegated to general creditor status, rather than policyholder status, in a
liquidation. The trial court disagreed with the Commissioner, finding that the
Muni GICs were insurance annuities, and that holders of the contracts were
entitled to policyholder status. The Court of Appeals affirmed the trial court,
concluding that: (1) the Muni GICs were insurance annuities under § 101 of the
Insurance Code; and (2) § 10541, which purports to characterize agreements
like Muni GICs as non‐insurance contracts, was inapplicable to the contracts in
question as it was enacted after the contracts were issued. The court refused
to apply the statute retroactively.
Florida
Florida Dep’t of Ins. v. Blackburn (In re Blackburn), 209 B.R. 4 (Bankr. M.D.
Fla. 1997). A natural person, as well as an artificial, non‐natural person such
as a corporation, can be an “affiliate” of an insurance company as such term
is used in provision of Florida insurer insolvency statute allowing a receiver
to recover distributions made to affiliates within five years before liquidation
petition. The court also held that an officer’s or director’s breach of duties
inherent in their office does not create a debt which is non‐dischargeable in
bankruptcy.
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 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.
New York Curiale v. United States, 216 A.D. 2d 48, 627 N.Y.S. 2d 655 (1 st Dept. 1995).
The court interpreted Department of Treasury v. Fabe (508 U.S. 491, 113 S.
Ct. 2202, 124 L. Ed . 2d 449) and New York Insurance Law Article 74
(Rehabilitation and Liquidation of Insurers)to give administrative costs and
expenses of a property/casualty insurer priority over claims by the Internal
Revenue Service (IRS). The court ruled that the IRS claims have priority over
all other claims except policyholder claims, with which the IRS claim shall
have equal priority. The Court stated, however, that if the insolvent were a
life insurance company, the IRS would, under New York law, have a lower
priority than policyholders.
In re Union Indemnity Insurance Co. of New York, 146 Misc. 2d 558, 557
N.Y.S.2d 446 (Supreme Court, New York County 1990), aff'd, 170 A.D.2d 342,
566 N.Y.S.2d 853 (1st Dep't 1991). The Liquidator of Union Indemnity Insurance
Company applied under section 7433 of the New York Insurance Law to classify
as a general creditor claim a portion of a claim filed with the Liquidation Court
by the Internal Revenue Service. The Court rejected the Liquidator's claim that
the federal insolvency statute ‐‐ under which the United States government is
given first priority over all other claimants ‐‐ is overridden by the McCarran‐
Ferguson Act. Instead, the Court found that the purpose of the McCarran‐
Ferguson Act was simply "to return the realm of insurance transactions to the
status quo ante." Thus, since the priority of the federal government in the
context of insurer insolvency was upheld in the context of insurance company
liquidation before McCarran‐Ferguson was enacted, the federal insolvency
statute overrides state law governing priorities in insurer liquidations and the
claim by the IRS could not be classified as a general creditor claim.
Texas
Langdeau v. United States, 363 S.W.2d 327 (Tex. Civ. App. 1962). The United
States sued for priority for its tax claims against an insolvent insurer. The trial
court gave priority to its tax claims with interest and the Court of Civil Appeals
affirmed, stating that the provisions in the insurance code giving priority to
wage claims of employees and disallowing interest on claims after delinquency
proceedings are instituted are not the regulation of insurance business
reserved to the states by the McCarran‐Ferguson Act. The court found that
the debts due to the United States must be satisfied first, and provisions in the
insurance code creating a lien for taxes and interest, prevail over the priority
sections of the insurance code.
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.
Expenses of Administration
Florida
Corcoran v. State ex rel. Department of Insurance, 502 So. 2d 966 (Fla. Dist. Ct.
App. 1987). Claims handling expenses of the Florida Insurance Guaranty
Association constitute "necessary expenses of the proceeding" under the
Florida statute and thus were afforded administrative priority.
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). Receiver failed to establish that per diem for meals and
reimbursement for staff salaries were necessary to recovery of property and
funds, so as to constitute recoverable expenses.
Georgia Oxendine v. Commissioner of Ins. of North Carolina, 229 Ga. App. 604, 494
S.E.2d 545 (1997). Under a plan of rehabilitation, rehabilitator agreed that
delinquent insurer would pay certain pre‐rehabilitation claims over several
years. The rehabilitation plan failed, and the insurer was placed into
liquidation. The claimants argued that these claims must be paid without
regard to priorities in liquidation or, in any event, that because of the postrehabilitation
settlement, these claims should be accorded an administrative
priority. The appellate court rejected both contentions, holding that all
claims are subject to prioritization in liquidation and that settlements by the
rehabilitator do not affect a debt’s priority in the event of a subsequent
liquidation.
Illinois
Iowa
Louisiana
Miller v. Central Mutual Ins. Co. of Chicago, 299 Ill. App. 194, 19 N.E.2d 822 (Ill.
App. 1939). The court held that it was not improper for the court to approve
the allowance of compensation for the receiver and counsel retained, without
hearing or requiring evidence in support of the necessity, propriety or
reasonableness of those expenditures, as the insolvent insurer had a right to
be heard on objections before a final order was entered.
State ex rel. Hager v. Iowa National Mutual Ins. Co., 430 N.W.2d 420 (Iowa
1988). Several officers of an insolvent mutual insurance company in liquidation
filed claims seeking recovery of their deferred compensation benefits as Class
3 claims under the liquidation provisions of the Iowa Code which are patterned
after the NAIC Model Act. In denying the claims, the Supreme Court of Iowa
found that the third‐priority status "is aimed at the insolvent insurance
company's obligation to its insureds and not to employee claims." 430 N.W.2d
at 422. The Court also found that the officers of the Company were prohibited
from invoking a second‐priority (claims of employees) status. The Court
concluded that the officers' deferred compensation benefits were Class 4,
general creditor claims.
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.
In the Matter Of First Columbia Life Insurance Company, 97‐1083 (La. App. 1
Cir. 9/29/98), 724 So.2d 790. Insurance Guaranty Associations (IGA)
successfully challenged a dissolution plan that prioritized payment of First
Columbia Life Insurance Company’s administrative costs ahead of foreign
insurance guaranty fund claims. The court held that LSA‐R.S. 22:743, 22:746,
entitling Insurance Commissioner to payment of administrative costs out of
the fund of the insolvent insurer did not confer priority over other Class I
claims, including domestic and foreign guaranty fund claims. The statutes
merely identify the source of the funds for dispersal, not the priority in which
claims of the same class are to be distributed. The proper method for
dispersal of funds within Class I claimants, when there are insufficient funds
to satisfy the claims in full, is a pro rata distribution. Accordingly, payments
made to the Liquidator for administrative expenses and to domestic
guaranty funds cannot prejudice the rights to equally ranking foreign
guaranty funds.
New Hampshire
In Re: The Liquidation of The Home Ins. Co., 154 N.H. 472 (2006). Where an
insolvent insurer had assumed business from a group of ceding insurers and
retroceded the same business to another reinsurer, the Court approved the
Liquidator’s agreement with the ceding insurers to pay a portion of reinsurance
recovered on allowed claims to the ceding insurers, who otherwise would not
prosecute claims as Class V claims were not expected to receive any
distribution. The Court held that the Liquidator is authorized to enter such an
agreement where the result is a net benefit to the estate. The payments to the
ceding insurers are administrative costs because they are pursuant to a postliquidation
agreement designed to collect assets that otherwise would be lost,
not “distributions” to lower class creditors. The Court affirmed the lower
court’s findings that the Class I payments were “necessary” and that the
agreement was fair and reasonable.
New York Curiale v. United States, 216 A.D. 2d 48, 627 N.Y.S. 2d 655 (1 st Dept. 1995).
The court interpreted Department of Treasury v Fabe (508 U.S. 491, 113 S. Ct.
2202, 124 L. Ed . 2d 449) and New York Insurance Law Article 74
(Rehabilitation and Liquidation of Insurers)to give administrative costs and
expenses of a property/casualty insurer priority over claims by the Internal
Revenue Service (IRS). The court ruled that the IRS claims have priority over
all other claims except policyholder claims, with which the IRS claim shall
have equal priority. The Court stated, however, that if the insolvent were a
life insurance company, the IRS would, under New York law, have a lower
priority than policyholders.

In re Bond & Mortgage Guarantee Co., 39 N.Y.S.2d 760 (1942). The court held
that when an insurance company guaranteeing mortgages enters liquidation
or rehabilitation, the cost of administering either certified or whole mortgages
for the benefit of the holders is chargeable to each particular fund, not the
assets of the company, notwithstanding provisions in the insurance code.
In re Concord Casualty & Surety Co., 171 Misc. 893, 14 N.Y.S.2d 94 (1939). The
court held that social security taxes are deemed expenses of the liquidation
proceeding and as such must be approved by the Supreme Court. They are
payable subsequent to the appointment of the liquidator and the dissolution
of the company.
In re Lawyers Mortgage Company, 158 A.D. 579, 287 N.Y.S. 625 (1936). The
expenses incurred in printing and mailing proposed plans for the
reorganization of a mortgage guaranty company is rehabilitation were allowed
to be paid from the assets in the hands of the rehabilitator.
Oklahoma
Oklahoma ex rel. Holland v. Heritage Nat’l Ins. Co., 184 P.3d 1093 (Okla. Civ. App.
2008). The court held that OKLA. STAT. tit. 36, § 1938 (2001), provided the right
for shareholders of an insolvent insurance company to file written objections at
a compensation approval hearing for attorney fees to be paid to counsel
engaged to assist the Insurance Department with the delinquency proceeding.
The appointed receiver argued that the shareholder should not be allowed to
object due to his lack of financial stake in the liquidation, his ulterior motives in
appearing, and his bad acts leading to the delinquency proceeding. The court,
however, held that OKLA. STAT. tit. 36, § 1938(C) (2001) expressed no such
exceptions to the shareholder’s right to object.
Washington Marquardt v. Federal Old Line Ins. Co., 33 Wash. App. 685, 658 P.2d 20 (1983).
The Washington life and health guaranty fund appealed from a determination
that "fringe benefits" are part of the 'compensation' paid to special deputy
insurance commissioners acting as receivers for insolvent insurance
companies. The appellate court noted that Washington public policy dictated
that the compensation of special deputies, and all expenses of the insurer and
of conducting the delinquency proceeding, should be borne by the insurance
industry, not by the public. The court held, therefore, that the term
"compensation" includes the cost of employee fringe benefits attributable to
services rendered by special deputy insurance commissioners.
Attorney's Fees
Alaska White v. Alaska Insurance Guaranty Association, 592 P.2d 367 (Alaska 1979).
Law firms, attorneys and insurance claims adjusters who were retained by an
insolvent insurance company to adjust, settle, and defend the claims and
lawsuits against policyholders sought declaratory judgment that they were
entitled to reimbursement for their professional fees from the insurance
guaranty fund. The Alaska Supreme Court held that claims for professional
services rendered to insolvent insurance companies were not compensable
from offers of guaranty fund.
California
McConnell v. All‐Coverage Insurance Exchange Auto and Fire, 229 Cal. App. 2d
735, 40 Cal. Rptr 587 (1964). The appellate court affirmed the decision to
award attorneys' fees, expenses and costs to the respondents from the assets
of the respondent Exchange's estate. The court wrote that affirmation of the
commissioner's contention that the court lacked jurisdiction would result in a
deprivation of property without due process of law.

Florida
Dilme v. SBP Serv., Inc. and First S. Ins. Co., 649 So. 2d 934 (Fla. Dist. Ct. App.
1995). An award of attorneys’ fees to a workers’ compensation claimant is
part of a covered claim for which the Florida Insurance Guaranty Association
may be responsible.
Haag v. State, 699 So. 2d 738 (Fla. Dist. Ct. App. 1997). The Department of
Insurance, acting as a receiver in a delinquency proceeding, entered into a
fee agreement with its attorneys. The attorneys were to be paid out of the
insurer’s assets, subject to court approval of the fee agreement pursuant to
Fla. Stat. § 631.141(6). The Court held that the approval of fees is determined
by their reasonableness and that it could not disregard the agreement
required by statute and adopt the lodestar approach.
Urich & Schenkman, P.A. v. Horton Insurance Co., 491 So. 2d 1195 (Fla. Dist. Ct.
App. 1986). The trial court held that an attorney's retaining lien is not a
secured claim and not subject to foreclosure by setoff under the liquidation
provisions of the Florida Statutes. The court reversed the lower court's
holding than an attorney's lien could not be offset against funds of an
insolvent insurer which were in the attorney's possession, but certified the
issue to the Supreme Court of Florida.
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 70 (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.

In re American Reserve Corp., 1993 U.S. Dist. LEXIS 2770 (N.D. Ill. Mar. 5,
1993). The trustee in bankruptcy of an insurance holding company retained
a law firm on a contingent‐fee basis to represent the trustee in certain
actions. The bankruptcy court approved the legal representation
agreement, which stated that the law firm would receive a one‐time retainer
fee and one‐third of any amount collected on behalf of the trustee in any of
the matters in which the law firm was counsel. In a settlement agreement,
the insolvent insurer's former auditors agreed to pay $250,000 to the
insolvent insurer's estate, and the Illinois Liquidator settled its claim with the
insolvent insurer for $250,000, foregoing $350,000. The law firm applied to
the bankruptcy court for a fee of $200,000, which was one‐third of the "net
benefit" to the insolvent insurer's estate (i.e., one‐third of $600,000,
comprised of the $250,000 paid directly by the accounting firms and the
$350,000 foregone by the Liquidator). The bankruptcy court allowed a fee
of $83,333, which represented one‐third of the amount the insolvent insurer
actually received. The district court agreed, stating that the fee agreement
was unambiguous, and the words "amount collected" established a
maximum fee cap, based on the "amount directly collected on behalf of the
trustee . . . ." Id. at 15. The court also noted that the trustee had paid
separate counsel a significant amount for the $350,000 benefit received, so
that the law firm in question was not entitled to be compensated for this
benefit.
Miller v. Central Mutual Ins. Co. of Chicago, 299 Ill. App. 194, 19 N.E.2d 822 (Ill.
App. 1939). The court held that it was not improper for the court to approve
the allowance of compensation for the receiver and counsel retained, without
hearing or requiring evidence in support of the necessity, propriety or
reasonableness of those expenditures, as the insolvent insurer had a right to
be heard on objections before a final order was entered.
People ex rel. Baylor v. Multi‐State Inter‐Insurance Exchange, 12 Ill. App. 3d
1058, 299 N.E.2d 482 (Ill. App. 1973). Under statute permitting exercise of
discretion of trial court to allow attorney's fees when record discloses
evidence of bad faith on part of pleader, trial court did not abuse its discretion
in denying motion of collector of assessment for fees and reasonable expenses
against insurance commissioner.
People ex rel. Schacht v. Main Ins. Co., 114 Ill. App. 3d 334, 448 N.E.2d 950
(1983). As a general rule, attorneys' fees and expenses incurred by an
insurance company in resisting a petition for appointment of a receiver, if
incurred in good faith, are a valid claim against the receiver for payment as a
preferred claim out of the assets of the estate as an expense of administration.
Kentucky Levassor v. Metropolitan Fire Ins. Co.'s Receiver, 188 Ky. 23, 220 S.W. 752
(1920). The court held that the receiver and attorneys employed are entitled to
compensation based on the value of the estate and the kind and amount of
work they put into enforcing the rights of the estate.
Louisiana
Green v. Champion Insurance Co., 600 So.2d 894 (La. App. 1st Cir. 1992), writ
not considered. Counsel for a former owner of the insolvent Champion sued
the ad hoc liquidator seeking reimbursement for legal fees expended in
defending his client in civil and criminal matters arising out of the insolvency.
The Supreme Court had previously ordered the release of impounded funds to
reimburse an attorney who had defended corporations affiliated with
Champion. See: 577 So.2d 249. Based on the "scant" record before it, the
court denied the requested funds, finding the requested payment of an
individual's legal fees did not inure to the benefit of the Champion
corporations, and thus the earlier Supreme Court order was distinguishable.

Massachusetts Commissioner of Insurance v. Massachusetts Accident Co., 318 Mass. 238, 61
N.E.2d 137 (1945). Where attorneys act on behalf of one group of claimants
against the insolvent estate and render legal services skillfully in their clients'
interest, but with no special regard to the estate as a whole, it is within the
discretion of the judge to deny their claim for compensation out of the
receivership estate or out of some fund created by benefits resulting to the
class of policyholders who may have been benefited by the attorney's efforts.
Minnesota Magnusson v. American Allied Ins. Co., 282 Minn. 287, 164 N.W.2d 867 (1969).
An attorney sought compensation for legal services rendered in an
unsuccessful attempt to resist receivership. The court held that compensation
for legal services rendered in resisting a corporate receivership is allowable as
an expense of administration only if the officers and directors who retain the
attorney for this purpose did so believing in good faith that the corporation
would prove to be solvent, and on this issue the attorney seeking allowance of
the claim has the burden of proof. The court found that the officers and
directors of the insolvent insurer were not acting in the justifiable belief that
the corporation would prove to be solvent when they retained the attorney.
The attorney's claim for compensation as an expense of administration was,
therefore, denied. The court did not decide whether the attorney could assert
this claim as a general creditor.
Missouri
Ainsworth v. Dalton, 694 S.W. 2d 833 (Mo. App. 1985). The sole stockholder of
an insolvent insurance carrier appealed an order of the court allowing the
payment of attorneys' fees incurred on behalf of the estate and at the
direction of the receivership court. In affirming the lower court's decision, the
Missouri Court of Appeals held that amounts paid attorneys for work
performed in a receivership proceeding are within the discretion of the trial
court and will not be set aside absent a showing of abuse of discretion.
Ainsworth v. Old Security Life Ins. Co., 694 S.W.2d 838 (Mo. App. 1985). A sole
stockholder which was entitled to receive all of the assets, upon final
distribution, of an insolvent carrier sought leave to intervene in a proceeding
involving payment of fees for the receiver's attorney. The Missouri Court of
Appeals granted the motion on the grounds that the petitioner had an
immediate and direct economic interest in the matter, whereas the receiver
was only a stakeholder. The Court found that: "[T]he receiver has a variety of
interests to serve, and really has no economic interest in the outcome of the
case. He may do his duty in defending against [the claim], and yet come short
of the kind of single‐purposed defense that may be expected from [the sole
stockholder]." 694 S.W. at 841.
Leggett v. Missouri State Life Ins. Co., 342 S.W.2d 833 (Mo. 1961). The court
held that stockholders who had successfully challenged a number of aspects
on the plan of operation were not precluded by the Missouri insurance code
from receiving an allowance from the fund for their attorney's fees. The court
noted that when one goes into court and creates a fund in which others are
entitled to share, those others are required to contribute their proportionate
part of attorney's fees.
Leggett v. Mutual Commerce Casualty Co., 250 S.W.2d 995 (Mo. 1952). The
promoter, principal stockholder, directing officer, and general counsel of an
insolvent company made a $60,000 claim for attorney's fees against the
insurer's estate. The trial court disallowed the $60,000 claim, but the court of
appeals upon review noted that the claim was broken into two parts: $50,000
for services rendered from the inception of the company until resignation one
year before liquidation and $10,000 rendered during that year. In upholding
the disallowance for the $50,000 amount because the attorney had not shown
an "employment contract" for such fees, the court noted that the $10,000

portion was not based on a specific contract but related to services as an
attorney for which the attorney was entitled to a reasonable value. Since there
was little evidence on the $10,000 figure, the case was remitted for
consideration of that point.
O'Malley v. Continental Life Ins. Co., 343 Mo. 382, 121 S.W.2d 834 (1938). An
attorney filed an intervening petition in a proceeding for fees as a preferred
claim. The attorney's fees were incurred in opposition to the petition for
liquidation. The court held that the standard for making such allowances was
twofold. First, such allowances are allowed to directors of the company as
trustees for necessary and proper expenses in the performance of their duties
to do what is reasonable and prudent to preserve the property of the company
for the benefit of policyholders, stockholders, and creditors. Second, such
directors are only entitled to such allowances when they incur them in good
faith with a sincere conviction in the solvency of the company and an honest
belief that its continuance is in the best interests of the beneficiaries, and with
reasonable grounds for such belief. The attorney has no independent right,
and the attorney's right is tied to the rights of the directors. The court held
that, on the facts of the case, the directors of the insolvent insurer showed
reckless disregard for the interests and protection of the policyholders so that
no claim of allowance for the company's defense could meet the enunciated
standard.
Robertson v. Missouri State Life Ins. Co., 136 S.W.2d 362 (Mo. App. 1940). A
policyholder of an insolvent insurance company intervened to challenge the
proposed sale of property and assets. In reversing the trial court's award of
attorney's fees to the policyholder (an attorney) based in part on the
allegation that the intervention resulted in the proposed purchase agreement
being amended in 39 respects, all for the benefit of the policyholders, the court
noted that the attorney had not been employed by the Missouri insurance
commissioner, or the policyholders, or the court, and that no fund had been
developed from which an allowance of attorneys' fees could be made. The
court noted further that the Missouri insurance code, as the exclusive
mechanism for the supervision and regulation of insurance companies, did not
provide for the allowance of attorney's fees out of the assets of a insolvent
insurance company.
Scheufler v. Continental Life Ins. Co., 350 Mo. 886, 169 S.W.2d (1943). The
attorney representing the Missouri insurance commissioner with respect to an
insolvent life insurance company appealed an award of $7,500 in legal fees on
the theory the allowance was inadequate since the sum requested was
$17,000, which had been agreed to between the attorney and the
commissioner. In noting that the final responsibility for fixing attorney's fees is
with the court, and that a trial de novo is appropriate at the appellate level,
and that the prior awards of $24,500 to the attorney are relevant (noting such
prior awards are not precluded from appellate court review for the fees
received for the whole proceeding), the court found that the trial court had
not properly considered the evidence concerning the prior fee awards and
therefore was instructed to try the case anew and fix the fee accordingly.
New Jersey Tuttle v. State Mutual Liability Ins. Co., 2 N.J. Misc. 973, 127 A. 682 (1925).
Claims by policyholders for court costs and attorney's fees incurred in
defending suits covered by their policies and arising out of accidents which
occurred before the appointment of the receiver and cancellation of the
policies should be allowed. However, if the accident occurred after the
appointment of the receiver, it should not be allowed.

New York
Finkelstein v. Van Schaick, 149 Misc. 101, 267 N.Y.S. 471 (1933). An attorney
should apply for a contingent fee, sought for obtaining settlements of claims
against an insurer, as part of the liquidation proceedings.
Matter of Casualty Company of America v. America Rubin Claims, 244 N.Y. 443,
155 N.E. 735 (1927). The insurance commissioner was not acting as an
arbitrator in determining the fees to be paid to hired counsel. The attorney
was required to apply to the court for additional compensation and the court
had the power to increase counsel fees, a power incidental to the supervision
of the courts of liquidation, not dependent on the power of approval
contained in the insurance code.
North Carolina
Oklahoma
State ex rel. Ingram v. All American Assurance Co., 34 N.C. App. 517, 239 S.E.2d
474 (1977). The rehabilitation court has broad supervisory powers, and
therefore can award fees to insolvent insurer's attorneys of record for services
rendered in an insolvency proceeding, although statute does not specifically so
allow. The commissioner of insurance has both discretionary and ministerial
powers under the statute.
Oklahoma ex rel. Holland v. Heritage Nat’l Ins. Co., 184 P.3d 1093 (Okla. Civ. App.
2008). The court held that OKLA. STAT. tit. 36, § 1938 (2001), provided the right
for shareholders of an insolvent insurance company to file written objections at
a compensation approval hearing for attorney fees to be paid to counsel
engaged to assist the Insurance Department with the delinquency proceeding.
The appointed receiver argued that the shareholder should not be allowed to
object due to his lack of financial stake in the liquidation, his ulterior motives in
appearing, and his bad acts leading to the delinquency proceeding. The court,
however, held that OKLA. STAT. tit. 36, § 1938(C) (2001) expressed no such
exceptions to the shareholder’s right to object.
Pennsylvania Greenfield v. Pennsylvania Insurance Guaranty Association, 256 Pa. Super. 136,
389 A.2d 638 (1978). A law firm which provided legal services to an insurance
company which was later liquidated could make a claim against the insurance
commissioner, as receiver, but could not recover from the Pennsylvania
guaranty fund.
Tennessee
Texas
McReynolds v. Weed, 1993 Tenn. App. LEXIS 321 (1993). Former directors of an
insurer placed in receivership filed counterclaim against the receiver, alleging
that the receiver had converted certain assets and was holding them illegally.
They sought injunctive relief and attorney’s fees and costs. The court held that
the directors were not entitled to an award of attorney’s fees in Tennessee in
the absence of a statute or contract specifically providing for such recovery.
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.
Kelly, Walker & Liles v. McFarling, 509 S.W.2d 659 (Tex. Civ. App. 1974). The
court held that a law firm, as a creditor of an insolvent insurer for legal services
rendered prior to the insurer being placed under a permanent receivership, is a
general unsecured creditor and not a preferred creditor within the Loss
Claimant's Priorities Act in the insurance code.
Vermont
In re Ambassador Ins. Co., 153 Vt. 417, 584 A.2d 423 (1989). The Supreme Court
of Vermont reversed a trial court's decision to deny payment of fees and
expenses incurred by attorneys and consultants who were hired by an
insurance company that opposed the application of the Vermont
Commissioner of Insurance for a liquidation order. Noting that the trial court
had authorized the company to retain counsel and experts to determine the
approximate extent of the company's solvency or insolvency, the Supreme
Court held that it would be unjust to deny fee reimbursement and that some
portion of the fees and expenses should be paid from the Company's estate.
Taxation of the Insolvent Insurer's Estate
California Carpenter v. Peoples Mutual Life Ins. Co., 10 Cal. 2d 299, 74 P.2d 508 (1938).
The court held that the gross premiums tax was a "franchise tax enacted for
the privilege of doing business in the state," and concluded that the insolvent
insurer was liable for the tax. The liquidator had argued that the gross
premiums tax constituted a property tax and therefore it could be imposed
only on a company doing business on the tax annual date, and the insolvent
insurer had been prohibited from doing business on that date.
New York
1934 Op. N.Y. Att'y Gen. 502. The insurance commissioner was not exempt
from the city tax imposed by a New York City local law while carrying on the
business of an insurer in connection with the rehabilitation of an insurer. The
commissioner would not be liable for the tax, as long as the commissioner did
not carry on the business, while engaged in the liquidation, conservation or
dissolution of an insurer.
Unclaimed and Withheld Funds
Georgia
Missouri
Op. Att'y Gen. 75‐83 (Ga. 1975). The receiver had undisbursed funds because
some claimants and creditors could not be located, and checks had been
returned. The Attorney General advised that when an insolvent insurer is a
domestic stock or mutual company, the Business Corporations Code applies,
and funds should be paid to Fiscal Division of the Department of Administrative
Services. For other types of insurers, the receiver should petition receivership
court for leave to deposit the funds in the court's registry.
Scheufle v. Continental Life Ins. Co., 351 Mo. 1139, 175 S.W.2d (1943), cert.
denied, Mottaz v. Scheufle, 321 U.S. 797. There was a balance of assets
remaining in the hands of the Missouri insurance commissioner as liquidator of
an insolvent insurer. Claims were asserted by the shareholders, policyholders,
and the reinsurer. From a decree awarding the remaining balance to the
reinsurer, the U.S. Supreme Court held that the balance should have been paid
first to discharge liens paid by individual policyholders under the reinsurance
contract because the transfer of assets was insufficient to support the
reinsurance liabilities absorbed by the reinsurer and thus, the liens were
attached.

Texas
Op. Att'y. Gen. WW‐795 (Tex. 1960) The Attorney General found the former
provision of the insurance code relating to escheat of unclaimed funds to be
unconstitutional as a taking of a private property without due process of law.
The law was amended in 1961 to correct this infirmity.
Interstate Relations
Conservator ‐ Constitutionality
California
Rhode Island Ins. Co. v. Downey, 95 Cal. App. 2d 220, 212 P.2d 965 (1950). The
court held that the provision in the insurance code authorizing the
appointment of the insurance commissioner as conservator as long as a
company is doing business in California, whether foreign or domestic, does not
impose an unconstitutional burden on interstate commerce, and does not
violate due process in view of the provision for a hearing after seizure. An
order giving the commissioner title to the insolvent insurer's assets "wherever
situated" referred to assets situated in the state.
Conservator ‐ Appointment
California Caminetti v. Prudence Mutual Life Insurance Ass'n, 62 Cal. App. 2d 945, 146
P.2d 15 (1944). An insurance company which applied to the court to set aside
an order appointing the commissioner as conservator of the company had the
burden of proof in the proceeding. See also, W. J. Jones & Son v.
Independence Indemnity Co., 52 Cal. App. 2d 374, 126 P.2d 463 (1942) and State
Investment and Insurance Co., v. Superior Court of City and County of San
Francisco, 101 Cal. 135, 35 P. 549 (1894).
Florida
South Carolina
Provident Capital Indemnity, Ltd. v. Florida (ex rel. Dep’t of Ins.), 677 So. 2d
363 (Fla. App. 1996). Although an alien insurer, which is not authorized to
transact business anywhere in the United States and had no assets in trust in
Florida, was not subject to liquidation in that state, it could be placed in
conservation in such state.
Lindsay v. Main Ins. Co., 281 S.C. 331, 315 S.E.2d 166 (App. 1984). It was held
that the trial court did not abuse its discretion in appointing a conservator of
assets for a foreign insurer, although insurer's statutory deposits in South
Carolina appeared to exceed claims against it in South Carolina, and
appointment of conservator would delay payments to claimants and be
expensive to insurer, where insurer looked at as a whole was insolvent.
Conservator ‐ Powers and Duties
Kentucky
Minnesota
United Public Ins. Co. v. A. J. Auxier Constr. Co., 406 S.W.2d 720 (Ky. 1966). The
court held that the affects of "delinquency proceeding" under the insurance
code are not limited only to when a "reciprocal" state is involved, but are
applicable to any delinquent insurer's assets in Kentucky whenever there are
delinquency proceedings pending in Kentucky. Thus, the court refused to
deliver the assets of a foreign insurer to a creditor who had commenced
proceedings against an insolvent foreign insurer after the commissioner had
been appointed conservator.
Hunt v. Nevada State Bank, 172 N.W.2d 292 (1969). The Minnesota conservator
of an insolvent West Virginia insurance company, with its executive offices and
business located in Minnesota, brought an action against 20 defendants

alleging a conspiracy to convert the assets of the insolvent insurance company.
In rejecting various motions to dismiss filed by the defendants, the court noted
the Minnesota nonconsensual long arm statute was applicable to the
nonresident defendants, including the bank, but also noted that the Texas
ancillary receiver was not an indispensable party to the proceeding although
the court would allow introduction of evidence to determine whether the
Texas ancillary receiver would be bound by the judgment. Finally, the court
rejected a challenge to the Minnesota conservator's legal capacity on the
theory that the West Virginia liquidator had not consented (when in fact the
liquidator had although there was a slight variance in timing).
New York
Van Schaick v. Astor, 153 Misc. 377, 274, N.Y.S. 322 (1934), reversed on other
grounds, 154 Misc. 543, 277 N.Y.S. 394. The insurance commissioner as
conservator of a foreign insurer duly licensed to do business in New York is
vested with the rights and burdened with the duties of an ancillary receiver of
the foreign corporation's assets within the state.
Van Schaick v. Jarcho Bros., Inc., 154 Misc. 10, 276, N.Y.S. 547 (1934). The rights
and duties of the insurance commissioner as conservator were those of an
ancillary receiver of a foreign corporation in an action by the commissioner to
recover premiums allegedly due on insurance policies. As an ancillary receiver,
the commissioner could collect and receive the debts, and demands and
collect other property of the corporation.
Ancillary Receiver ‐ Appointment
Arizona
State ex rel. Low v. Imperial Ins. Co. By and Through Ins. Commissioner of the
State of Calif., 140 Ariz. 426, 682 P.2d 431 (App. 1984). The court held that
there were no assets of the insolvent California insurer located in Arizona and
therefore there was no basis for appointing an ancillary receiver to liquidate
claims of Arizona residents.
California Quackenbush v. Superior Court, No. B112100 (Cal. Ct. App. Oct. 31, 1997),
reported in Mealey's Litig. Rep.‐Ins. Insolvency, Vol. 9, No. 11 at J1 (Nov. 5,
1997). Court denied writ of mandate seeking an ancillary receivership of
Centaur Insurance Company, a foreign insurer, finding that the limited
number of California claimants and the Insurance Commissioner's
extraordinary delay and improper purpose made an ancillary receivership
inappropriate.
Florida Florida Ins. Guaranty Assn. Inc. v. State ex rel. Department of Insurance, 400
So.2d 813 (Fla. App. 1981). The court cannot appoint the Florida insurance
commissioner as receiver to liquidate the Florida assets of a foreign insurer
when a receiver has not yet been appointed in the domiciliary state. The
purpose of the Uniform Insurers Liquidation Act is to secure equal treatment
for all creditors. A cardinal feature of that Act is the vesting of predominant
control of the insolvent insurer in the domiciliary receiver.
Op. Att'y Gen. 62‐19 (1962). On the grounds specified in the insurance code, it
is within the sound discretion of the insurance commissioner to apply for an
order appointing the commissioner as the ancillary receiver of a foreign
insurer. However, the commissioner is required to do so when either 1) there
has been a liquidation order in an insurer's domiciliary state and the
commissioner believes that there are sufficient assets to justify appointment of
an ancillary receiver; or 2) at least ten Florida residents that have a claim
against the receiver petition the commissioner for the appointment of an
ancillary receiver.

Illinois
People ex rel. Potts v. Continental Beneficial Assn., 204 Ill. App. 501 (Ill. App.
1917). The insurance commissioner may petition a court of equity and such
court may appoint an ancillary receiver for a Pennsylvania association as
respects assets located in Illinois where the association was insolvent and was
removing assets following its withdrawal from the further conduct of business
in Illinois.
Indiana O'Malley v. Hankins, 207 Ind. 589, 194 N.E. 168 (1935). The Indiana
policyholders and creditors of an insolvent Missouri insurance company were
not entitled to have a receiver appointed in Indiana where the Missouri
insurance commissioner had acquired title to all the company's property and
there was no evidence that the company had any substantial amount of
Indiana property or that the Indiana policyholders would be discriminated
against under Missouri law. The court noted that although an insolvent
company may have "died before the filing of an appeal," the rights of the
parties continue since the judgment affects property and the proceeding thus
is in rem and not in personam. Further, since the Missouri commissioner made
a contract reinsuring the company's policyholders, it is inconceivable that
equity courts in 20 foreign jurisdictions would want to dissipate assets so as to
undercut the reinsurance contract.
Iowa
Kentucky
Michigan
Missouri
Parsons v. Charter Oak Life Ins. Co., 31 F. 305 (S.D. Ia. 1887). The receiver of an
insolvent Connecticut insurance company, which owned Iowa real estate and
had Iowa policyholders, controlled all assets including those in Iowa and thus,
the appointment of an ancillary receiver in Iowa was improper. The court's
reasoning was based on the fact that the Iowa policyholders contracted with a
Connecticut company and thus, took subject to the liquidation provisions of
Connecticut law. Further, the laws of Iowa did not provide Iowa policyholders
with a superior right to the company's assets in Iowa.
Whalen v. Keystone Mutual Casualty Co., 258 S.W.2d 450 (Ky. 1953). Creditors
and policyholders of insolvent foreign insurer brought suit to have receiver
appointed. Thereafter, the Kentucky insurance commissioner brought an
action to have an ancillary receiver appointed for the company, and then
sought to have the suit instituted by policyholders and creditors dismissed for
lack of jurisdiction. The court dismissed the creditors' suit holding that the
insurance code which empowered the commissioner to apply for the
appointment of an ancillary receiver was exclusive of the common law right of
stockholders and creditors to bring proceedings to have a receiver appointed.
Cooley v. Union Indemnity Co., 307 Mich. 177, 11 N.W.2d 850 (1943). Where the
ancillary receiver for a foreign insurance company had transmitted to the
domiciliary receiver all the remaining assets of the ancillary receivership,
including the allowed claim against an insolvent bank, and the domiciliary
receivership had been closed, and there was no suit pending in the Michigan
state courts for or against the insurance company, the Michigan court had no
jurisdiction to reappoint the ancillary receiver upon petition for instructions
concerning a check payable to the receiver for dividends on the claim against
the insolvent bank.
Harrison v. Missouri State Life Ins. Co., 59 P.2d 774 (1936). The appointment of
a receiver or the refusal to appoint is within the sound discretion of the court,
so that order vacating appointment of receiver for assets in state of an
insolvent Missouri insurance company was held to be within the trial court's
discretion, where evidence disclosed that appointment of receiver was
unnecessary to protect interests of plaintiffs and that appointment would
probably result in loss to other policyholders.

State ex enf. McKittrick ex rel. Maloney v. Fidelity Assurance Association, 352
Mo. 725, 179 S.W.2d (1944). In rejecting the Missouri insurance commissioner's
petition for intervention in an action involving an insolvent West Virginia
insurance company, the court noted that the Missouri insurance code did not
require that only the Missouri commissioner should institute a suit for
appointment as receiver of a foreign insurance company, particularly, when
the assets that were deposited by the foreign insurance company were assets
under the control of Missouri and were used as security for annuity contracts.
New York
Rose v. Fid. Mut’l Life Ins. Co., 207 F. Supp. 2d 50 (E.D.N.Y. 2002). The assignees
of a life insurance policy issued by an insurer in rehabilitation in Pennsylvania
were required to pursue an action alleging conversion, negligence, and breach
of contract in Pennsylvania because New York was a reciprocal state under the
UILA and no ancillary receiver had been appointed in New York.
North Carolina Blackwell v. Mutual Reserve Fund Life Association, 141 N.C. 117, 53 S.E. 833
(1906). The plaintiff sued a foreign insurer and asked the court to appoint a
receiver in order to take control of the insurer's North Carolina assets, which
plaintiff alleged the insurer was removing from state in order to defraud North
Carolina policyholders. The court held that where only "property" of the
insurer in the state was assessments due from members, no receiver would be
appointed as the assessments were an unattachable debt.
Ohio State ex rel. Bohlinger v. Annat, 60 O.L.A. 453, 123 N.E.2d 71 (1955). The
insurance commissioner has the right, in the exercise of sound discretion, after
the commencement of delinquency proceedings in New York against an
insurer doing business in Ohio, to request a proper court of Ohio for
appointment as ancillary receiver to liquidate the assets of the company in
Ohio if the commissioner found such assets were sufficient to justify the
appointment of the ancillary receiver. If they were not sufficient, the
commissioner could, under the statute, transfer to the domiciliary receiver for
liquidation in New York, the special statutory deposit placed with the insurance
commissioner, subject to the statutory conditions of liquidation of the deposit.
As the commissioner owes a legal duty to Ohio claimants to exercise
discretion within a reasonable time, a failure to request the appointment of an
ancillary receiver or to transfer the statutory deposit constitutes an abuse of
discretion warranting the issuance of mandamus to transfer such deposit to
the domiciliary liquidator for the purpose of liquidating assets of such insurer.
Oklahoma
Clinton v. Hoppedge, 2 F. Supp. 935 (N.E. Okla. 1933). Where foreign insurance
company has been dissolved by its state of domicile, the insurance
commissioner of Oklahoma is required to revoke or suspend authority of
corporation to do business in Oklahoma, and may appoint a receiver over such
company's assets.
Vermont Philip O'Deane v. C & S Wholesale Grocers, Inc., 155 Vt. 651, 584 A.2d 423
(1990). Following the appointment of the Massachusetts Insurance
Commissioner as permanent receiver of American Mutual Liability Insurance
Company, the company moved to dismiss an action against it in Vermont. The
Supreme Court of Vermont denied the motion, finding that Massachusetts
Insurers' Liquidation Act is sufficiently similar to Vermont's counterpart to
qualify Massachusetts as a "reciprocal state," and that Massachusetts law
provided for the appointment of an ancillary receiver in Vermont to process
Vermont claims.
Ancillary Receiver ‐ Filing of Claims

Arizona
Colorado
State ex rel. Low v. Imperial Ins. Co. By and Through Ins. Com'r of State of Cal.,
140 Ariz. 426, 682 P.2d 431 (App. 1984). The court held in this case that
California law applied, and thus, claimants who elected to file with the
California domiciliary receiver of the insolvent California insurer for claims for
reinsurance proceeds arising out of medical malpractice judgments they
obtained against insureds in Arizona were bound by actions taken by the
domiciliary receiver in California courts.
Insurance Affiliates, Inc. v. O'Connor, 522 F. Supp. 703 (D. Colo. 1981). The court
held that if ancillary proceedings had not been commenced in Colorado, then
Colorado courts were divested of jurisdiction to hear actions involving
controverted claims against out‐of‐state insurers. In such a situation where
ancillary proceedings have not been commenced in Colorado, the plaintiffs
must file claims in the domiciliary state of the insolvent insurer.
Florida Financial International Life Ins. Co. of New Mexico v. Beta Trust Corp., Ltd., 405
So.2d 306 (Fla. App. 1981). The Florida court ordered that proceeds of annuity
contracts, issued by a New Mexican insurer now in receivership, be deposited
with the New Mexico court and that any claim against the policy be proved in
New Mexico, since no Florida ancillary receiver had been appointed.
Georgia
Illinois
Collins v. Dacus, 211 Ga. 779, 89 S.E.2d 198 (1955). The court held that the denial
of a claim by the domiciliary receiver did not bar a claim against ancillary
receiver.
Clark v. Standard Life & Accident Ins. Co., 68 Ill. App. 3d 977, 386 N.E.2d 890 (Ill.
App. 1979). According to the Uniform Insurers Liquidation Act, where a
liquidation proceeding is commenced in a reciprocal state involving an insurer
domiciled in a reciprocal state, claims against insurer by Illinois resident
claimant may be made in Illinois if there is an ancillary liquidation proceeding
being conducted in Illinois. But, if no such ancillary proceeding is pending in
Illinois, as in this case, claims have to be proved in domiciliary state as provided
by law in such state.
In re Ancillary Receivership of Ideal Mutual Ins. Co., 218 Ill. App. 3d 1039, 578
N.E.2d 1235 (Ill. App. Ct. 1991). Midwest Steel Erection Company's insurer
was declared insolvent in New York, and the New York court set February 7,
1986 as a cut‐off date for filing proofs of claim. Midwest filed a proof of
claim by the cut‐off date, but was served with three complaints after the cutoff
date, but while its policy with the insolvent insurer was active. Midwest
asked the Illinois Insurance Guaranty Fund ("IIGF") for fund protection for
the later claims, but the fund refused, stating that the claims were not timely
filed. Midwest amended its proof of claim with the New York Insurance
Department, and again asked the fund for protection on the later claims, but
the fund refused. The court agreed with the IIGF's actions, and stated that
the three later claims were not covered under the Illinois Insurance Guaranty
Fund Act ("the Act"), as they were contingent claims not filed before the
cut‐off date. While an insured may file contingent claims, they must be
timely filed to be covered claims. The court said that the amendment to the
proof of claim form filed in New York was not an amendment at all, but
instead added new and distinct claims. The court ruled that the New York
liquidator's acceptance of Midwest's claim as a covered claim was not
binding on the IIGF. The court interpreted Section 221.4 of the Insurance
Code to mean that if a Illinois claimant chooses to prove his or her claim
against an insurer domiciled in another state in an Illinois court, the decisions
of the Illinois courts would be binding on the other state's liquidator.
People ex rel. Potts v. Continental Beneficiary Assn., 289 Ill. 40, 124 N.E. 352
(1919). Following the appointment of an ancillary receiver to collect the Illinois

assets of a Pennsylvania fraternal benefit association, the court may retain
jurisdiction for determination of the rights of individual creditors as respects
the Illinois assets.
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
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.
New Jersey Zullo Lumber v. King Construction, 146 N.J. Super. 88, 368 A.2d 987 (1976).
When ancillary proceedings had not been commenced in New Jersey regarding
the liquidation of a New York insurance company, New York was the proper
forum for litigation of claims. Claimants, including the New Jersey Housing
Finance Agency, were required to comply with the order of the New York
court restraining them from prosecuting any action against the company other
than the required filing and litigation of claims in that court. Since abatement
is generally disfavored, the New Jersey actions against that company would be
stayed rather than abated.
New York
G. C. Murphy Co. v. Reserve Ins. Co., 54 N.Y.2d 69, 444 N.Y.S.2d 592, 429 N.E.2d
111 (1981). The court held that the claim asserted against an insolvent Illinois
insurance company had to be pursued in Illinois, absent the appointment of an
ancillary receiver in New York, even though the claims of the insured had been
secured by an undertaking filed pursuant to the New York insurance code.
G.C. Murphy Co. v. Reserve Ins. Co., 427 N.Y.S.2d 800, 74 A.D.2d 235 (1980).
New York proceeds against Illinois insolvent insurer were stayed where
liquidation was being conducted by the Insurance Director in Illinois. Because
ancillary proceedings were instituted in New York, plaintiff was required to
pursue claims in Illinois.
Vlasaty v. Avco Rent‐A‐Car System, Inc., 60 Misc.2d 928, 304 N.Y.S.2d 118
(1969). When no ancillary receiver is appointed for a defunct nonresident
insurer, the plaintiffs seeking recovery from the insurer must proceed with
claims in the insurer's state of domicile.
Ancillary Receiver ‐ Powers and Duties
Georgia Georgia Insurers Insolvency Pool v. Moore, 183 Ga. App. 66, 357 S.E.2d 823
(1987). An insured who waited 15 months after a court‐ordered deadline for
filing claims against an insolvent automobile insurer before seeking to
retroactively purchase personal injury protection benefits from the insolvent
insurer was not barred in participating in distribution of the insolvent insurer's
assets due to the evidence showing that statutory and court‐ordered notice

equirements had not been complied with by the ancillary receiver of the
insolvent insurer.
Indiana
Kentucky
New Jersey
New York
State of Florida ex rel. O'Malley v. Department of Insurance of Indiana, 155 Ind.
App. 168, 291 N.E.2d 907 (1973). The Florida ancillary receiver of an insolvent
insurer challenged the Indiana domiciliary liquidator's handling of a reinsurance
treaty, which ceded 42.5% of the insolvent insurers liability to the assuming
insurer, another Indiana insurer. Pursuant to an Indiana court order, the
assuming insurer was allowed to adjust and pay claims of the insolvent insurer,
with a right to reimbursement from other recoveries by the Indiana liquidator
for the insolvent insurers 57.5% share of the loss. The Florida ancillary receiver
was not entitled to any part of the reinsurance proceeds associated with
Florida risks since such proceeds are general assets of the liquidation estates.
The Florida ancillary receiver had no lawful interest and therefore lacked
standing to challenge the Indiana Court's approval of he reinsurer's proposal.
Marmor Ins. Agency v. Ardery, 240 S.W.2d 832 (Ky. 1951). The court held that
although the court appointing the receiver has control of the administration of
the estate, the parties inquested were indebted to the insurer by contract only
and so had no community of interest with the receivership. Therefore, the
ancillary receiver had only the rights of the insolvent insurer to bring actions to
recover assets and must bring those actions in the county where the parties
resided. The receiver in Kentucky had attempted to sue Pennsylvania
insurance agency in county where court appointed ancillary receiver.
Murphy v. Ambassador Ins. Co., 195 N.J. Super. 274, 478 A.2d 1243 (Ch. 1984). A
Vermont order of rehabilitation for a domiciled insurer, did not constitute
"sequestration". Thus, New Jersey ancillary receiver was not entitled to
conserve the assets and balances of the Vermont company held by its agents
and brokers in New Jersey. Further, the fact that Vermont statutes treated
preferences differently from the way New Jersey statutes treated them did
not require a finding that Vermont was not a "reciprocal insurer" for purposes
of determining whether the New Jersey ancillary receiver or the Vermont
domiciliary receiver was entitled to assets and balances held by the Vermont
company's agents and brokers in New Jersey. If any provisions of state
insurance statutes conflict with those of the Uniform Insurers Liquidation Act,
the Uniform Act controls.
In re National Surety Co., 286 N.Y. 216, 36 N.E.2d 119 (1941). The court held that
the ancillary receivers in South Carolina has the right to conduct an ancillary
receivership and to distribute to local creditors the company's assets and its
statutory deposit in that state.
Matter of People, City Eq. Fire Ins. Co., 238 N.Y. 147, 144 N.E. 484 (1924). The
court held that no lien by attachment could be acquired on the assets of an
English insurance corporation because the insurance commissioner was
appointed as ancillary receiver and possessed the property not only for the
benefit of policyholders, stockholders, and creditors in the United States, but
rather for the benefit of all policyholders, stockholders and creditors of the
English corporation, regardless of their location.
Serio v. U.S. Fire Ins. Co., 837 N.Y.S.2d 294 (App. Div. 2007). As ancillary receiver
of an insurance company, the Superintendent of Insurance was estopped from
disclaiming coverage after the insurance company had assumed defense of the
insured without reserving rights. The insured was prejudiced by the
Superintendent’s disclaimer issued after liability was established in the
underlying action. In matters of litigation the Superintendent is considered an
entity separate from the state itself.

Whitney M. Young, Jr. Health Ctr. v. New York State Dep't of Ins. Liquidation
Bureau, 155 A.D.2d 742 (3d Dep't 1989). Plaintiff Health Center had been sued
by a former patient and submitted a claim to its malpractice insurance carrier,
Integrity Insurance Company. Integrity disclaimed coverage on any acts of
malpractice which occurred prior to the date on which Integrity's coverage of
the Health Center began. When Integrity was placed in ancillary receivership in
New York, the Ancillary Liquidator reiterated the disclaimer of coverage. The
Health Center commenced a declaratory judgment action against Integrity
seeking an order determining coverage. The Ancillary Liquidator moved to
dismiss the action and for referral to the ancillary receivership court. The New
York Supreme Court for Albany County denied the Liquidation Bureau's
motion. The Appellate Division, Third Department, reversed, holding that the
Health Center's declaratory judgment action was stayed pursuant to the order
of the liquidation and that the matter should be referred to the ancillary
receivership court.
North Carolina North Carolina Reinsurance Facility v. North Carolina Ins. Guaranty Assoc., 67
N.C. App. 359, 313 S.E.2d 253 (1984). The court held that funds from a state
automobile residual market mechanism owing to the insolvent insurer are not
"assets" within the meaning of the Uniform Act, and thus are not recoverable
by the ancillary receivers, but instead may be used by Guaranty Association.
Any remainder after paying covered claims to be given to domiciliary receiver.
This is result of intent of Uniform Act to keep local creditors from obtaining
unfair preference over assets of the insolvent insurer.
Texas
Moody v. State, 539 S.W.2d 354 (Tex. Civ. App. 1976), writ ref. n.r.e., cert.
denied, 434 U.S. 985 (1977), rehearing denied, 434 U.S. 1042 (1978). While the
court agreed that the Texas ancillary receiver should have sought court
approval to extend the limited moratorium placed on the payments of cash
values upon the insolvent insurer's policies, the court affirmed the lower
court's summary judgment for the ancillary receiver because appellant had no
standing to sue and no justifiable interest in the case. An ancillary receiver has
the same rights, duties and liabilities as a domiciliary receiver. Appellant was a
claimant against the insurer's assets, which were transferred to a receiver.
Ancillary Receiver ‐ Relation to Domiciliary Receiver
Florida
Bartholomew v. Glens Falls Ins. Group, 241 So.2d 698 (Fla. App. 1970), cert.
dismissed, 262 So.2d 680 (1972). The Arkansas insurance commissioner's
proceedings declaring insurer insolvent and appointing receiver were not
determinative of date of insolvency for purposes of Florida uninsured motorist
coverage, although the Florida commissioner had recognized the same date in
ancillary proceedings. Plaintiff could present proof that the date of actual
insolvency was earlier.
Hobbs v. Don Mealey Chevrolet, Inc., 642 So. 2d 1149 (Fla. Dist. Ct. App.
1994). The trial court had jurisdiction to determine claims against a Missouri
insurer in rehabilitation, as opposed to liquidation, even in the absence of an
ancillary receivership. Under the wording of Florida’s insurer insolvency
code, Florida residents are relegated to the receivership court to file their
claims only if the insurer is in liquidation.
Georgia
Preferred Ins. Co. v. Bentley, 225 Ga. 160, 166 S.E.2d 340 (1969), cert. denied,
396 U.S. 826 (1969). Where the Michigan domiciliary receiver did not object to
the final report of the Georgia ancillary receiver until after the report was
approved by the court, the objections were too late and were overruled.

Michigan
Commissioner of Insurance v. National Life Ins. Co. of United States, 280 Mich.
344, 273 N.W. 592 (1937). Based upon the liquidation and dissolution
proceedings in Illinois, where a principal receiver of the insurance company
was appointed, and in Michigan, where an ancillary receiver was appointed,
the Illinois receiver, except by permission of the Michigan court, could not take
the company's property from Michigan. To protect the claim of the state of
Michigan for taxes, the Michigan court could impose conditions, including the
adjudication of the priority of the claims to be paid out of the funds turned
over to the Illinois receiver.
New Jersey Murphy v. Ambassador Ins. Co., 195 N.J. Super. 274, 478 A.2d 1243 (Ch. 1984).
The domiciliary receiver of an insurance company in delinquency proceedings
was entitled to possession of the insurer's assets wherever situated in order to
achieve the objectives of the Uniform Insurers Liquidation Act, including any
assets held out‐of‐state by the insurer's agents and brokers.
New York
In re National Surety Co., 286 N.Y. 216, 36 N.E.2d 119 (1941). When the insurance
commissioner took possession of domestic insurer and an ancillary
receivership was conducted in South Carolina, the New York commissioner, as
the domiciliary liquidator, was necessarily interested in the results of the South
Carolina proceedings and as such might request information of the ancillary
receivers and their attorneys concerning any surplus after payments of just
claims.
Liquidation of Special Deposits
Eighth Circuit American United Life Ins. Co. v. Fischer, 117 F. 2d 811, reviewed, 314 U.S. 549,
(8th Cir. 1941). Where the assets of an Iowa domiciled insurer had been
acquired by a now insolvent Michigan insurer through a reinsurance
agreement, the Circuit held the Iowa receiver had no legal title to securities on
special deposit in Iowa even though there was physical custody. The Iowa
insurance commissioner held merely a contractual interest for the benefit of
holders of policies originating in the Iowa company because the commissioner
was a custodian, bailee, or pledgee, depending on what function was required
under the reinsurance agreements. The Michigan commissioner was the
statutory successor of the insolvent Michigan company, and as such had title
to all its assets wherever situated.
Tenth Circuit
Alabama
Hobbs v. Occidental Life Ins. Co., 87 F.2d 380 (10th Cir. 1937). As against the
contention that the policies of an insolvent insurance company remained in
effect because of a reinsurance agreement entered into with a solvent insurer,
and thereby required the commissioner to maintain on deposit with the state
for the benefit of the policyholders certain securities, it was held that the order
requiring the commissioner to withdraw and forward the proceeds of such
securities was proper, as upon adjudication of insolvency the policies were
terminated and the holders became creditors for an amount equal to the then
value of their policies with no other rights than that of participating pro rata in
the assets.
Hopkins v. Lancaster, 254 F. 190 (N.D. Ala. 1918). When the receiver of an
insolvent Illinois brought an action in Alabama to recover securities of the
insurer held on deposit, a creditor intervened in an attempt to claim against
the funds held by the court. The court held that the creditors were not
judgment creditors nor bond holders, and therefore, not entitled to payment
of claims from these funds. The court also found that the creditors also were
not entitled to an equitable lien upon the funds.

Arkansas
Florida
Georgia
Combs v. Haddock, 408 S.W.2d 861 (1966). The court rejected the Arkansas
liquidator's argument that a claim against a special deposit should be denied
because the lien was created within four months prior to the filing of the
liquidation petition.
Missouri Division of Ins. v. State ex rel. Department of Ins., 374 So.2d 589 (Fla.
App. 1979). The Missouri receiver of two insolvent Missouri insurers appealed
an order that the Florida ancillary receiver could use the statutory deposit of
one of the insurers to satisfy claims of Florida insureds and creditors against
the other insurer. It was held that where the two insolvent Missouri
companies had commingled funds and otherwise disregarded the corporate
distinction between them, the Florida ancillary receiver could apply the
statutory deposit of one entity to satisfy claims against the other.
Collins v. Dacus, 211 Ga. 779, 89 S.E.2d 198 (1955). The court held that the laws
of Georgia apply to the ancillary receiver's liquidation of special deposits in
Georgia.
Kelsey v. Cogswell, 112 F. 599 (C.C. N.D. Ga. 1901). It was held that the statutory
deposit under Georgia law required of fire insurance companies would be first
used to satisfy claims arising from fire losses, before being distributed to
satisfy unearned premium and other claims.
Preferred Ins. Co. v. Bentley, 223 Ga. 735, 157 S.E.2d 737 (1967). Where no
evidence was presented that Michigan was a reciprocal state under the
Uniform Insurers Liquidation Act, special deposits of insolvent Michigan insurer
would be held for benefit of Georgia claimants, and not turned over to
domiciliary receiver. Any balance remaining after paying all Georgia claims
would be given to domiciliary receiver.
Iowa State v. American Bonding & Cas. Co., 221 N.W. 585, 206 Iowa 988 (1928).
Funds deposited with the Iowa insurance commissioner by an insolvent insurer
under the erroneous belief that such deposit was required by statute did not
lose their trust character by virtue of such mistake. Consequently, the deposit
passed into the hands of the receiver as a trust fund, and holders of claims for
unearned premiums were entitled to have their claims established against the
trust fund.
Massachusetts
Michigan
Minnesota
Commissioner of Insurance v. Equity General Ins. Co., 346 Mass. 233, 191 N.E.2d
(1963). The Supreme Judicial Court of Massachusetts held that in an ancillary
receivership of a Florida insurance company, the deposit placed by the insurer
in Massachusetts was for the benefit of Massachusetts policyholders and
creditors, not those of all the states. Under the Uniform Insurers Liquidation
Act, special deposits must be applied in accordance with the statutes which
created them. In accordance with Massachusetts' "retaliatory laws," the
application of the special deposit in Massachusetts was determined by
Florida's laws applicable to a Massachusetts company. A similar deposit in
Florida would have been found under Florida law to be held for the benefit of
Florida policyholders and creditors. Therefore, Massachusetts policyholders
and creditors were entitled to prove special deposit claims.
Fletcher v. State Treasurer, 16 Mich. App. 87, 167 N.W.2d 594 (Mich. App. Ct.
1969). A trust deposit of securities made by a domestic casualty insurer was
not made for the benefit of a limited class of persons but was a general asset
for the benefit of all policyholders, including their judgment creditors and
general creditors.
Hayne v. Metropolitan Trust Co., 67 Minn. 245, 69 N.W. 916 (1897). While
solvent, the insurance company had deposited with the insurance

commissioner certain securities for the benefit of its policyholders.
Subsequently, the insurance company exchanged securities. The exchange
was done without the knowledge of the policyholders and without the
approval of the State Treasurer. Once the insurance company was declared
insolvent, the receiver demanded delivery of the initial securities and was given
the other less valuable securities which were deposited with the insurance
commissioner. The trust company refused to return the initial securities to the
receiver, and the court held that the transfer and surrender of the initial
securities was void because the policyholders were the equitable owners and
they never consented to the exchange. Therefore, the receiver was merely
trying to recover what was and had been the policyholder's property, and the
trust company had no right to insist that it be made whole at the expense of
the trust fund belonging to the policyholders.
Missouri
Holloway v. Federal Reserve Life Ins. Co., 21 F. Supp. 516 (W.D. Mo. 1937). A
Missouri life insurance company was reinsured by an insolvent Kansas
company, which was the subject of an order appointing a receiver in Kansas.
The Kansas receiver demanded that the Missouri insurance commissioner turn
over a statutory deposit to the receiver. The court held that Missouri law did
not provide for the liquidation or disposition of the deposit that belonged to a
foreign insurer, and the Missouri commissioner was ordered to return the
deposit to the Kansas receiver.
New York G. C. Murphy Co. v. Reserve Ins. Co., 101 Misc.2d 729, 421 N.Y.S.2d 1006 (1970).
An insured incorporated in Delaware and whose principal place of business
was Pennsylvania, but which was authorized to do business in New York, was
entitled to protection under the New York law requiring its insurance company
to put up a bond even though the insurer was in liquidation in Illinois and not
licensed to do business in New York. The court found that the Uniform
Insurers Liquidation Act could not be used to deprive the insured of the
statutory security protection even though ordinarily an action would be
required to be commenced in a liquidation proceeding to recover against an
insurer's general assets.
In re Southern Surety Co. of New York, 282 N.Y. 54, 24 N.E.2d 845, reargument
denied, 282 N.Y. 678, 26 N.E.2d 809 (1939). When a New York insurance
company deposited securities in Ohio with the insurance commissioner in trust
for the benefit of its policyholders, the court held that an Ohio policyholder
was a secured creditor and was therefore entitled to prove its claim for the
difference between the original debt and the amount realized from the Ohio
fund.
In the Matter of the Attorney General v. The North America Life Ins. Co., 92
N.Y. 654 (1883). A special term of 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 jurisdiction over the fund
and refused to disturb the original order.
Levin v. Nat’l Colonial Ins. Co., 806 N.E.2d 473 (N.Y. 2004). The lower New York
state court was required to give full faith and credit to the Kansas state court’s
liquidation order approving classification and disposition of a trust as a “special
deposit” under the Uniform Insurers Liquidation Act. The state court in New
York improperly exercised jurisdiction over the special deposit and was directed
to transfer the trust assets to the insolvent insurer’s liquidator in Kansas.
North Carolina
Continental Bank and Trust Co. v. Gold, 140 F. Supp 252 (E.D. N.C. 1956). The
court held that a statutory deposit of foreign insurer, under North Carolina law,

is property of the state with title vested in the state treasurer and insurance
commissioner. As a result, a federal receiver may not take possession of this
asset as it is not an asset of the insolvent insurer.
Continental Bank & Trust Co. v. Gold, 140 F. Supp 252 (E.D. N.C. 1956). When a
federal receiver sought to compel North Carolina officials to deliver securities
deposited by an insolvent foreign insurance company, the court held that
securities transferred by a foreign insurance company to North Carolina to be
held in trust for the benefit of North Carolina policyholders, were not property
of the insolvent insurance company within the federal statute authorizing the
federal court appointed receiver to control property of the insolvent within
whatever district it was located.
North Carolina Reinsurance Facility v. North Carolina Ins. Guaranty Assoc., 67
N.C. App. 359, 313 S.E.2d 253 (1984). Under Uniform Insurers Liquidation Act,
the domiciliary receiver has primary responsibility for collecting and
distributing insolvent insurer's assets. However, the Uniform Act gives some
claims priority against special deposits of an insolvent insurer held by state
treasurers in foreign states where the insurer was doing business.
State ex rel. Ingram v. Reserve Ins. Co., 303 N.C. 623, 281 S.E.2d 16 (1981)
modifying and aff'g., 48 N.C. App. 643, 269 S.E.2d 757 (1980). The court held
that the ancillary receiver had the statutory right to liquidate this deposit to
satisfy a statutory lien against it held by policyholders in the state. A
later‐ratified statute also gave the guaranty fund access to this deposit in order
to pay covered claims. The court held that later statute had retroactive
application, and the guaranty fund could use the statutory deposit to pay
claims.
Ohio
Falkenbach v. Patterson, 43 Ohio St. 359, 1 N.E. 757 (1885). When an insolvent
life insurance company is dissolved and is winding up its affairs through the
liquidator, all or part of the deposited securities constituting the reserve shall
be used if needed to pay claims of policyholders.
McGhee v. Casualty Co. of America, 15 Ohio App. 457 (1921). In the distribution
of the deposit made by a foreign insurance or guarantee company with the
state treasurer, the claim of a non‐resident creditor, which arises out of a
contract of insurance made outside the state should be disallowed,
notwithstanding the fact that the claimant transacted a part of its business in
Ohio, or incurred liabilities under the Ohio workers' compensation law
because, neither fact changed the non‐resident status of the claimant, and
special deposits are to be used for Ohio residents only.
Ohio v. Matthews, 64 O.S. 419 (1901). The Superintendent of Insurance holds
securities in trust for the benefit of the policyholders and when company
becomes insolvent, assignee or receiver of the company cannot recover any
portion of the securities until the superintendent has distributed the securities
among the policyholders to satisfy all of their claims.
State ex rel. Bohlinger v. Annat, 68 O.L.A. 453, 123 N.E.2d 71 (1955). The court
held that if the assets in Ohio of an insolvent insurer were not sufficient for the
appointment of an ancillary receiver, then the insurance commissioner should
transfer special deposits in Ohio to the domiciliary liquidator, and if the Ohio
insurance commissioner fails to act in a reasonable time to request an ancillary
receivership or to transfer the special deposit, the domiciliary liquidator is
entitled to the issuance of a writ of mandamus for the purpose of transferring
such deposit.

State ex rel. Cincinnati Life Assn's Assignee v. Matthews, 64 Ohio St. 419, 60
N.E. 605 (1901). Securities required to have been deposited with the insurance
commissioner by an insurance company are to be held in trust for the benefit
and protection of, and as security for, the policyholders of such company, so
that the assignee of such company cannot recover the securities from the
commissioner without first showing that such company is no longer liable to
any of its policyholders.
State ex rel. Safeguard Ins. Co. v. Vorys, 171 Ohio St. 109, 167 N.E. 2d 910 (1960).
Where Ohio insurer filed with the Ohio superintendent of Insurance a
certificate and deposit for the benefit of all its policyholders, and where Ohio
Superintendent of Insurance found that such corporation was not and was not
likely to become insolvent, Superintendent had duty to deliver to the
corporation the deposit which had been made to him by the insurer which had
now been merged into a foreign corporation.
State ex rel. Turner v. Union Casualty Ins. Co., 8 Ohio App. 285, 29 O.C.D. 491
(1917). Under the insurance code in Ohio, a deposit made by a foreign
insurance company with the insurance commissioner, as a prerequisite to
doing business in Ohio, should, on insolvency of insurance company, be
administered by the Ohio insurance commissioner under direction of court,
and should be described directly to policyholders entitled to share therein, and
should not be turned over to domiciliary receiver of company.
Oregon State ex rel. Driscoll v. Early American Insurance Corp., 84 Or. App. 252, 733
P.2d 919 (1987). Oregon ancillary receiver of Alabama insurer was allowed to
keep $30,000 insurance deposit for surety insurance to extent necessary to
settle claims against such insurer arising out of its other insurance business in
Oregon, with any excess to go to the domiciliary receiver.
Rhode Island Langdeau v. Narragansett Ins. Co., 94 R.I. 128, 179 A.2d 110, affirmed, 95 R.I. 4,
182 A.2d 322 (1962). The legislature enacted the Uniform Insurers Liquidation
Act knowing its prior enactments which required foreign insurers to deposit
trust funds with Rhode Island's general treasurer and to give up the trust fund
only after following specific procedures, including publication notice for six
months. It was found that the prior provisions were undisturbed by the
Uniform Insurers Liquidation Act and thus the prior laws were held to apply to
liquidate insurance companies.
South Carolina Clark v. Preferred Accident Ins. Co. of New York, 231 S.C. 167, 97 S.E.2d 498
(1957). The New York statutory liquidator of an insolvent surety company
sought to withdraw bonds held in South Carolina subject to a statutory deposit
requirement. No surety claims were pending in South Carolina. It was held
that the statutory deposit could be retained by South Carolina as an "other
asset" of the corporation for the protection of South Carolina policyholders
who were not surety creditors.
Wise v. Carolina Hail Ins. Co., 108 S.C. 504, 94 S.E. 535 (1918). It was held that
under Sections 2701 and 2708 of the Civil Code of 1912, an insurer's statutory
deposit held by the insurance commissioner was subject to claims of
policyholders before claims of creditors.
Texas
Virginia
Op. Att'y. Gen. WW‐497 (Tex. 1958). A general court order placing an insurance
company in receivership is sufficient authority for the State Treasurer to
release securities deposited with the Treasurer.
Andrews v. Cahoon, 196 Va. 790, 86 S.E.2d 173 (1955). A Virginia resident with
claim against insolvent New York insurer could proceed to enforce a lien
against the insurer's statutory deposit in Virginia, although the resident had

made no attempt to prove the claim in the New York liquidation proceeding.
The statutory deposit provisions of the insurance code provide an alternative
mode of recovery for Virginia residents. The insured's failure to forward notice
of the suit to the insurer, in compliance with the terms of the policy, was
excused where the actions of the receiver showed that such compliance would
have been useless.
Shepherd v. Virginia State Ins. Co., 120 Va. 383, 91 S.E. 140 (1917). A domestic
Virginia company had reinsured fire policies of a foreign insurer. The foreign
insurer became insolvent. The Virginia reinsurer asserted claims against
statutory deposit bonds held by the Virginia State Treasurer on behalf of the
foreign insolvent insurer. It was held that a reinsurer is not a policyholder
within the meaning of Section 17 of the Virginia Insurance Act of 1906, and
therefore is not entitled to share in the proceeds of the bonds.
Universal Life Ins. Co. v. Cogbill, 71 Va. (30 Gratt.) 72 (1878). A foreign life
insurance company became insolvent. The plaintiff had purchased policy for
benefit of his wife. The court held that the plaintiff could sue in his own name
to recover premiums paid, and that claims could be paid out of bonds of the
insurer held by the state treasurer.
Wisconsin
Hughs v. Hunner, 91 Wis. 116, 64 N.W. 887 (1895). Prior to dissolution, an
insurer reinsured all of its risks. Upon completion of the reinsurance
agreement, the insurer deposited a surety bond to protect the reinsurance.
The Wisconsin Court held that the bond was deposited to protect the
policyholders of Wisconsin only, and because it was in the custody of the
Wisconsin treasurer, it was within the jurisdiction of the Wisconsin courts.
In re Fidelity Assurance Assn., 247 Wis. 619, 20, N.W.2d 638 (1945). It was
found that the state banking commission or had no beneficial interest in
securities that were deposited with it by an insolvent foreign insurance
association. The state banking commissioner merely held the securities for the
protection of the policyholders of the insolvent association. Thus, an effort to
review an order awarding 6% interest from the date of insolvency to Wisconsin
contract holders and the denial of the claim of the domiciliary receiver (West
Virginia) for the remaining funds held in Wisconsin after payment of all
Wisconsin policyholders was dismissed for the lack of standing.
Liquidation of Alien Insurers
Ninth Circuit
In re Hughes (Fremont Ins. Co. (UK) Ltd.), BAP No. CC‐97‐1924‐OPJ (9th Cir.
B.A.P. Oct. 5, 1998), reported in Mealey's Litig. Rep.‐Ins. Insolvency, Vol. 10,
No. 10 at C1 (Oct. 21, 1998). U.S. Bankruptcy Appellate Panel affirmed an
order of the bankruptcy court directing turnover under section 304(b) of the
Bankruptcy Code of a trust fund established by an alien insurer pursuant to
New York’s Regulation 41 for the benefit of U.S. policyholders and cedents.
The court found that the trust agreement had expired by its terms on
August 7, 1988 and upon such expiration, the insurer had an absolute legal
right to the trust assets. The court further found that a claimant that did not
present a claim prior to the August 7, 1988 termination date could not
enforce its claim against the assets of the trust. As no claims had been
properly perfected, the court determined that the trust assets should be
turned over for distribution with the other assets of the alien insurer’s
estate.
Florida Provident Capital Indem., Ltd. v. State (ex rel. Dep’t of Ins.), 654 So. 2d 232
(Fla. Dist. Ct. App. 1995). Alien insurer domiciled in and formed under the
laws of Dominica, not authorized to transact business in the United States,

and without assets in trust in Florida, could not be placed into liquidation in
Florida.
Provident Capital Indemnity, Ltd. v. Florida (ex rel. Dep’t of Ins.), 677 So. 2d
363 (Fla. App. 1996). Although an alien insurer, which is not authorized to
transact business anywhere in the United States and had no assets in trust in
Florida, was not subject to liquidation in that state, it could be placed in
conservation in such state.
New York
In re Norske Lloyd Ins. Co., 242 N.Y. 148, 151 N.E. 159 (1926). The court held that
domestic creditors holding policies issued in foreign countries were entitled to
prove their claims in the U.S. The policies were small and the policyholders
could not bear the expense of foreign travel and the costs of adjudication
abroad.
In Re Petition of Joint Provisional Liquidators of North Atlantic Insurance
Company Limited, 229 B.R. 90 (S.D.N.Y. 1999). In this ancillary proceeding
commenced pursuant to 11 U.S.C. § 304 (Bankruptcy Code), the provisional
liquidators sought a declaratory judgment that the debtor, North Atlantic
Insurance Company Limited, was entitled to interest income from two
trusts. Northwestern National Insurance Company counterclaimed for
damages and sought punitive damages on the ground that North American
fraudulently withdrew $16 million from the trusts. Northwestern also
commenced a separate RICO action against North American, based on the
same allegations. The provisional liquidators moved to dismiss the
counterclaims and the RICO action. Northwestern argued that it should be
permitted to defend itself by means of a counterclaim, and that England,
where the original North Atlantic insolvency proceeding was pending, had
no action equivalent to a RICO action.
The court observed that a proceeding brought pursuant to 11 U.S.C. § 304 is
not a full‐scale bankruptcy proceeding, but is a limited one, designed to aid a
proceeding in a foreign court. A primary purpose of a § 304 proceeding is to
prevent actions in the United States that would not be permitted in the
foreign country where the insolvency proceeding originated. The court
found the counterclaims and the RICO action violative of the injunction that
had been issued at the outset of the § 304 proceeding that enjoined the
commencement or continuation of any action or arbitration against North
Atlantic in the United States. The counterclaims and the RICO action were
dismissed with leave to bring them in the insolvency proceeding pending in
England.
In Re Pinhas Rubin and Joseph Halevy, as Liquidators of The Israel
Reinsurance Company, Ltd., 160 B.R. 269 (S.D.N.Y. 1993). The liquidators of
an insolvent Israeli insurance company moved pursuant to 11 U.S.C. § 304
(Bankruptcy Code) to enjoin the commencement or continuation of all
further actions against Israel Re in any U.S. jurisdiction and to enjoin any
attachment, lien, judgment or other claim against Israel Re’s property. A key
issue in the case was the disposition of a $2 million trust fund that had been
established by Israel Re in a New York bank for the benefit of domestic
insurers. The liquidator of Integrity Insurance Company (“Integrity”), a
claimant, argued that the trust should not be made part of the estate of
Israel Re and should be placed beyond the reach of the Israeli liquidation
court. The Bankruptcy Court applied New York law to determine Israel Re’s
interest in the trust, and concluded that because Israel Re’s interest was
reversionary and not quantifiable, the court could not order the turnover of
the trust to the estate. The court, however, enjoined the continuation of
Integrity’s action that had led to an attachment of the trust and directed
Integrity to pursue its claim in the Israeli liquidation court. In the process, the

court ruled that proceedings under 11 U.S.C. § 304 are not violative of the
McCarran‐Ferguson Act because New York case law (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)) and the Uniform Insurers Liquidation Act, adopted by New York,
require claimants against foreign insolvent insurers to pursue their claims
through foreign liquidation proceedings. The court observed that the
purpose of a filing under 11 U.S.C. § 304 is to prevent piecemeal distribution
of assets in the United States by means of proceedings commenced in U.S.
courts by local creditors and found that enjoining further actions against the
trust would prevent the proverbial “race to the courthouse” and would
preserve the trust pending a pro rata distribution of its assets to the
American policyholders of Israel Re. The court concluded its analysis by
finding that the principles of Israeli bankruptcy law are not dissimilar to the
U.S. Bankruptcy Code. Accordingly, the court stated that “there is a distinct
judicial preference for deferring to the foreign tribunal litigation respecting
the validity or the amount of the claims against the foreign debtor.
Integrity’s attachment of the trust was vacated and the injunction sought by
the petitioners was granted.
In the Matter of the Application of the People of New York for an Order re the
Second Russian Ins. Co., 256 N.Y. 177, 176 N.E. 133 (1931). The claim was based
on a contract entered into in St. Petersburg, Russia, between a Russian
insurance corporation and a partnership composed of German citizens. Under
the terms of the agreement, the Germans were entitled to commissions. The
court held that this was a foreign claim, and unless protected by a lien or an
equity in the nature of a lien, it was not entitled to share in the distribution
made by the insurance commissioner.
Moscow Fire Ins. Co. 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.
Moscow Fire Ins. Co. v. Bank of New York & Trust Co., 280 N.Y. 286, 20 N.E.2d
758 (1939), reargument denied, 280 N.Y. 848, 21 N.E.2d 890, motion denied,
293 N.Y. 749, 56 N.E.2d 745. The state courts could treat the U.S. branch of a
Soviet insurance company as a separate organization and proceed with its
liquidation. The courts were bound to give effect to Soviet decrees
terminating the insurance company in Russia.
Ohio Benjamin v. KPMG Barbados, 2005 Ohio 1959 (Ohio Ct. App. 2005). The
liquidator of two insolvent insurers sued the foreign auditors for negligence
regarding their audits of the offshore reinsurers of two Ohio insurers. The
liquidator argued that the auditors’ negligent audits contributed to the insurers’
insolvency. The appellate court affirmed the dismissal, stating that it is
unreasonable to subject a foreign auditor to the jurisdiction of courts in a state
in which it solicits no business, is not licensed to perform professional
accounting services, maintains no assets or property, and has not been retained
to perform professional accounting service, simply because the foreign
reinsurance company that it audited reinsured the risks of an insurance
company domiciled in Ohio.

State ex rel. Burgess v. Crabbe, 114 Ohio St. 517, 151 N.E. 759 (1926). Comity
does not require an Ohio court to recognize foreign liquidator applying under
Ohio's code for the distribution of funds held in the state for the security of
policyholders of the foreign insurance company, when the foreign company's
policies, reinsuring Ohio risks, have not matured, and the liabilities of the
foreign company cannot at the present time be determined in liquidation
proceeding.
State ex rel. Haavind v. Crabbe, 114 Ohio St. 504, 151 N.E. 755 (1926). While
comity permits state courts to recognize the receiver appointed in another
country, it does not require Ohio courts to recognize a foreign receiver
applying under Ohio's code for the distribution of funds held in the state for
the security of the policyholders of the alien insurance company, as no
policyholder or creditor has applied to attorney general to bring action for
distribution.
Attachment, Garnishment or Execution
Second Circuit Ace Grain Co. v. Rhode Island Ins. Co., 107 F. Supp. 80 (S.D. N.Y.) affirmed, 199
F.2d 758 (2nd Cir. 1952). The court granted the receiver's motion for an order
dismissing supplementary proceedings and restraining all actions or
proceedings in the nature of attachment, garnishment or execution against an
insurer placed in receivership in Rhode Island.
Tenth Circuit
Arizona
District of Columbia
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.
Alabama Nat. Life Ins. Co. v. Gammill, 18 Ariz. App. 575, 504 P.2d 516 (1972). A
creditor initiated a garnishment proceeding against a bank which held assets
belonging to the insolvent insurer. No ancillary receiver was appointed in
Arizona, and a domiciliary receiver was appointed after the initiation of the
garnishment proceeding. The insolvent insurer attempted to vacate the
garnishment proceeding, but the court held the fact that the privilege of an
ancillary receiver was available in Arizona and foregone, and the absence of
reciprocity in this field of legislation did not permit the utilization of the Arizona
law to defeat the garnishment.
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 Colburn v. Highland Realty Co., 153 So.2d 731 (Fla. App. 1963). A Florida
purchaser of Florida real estate from Michigan insurance corporation vendor
brought action for specific performance, and a judgment for the purchaser
was appealed by the Michigan insurance commissioner, as receiver of the
vendor. The appellate court held that the lower court's order that liens against
property be paid from proceeds of sale was invalid because this was in the
nature of an attachment, garnishment, or execution, contrary to the Florida
law.
Kansas
Michigan
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.
American Druggists' Insurance Company v. Carlson, Circuit No. G85‐340 CA7,
1989 U.S. Dist. LEXIS 17719 (W.D. Mich. 1989). The Court of Common Pleas of
Franklin County, Ohio issued an order declaring: (1) an insurer insolvent, (2)
appointing the Ohio Superintendent of Insurance to liquidate the insurer, (3)
named the Attorney General as counsel of record for the insurer, (4) gave
notice to all attorneys previously representing the insurer that their authority
to represent the insurer was terminated and (5) ordered former counsel to
return all files, documents, fees and other assets and properties of the insurer
to the liquidator. The insurer brought the case in diversity; a Magistrate's
Order denied the insurer's motion for an order requiring predecessor counsel
to turn over files in its possession and granted the predecessor counsel a lien
on any original documents. Insurer appealed, arguing that the Magistrate
erred in not enforcing the Ohio court order and that the grant of lien was
improper since Michigan law provides that the proper forum for the attorneys
to assert a claim against the insurer is in the Ohio court which is liquidating the
insurer. On appeal, this court held that since the files were located outside of
Ohio, they were located outside the liquidation court's in rem jurisdiction and
thus the Ohio liquidation court's order is not entitled to full faith and credit by a
Michigan court. It was concluded that the liquidation court lacked personal

jurisdiction over the attorneys in so far as it sought to compel them to turn
over files. Thus, the insurer's remedy was to file in a Michigan court to have its
rights in the disputed files determined instead of relying on the liquidation
court order. The court did find the Magistrate's Order to be clearly erroneous
to the extent that it imposed any liens in favor of the attorneys since the
proper forum for the attorneys to present their claim is the Ohio liquidation
court.
Missouri
Bensinger v. Pacific States Life Ins. Co., 25 F. Supp. 295 (E.D. Mo. 1938). A
Colorado life insurance company was placed in liquidation in Colorado with
ancillary receivers appointed in Missouri and Illinois, with an Indiana claimant
as assignee of an Illinois claimant filing a claim in the Missouri ancillary
proceeding for the attachment of certain land in Missouri. In rejecting this
effort to attach Missouri assets, the court noted that liquidation of an insolvent
insurance company is designed to be prompt, fair and equitable so that the
closing of the estate is for the benefit of all creditors. This would appear to be
even more appropriate when the creditor is from Indiana attempting to take
preference over creditors residing in Missouri.
Fry v. Charter Oak Life Ins. Co., 31 F. 197 (Cir. Mo. 1887) and Weingarter v.
Charter Oak Life Ins. Co., 32 F. 314 (Cir. Mo. 1887). An insolvent mutual life
insurance company from Connecticut, licensed in Missouri, was insolvent and
the Connecticut insurance commissioner was appointed as liquidator. As a
result, Missouri policyholders were not permitted to attach Missouri property
in order to recover the reserve value of their life insurance policies.
McDonald v. Pacific States Life Ins. Co., 344 Mo. 1, 124 S.W.2d 1157 (1939). The
court held that the filing of a proof of claim in the domiciliary proceeding by
the claimant, bound the claimant to the decree entered in Colorado enjoining
all attachments and garnishment proceedings.
Strubinger v. Mid‐Union Indemnity Co., 352 S.W.2d 397 (Mo. App. 1961). In
upholding dismissal of a Missouri attorney's garnishment petition on assets of
an insolvent Illinois insurance company, the court reviewed the order of
rehabilitation which stayed all proceedings against the company, and
distinguished the case of Morris v. Jones, 329 U.S. 545. The Illinois order of
rehabilitation was entered prior to the institution of the attorney's
garnishment proceeding and the assertion of a lien resulting from the
successful recovery of a settlement on a subrogation claim belonging to the
insolvent insurer. It appears the attorney was retained by the insolvent insurer
prior to the rehabilitation order. The court held that the dismissal of the
garnishment proceeding was proper since the Illinois court's order had
enjoined and restrained people from pursuing the insolvent insurer and that
the attorney's claim would need to be presented in the liquidation proceeding
since the asset belonged to the Illinois rehabilitation and thus was not subject
to attachment or garnishment in Missouri.
Nebraska State ex rel. Sorenson v. State Bank of Omaha, 287 N.W. 762, 136 Neb. 880
(1939). The court held that the public policy of Nebraska did not permit a
judgment creditor to seize by garnishment dividends on deposits of an
insolvent New York insurance company with an insolvent Nebraska state bank,
after title thereto had vested in the liquidator of the insurance company by
virtue of the insurance laws of New York, in disregard of the liquidator's prior
demand for such funds for the benefit of all creditors and a previous order of a
Nebraska court to turn them over to the New York liquidator.
New Jersey
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 out‐

of‐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
Ace Grain Co. v. Rhode Island Ins. Co., 107 F. Supp. 90 (S.D. N.Y. 1952), affirmed,
199 F. 2d 758. The court found that a proceeding appointing a receiver for an
insurance company for the purpose of preserving its assets and rehabilitating
the company was a "delinquency proceeding" within the meaning of the New
York insurance code and of an identical provision adopted by Rhode Island
even though the insurance company was not insolvent. Therefore, the court
granted the receiver's motion to dismiss attachment proceedings brought in
New York against the company on the basis that New York law prohibited the
maintenance of any proceeding in the nature of attachment of execution
against a delinquent insurer on its assets in pending delinquency proceedings
in New York or any other reciprocal state.
In the Matter of the Application of the People of New York for an Order re the
First Russian Ins. Co., 253 N.Y. 365, 171 N.E. 572 (1931). Before the insurance
commission was ordered to take possession of a foreign insurance
corporation's property, an assignee of a foreign creditor procured a warrant of
attachment on the corporation's trust assets deposited for the benefit of
domestic policyholders. After the insurance commissioner completed the
liquidation of domestic claims, there was a surplus. The attaching creditor was
entitled to payment of the attached amount with interest.
Martyne v. American Union Fire Ins. Co., 168 A.D. 380, 153 N.Y.S. 433 (1915),
affirmed, 216 N.Y. 110 N.E. 502. A creditor of an insolvent foreign insurance
company was not permitted to bring a suit of attachment against the insolvent
foreign insurer when the insurance commissioner had taken over the insurer's
assets.
Oklahoma
Oregon
Joplin Corp. v. State ex rel. Grimes, 570 P.2d 1161 (Okla. 1977). Where
delinquency proceedings against an insurer under the Uniform Insurers'
Liquidation Act were commenced by the insurance commissioner on April 4,
where a creditor took judgment against the insurer in Missouri on April 14,
where an order enjoining all persons from seeking or obtaining preferences or
attachments or other liens against the insurer was entered in Oklahoma on
April 16, and where the creditor's Missouri judgment was filed in Oklahoma on
April 18, the filing of the Missouri judgment did not create a lien in favor of the
creditor so as to make it a secured creditor for purposes of the Act.
Ezell v. Equity General Ins. Co., 219 F. Supp. 51 (D. Ore. 1962). The plaintiff
obtained a money judgment against a Florida insurer in an Arkansas court and
attempted to enforce it pursuant to a writ of execution issued from a federal
district court in Oregon, to make a general garnishment of credits and property
of the insurer within Oregon and in the hands of the Oregon ancillary receiver.
The insurer had also been declared insolvent and placed in receivership in its
domiciliary state, Florida. The court held that it was obliged to honor the
substantive law of Oregon, which prohibited garnishment or execution during
the pending of delinquency proceedings.

Pennsylvania Lewycka v. Springfield Mutual Ins. Co., 201 Pa. Super. 341, 191 A.2d 925 (1963).
When garnishor obtained judgment before initiation of proceedings against
the insurer, the insurance commissioner could not obtain a stay of the
garnishment.
Texas
Virginia
Fidelity Group Co. v. LeBow, 107 S.W.2d 755 (Tex. Civ. App. 1937) writ dismissed
w.o.j. When law required that insurers maintain a deposit as trust funds for
policyholders and claimants of the insurance company, the question arose
regarding whether or not trust funds on deposit were exempt from
garnishment proceedings by a judgment creditor. The law requires that the
funds may be garnished by a designated creditor only after a final judgment
has been entered. When the insurance company becomes insolvent, the trust
funds become assets for the benefit of all creditors.
Universal Life Ins. Co. v. Binford, 76 Va. 103 (1882). Receivership proceedings
were started in New York against a New York insurer. Eight Virginia
policyholders sued to attach property of the insurer in Virginia, in order to
protect the obligations due them by the company when their policies matured.
Insured held that because company was insolvent at time the suit was filed,
plaintiffs were entitled to recover. Improvement of the company's financial
condition subsequent to the suit did not defeat policyholder's right.
Priorities ‐ Interstate Claimants
Illinois
Malicki v. Bulkley, 107 Ill. App. 595 (1903), affirmed 206 Ill. 249. Subsequent to
an Illinois court order placing the insurance company in receivership, a creditor
was awarded a judgment against the insurance company by the court of
another state. The Illinois Supreme Court affirmed the Appellate Court's
determination that the creditor was not entitled to any preferential interest in
a fund held by the initial receivers of the insurance company because the
creditor obtained the judgment after the company had been adjudged
insolvent and placed into receivership.
People v. Chicago Lloyds, 391 Ill. 492, 63 N.E.2d 479 (1945), reversed, Morris v.
Jones, 329 U.S. 545, rehearing denied, 330 U.S. 854. Disallowance in Illinois of
claim by Missouri claimant was proper because Missouri does not by statute
give that state's creditors priority in an insurer's property located in that state.
Iowa
Schloss v. Metropolitan Surety Co., 149 Iowa 382, 128 N.W. 384 (1910). The
court held that the rights of a foreign receiver to funds in Iowa are not
recognized if the result would be to relegate the domiciliary state's creditors to
whatever relief they could obtain in a foreign jurisdiction where there are in
state assets to satisfy claims.
Michigan Commissioner of Insurance v. Lloyd's Insurance Company of America, Inc., 287
Mich. 599, 288 N.W. 703 (1939). The Supreme Court of Michigan held that the
trial court abused its discretion in ordering the transfer of Michigan assets of
an insolvent New York corporation to the New York liquidator without first
having ascertained that the Michigan creditors would receive adequate
protection in a foreign jurisdiction.
Commissioner of Insurance v. National Life Ins. Co. of United States, 280 Mich.
344, 273 N.W. 592 (1937). Based upon the liquidation and dissolution
proceedings in Illinois, where a principal receiver of the insurance company
was appointed, and in Michigan, where an ancillary receiver was appointed,
the Illinois receiver, except by permission of the Michigan court, could not take
the company's property from Michigan. To protect the claim of the state of
Michigan for taxes, the Michigan court could impose conditions, including the

adjudication of the priority of the claims to be paid out of the funds turned
over to the Illinois receiver.
Missouri
Bensinger v. Pacific States Life Ins. Co., 25 F. Supp. 295 (E.D. Mo. 1938). A
Colorado life insurance company was placed in liquidation in Colorado with
ancillary receivers appointed in Missouri and Illinois, with an Indiana claimant
as assignee of an Illinois claimant filing a claim in the Missouri ancillary
proceeding for the attachment of certain land in Missouri. In rejecting this
effort to attach Missouri assets, the court noted that liquidation of an insolvent
insurance company is designed to be prompt, fair and equitable so that the
closing of the estate is for the benefit of all creditors. This would appear to be
even more appropriate when the creditor is from Indiana attempting to take
preference over creditors residing in Missouri.
McDonald v. Pacific States Life Ins. Co., 344 Mo. 1, 124 S.W.2d 1157 (1939). The
holder of a judgment on a life insurance policy issued by an insolvent Colorado
insurance company, attached certain Missouri real estate belonging to the
insolvent insurer. Missouri had also appointed an ancillary receiver for the
insolvency. The holder of the judgment also filed a claim in the Colorado
liquidation proceeding, which had been allowed but not yet paid. In restating
the statutory powers of the domiciliary liquidator to the assets of the insolvent
insurer, the Missouri court rejected the claimant's argument that the claimant
was not bound by the statutory provisions of the state of Colorado and further
noted that the assets of the insolvent insurer should be treated as one unit for
the benefit of all creditors without regard to the location of the assets or the
residence of the creditor. Thus, the claims of the Missouri creditors should not
be given preference to those from other states by the Missouri ancillary
receiver. Further, the Missouri priority of distribution statute would not be
applicable to a Colorado insolvency.
New York
Seidman & Seidman v. Gee, No. 88 Civ. 3382, 1989 U.S. Dist. Lexis 7503 (S.D.
N.Y. 1989). Gee was appointed liquidator of Universal Casualty and Surety
Company, Ltd., a defunct Cayman Islands insurer. Gee entered into three
standstill agreements in 1986 and 1987 with Universal's U.S. auditors, Seidman
& Seidman, in which Gee agreed to give Seidman notice before commencing
suit in return for Seidman's agreement to waive any statute of limitations
defense. In March, 1988, Seidman was served with process in a Florida state
court action which Gee had commenced in July, 1987. In May, 1988, Seidman
brought an action against Gee in District Court in the Southern District of New
York alleging fraud and breach of the standstill agreements. Gee moved to
dismiss for lack of personal and subject matter jurisdiction and on grounds that
Seidman's claims were asserted as counterclaims in the Florida state court
action. The Court found subject matter jurisdiction existed based on diversity,
and found sufficient business transactions in New York to warrant personal
jurisdiction. The Court also did not find circumstances justifying priority for the
Florida state court action. Gee's motion to dismiss was therefore denied.
Ohio Covington v. Indiana Dep’t of Natural Res., 2002 Ohio 2874 (Ohio Ct. App. 2002).
Prior to becoming insolvent, the insurance company issued performance bonds
to Indiana surface mining companies. The mining companies failed to perform
the mine reclamation required by Indiana Law. The Indiana Department of
Natural Resources then, pursuant to Indiana Law, required the mining
companies to forfeit their performance bonds if the Department determined
the surface mining operator failed to properly reclaim the land. The
Department then attempted to obtain funds from the Ohio Superintendent
based upon the mining companies’ performance bonds purchased from the
insurance company. The Department argued that it should be given a Class 2
classification under Ohio Revised Code § 3903.42. The Court, noting that the
statute in question is unambiguous and therefore should be given its plain

meaning, held that the Indiana claims should be given Class 6 classification
because they are the “claims of any state or local government.”
Reciprocity
Second Circuit
Fifth Circuit
Twin City Bank v. Mutual Fire Marine & Inland Ins. Co., 646 F. Supp. 1139 (S.D.
N.Y. 1986), aff'd 812 F.2d 713 (2d Cir. 1987). The New York Southern District
Court held that an insurer undergoing rehabilitation, pursuant to an Order of
Suspension issued by the Pennsylvania Commissioner, was entitled to have the
execution of an Arkansas judgment stayed in New York. The court explained
that Pennsylvania was a "reciprocal state" under New York Insurance Law
prohibiting the maintenance of any action or proceeding during the pendency
of delinquency proceedings. The court added that even if Pennsylvania was
not a reciprocal state, under the circumstances, it was appropriate to extend
comity in order to respect the pending delinquency proceedings in
Pennsylvania.
Callon Petroleum Co. v. Frontier Ins. Co., 351 F.3d 204 (5th Cir. 2003). The court
of appeals found that a summary judgment enforcing the collection of a bond
from an insolvent insurer was valid despite an out‐of‐state receiver’s subject
matter jurisdiction argument. The court stated that the insolvent insurer’s entry
into rehabilitation in another state did not automatically strip subject matter
jurisdiction. Furthermore, diversity jurisdiction was sound. The insolvent
insurer’s rehabilitator had failed to respond to the motion for summary
judgment and over a year later, moved to have the adverse judgment vacated.
The court stated the receiver’s due process argument was unpersuasive. The
court relied on the fact that the receiver was given three notices of the
judgment and had failed to act for 14 months.
Fla. Dep’t of Ins. v. Chase Bank of Tex., N.A., 274 F.3d 924 (5th Cir. 2001).
Florida’s receiver of an insolvent insurer lacked standing in Texas to bring suit on
behalf of policyholders for fraud and breach of fiduciary duty against a bank.
Policyholders had not assigned their claims to the receiver. Accordingly, the
court stated there was an absence of facts to support any acceptable basis of
representation.
Tenn. ex rel. Sizemore v. Surety Bank, 200 F.3d 373 (5th Cir. 2000). The Fifth
Circuit Court of Appeals held that an out‐of‐state insurance receiver lacked
standing in Texas. The receiver sought to obtain control of the insolvent
insurer’s Texas assets through the Tennessee courts. When the Tennessee
receiver tried to enforce his state’s liquidation order in Texas, the district court
there granted summary judgment in favor of defendant, declaring that the
Tennessee court lacked jurisdiction over assets outside of Tennessee.
Furthermore, receivership proceedings had likewise begun in Texas, and a Texas
receiver had already been designated. The court of appeals affirmed the district
court’s decision.
Seventh Circuit
Holz v. Smullan, 277 F.2d 58 (7th Cir. 1960). The New York liquidator brought
an action to require an Illinois agent to account for monies collected for
insolvent insurer. With the approval of the Illinois ancillary receiver, the agent
returned all unearned premium to policyholders, but the New York liquidator
contended the agent had no authority to make such refunds. Noting that the
Illinois ancillary liquidator had the same powers and duties with respect to
insolvent insurer's assets in Illinois as possessed by the domiciliary liquidator,
the court held that if under Illinois law the agent would have been liable to a
policyholder who brought an action to recover on one of the unearned
premiums, the agent should not be held liable to the domiciliary liquidator
because of the return of premiums to the policyholder who were entitled to

them, especially where the return of the unearned premiums was made with
the approval of the ancillary liquidator.
Arizona
Alabama Nat. Life Ins. Co. v. Gammill, 18 Ariz. App. 575, 504 P.2d 516 (1972). A
creditor initiated a garnishment proceeding against a bank which held assets
belonging to the insolvent insurer. No ancillary receiver was appointed in
Arizona, and a domiciliary receiver was appointed after the initiation of the
garnishment proceeding. The insolvent insurer attempted to vacate the
garnishment proceeding, but the court held the fact that the privilege of an
ancillary proceeding was available in Arizona and foregone, and the absence of
reciprocity in this field of legislation, did not permit the utilization of the
Arizona law to defeat the garnishment.
State ex rel. Low v. Imperial Ins. Co. By and Through Ins. Com'r of State of Cal.,
140 Ariz. 426, 682 P.2d 431 (App. 1984). The issue in this case was whether a
domiciliary receiver in a nonreciprocal state (California) was entitled to
reinsurance proceeds traceable to a reciprocal state (Arizona). The court held
that the reinsurance proceeds which resulted from the insolvent insurer's
contracts with reinsurers and its subsequent insolvency were general assets
vested solely in the California domiciliary liquidator.
California
Profeta v. Vesta Fire Insurance, A116030, 2008 Cal. App. Unpub. LEXIS 1660 (Ct.
App. Feb. 29, 2008). The court held a bare assertion that Texas had adopted the
UILA was inadequate to establish that a Texas stay order should be honored by
a California court under UILA reciprocity principles. Additionally, the court
found no reasons why permitting the appeal to proceed would interfere with
the Texas litigation.
Colorado Herstam v. Bd. of Dir. of Silvercreek Water Sanitation Dist., 895 P.2d 1131
(Colo. App. 1995). In order for a state to be reciprocal to Colorado, the
reciprocal state only needs to have “in substance and effect” provisions
similar to those specified in C.R.S. § 10‐3‐502(15). Although the wording in
the Arizona statutes and Colorado statutes is not identical, it is substantially
similar and meets the definition of “reciprocal states.” Therefore, the
Arizona order must be afforded full faith and credit and the receiver is
entitled to apply for an injunction pursuant to C.R.S. § 10‐3‐505.
Stephens v. Colaiannia, 942 P.2d 1374 (Colo. App. 1997) – Colorado and
Louisiana are “reciprocal” states under their respective statutory schemes.
Thus, under the law of both states, Louisiana Insurance Guaranty
Association’s (LIGA) settlement of the claimants’ claims and payments to
them entitled it to subrogation of those claimants. The receiver, therefore,
became bound to recognize and address those rights.
Connecticut D’Agata v. Nutmeg Intensive Rehab., PC, No. CV020077692S, WL 1843028
(Conn. Super. July 15, 2002). Citing the Insurers Rehabilitation and Liquidation
Act, adopted in Connecticut and Pennsylvania which are reciprocal states under
the Act, the court stayed a personal injury action where the defendant was
insured by an insolvent insurer and the Pennsylvania state court had entered a
liquidation order staying all actions against insureds of the insolvent insurer.
Massey v. Town of Windsor, 289 F. Supp.2d 160 (D. Conn. 2003). The district
court stayed an employee’s discrimination action against a town and town clerk
whose insurer was declared insolvent, based on a Pennsylvania court order
staying all actions against the insurer. Both Pennsylvania and Connecticut have
adopted the Uniform Insurers Rehabilitation and Liquidation Act and are
reciprocal states under the Act.

Rose v. Fid. Mut'l Life Ins. Co., 207 F. Supp.2d 50 (E.D.N.Y. 2002). The court
dismissed a state court action, brought by assignees of a life insurance policy
against a Pennsylvania insurer undergoing rehabilitation in Pennsylvania,
alleging improper distribution of policy proceeds. Given Pennsylvania’s status as
a reciprocal state under New York’s version of the Uniform Insurers Liquidation
Act and the fact that no ancillary receiver was appointed, the plaintiffs were
required to pursue their claims in Pennsylvania.
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.
American Bonding Co. v. Coastal Metal Sales, Inc., 679 So. 2d 1250 (Fla. Dist.
Ct. App. 1996). Florida action brought against Arizona insurer in
rehabilitation held subject to stay issued by Arizona court. The court held
that Florida and Arizona are reciprocal states under the Uniform Insurers
Liquidation Act and that comity required enforcement of the Arizona stay.
Illinois Sears, Roebuck and Co. v. Northumberland General Ins. Co., 617 F. Supp. 88
(D.C. Ill. 1985). Claims filed against a New York insurance company involved in
liquidation proceedings in New York were appropriately dismissed under the
Uniform Reciprocal Liquidation Act. No ancillary proceedings were being
conducted in Illinois and, therefore, the claims must be brought in New York
under the law of that state.
Louisiana
All Star Adver. Agency, Inc. v. Reliance Ins. Co., 898 So. 2d 369 (La. 2005). The
state supreme court addressed the issue of whether the Louisiana insurance
receivership statutes, based on the Uniform Insurance Liquidation Act, was
equivalent in substance and effect as the Pennsylvania insurance receivership
statutes for the purpose of determining whether an order from a Pennsylvania
insurance receivership court was entitled to full faith and credit in Louisiana.
The court held that Pennsylvania and Louisiana have reciprocal statutes, and
therefore, the order from the Pennsylvania receivership court was entitled to

full faith and credit in Louisiana. The court explained that a determination of
reciprocity required an independent examination of the two states’ receivership
statutes and not reliance on a cursory review of a non‐statutory table of
comparisons in an annotated statute volume.
Bonura v. United Bankers Life Insurance Co., 509 So. 2d 8 (La. Ct. App. 1987).
Louisiana court had subject matter jurisdiction in a coverage dispute between
Louisiana resident and an insolvent Texas domiciled insurer. The court held
that because Louisiana has adopted the Uniform Insurers Liquidation Act and
Texas had not and was thus not a reciprocal state, the provisions of the
Uniform Insurers Liquidation Law are not applicable with respect to claims
against foreign insurers from Texas. However, the court held that under
Louisiana's Insurance Code, no insurance contract delivered or issued for
delivery in Louisiana which covers Louisiana residents may contain any
provision which deprives the courts of Louisiana of jurisdiction over actions
against the insurer. Thus, no foreign insurer may enjoy the benefits of a source
of business in Louisiana without being prepared to answer any claims based on
that business by a Louisiana resident in the Louisiana courts.
Bonura v. United Bankers Life Insurance Company, 552 So.2d 1248 (La. App. 1st
Cir. 1989), writ denied, 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 denied, 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.
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.
New York Dean Construction Co. v. Agricultural Ins. Co., 22 A.D.2d 82, 254 N.Y.S.2d 196
(1964). The court held that New York's adoption of the Uniform Insurers
Liquidation Act expressly confines to the reciprocal states the operation of its
common law rule of abatement where the dissolution of a foreign insurer
served to abate all actions pending against the insurer. Therefore, where
Pennsylvania was not a reciprocal state, the Pennsylvania receiver was not
vested by operation of law with title to an insurer's New York property and
could not sue to recover the assets, nor could Pennsylvania rely on abatement
to prevent actions against the insurer in New York to recover on its policies.
Kelly v. Overseas Investors, Inc., 24 A.D.2d 157, 264 N.Y.S.2d 586
(1965),reversed on other grounds, 18 N.Y.2d 622, 272 N.Y.S.2d 733, 219 N.E.2d
288. The court held that a retaliatory purpose should not be read into the
Uniform Insurers Liquidation Act. Absent the policy argument that withholding
comity and barring an insurance commissioner of a non‐reciprocal state from
suing in New York would eventually force the non‐reciprocal state to adopt the

uniform law or that it was necessary to secure otherwise unavailable benefits
for New York, retaliation would not be a motive found in the statute. The
statute's purpose was to expand the areas for interstate comity.
Levin v. Nat’l Colonial Ins. Co., 806 N.E.2d 473 (N.Y. 2004). The lower state court
improperly exercised jurisdiction over a trust fund, which was a “special
deposit” under the Uniform Insurers Liquidation Act (UILA). The lower court
was required to give full faith and credit to an order of the Kansas liquidation
court approving the classification and disposition of the trust remainder, which
was directed to be transferred to the insolvent insurer’s liquidator in Kansas.
The New York and Kansas statutes are similar, and Kansas is a reciprocal state
for UILA purposes.
Oregon
Ainsworth v. Cincotta, 79 Or. App. 574, 721 P.2d 455 (1986). The court held that
the Director of the Missouri Division of Insurance, as the domiciliary receiver,
was allowed to recover balances due from local agents in Oregon, because
Missouri was a "reciprocal state," a state which as adopted the Uniform
Insurers Liquidation Act.
Nasef v. U&J Investments, Inc., 91 Or. App. 344, 755 P.2d 126 (1988). Insurer
was the subject of insolvency proceedings in Indiana, its domiciliary state.
Indiana and Oregon have both enacted and consequently, are "reciprocal
states" under the Uniform Insurers Liquidation Act. The court held that the
existence of the proceedings in Indiana barred the further prosecution of an
action in Oregon against the insurer on an insurance contract, even though the
Indiana court's orders foreclosing further proceedings may have been
temporary in nature.
South Carolina Smalls v. Weed, 293 S.C. 364, 360 S.E.2d 531 (1987) (following remand by 292
S.C. 408, 356 S.E.2d 843 (1987)). Despite the fact that South Carolina and
Tennessee are reciprocal states under South Carolina's version of the Uniform
Insurer's Liquidation Act, a South Carolina insured is not prohibited from
bringing an action in South Carolina to prove a claim against the rehabilitator of
a Tennessee insurance company since the statutory provisions prohibiting
actions against liquidators of insurance companies were determined not to be
applicable to actions against a rehabilitator. Therefore, South Carolina courts
have subject matter jurisdiction over an insured's action to prove a claim
against a domiciliary rehabilitator from Tennessee.
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.
Texas
West Virginia
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
rehabilitation, 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.
Swing v. Bentley & Gerwig Furniture Co., 45 W.Va. 283, 31 S.E. 925 (1898). The
trustee of an insolvent Ohio company instituted an action in West Virginia
court and the defendant argued on the grounds that the trustee had no
capacity to sue in West Virginia courts. The court held that under principles of
comity a receiver, trustee, or assignee of a dissolved foreign corporation,
properly appointed in the state of its domicile, may sue in West Virginia in the
receiver's own name or the corporation's name. It was also held that before
receiver of the foreign corporation can recover on a premium note, the
receiver must show that all conditions precedent contained in the note have
been complied with.
Judicial Comity and Jurisdiction
U.S. Supreme
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.
Morris v. Jones, 329 U.S. 545, S. Ct. 451 (1947) reh. denied, 330 U.S. 854. In
determining whether a judgment creditor, who acquired judgment in a
Missouri court against an Illinois insurance company after the insurer's
liquidator had been appointed by an Illinois court, was entitled to allowance of
his claim based on the judgment under the full faith and credit clause, it was no
more important that suit on the underlying claim could not have been
maintained in Illinois after the liquidator had been appointed than the fact that
the statute of limitations of the forum state might have barred it.
Pink v. AAA Highway Express, Inc., 314 U.S. 201 (1941). The U.S. Supreme Court
held that an assessment validity determined according to the laws of the state

of incorporation of a mutual insurer is entitled to full faith and credit, but the
question whether a resident of another state is a member of the mutual
insurer is a question of the law of the state of residency.
Underwriters National Assurance Co. v. North Carolina Life and Accident and
Health Insurance Guaranty Association, 455 U.S. 691, (1982). The United States
Supreme Court held that the North Carolina Court had violated the full faith
and credit clause of the United States Constitution by refusing to treat the
Indiana rehabilitation court's judgment adjudicating the rights of the Indiana
rehabilitator and North Carolina life and health guaranty fund as respects to a
statutory deposit made by the insolvent insurer in North Carolina. The Court
noted that the Indiana rehabilitation court had fully and fairly considered
whether it had subject matter jurisdiction to settle the competing claims of the
Indiana rehabilitator and North Carolina guaranty fund to the deposit and that
the Indiana rehabilitation court had personal jurisdiction over the parties
necessary to determine the North Carolina guaranty fund's claim against the
deposit.
Second Circuit
Fourth Circuit
Twin City Bank v. Mutual Fire Marine & Inland Ins. Co., 646 F. Supp. 1139 (S.D.
N.Y. 1986), aff'd 812 F.2d 713 (2d Cir. 1987). The New York Southern District
Court held that an insurer undergoing rehabilitation, pursuant to an Order of
Suspension issued by the Pennsylvania Commissioner, was entitled to have the
execution of an Arkansas judgment stayed in New York. The court explained
that Pennsylvania was a "reciprocal state" under New York Insurance Law
prohibiting the maintenance of any action or proceeding during the pendency
of delinquency proceedings. The court added that even if Pennsylvania was
not a reciprocal state, under the circumstances, it was appropriate to extend
comity in order to respect the pending delinquency proceedings in
Pennsylvania.
Keehn v. Parrish Dray Line, 145 F.2d 646 (4th Cir. 1944). When Illinois statutory
receiver of an insolvent Illinois insurer brought suit in South Carolina to recover
assessments levied by the Illinois receivership court against all policyholders of
the insolvent mutual insurer, it was held that a valid assessment levied by the
Illinois court was conclusive and binding against all South Carolina
policyholders, but since they were not personally served with process in the
liquidation proceeding and parties to the action, they could attempt to prove
that they were not members of the company and therefore not liable to pay
the assessment.
Miller v. Barnwell Bros. Inc., 137 F.2d 257 (4th Cir. 1943). The Fourth Circuit held
that since an insurer is subject to the valid regulatory power of its state of
incorporation, an assessment against members of an insolvent mutual insurer
by an Illinois receivership court would be binding on North Carolina
policyholders.
Fifth Circuit
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). Insurance broker brought action as subrogee
against insolvent insurer and its president and chairman of the board to
recover unearned premiums paid after insolvency. Citing the McCarran‐
Ferguson Act, 15 U.S.C. § 1011, the court affirmed an administrative stay
pending resolution of all proceedings in the state liquidation court on the
grounds of Burford abstention. Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098
(1943). The action against the president and chairman of the board individually
for mismanagement and undercapitalization was also properly stayed,
because the derivative claim involved the same assets which the Commissioner
was required to collect and distribute in the liquidation proceeding. Pursuit of
those claims in federal court would "usurp" Louisiana's control over the
liquidation proceeding, permit plaintiff to obtain an unfair advantage over

other claimants, and "encroach" into the Commissioner's exclusive power as
liquidator.
Callon Petroleum Co. v. Frontier Ins. Co., 351 F.3d 204 (5th Cir. 2003). The court
of appeals found that a summary judgment enforcing the collection of a bond
from an insolvent insurer was valid despite an out‐of‐state receiver’s subject
matter jurisdiction argument. The court stated that the insolvent insurer’s entry
into rehabilitation in another state did not automatically strip subject matter
jurisdiction. Furthermore, diversity jurisdiction was sound. The insolvent
insurer’s rehabilitator had failed to respond to the motion for summary
judgment and over a year later, moved to have the adverse judgment vacated.
The court stated the receiver’s due process argument was unpersuasive. The
court relied on the fact that the receiver was given three notices of the
judgment and had failed to act for 14 months.
Fla. Dep’t of Ins. v. Chase Bank of Tex., N.A., 274 F.3d 924 (5th Cir. 2001).
Florida’s receiver of an insolvent insurer lacked standing in Texas to bring suit on
behalf of policyholders for fraud and breach of fiduciary duty against a bank.
Policyholders had not assigned their claims to the receiver. Accordingly, the
court stated there was an absence of facts to support any acceptable basis of
representation.
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.
Tenn. ex rel. Sizemore v. Surety Bank, 200 F.3d 373 (5th Cir. 2000). The Fifth
Circuit Court of Appeals held that an out‐of‐state insurance receiver lacked
standing in Texas. The receiver sought to obtain control of the insolvent
insurer’s Texas assets through the Tennessee courts. When the Tennessee
receiver tried to enforce his state’s liquidation order in Texas, the district court
there granted summary judgment in favor of defendant, declaring that the
Tennessee court lacked jurisdiction over assets outside of Tennessee.
Furthermore, receivership proceedings had likewise begun in Texas, and a Texas
receiver had already been designated. The court of appeals affirmed the district
court’s decision.
Seventh Circuit
Property & Casualty Ins. Ltd. v. Central National Ins. Co. of Omaha, 936 F.2d
319 (7th Cir. 1991). Plaintiff sought amounts allegedly owed under a
reinsurance agreement and damages arising out of the failure to pay those
amounts. While plaintiff and defendant were litigating their action in Illinois,
Nebraska's director of insurance placed defendant insurance company under
supervision. In 1990, a Nebraska state court appointed the state's director
of insurance as rehabilitator of defendant insurance company. One portion
of the rehabilitation order instructed the rehabilitator to consider
immediately all litigation involving defendant insurance company that was
pending outside of the Nebraska and to petition the courts having

jurisdiction over that litigation for stays whenever necessary to protect the
estate of defendant insurance company. The Illinois district court concluded
that principles announced in Burford required abstention. On appeal, the
court of appeals interpreted Burford to require two essential elements for
abstention. First, the state must offer some forum in which claims may be
litigated. Second, that forum must stand in a special relationship of technical
oversight or concentrated review to the evaluation of those claims. Because
the factual record developed by the district court did not clearly
demonstrate whether a specialized proceeding was required by the
Nebraska rehabilitation statute or had been commenced by the
rehabilitator, the appellate court remanded the case to the district court to
determine, using any reasonable format, whether Nebraska had commenced
the type of specialized proceeding required by Burford.
Ninth Circuit
Hawthorne Sav. F.S.B. v. Reliance Ins. Co., 421 F.3d 835 (9th Cir. 2005). Insured
sued insurer to collect a judgment. On appeal insurer argued the court lacked
jurisdiction because the McCarran‐Ferguson Act bars 28 U.S.C. § 1332 (federal
diversity statute) from preempting or interfering with Pennsylvania's
rehabilitation and liquidation statutes and thus divests jurisdiction from the
Federal court while the Pennsylvania liquidations occurs. The court held
diversity jurisdiction does not interfere with the Pennsylvania proceeding.
Moreover, comity does not require a federal court to abandon jurisdiction
because a similar suit is later filed in a state 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. Under 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."
Connecticut
Delaware
Komjathy v. Lewin P&H Supply Co., No. CV02392815S, 2003 WL 22413660 (Conn.
Super. Oct. 10, 2003). The court granted a stay of proceedings pending
rehabilitation proceedings based on a stay ordered by a Rhode Island state
court, citing the Model Insurers Rehabilitation and Liquidation Act (Model Act),
adopted in Connecticut, and “reasons of practice, convenience and
expediency.”
Cook v. Delmarva Power & Light Co., No. 82C‐AU‐32, 81C‐OC‐54, slip op. (Del.
Sup. Ct., October 7, 1985). A Delaware Court is not compelled to defer to an
injunction issued by a New York state court barring all proceedings for which a
New York insurance company in liquidation was obligated to defend any party.
The New York Court lacked jurisdiction over any parties in the Delaware action,
although one of the parties was an insured of the company in liquidation and
was entitled to a defense furnished by the company.
In Re Lifeco Investment Group, Inc., 173 B.R. 478 (Bankr. Del. 1994). The Florida
Department of Insurance, in its capacity as ancillary receiver for an insolvent
insurance company not domiciled in Florida, moved inter alia, for a change of
venue in a Chapter 11 case of the insurance holding company that owned the
insurer. The Bankruptcy Court, held that: (1) the Florida Department lacked
standing to bring the motion; and (2) third parties that voiced their support for
Department's motions did not thereby become movants in their own right, and
their standing, therefore, had to be evaluated.
District of Columbia
Argon Financial Group v. Marro, 897 F. Supp. 568 (D.D.C. 1995). The creditor
of an insolvent insurer filed suit against a government official for breach of
fiduciary duty, tortuous interference with a contract, and civil rights

violations. Previously, the Delaware Chancery Court had issued a liquidation
order and injunction prohibiting actions against the insolvent insurer and the
Commissioner as Receiver.
Pursuant to D.C. Code Ann. § 35‐2822 (1994 Supp.), the court held that full
faith and credit are to be given to the injunctions of neighboring courts.
Further, the court held that the McCarran‐Ferguson Act required the court to
defer to the Delaware Chancery Court so that it may supervise and regulate
the entire liquidation process. Therefore, the creditors complaint was
dismissed.
Consumers United Insurance Company v. Smith, 644 A.2d 1328 (D.C. App
1994). A Delaware domiciled insurance company became embroiled in a
dispute with its landlord in the District of Columbia. After a jury verdict in its
favor in the amount of $2,500,000, the landlord, unaware that a few days
earlier the insurance company transferred a building it owned in the District
to its parent company, attempted to recover on its judgment by recording a
lien on the building in the District; the landlord also attempted to garnish the
insurance company’s funds in a District of Columbia bank. Shortly
thereafter, the Delaware Insurance Commissioner seized the insurance
company’s assets under an order which enjoined all persons (including the
District of Columbia landlord) from asserting any claim against the insurance
company’s property. The landlord thereafter filed motions in the Superior
Court of the District of Columbia to recover the funds it had garnished and to
pierce the corporate veil and execute on the building in the District. The
landlord’s motions were granted, and the insurance company appealed.
On appeal, the Court ruled that the landlord had priority over the Delaware
Insurance Commissioner in claiming the bank accounts and building. The
Court also ruled that the Full Faith and Credit Clause did not require the
landlord to obtain permission from the Delaware receivership court in order
to proceed further in the adjustment of its judgment liens in the District of
Columbia.
Florida
Georgia
Illinois
Hobbs v. Don Mealey Chevrolet, Inc., 642 So. 2d 1149 (Fla. Dist. Ct. App.
1994). The trial court had jurisdiction to determine claims against a Missouri
insurer in rehabilitation, as opposed to liquidation, even in the absence of an
ancillary receivership. Under the wording of Florida’s insurer insolvency
code, Florida residents are relegated to the receivership court to file their
claims only if the insurer is in liquidation.
Wilson v. Missouri State Life Ins. Co., 184 Ga. 184, 190 S.E. 552 (1937). The
Georgia Supreme Court rejected a challenge to the Missouri liquidator's power
to convey Georgia real estate, noting that the Missouri liquidator was clothed
with authority both pursuant to statute and court order and specifically
referred to the court's prior rulings in O'Malley v. Wilson, 182 Ga. 97, 185 S.E.
109.
Evans v. Illinois Surety Co., 319 Ill. 105 (1926). In liquidation proceedings, the
court holds and administers the estate, through the court appointed receiver,
and determines the rights of all creditors of the liquidating insurance company.
Thus, the court was not bound by a judgment entered in a foreign jurisdiction
in favor of a creditor where the receiver was not a party in the proceedings,
but instead had the authority to require independent proof of such claim.
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

ehabilitation 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 v. Chicago Lloyds, 391 Ill. 492, 63 N.E.2d 479 (1945) reversed, Morris v.
Jones, 329 U.S. 545, rehearing denied, 330 U.S. 854. The court held that the full
faith and credit clause of the U.S. Constitution is not authority for placing the
foreign creditor who obtained a judgment in a better position in Illinois than
such a creditor would be in Missouri.
Republic Ins. Co. v. Maleski, 1994 U.S. Dist. LEXIS 14153 (N.D. Ill. Sept. 30,
1994). Respondents, the Pennsylvania Insurance Commissioner, moved to
dismiss Republic's petition to confirm an arbitration award, and argued that
Republic, was collaterally estopped from denying that the plan of
rehabilitation gives the Pennsylvania Commonwealth Court exclusive
jurisdiction to rule on the arbitration award. The court held that both the
Pennsylvania state courts and state statutes made clear that a lower state
court did not have exclusive jurisdiction over pending proceedings "by or
against an estate in rehabilitation." Therefore, the petitioner could deny
that the plan of rehabilitation required that lower state court to rule on the
arbitration award as it related to the rehabilitation plan. The court also ruled
that there were insufficient grounds for Burford or Colorado River
abstention.
The court held that Burford abstention failed to apply to the case at bar
because the state did not have a specialized proceeding for the evaluation of
claims by or against an estate in rehabilitation. The court noted that of the
two types of Burford abstention, the second type has two essential
elements. First, a state must offer a forum in which to litigate the claims.
Second, the forum has to be a specialized proceeding. Without Burford
abstention, the court addressed whether Colorado River abstention applied.
Because the case at bar had parallel suits in both the federal and state
forums, the analysis could balance whether factors favored or disfavored a
stay in the proceeding. After weighing ten factors including assumed
jurisdiction, forum convenience, piecemeal litigation, order of jurisdiction,
protection of rights, progress of proceedings, concurrent jurisdiction,
availability of removal, and vexatious or contrived nature of the federal
claim, the court held that the balance did not support abstention.
Schacht v. Cadillac Ins. Co., 1991 U.S. Dist. LEXIS 11606 (N.D. Ill. 1991). The
Illinois Director of Insurance filed a complaint against an insolvent insurer,
alleging that it made illegal transfers of funds from other insolvent insurers
in violation of Section 204(3) of the Illinois Insurance Code. The court first
rejected Cadillac's argument that the court should abstain from asserting its
jurisdiction under the Burford abstention doctrine. Although the transfers
were made from two Illinois insolvent insurers, now in conservation
proceedings, in Illinois to a Michigan insolvent insurer, in liquidation
proceedings in Michigan, the federal court's exercise of jurisdiction would
not interfere with the state liquidation courts' equitable distribution powers.
With respect to the Director's voidable preference claim, the court held that
the fact that the first conservation complaint was dismissed by agreed order
(although a second complaint was filed) did not affect the classification of
the transfer as a voidable preference, since that transfer occurred within
two years of the filing of the complaint. § 204(3) of the Illinois Insurance
Code imposes liability for preferential transfers of assets upon those who

participate in the transaction "on behalf of" the Cadillac, corporation. While
not explicitly alleging that defendant acted "on behalf of" his corporation,
the pleadings were sufficiently detailed to allow for such an inference.
Therefore, the court denied defendant's motion to dismiss for failing to
state a cause of action.
Iowa
Franzen v. Hutchinson, 94 Iowa 95, 62 N.W. 698 (1895). The Iowa agents of a
Minnesota insolvent insurer, upon learning that the company had been placed
in receivership, cancelled certain policies of the company and took
assignments of unearned premium claims which they sought to set off against
their debts to the Minnesota company. The Iowa court held that the
company's voluntary assignment under Minnesota law was invalid under Iowa
law and therefore would not be given extraterritorial effect to the assignment
in enforcing judgments against the Iowa agents.
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 contacts
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."
Louisiana
All Star Adver. Agency, Inc. v. Reliance Ins. Co., 898 So. 2d 369 (La. 2005). The
state supreme court addressed the issue of whether the Louisiana insurance
receivership statutes, based on the Uniform Insurance Liquidation Act, was
equivalent in substance and effect as the Pennsylvania insurance receivership
statutes for the purpose of determining whether an order from a Pennsylvania
insurance receivership court was entitled to full faith and credit in Louisiana.
The court held that Pennsylvania and Louisiana have reciprocal statutes, and
therefore, the order from the Pennsylvania receivership court was entitled to
full faith and credit in Louisiana. The court explained that a determination of
reciprocity required an independent examination of the two states’ receivership
statutes and not reliance on a cursory review of a non‐statutory table of
comparisons in an annotated statute volume.
Bonura v. United Bankers Life Insurance Co., 509 So. 2d 8 (La. Ct. App. 1987).
Louisiana court had subject matter jurisdiction in a coverage dispute between
Louisiana resident and an insolvent Texas domiciled insurer. The court held
that because Louisiana has adopted the Uniform Insurers Liquidation Act and
Texas had not and was thus not a reciprocal state, the provisions of the
Uniform Insurers Liquidation Law are not applicable with respect to claims
against foreign insurers from Texas. However, the court held that under
Louisiana's Insurance Code, no insurance contract delivered or issued for
delivery in Louisiana which covers Louisiana residents may contain any
provision which deprives the courts of Louisiana of jurisdiction over actions
against the insurer. Thus, no foreign insurer may enjoy the benefits of a source
of business in Louisiana without being prepared to answer any claims based on
that business by a Louisiana resident in the Louisiana courts.
Bonura v. United Bankers Life Insurance Company, 552 So.2d 1248 (La. App. 1st
Cir. 1989), writ denied, 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 denied, 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.

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.
Massachusetts
Michigan
Clentimack v. AA Transportation Co., Inc., 2003 Mass. Super. LEXIS 373; Int’l
Church of the Foursquare Gospel v. City of Fitchburg, 17 Mass. L. Rep. 30 (Mass.
Super. Ct. 2003); Selinga v. Dukakis, 2003 Mass. Super. LEXIS 355; Jack‐O‐
Lantern Spectacular, Inc. v. Usovicz, 16 Mass. L. Rep. 335 (Mass. Super. Ct. 2003).
In each of these four cases, the action had been stayed for many months
pursuant to a rehabilitation order involving the defendant’s insurer in another
state. The Court held that each case should proceed despite the stay because
after such an extended delay, the interests of justice before the present court
outweighed the justifications for continuing the stay.
American Druggists' Insurance Company v. Carlson, No. G85‐340 CA7, 1989 U.S.
Dist. LEXIS 17719 (W.D. Mich. 1989). The Court of Common Pleas of Franklin
County, Ohio issued an order declaring: (1) an insurer insolvent, (2) appointing
the Ohio Superintendent of Insurance to liquidate the insurer, (3) named the
Attorney General as counsel of record for the insurer, (4) gave notice to all
attorneys previously representing the insurer that their authority to represent
the insurer was terminated and (5) ordered former counsel to return all files,
documents, fees and other assets and properties of the insurer to the
liquidator. The insurer brought the case in diversity; a Magistrate's Order
denied the insurer's motion for an order requiring predecessor counsel to turn
over files in its possession and granted the predecessor counsel a lien on any
original documents. Insurer appealed, arguing that the Magistrate erred in not
enforcing the Ohio court order and that the grant of lien was improper since
Michigan law provides that the proper forum for the attorneys to assert a
claim against the insurer is in the Ohio court which is liquidating the insurer. On
appeal, this court held that since the files were located outside of Ohio, they
were located outside the liquidation court's in rem jurisdiction and thus the
Ohio liquidation court's order is not entitled to full faith and credit by a
Michigan court. It was concluded that the liquidation court lacked personal
jurisdiction over the attorneys in so far as it sought to compel them to turn
over files. Thus, the insurer's remedy was to file in a Michigan court to have its
rights in the disputed files determined instead of relying on the liquidation
court order. The court did find the Magistrate's Order to be clearly erroneous
to the extent that it imposed any liens in favor of the attorneys since the
proper forum for the attorneys to present their claim is the Ohio liquidation
court.
Keehn v. Charles J. Rogers, Inc., 311 Mich. 416, 18 N.W.2d 877 (1945). In an
action by a receiver to collect an assessment where no demand for the
payment of the assessment was made within one year after termination of
policy, though the policyholder was an insured within one year preceding the
liquidation proceedings, there was no liability for the assessment, as the statue

governing Illinois mutual insurance companies, which fails to fix limits as to
time when assessment against policyholders can be demanded, does not
extend beyond territorial limits of that state. The remedy of the Illinois
receiver in suing a Michigan corporation in Michigan courts can be effective in
Michigan only on grounds of comity and not by constitutional mandate.
Minnesota Fuhrman v. United American Insurers, 269 N.W.2d 842 (Minn. 1978).
Appointment of a liquidating receiver in Iowa does not preclude a Minnesota
court from asserting in personam jurisdiction over the company. Furthermore,
the Iowa court's specific injunction of Fuhrman's Minnesota lawsuit is not
enforceable in a Minnesota court and does not affect the subject matter
jurisdiction of the Minnesota court.
Seaway Port Authority v. Midland Ins., 430 N.W.2d 242 (Minn. App. 1988).
Defendant insurance companies claimed that receivership orders which were
issued by out‐of‐state courts and which enjoin further assertions of claims
against them, remove them from the jurisdiction of the Minnesota trial court.
The Appellate Court disagreed, holding that the court is not deprived of its
jurisdiction.
Swing v. Red River Lumber Co., 105 Minn. 336, 117 N.W. 442 (1908). The court
held that since the Ohio action was ex parte, it was not conclusive as to
whether an alleged member of a mutual company was subject to an
assessment and therefore not entitled to be recognized under the full faith
and credit clause of the U.S. Constitution.
Missouri
Nevada
New Jersey
Superintendent of Insurance of the State of New York v. Livestock Market
Insurance Agency, Inc. 709 S.W.2d 897 (Mo. App. 1986). The Superintendent of
Insurance of the State of New York, as liquidator of an insolvent insurer,
brought suit in Missouri state court as assignee of a written contract between
a general agent (the assignor) and a subagent. In determining that the
liquidator's action was barred by limitations, the Missouri Court of Appeals did
not question the propriety of an out‐of‐state liquidator seeking to enforce a
claim in the State of Missouri.
Frontier Ins. Serv., Inc. v. State, 849 P.2d 328 (Nev. 1993). In determining
whether premiums collected by the agent for an insolvent insurer could be
setoff against commissions owed it by the insurer, the Nevada courts
applied the Indiana Uniform Insurers Liquidation Act, which was the
liquidation statute of the domiciliary state.
Glushakow v. Confederation Life Ins. Co., 1994 U.S. Dist. LEXIS 20325 (D.N.J.
1994). Recognizing "the strong regulatory possibility that the rehabilitation of
insolvent insurers can best be accomplished through non‐interference by
outside courts," the Federal District Court deferred to the injunctions entered by
the Michigan and Georgia state courts enjoining any litigation against the insurer
placed in rehabilitation. The Court held this, all the while recognizing that it was
not bound by either injunction, but noting that "the principal of comity to
coordinate jurisdictions calls for staying the action while these other
proceedings are pending."
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.
Motor Club of Am. v. Weatherford, 841 F. Supp. 610 (D.N.J. 1994). A New Jersey
holding company and New Jersey insurance company sued the Oklahoma
Commissioner of Insurance seeking to prevent the Commissioner from
awarding the transfer of the New Jersey insurer from an insolvent Oklahoma
insurer to its parent company in New Jersey. The Federal District Court first held
that the Oklahoma Liquidation Act, and not the New Jersey Holding Company
Act, controlled for purposes of any abstention analysis. Further, the Court
deemed Burford abstention appropriate, despite the fact that the claims
concerned the Oklahoma Commissioner's compliance with the New Jersey
Holding Company Act. The Court reasoned that abstention was appropriate as
Oklahoma, like New Jersey, has formulated a detailed, specialized and complex
scheme to oversee the liquidation of insolvent insurers. Moreover, provisions of
the Oklahoma Liquidation Act mandate that the venue of any delinquency
proceedings must be in Oklahoma and that the Oklahoma Court be the
"exclusive original jurisdiction of delinquency proceedings."
Venetsanos v. Zucker, Facher & Zucker, 271 N.J. Super. 459 (App. Div.), certif.
denied, 1994 N.J. LEXIS 535 (N.J. 1994). The New Jersey Appellate Division
rejected the argument that it lacked jurisdiction to determine obligations as
between a reinsurer and an insurer where the insurer had been placed in
rehabilitation by the Pennsylvania Department of Insurance. Because the issue
presented was the ultimate liability of the reinsurer, and not the insurer in
rehabilitation, the Court held that the Uniform Liquidation of Insurers Act was
inapplicable.
New Mexico
Benham v. Forest Prod. Co., 101 N.M. 119, 679 P.2d 261. Out‐of‐state insurers
transacted business and insured risks in Colorado and were required to
deposit, through their attorney‐in‐fact in Denver, money or securities with
the Colorado Insurance Commissioner as security for the performance of all
reciprocal contracts and as security for any act or omission of the attorneyin‐fact.
These activities fell within the coverage of the Colorado long‐arm
statute. Therefore, the exercise of jurisdiction in Colorado over insurers who,
for over 20 years, were subscribers of an insurance exchange governed by
and regulated under Colorado law did not offend due process.
Craft v. Sunwest Bank of Albuquerque, N.A., 84 F. Supp. 2d 1226 (D. N.M. 1999).
Meadowlark Insurance Company (“Meadowlark”) was an off‐shore insurer
desiring to sell surplus lines of insurance in the United States. To that end,
Meadowlark contacted Sunwest Bank, N.A. (“Sunwest”) to establish a trust
fund required to sell insurance legally in many states, including New Mexico.
The trust fund provided regulators with, inter alia, assurance that Meadowlark
would not just withdraw from these markets without paying claims incurred.
Meadowlark’s principals were not, however, engaged in the business of
insurance, but rather a money making scheme. A Missouri court ordered
Meadowlark into liquidation, and appointed Craft as Special Deputy Liquidator
(“SDL”). Upon discovery of the trust in New Mexico, the SDL moved to
participate in state court proceedings initiated by Sunwest and gained control of
the trust assets. After evaluating the status of the trust assets, the SDL
determined that the value was, after subtracting expenses, actually only
$206,000 rather than the $2,500,000 claimed and sued Sunwest for the
difference between that amount and the $1,500,000 which the SDL asserted
would have been in the fund but for Sunwest’s breach of the trust agreement.

Sunwest contested the SDL’s standing to bring the breach of trust suit. The
court held that the SDL of Meadowlark had standing to bring the breach of trust
and negligence claims raised, because it “is apparent that these claims, if
successful, will benefit the estate of Meadowlark as a whole rather than any
individual claimant. The claims are not designed to redress any individual injury
suffered by a policyholder or creditor. Instead, they are intended to increase
the assets available for division during the liquidation process.” Therefore, as a
matter “of public policy in general, and of statutory interpretation in particular,
an insurance‐company receiver or liquidator has standing to bring such claims.”
Sunwest also urged the court to consider that the domiciliary receivership
proceeding should have been brought in New Mexico, and that the Missouri
proceeding be considered ancillary. The court disagreed, finding that even if
New Mexico “should be considered the domiciliary state for Meadowlark, the
result sought by [Sunwest] would be contrary to principles of full faith and
credit and judicial economy, as well as the purposes behind the Uniform
Insurers Liquidation Act [“UILA”] which has been adopted in New Mexico.”
Thus, because a Missouri court had appointed an SDL for Meadowlark, and
liquidation proceedings had been ongoing in Missouri for some time, New
Mexico courts were required to give the Missouri court’s orders full faith and
credit, or at minimum to enforce them as a matter of comity.
New York A.B. Med. Serv. PLLC v. Highland Ins. Co., 791 N.Y.S.2d 867 (N.Y. Civ. Ct. 2004).
The court stayed an action seeking direct payment from an insurer in
receivership under a Texas state court order based on comity, although Texas
has not enacted the Uniform Insurer’s Liquidation Act (UILA) and is not a
reciprocal state with New York.
Acken v. New York Title & Mortgage Co., 9 F. Supp. 521 (N.D. N.Y. 1934). The
court held that property in the possession of the insurance commissioner of a
company in rehabilitation was not in custodia legis requiring other courts to
refrain from actions involving custody of the property. Property in custodia
legis is property within the custody of the court and no other court has the
right to interfere with that possession unless that court has direct supervisory
control over the court with prior possession or some superior jurisdiction in the
premises. Therefore, the custody of the commissioner whether or not aided or
supervised by the courts was not in any sense custodia legis, as administrative
and legislative agencies are not courts or agents entitled to comity under the
doctrine.
Ambassador Ins. Co. v. Allied Programs Corp., 165 A.D.2d 806, 564 N.Y.S.2d 54
(1st Dep't 1990), app. dismissed without op., 76 N.Y.2d 1017, 565 N.Y.S.2d 766,
566 N.E.2d 1171 (1990). Under a Vermont Superior Court Liquidation Order, the
Commissioner of Banking and Insurance for the State of Vermont, as receiver
of Ambassador Insurance Company, sought to recover earned and unearned
premiums and commissions due from Allied, Ambassador's former agent. In
affirming the decision of the lower court, which granted a motion for partial
summary judgment as to the liability of the agent, the Appellate Division held
that the Uniform Insurers Liquidation Act, which was enacted to provide a
uniform system for the orderly and equitable administration of the assets and
liabilities of defunct multi‐state insurers, mandates recognition of the Vermont
Liquidation Order and allowed the Liquidator to assert claims against the
agent.
Beecher v. Lewis Press Company, 238 A.D. 2d 927, 661 N.Y. S. 2d 116 (4th
Dept. 1997). In this action, the defendant was insured by Canadian Universal
Insurance Company Ltd. Canadian Universal was declared insolvent by the
Rhode Island Insurance Department and the Superior Court of Rhode Island
issued an order enjoining and restraining all claims against any insured of
Canadian Universal. The plaintiff sought to avoid the imposition of the

Rhode Island injunction by arguing that the defendant, Lewis Press
Company, was not entitled to liability coverage from Canadian Universal. The
court found that to continue the action would compel Canadian Universal to
continue to incur expenses to defend the action in direct violation of the
Rhode Island Order which is intended to preserve and protect the assets of
the insolvent company. The Court concluded that the Full Faith and Credit
Clause requires a New York court to honor a Rhode Island order enjoining
actions against an insolvent insurer.
Capitol Indemnity Corporation v. Salvatore Curiale, 871 F. Supp. 205 (S.D.N.Y.
1994). Agency Managers Casualty Reinsurance Pool (the “AMI Pool”) was
formed by several insurance companies to reinsure risks ceded to
retrocessionaires. Plaintiff Capitol Indemnity Company participated in the
AMI Pool as a direct participant, a retrocessionaire and as a group
retrocessionaire. Capitol established trust fund accounts and an operating
account. From 1978 through 1986, four member companies of the AMI Pool
were placed into liquidation. In 1988 the AMI Pool filed for Chapter 7
Bankruptcy protection. Following litigation in Bankruptcy Court, the trust
fund accounts were ordered transferred to the New York Superintendent as
Liquidator of three of the member companies of the AMI Pool. In this action
against the New York Superintendent and a Deputy Superintendent, both in
their official capacities and individually, Capitol alleged that it was the owner
of the trust account funds and that those funds had been improperly
distributed to the estates of the insolvent companies by the Superintendent.
The defendants’ moved to dismiss the complaint under the Burford
abstention doctrine, that requires federal courts to abstain where the
exercise of jurisdiction would unnecessarily interfere with the administration
of a complex state regulatory system. The court found that although the
Superintendent and the Deputy Superintendent were named as defendants
individually, the acts complained of were part of their official duties and
were not ultra vires acts. There were no allegations of self‐dealing against
the defendants. Upon application of the Burford abstention doctrine, the
court declined to decide the parties’ summary judgment motions and
granted the defendants’ motion to dismiss the action.
Future Ways, Inc. v. Odiorne, 697 F. Supp. 1339 (S.D. N.Y. 1988). The court held
that it did not have in personam jurisdiction, pursuant to New York's long‐arm
statute, over a Texas statutory liquidator of an unauthorized, nonresident
insurer where the only contact between New York and the insolvent insurer
was the fact that the insurer had issued an insurance policy to a Texas‐based
company whose products were delivered in New York on one isolated
occurrence.
Home Insurance Co. v. Olympia & York Maiden Lane Co., 174 Misc. 2d 45, 662
N.Y.S. 2d 986 (Sup. Ct. N.Y. Cty. 1997). In a landlord‐tenant case, a Justice of
the Supreme Court, N.Y. County, directed The Home Insurance Co. to make a
rent deposit of over $20 million with a Temporary Receiver. The Home was
under an Order of Supervision issued by the New Hampshire Insurance
Department and the New Hampshire Insurance Commissioner had ordered
The Home not to make the rent deposit. The New York court ruled that
without an ancillary proceeding, it did not have to give comity or full faith
and credit to the New Hampshire administrative order. The court agreed to
stay its rent deposit order only if The Home posted an undertaking.
In re National Surety Co., 283 N.Y. 68, 27 N.E.2d 505 (1940), motion denied, 284
N.Y. 593, 29 N.E.2d 668, cert. denied, 311 U.S. 707. The court held that
judgments against a dissolved corporation in a foreign jurisdiction apply only to
local assets located in the foreign jurisdiction. The Mississippi creditor of a
New York surety obtained a judgment in Mississippi after the New York

company had been dissolved in New York. The judgment had not
extraterritorial effect and was subject to collateral attack in New York. The
statutes of a foreign jurisdiction cannot modify, change, or nullify the
effectiveness of the dissolution of a domestic insurer in the state of its
incorporation.
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.
In re Reliance Group Holdings, Inc. Sec. Litig., No. 00‐CV‐4653 (TPG), 2004 WL
943545 (S.D.N.Y. Apr. 30, 2004). The court rejected the liquidator’s motion to
intervene and dismiss or stay enforcement of a Memorandum of Understanding
and Funding Agreement reached as part of settlement in a securities class
action, and granted the plaintiff’s motion to enforce the Agreement, despite the
liquidator’s filing of an emergency petition for preservation of the insolvent
insurer’s assets. The liquidator originally filed the emergency petition in
Pennsylvania state court and later removed the action to federal court in
Pennsylvania. The court held that the federal court in Pennsylvania had not
made any substantive rulings or asserted in rem or quasi in rem jurisdiction over
the insolvent insurer’s insurance policies or their proceeds, and it would be
“manifestly unjust” to the litigants seeking relief in federal court in New York for
the federal court to abstain. The court found no circumstances requiring
abstention.
Insurance Corporation of Hannover v. Latino Americana de Reaseguros, S.A.,
868 F. Supp 520 (S.D.N.Y. 1994). Latino Americana de Reaseguros, S.A.
(LARSA), a Panamanian reinsurance company, went into statutory
reorganization under the protection of the National Commission for
Reinsurance of the Republic of Panama. In order to be eligible for the
placement of insurance business by excess line brokers licensed in the State
of New York, LARSA had established a trust pursuant to New York State
Insurance Department Regulation 41 (11 NYCRR 27.5). The trust was funded
by a letter of credit issued by a New York bank. This decision deals with
various claims against the trust. The court stated that the Regulation 41
trust is for the benefit of policyholders and beneficiaries. In the event the
insurer is found to be insolvent pursuant to the laws of its domiciliary
jurisdiction, the trustee is to distribute the trust funds at the direction of the
New York Superintendent of Insurance, pursuant to the provisions of Article
74 of the New York Insurance Law (Rehabilitation and Liquidation of
Insurers). The court ruled that it was the only tribunal with jurisdiction over
the trust property. Although the courts of Panama might be able to order
the payment of other claims, they could not order that the claims in this
litigation be paid from the trust property because Panamanian courts lack
jurisdiction over the funds.
Levin v. Tiber Holding Co., No. 98 CIV. 8643(SHS), 1999 WL 649002 (S.D.N.Y.
Aug. 25, 1999). After deciding that it had subject matter jurisdiction over the
liquidator’s action against the insurer and its owners, the federal district court
held that the liquidator’s motion for remand on abstention grounds was
untimely and meritless because this action concerned a matter ancillary to the
liquidation action and did not involve review of a decision made by the
Superintendent himself.
Manitoba Development Corporation v. King, 1996 WL 161826 (S.D.N.Y.), 1996
U.S. Dist. LEXIS 4284. An action, including RICO allegations, arising from the
insolvency of Union Indemnity Insurance Company of New York, was placed
on the suspense docket while an effort was under‐way to achieve a global
settlement of the Union claims. The Plaintiff Manitoba Development

Corporation alleged that, after Union Indemnity was placed in liquidation by
the New York Superintendent of Insurance, Union defaulted on a
performance bond guaranteeing timely completion of work by two
subcontractors hired by a subsidiary of Manitoba. Manitoba named Union
Indemnity’s former officers and directors as defendants, alleging common
law fraud, negligent misrepresentation and claims under RICO for damages
allegedly caused by the default on the bond. The court kept this case on the
suspense docket, finding that a New York State Supreme Court Order of
Liquidation is broad enough to prevent litigation against Hall’s directors in
other courts, particularly because Manitoba had already filed claims in the
liquidation action. The court reached its decision on the basis of Corcoran v.
Frank B. Hall & Co., 149 A.D. 2d 165, 545 N.Y.S. 2d 278 (1 st Dept. 1989), which
held that Union Indemnity’s creditors cannot submit themselves to the
jurisdiction of the liquidation court and thereafter assert claims stemming
from the insolvency against individual defendants, including officers and
directors, outside the jurisdiction of the liquidation court.
Moscow Fire Insurance Co. v. Bank of New York & Trust Co., 280 N.Y. 286, 20
N.E.2d 758 (1939), reargument denied, 280 N.Y. 848, 21 N.E.2d 890, motion
denied, 293 N.Y. 749, 56 N.E.2d 745. The courts were bound to give effect to
Soviet decrees terminating the insurance company in Russia.
Serio v. Black, Davis & Shue Agency, Inc., No. 05 CIV. 15 (MHD), 2005 WL
25600390 (S.D.N.Y. Oct. 11, 2002). In the rehabilitator’s action to recover
premiums from the defendant agency under a brokerage contract, the federal
district court granted the rehabilitator’s motion for stay, citing Burford
abstention.
North Carolina Commonwealth Mutual Fire Ins. Co. v. Edwards, 124 N.C. 116, 32 S.E. 404 (1899).
Where foreign insurer had complied with statutory deposit and other
requirements of North Carolina law, and thereafter became insolvent in its
domiciliary state, North Carolina residents were subject to assessments validly
rendered in the domiciliary state.
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.
Ohio
Oklahoma
Pennsylvania
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.
Professional Construction Consultants, Inc. v. Grimes, 552 F. Supp. 539 (W.D.
Okla. 1982). Where under the Oklahoma Uniform Insurers Liquidation Act
claims against a surety's liquidators had been fully liquidated, such judgment
was binding on plaintiff.
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 domicilliaries against its
own corporations outweighed Bermuda's interest in regulating its reinsurance
industry where the subsidiary is "exempt" (does not do business).
South Carolina Smalls v. Weed, 293 S.C. 364, 360 S.E.2d 531 (1987) (following remand by 292
S.C. 408, 356 S.E.2d 843 (1987)). Despite the fact that South Carolina and
Tennessee are reciprocal states under South Carolina's version of the Uniform
Insurer's Liquidation Act, a South Carolina insured is not prohibited from
bringing an action in South Carolina to prove a claim against the rehabilitator of
a Tennessee insurance company since the statutory provisions prohibiting
actions against liquidators of insurance companies were determined not to be
applicable to actions against a rehabilitator. Therefore, South Carolina courts
have subject matter jurisdiction over an insured's action to prove a claim
against a domiciliary rehabilitator from Tennessee.
Wetmore v. Scalf, 85 S.C. 285, 67 S.E. 298 (1910). The court conducting the
receivership of an insolvent South Carolina domestic mutual insurer had
jurisdiction over all members of the company to collect assessments,
regardless of their residence.
Tennessee Credit General Ins. Co., v. Ins. Serv. Group, Inc., 2007 Tenn. App. LEXIS 495
(Tenn. Ct. App. 2007). Insurance company entered into agreement with agency
that provided that the agreement was governed by the law of Ohio and that
disputes were to be settled and determined by arbitration. The insurance

company was then placed in liquidation and the agency filed an action over a
payment dispute. A motion to compel arbitration was granted, and the trial
court stayed such arbitration pending a decision on appeal. In affirming, the
appellate court determined that the primary issue in this case was whether Ohio
or Tennessee law applied to resolve the contract dispute regarding arbitration.
The parties’ choice of law was honored. Therefore, Ohio law controlled.
Because Ohio law provided that on procedural matters, such as arbitration, the
law of the forum governed, Tennessee law was applied to determine whether
an issue is arbitrable. Applying Tennessee law, the dispute was subject to
arbitration under Tennessee Code § 29‐5‐302(a).
Davis v. Amra Grotto M.O.V.P.E.R., Inc., 169 Tenn. (5 Beeler) 564, 89 S.W.2d 754
(1936). When Tennessee creditors had impounded the Tennessee assets of
insolvent Ohio insurance company, and the Ohio receiver asserted that all of
these assets should be transferred to the receiver, it was held that this issue
was not properly presented for determination because Ohio receiver was not a
creditor, where the order appointing the receiver did not vest the receiver with
title to all assets of the insurer. The court also noted that even if the Ohio
receiver should be allowed to intervene, the receiver would not be allowed to
remove Tennessee assets as long as the insurance company owed obligations
to local creditors, where the insurance company, although incorporated in
Ohio, had domesticated in Tennessee.
Taylor v. Life Ass'n. of America, 13 F. 493 (C.C. W.D. Tenn. 1882). When
Tennessee policyholders of insolvent Missouri life insurer brought suit in
Tennessee to attach its assets and distribute them according to Tennessee law,
it was held that because under Tennessee law the Tennessee creditors had
acquired no specific lien or right or priority prior to the transfer of assets to the
receiver, the suit of the Tennessee creditors must be dismissed, and the
creditors must seek satisfaction in the insolvency proceeding in Missouri.
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.

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).
Bryant v. United Shortline Inc. Assurance Services, N.A., 984 S.W. 2d 292
(Tex. App.‐‐Ft. Worth 1998) Liquidator successfully appealed motion for
summary judgment in favor of United Shortline Inc., insurance broker. The
court held: ownership of funds was a question of fact, precluding summary
judgment; the court had quasi in rem jurisdiction over interpleaded funds.
Insurance broker, as a judgment creditor, brought action against an
insurance company, the judgment debtor, to preserve assets. The Bank
possessing assets interpleaded the funds bringing the liquidator of a
Tennessee insurance company into the suit. Despite the liquidation
proceeding in Tennessee, the Texas court had quasi in rem jurisdiction over
the interpleaded funds that were in the Tennessee courts registry and had
been in a bank in Texas before it sought interpleader. Tennessee did not
have jurisdiction over an alien insurance companies assets. Any order of a
Tennessee court liquidating a non – domiciliary alien insurer’s assets in
another state would not be entitled to full faith and credit since it would
exceed the courts subject matter jurisdiction based on a prior Texas state
court appellate determination. The Tennessee statute granting jurisdiction
would be interpreted as limited to the alien insurer’s assets to those in the
state.
Moody v. State, 520 S.W.2d 452 (Tex. Civ. App. 1975), writ. ref. n.r.e. 547 S.W.2d
958 (Tex. 1977). The Texas court held that because an Alabama judgment was
rendered by a court of competent jurisdiction and adjudicated the issue of
solvency of an insurer, it would be treated as a final judgment entitled to full
faith and credit in Texas proceedings seeking cancellation of the insurer's
charter and certificate of authority.
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
rehabilitation, 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.
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.
Virginia
Bockover v. Life Association of America, 77 Va. 85 (1883). The plaintiff was
policyholder of a foreign company that had been declared insolvent. The
Missouri court had vested all assets of the company in the hands of a receiver.
The plaintiff attached, in a Virginia court, debts owed to the company by
Virginia residents. The company answered that debts were not subject to
attachment, and receiver intervened claiming to be entitled to the debts. It
was held that as the Missouri statute for winding up the insurer was valid, the
decree of the Missouri court vesting assets in receiver was valid, and would be
observed by Virginia. Attachments therefore would be dissolved.
Eastern Indemnity Co. of Maryland v. Hirschler, Fleischer, Weinberg, Cox &
Allen, 253 Va. 9, 366 S.E.2d 53 (1988). In a law firm's action against an insolvent
insurer to recover for legal services and disbursements, court orders entered in
the domiciliary delinquency proceeding in Maryland which prohibited actions,
judgments, liens or attachments against an insolvent insurer were held not
entitled to full faith and credit in Virginia because the law firm was neither a
party to nor given notice of the Maryland proceeding, and because the
Maryland court never litigated or decided its jurisdiction over the law firm.
Morrow v. Vaughn‐Bassett Furniture Co., Inc., 173 Va. 417, 4 S.E.2d 399 (1939).
A Virginia member of an insolvent Texas mutual insurer was assessed on a
policy. Although the Virginia resident was not a party to the Texas suit, it was
held that the assessment was valid as the Virginia resident was a party by
representation, and liability for the assessment attached while the Virginian
was a member of the company and while the company was in fact insolvent.
Washington
Wisconsin
American Star Ins. Co. v. Grice, 865 P.2d 507 (Wash. 1994). While a
declaratory judgment action brought by an insurer was pending, an order of
liquidation and permanent injunction were issued in respect of the insurer
pursuant to the Wisconsin Uniform Insurers Liquidation Act. The Supreme
Court of Washington emphasized the need for interstate comity and
recognition of the Wisconsin liquidation proceeding. The court determined
that to the extent the action was against the insurer ‐‐ since the insured
sought affirmative action against the insurer in seeking a declaration that it
was entitled to coverage ‐‐ the Wisconsin Uniform Insurers Liquidation Act
called for abatement of the action. The court further determined that to the
extent the action was by the insolvent insurer, the liquidator had effectively
exercised his option under the Uniform Act to abandon the action.
In the Matter of the Liquidation of Executive Life Ins. Co., Fuhrmann v. Wis.
Ins. Sec. Fund, 218 Wis. 2d 832, 581 N.W.2d 594 (Ct. App. 1998) (unpublished
disposition ‐ table only). Fara Fuhrmann was the beneficiary of a First
Executive (insolvent insurer) annuity. Fuhrmann voluntarily opted into the
supervisory California court’s rehabilitation plan. Because under the
calculation of benefits under the California court’s plan, Fuhrmann’s benefits
were lower than they would have been had she proceeded with a claim

against the Wisconsin Insurance Security Fund ("WISF"), Fuhrmann
attempted to opt‐in to the California plan, yet still pursue her claims against
the WISF. The present value of her annuity payments under the plan was
less than the annuity's original value. She asked the WISF to pay to her the
difference between what she received under the plan and the WISF’s
$300,000 limit on claims. The court held that when Fuhrmann opted into a
California court's payment plan for insureds of an insolvent insurer, she
released the WISF from any obligation to respond to her claim, and that she
subjected herself to the California court's jurisdiction; therefore, the Full
Faith and Credit Clause demanded that Wisconsin decline to entertain
Fuhrmann's challenges to her treatment under the California plan. If a
Wisconsin court were to allow Fuhrmann to proceed, that court would
undermine the relief fashioned by the California court, which would violate
the obligation to give the California court's judgment the same credit it
would have in California courts. Fuhrmann's attempts to reserve Wisconsin
as her relevant state for computation of benefits failed, as the WISF had no
notice of her letter to the California liquidator of Executive Life, and her
attempt did not negate her release of the WISF that arose because of her
participation in the California plan. she received under the plan and the
Fund's $300,000 limit on claims.
Iserman v. MBL Life Assurance Corp., 231 Wis.2d 136, 605 N.W.2d 210 (Ct. App.
1999). A Wisconsin insured of a New Jersey insurer in rehabilitation filed suit
against the insurer’s successor to which liabilities and assets were transferred
during rehabilitation. The insured asserted claims for breach of contract and
bad faith, and sought declaratory relief. The circuit court ruled it did not have
jurisdiction because the claim fell within the rehabilitation plan filed in New
Jersey. The appellate court held jurisdiction existed, but affirmed. The court
reasoned that the principle of comity governed because both New Jersey and
Wisconsin enacted very similar insurance rehabilitation and liquidation acts, and
the policy supporting comity outweighed any detriment to policyholders.
Accordingly, the court followed the rehabilitation plan in place in New Jersey
which provided that the rehabilitation court had “exclusive jurisdiction” over
the insurer’s rehabilitation proceedings. While Wisconsin permits residents to
file claims with an ancillary receiver in liquidation proceedings, the court noted
that no ancillary receiver had been appointed. Thus, the insured’s avenue of
relief was with the New Jersey court.
Janak v. Allstate Ins. Co., 319 F. Supp. 215 (W.D. Wis. 1970). In upholding the
restraining order barring persons from obtaining judgments against insolvent
insurer and from interfering with the business of the liquidator issued by the
state court, the federal court noted that full faith and credit must be given to
the Illinois court's order even though the parties alleged they did not receive
notice of the liquidation order.
Sanchez v. Finlay Jewelry Corp., 284 Wis.2d 570, 699 N.W.2d 253 (Wis. Ct. App..
2005) – Court affirmed entry of default judgment against insured, whose insurer
was under order of liquidation in New York state court, where insured did not
respond to complaint. Court rejected comity argument, under which New York
state court injunction against new suits against insurer barred the current suit,
because New York state court injunction was expressly limited to all parties “to
law suits in this state.” The court further reasoned that insured’s failure to act in
light of its knowledge of insurer’s insolvency was not reasonable.
Interaction with Bankruptcy Estates
Tenth Circuit
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.
Florida
In re Aloisi, Anna Patricia, Debtor, 261 B.R. 504 (M.D. Fla. 2001). A proof of claim
may be filed with the Bankruptcy Court, but any recovery is unlikely. The Debtor
simply has no money to defend the District Court Action, and it would be unjust
and unfair to a debtor seeking a fresh start to return to litigating a claim that is
already discharged. 261 B.R. at 509.
The effect of a Chapter 7 discharge is to release a debtor from “all debts that
arose before the date of the order for relief... and any liability on a claim that is
determined under section 502 of this title as if such claim had arisen before the
commencement of the case, whether or not a proof of claim based on any such
debt or liability is filed under section 501 of this title, and whether or not a claim
based on any such debt or liability is allowed under section 502 of this title.” 11
U.S.C. § 727(b). As applied to this case, Bankruptcy Code Sections 727(a) and (b)
release the Debtor from any judgment the District Court may award, even if the
action were permitted to proceed. 261 B.R. at 509.

PART II
Cross‐Border Run‐Offs and Receiverships
A. United States Assistance to Non‐U.S. Re/Insurance Run‐Off, Liquidation,
Administration
1. Introduction
Selinda A. Melnik
Edwards Angell Palmer & Dodge LLP
Non‐U.S. re/insurance companies involved in run‐off, liquidation, administration and the like outside of the
United States often have assets or other exposure in the U.S. which must be protected to ensure effective
implementation of the non‐U.S. endeavor. Typically, the representative of the non‐U.S. re/insurer seeks to
obtain a stay of acts within the United States against the re/insurer or its assets and the transfer of U.S. sited
assets or their proceeds back to the foreign jurisdiction to enable claims resolution and distribution of value to
claimants to occur within, and under the laws governing, the foreign proceeding.
Absent jurisdictional access to assistance via U.S. state re/insurance proceedings, the representative of the
non‐U.S. re/insurer must look to U.S. federal law. If the non‐U.S. run‐off, liquidation or administration meets
the definition of a “foreign proceeding” under the U.S. Bankruptcy Code, the representative of that “foreign
proceeding” may not seek relief from any court within the United States ~ municipal, state or federal ~ under
any law without first seeking recognition of the “foreign proceeding” via Chapter 15 of the U.S. Bankruptcy
Code. Bankruptcy Code Chapter 15 recognition of the “foreign proceeding” is a jurisdictional predicate to relief
in the United States in aid of that proceeding. It effectively is an “entry visa” required to obtain assistance
from any U.S. court in aid of a “foreign proceeding.”
Non‐U.S. re/insurers engaged in such business in the United States are not eligible to be debtors in full plenary
proceedings commenced in the United States under the U.S. Bankruptcy Code, such as Chapter 7 liquidation or
Chapter 11 reorganization proceedings. 11 U.S.C. §109(b)(3)(a). Moreover, Chapter 15 ancillary recognition and
relief in aid of non‐U.S. proceedings generally is not available to non‐U.S. proceedings concerning the types of
entities that otherwise would not be eligible to be debtors under the U.S. Bankruptcy Code (in the main,
entities regulated under U.S. State or Federal law, such as banks and insurers). Thus, absent some exception, a
non‐U.S. proceeding involving a re/insurer would not be eligible for Chapter 15 recognition and relief in the
United States. However, Chapter 15 subsection 1501(c)(1) expressly excepts from these otherwise excluded
entities non‐U.S. proceedings involving non‐U.S. insurance companies, which Congress has determined “are
eligible for recognition and relief under Chapter 15 as they had been under [now‐repealed] section 304.” 1
The eligibility of foreign insurance companies for Chapter 15 relief is not a departure from prior law. It is both a
continuation of current law and effective codification of a developed body of case law generated under former
section 304. 2 Chapter 15 subsection 1501(d), however, carves out from the relief the U.S. bankruptcy court may
grant in aid of a proceeding involving a foreign insurer under Chapter 15 any relief respecting any deposit,
escrow, trust fund or the like posted by a foreign insurer under State insurance law or regulation for the
benefit of policyholders in the United States.
U.S. Bankruptcy Code Chapter 15 became effective October 17, 2005, at which time it replaced former single
section 304 of the U.S. Bankruptcy Code. In the ensuing three years plus, more than 260 single and jointly
administered cases have been brought under Chapter 15, eighteen (18) of which have sought relief in aid of
non‐U.S. re/insurers, with one ultimately withdrawn following decision to not proceed with the UK scheme of
arrangement (NRG Victory Reinsurance Ltd). Of the remaining seventeen (17) re/insurance related Chapter 15
cases, thirteen (13) have involved non‐U.S. run‐off schemes of arrangement, three (3) have involved liquidation
or winding‐up proceedings, and one (1) was filed in aid of a UK administration proceeding.
A chart setting forth pertinent information about the re/insurance related Chapter 15 cases filed through the
end of February 2009 comprises Part B of this Chapter. Part C briefly explores the purposes of Chapter 15 and
1 House Report No. 109‐31, Pt. 1, 109 th Cong., 1 st Sess. (2005) (hereinafter “House Report”) at 107.
2 See generally In re Tri‐Continental Exchange, Ltd., 349 B.R. 627 632 (Bankr. E.D. Cal. 2006).

eligibility for Chapter 15 recognition and relief in the U.S. Part D discusses the very few decisions rendered by
U.S. courts in re/insurer Chapter 15 cases filed to date which address issues specific to re/insurers, as opposed
to those generic to Chapter 15 cases involving any debtor. 3 Part E considers the central objections articulated
thus far by policyholder counsel to Chapter 15 relief in aid of solvent schemes of arrangement. 4
2. Chapter 15 Re/Insurance Cases Filed Through February 2009
CASE(S)
Globale
Ruckversicherun,
Global General
and Reinsurance
Co Ltd
Thomas Klaus
Freudenstein as
Foreign Rep
FOREIGN
PROCEEDIN
G
COUNTRY
United
Kingdom
DISPOSITION
Run‐Off
Scheme
Part of AXA
pool (see
below)
Recognized
Global General
as Main
Proceeding,
Globale as
Non‐Main
Bluepoint Re Ltd Bermuda Provisional
Liquidation
Recognized as
Main
Proceeding
Sphere Drake
Insurance Ltd
ING Re (UK)
Limited
United
Kingdom
United
Kingdom
Run‐Off
Scheme
Recognized as
Main
Proceeding
Run‐Off
Scheme
Recognized as
Main
Proceeding
REPORTED
DECISIONS
FILED IN U.S.
BANKRUPTCY
COURT FOR
New York
Southern Dist
New York,
Southern Dist
New York,
Southern Dist
New York
Southern Dist
CASE #
08‐14939
08‐14940
Jointly
Administere
d
Cases
DATE
FILED
10
Decembe
r 2008
08‐13169 13 August
2008
08‐12832 22 July
2008
08‐10018 04
January
2008
3 Comprehensive exploration of key issues adjudicated to date respecting Chapter 15 is beyond the scope of
this work. The author (smelnik@eapdlaw.com) can direct the reader to several recent compendia. In addition,
as of this writing, the following court decisions on issues raised by Chapter 15 have been reported: In re
Bancredit Cayman Limited, 2007 WL 3254369 (Bankr. Nov. 2, 2007), aff’d, 2008 WL 919533 (Mar. 31 2008),
further disposition, 2008 WL 5396618 (Bankr. Nov. 25, 2008); In re Basis Yield Alpha Fund, Decision and Order on
Motion for Summary Judgment Seeking Recognition as foreign main proceeding, 381 B.R. 37 (Bankr. S.D.N.Y. Jan.
16, 2007); In re Bear Stearns High‐Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122 (Bankr.
S.D.N.Y. 2007), aff’d, 389 B.R. 325 (S.D.N.Y. 2008); In re Betcorp, __ B.R. ___, 2009 WL 606437 (Bankr. D. Nev.
2009) (on appeal); In re Condor Insurance Limited, 2008 WL 2858943 (Bankr. S.D. Miss. July 17, 2008), aff’d,
2009 WL 321627 (S.D. Miss. Feb 9, 2009); In re Ephedra Products Liability Litigation, 349 Bankr. 333 (2006); In re
Ernst & Young, Inc, as Receiver of Klyties Developments, Inc, 383 B.R. 773 (Bankr. D. Colo. 2008); In re Ho Seok
Lee, 348 BR 799 (Bankr. W.D. Wash. 2006); In re Iida, 377 B.R. 243 (BAP 9th Cir. 2007); In re Loy, 380 B.R. 154
(Bankr. E.D. Va. 2007); In re Oversight & Control Comm’n of Avanzit, SA, 385 B.R. 525 (Bankr. S.D.N.Y. 2008); In re
Petition of Lloyd, No 05‐60100(BRL), 2005 WL 3764946 (Bankr. S.D.N.Y. Dec. 7, 2005); In re Pro‐Fit Holdings, Ltd,
391 B.R. 850 (Bankr. C.D. Cal. 2008); In re Ran, 390 B.R. 257 (Bankr. S.D. Tex. Houston Div 2008); In re SPhinX,
Ltd, 351 B.R. 103 (Bankr. S.D.N.Y. 2006), aff’d, 371 B.R. 10 (S.D.N.Y. 2007); In re Tradex Swiss AG, 384 B.R. 34
(Bankr. D. Mass. 2008); In re Tri‐Cont. Exch Ltd, 349 B.R. 627 (Bankr. E.D. Cal. 2006); Lavie v Ran, 384 B.R. 469
(S.D. Tex. 2008); US v JA Jones Constr Group, 333 B.R. 637 (E.D.N.Y. 2005).
4 Only one of these objections has been asserted via formal objection filed in any Chapter 15 case to date (see
In re Greyfriers Insurance Company Limited, et al., eleven (11) jointly administered Chapter 15 cases filed September
18, 2007 re “WFUM” pool solvent scheme participants, Bankruptcy Court for the Southern District of New York
Case Nos. 07‐12934‐43).

CASE(S)
Highland
Insurance
Company (UK) Ltd
In re Greyfriars
Insurance Company
Limited, et al. ~
PRO Insurance
Solutions Limited
as foreign
representative of:
Greyfriars
Insurance
Company Limited,
Sovereign
Insurance (UK)
Limited, Allianz
Insurance PLC,
Heddington
Insurance (U.K.)
Limited, Mitsui
Sumitomo
Insurance
Company (Europe)
Limited, The
Ocean Marine
Insurance
Company Limited,
Oslo Reinsurance
Company (UK)
Limited, The Sea
Insurance
Company Limited,
Tokio Marine
Europe Insurance
Limited, WauSau
Insurance
Company (U.K.)
Limited, Allianz
Global Corporate
& Specialty
(France), [“WFUM
POOL cases”]
Condor Insurance
Ltd
FOREIGN
PROCEEDIN
G
COUNTRY
United
Kingdom
United
Kingdom
Cayman/
Nevis
DISPOSITION
Administration
Recognized as
Main
Proceeding
Pool Run‐Off
Scheme
Contested Ch
15:
Policyholders
objected
arguing US
bankruptcy
court should
not grant Ch 15
relief absent a
full inquiry into
scheme
creditor
protections.
Ch 15 Recog.
granted over
obj as Main
Prcdng re all
but Allianz,
Recognized as
Non‐Main
Filing to
prevent
collection of
assets in US to
satisfy arb
award
Contested Ch
15;
Recognized as
Main
Proceeding
REPORTED
DECISIONS
2008 WL
2858943
(Bankr. S.D.
Miss. July 17,
2008), aff’d,
2009 WL
321627 (SD
Miss. 2/9/09)
FILED IN U.S.
BANKRUPTCY
COURT FOR
New York
Southern Dist
New York
Southern Dist
Mississippi
Southern Dist
CASE #
DATE
FILED
07‐13970 18 Dec.
2007
07‐12934 thru
07‐12943
Jointly
Administere
d
Cases
18 Sept
2007
07‐51045 26 July
2007

CASE(S)
Oslo Reinsurance
FOREIGN
PROCEEDIN
G
COUNTRY
United
Kingdom
DISPOSITION
Run‐Off
Scheme
Recognized as
Main
Proceeding
Arion Insurance Bermuda Run‐Off
Scheme
Recognized as
Main
Proceeding
AXA Insurance UK,
MMA IARD, Global
General and
Reinsurance,
Ecclesiastical
Insurance Office
Compagnie
Europeenne
D’Assurances
Industrielles S.A.
Europaische
Ruckversicherungs
Gesellschaft In
Zurich (RGM Pool)
Tri‐Continental
Exchange Ltd,
Alternative Market
Exchange Ltd,
Combined
Services, Ltd.
Gordian Runoff
(UK) Limited
United
Kingdom
United
Kingdom
United
Kingdom
St. Vincent
and
Grenadines
United
Kingdom
Reinsurance
Pool Run‐Off
Scheme
Run‐Off
Scheme
Recognized as
Non‐Mail
Proceeding
Run‐Off
Scheme
Recognized as
Non‐Main
Proceeding
SVG Winding
Up;
(US forfeiture
action for
fraud within
US)
Contested Ch
15;
Recognized as
Main
Proceeding;
Order re
distrib. USbased
funds;
Order
protocols
requiring file
reports in US
case re actions
taken in SVG
case and re
fees.
Run‐Off
Scheme
Recognized as
Main
Proceeding
REPORTED
DECISIONS
349 B.R. 627
(Bankr. E.D.
Cal. 2006).
FILED IN U.S.
BANKRUPTCY
COURT FOR
New York
Southern Dist
New York
Southern Dist
New York
Southern
District
New York
Southern
District
New York
Southern
District
California
Eastern Dist
New York
Southern Dist
CASE #
07‐12211‐12
Jointly
Administere
d
DATE
FILED
19 July
2007
07‐12108 9 July
2007
07‐12110‐12113
Jointly
Administere
d Cases
9 July
2007
07‐12009 28 June
2007
06‐13061 21 Dec.
2006
06‐22652
06‐22655
06‐22657
Jointly
Administere
d Cases
20 July
2006
06‐11563 11 July
2006

CASE(S)
Hatteras
Reinsurance Ltd
NRG Victory
Reinsurance Ltd
Lion City Run‐Off
Private Limited
La Mutuelle du
Mans Assurances
IARD UK Branch
MMA Account
FOREIGN
PROCEEDIN
G
COUNTRY
Bermuda
United
Kingdom
Singapore
United
Kingdom
DISPOSITION
Invol winding
up
Contested Ch
15
Recognized as
Main
Proceeding
Run‐Off
Scheme
Recognized as
Main
Proceeding but
Scheme not
pursued and
Ch 15 Case
Withdrawn
Run‐Off
Scheme
Recognized as
Main
Proceeding
Run‐Off
Scheme
Recognized as
Main
Proceeding
REPORTED
DECISIONS
In re Petition
of Lloyd,
2005 WL
3764946
(Bankr.
SDNY Dec. 7,
2005)
FILED IN U.S.
BANKRUPTCY
COURT FOR
New York
Southern Dist
New York
Southern Dist
New York
Southern Dist
New York
Southern Dist
CASE #
DATE
FILED
06‐11304 8 June
2006
06‐11052 12 May
2006
06‐10461 15 March
2006
05‐60100 11 Nov.
2005
3. What is Chapter 15?
The United States of America formally incorporated the UNCITRAL Model Cross‐Border Insolvency Law 5
virtually intact into its bankruptcy law effective 17 October 2005. 6 In doing so, the United States Congress
took the highly unusual step of creating an entire new chapter of the U.S. Bankruptcy Code ~ replacing former
single section 304 with thirty‐two section Chapter 15.
a. Purpose and Effect of Chapter 15
Chapter 15, like the Model Law it incorporates, was adopted by the United States Congress to ensure greater
certainty and predictability in the outcome of insolvency cases impacting more than one nation. Congress
expressly noted that Chapter 15 was being adopted to demonstrate the United States’ commitment to the
UNCITRAL Model Law and, generally, to cooperation and universalism. 7 True to that intent, the statutory
construction and substantive content of Chapter 15 closely track the UNCITRAL Model Law. Moreover, the
5
UN Commission on International Trade Law (“UNCITRAL”) Model Cross‐Border Insolvency Law, U.N. G.A., 52d
Sess., Supp. No. 17 (A/52/17)(1997) (the “Model Law”).
6 Chapter 15 was added to U.S. law as part of the Bankruptcy Abuse Prevention & Consumer Protection Act of
2005, Pub.L. 109‐8, 112 Stat. 23 (“BAPCPA”). It is embodied in sections 1501 through 1532 of the United States
Bankruptcy Code, which itself is set forth in Title 11 (11 U.S.C. §§ 101 et seq.) of the United States Code.
7
Collier on Bankruptcy (Alan N. Resnick & Henry J. Sommer, eds., Matthew Bender, 15 th ed., rev 2006) 8, para.
1501.02.

legislative history of Chapter 15 instructs the U.S. bankruptcy court to look to the Model Law, its Guide to
Enactment and other history as central to the legislative history to Chapter 15. 8
Further, and of significant consequence, Chapter 15 impacts proceedings within the United States commenced
not only under the U.S. Bankruptcy Code and in the U.S. bankruptcy courts, but also cases commenced under
other laws in other Federal, State and Local courts. If a non‐U.S. proceeding is a “foreign proceeding” as
defined under Chapter 15 section 1502(4), no relief may be obtained in aid of that proceeding or the debtor it
involves, other than relief in aid of collecting a debt owed to that debtor, from any court within the United
States, federal or state or local, unless a Chapter 15 petition for recognition of the “foreign proceeding” first is
filed with an appropriate U.S. federal bankruptcy court and that court enters an order granting recognition of
the “foreign proceeding.” 11 U.S.C. § 1509. Once a Chapter 15 recognition order has been obtained from a U.S.
bankruptcy court, all other courts within the United States are required to grant comity or cooperation to the
representative of the “foreign proceeding” who seeks their assistance. 11 U.S.C. §1509(b)(3).
b. Judicial Discretion Under Chapter 15
Chapter 15 is intended to afford non‐U.S. proceedings swifter, less subjective, and more certain and predictable
relief in the United States in aid of effectuation and implementation of the foreign proceeding. Accordingly, in
contrast to what was viewed as broad subjective discretion permitted under former section 304, the
bankruptcy court’s discretion in determining whether or not to grant Chapter 15 recognition is more severely
constrained if certain specified predicate criteria are met. 11 U.S.C. §1517.
Determining whether or not to grant recognition to a foreign proceeding is now intended to be a simple,
expeditious examination by the U.S. bankruptcy court of certain predicate criteria ~ the eligibility of the
foreign proceeding for assistance from U.S. courts, the credentials of the petitioning representative of that
proceeding, and the sufficiency of the application for recognition of the foreign proceeding. Moreover, the
U.S. court is required to act on a petition for recognition “at the earliest possible time.” 11 U.S.C. §1517(c). If the
court determines that the predicate criteria for recognition have been met, the court may not abstain from
hearing the case, even in the “interest of justice” or in the “interest of comity”. 28 U.S.C. §1334(c)(1). Under
such circumstances, the court may only refuse to grant recognition where the court determines that granting
recognition under the circumstances presented “would be manifestly contrary to the public policy of the
United States.” 11 U.S.C. §1506.
The U.S. court is not empowered by Chapter 15 or otherwise to impose U.S. law on non‐U.S. proceedings or to
second‐guess, re‐visit or re‐adjudicate the foreign court’s orders and decisions.
Indeed, Chapter 15 expressly instructs the court that “[i]n interpreting this chapter the court shall consider its
international origin, and the need to promote an application of this chapter that is consistent with the application
of similar statutes adopted by foreign jurisdictions.” 11 U.S.C. §1508. If the U.S. court finds the applicable foreign
law to be anathema to the most fundamental U.S. public policy, the U.S. court is not empowered to change the
foreign law. The U.S. court is only empowered to refuse to assist in the application of that foreign law. If the
U.S. court finds that the foreign proceeding and/or foreign representative have not met the predicate criteria
for recognition, the U.S. court is only empowered to refuse to assist the implementation of that foreign
proceeding within the territorial jurisdiction of the United States.
c. Eligibility Basics for Chapter 15 Recognition and Relief
To obtain relief from a U.S. bankruptcy court ancillary to and in aid of a non‐U.S. proceeding, certain predicate
requirements first must be met:
• The non‐U.S. proceeding must be Eligible for recognition under Chapter 15
• The Petitioner must be Eligible to file the Ch. 15 case in aid of that proceeding
• Commencement of the Chapter 15 case must be effected properly
8 House Report at 107.

• The Court in which the Chapter 15 case is filed must be the proper Venue
• The Petitioner must be entitled to obtain the Relief sought
Not all foreign proceedings are eligible for recognition and relief under Chapter 15. Moreover, the relief the
U.S. bankruptcy court is empowered to grant in aid of a foreign proceeding depends ab initio on whether the
foreign proceeding is eligible for recognition and relief and where the proceeding is pending.
To be eligible for recognition under Chapter 15, the non‐U.S. proceeding must be a “foreign proceeding” as
redefined in the general definitions section of the U.S. Bankruptcy Code (section 101). A “Foreign Proceeding”
now means 9
“a collective judicial or administrative proceeding in a foreign country, including an interim
proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the
assets and affairs of the debtor are subject to control or supervision by a foreign court, for the
purpose of reorganization or liquidation.”
11 U.S.C. §101(23). 10
Even if a proceeding pending outside of the United States meets the definition of “Foreign Proceeding,” it still
may not be eligible for recognition, and therefore relief, under Chapter 15.
Bankruptcy Code section 1502(7) expressly defines “recognition” for purposes of Chapter 15 to mean “the
entry of an order granting recognition of a foreign main proceeding or a foreign nonmain proceeding under this
chapter.” 11 U.S.C. §1502(7)(emphasis added). Thus, the Foreign Proceeding must be either a “foreign main
proceeding” or a “foreign nonmain proceeding” to be eligible for recognition.
A “Foreign Main Proceeding” is defined for purposes of Chapter 15 to mean “ a foreign proceeding pending in
the country where the debtor has the center of its main interests.” 11 U.S.C. §1502(4). While “center of main
interests” (popularly referred to as “COMI”) is not a defined term in Chapter 15 or elsewhere in the Bankruptcy
Code, section 1516 of the Bankruptcy Code ~ titled “Presumptions concerning recognition” ~ provides that “in
the absence of evidence to the contrary, the debtor’s registered office, or habitual residence in the case of an
individual, is presumed to be the center of the debtor’s main interests.” 11 U.S.C. §1516(c). 11
A “Foreign Nonmain Proceeding” is defined for purposes of Chapter 15 to mean “a foreign proceeding, other
than a foreign main proceeding, pending in a country where the debtor has an establishment.” 11 U.S.C. §1502(5).
The term “establishment” is defined in the Bankruptcy Code in the Chapter 15 definitions section. For
purposes of Chapter 15, “establishment” means “any place of operations where the debtor carries out a
nontransitory economic activity.” 11 U.S.C. §1502(2). However, neither “operations” nor “nontransitory
economic activity” are defined in the Bankruptcy Code.
In contrast, relief under former section 304 appears to have been available only in aid of what would be a
Foreign Main Proceeding under Chapter 15. The pre‐Chapter 15 definition of “foreign proceeding”, applicable
to old section 304, required the proceeding to be pending in a foreign country in which the debtor’s domicile,
residence, principal place of business or principal assets were located at the commencement of the
proceeding.
9 Prior to the BAPCPA amendments of 2005, which repealed old section 304 and added Chapter 15, “foreign
proceeding” was defined differently under the Bankruptcy Code. Former section 101(23) defined “foreign
proceeding” to mean “a judicial or administrative proceeding, whether or not under bankruptcy law, in a
foreign country in which the debtor’s domicile, residence, principal place of business, or principal assets were
located at the commencement of that proceeding, for the purpose of liquidating an estate, adjusting debts by
composition, extension or discharge, or effecting a reorganization.”
10 “Foreign Court” is a newly defined term in the Bankruptcy Code. Its definition is contained in Chapter 15
itself, rather than in the generic definition section 101 of the Bankruptcy Code. As such, the definition is
relevant solely for purposes of Chapter 15. “Foreign Court” means “a judicial or other authority competent to
control or supervise a foreign proceeding.” 11 U.S.C. §1502(3).
11 The major Chapter 15 disputes to date have been over the COMI of the foreign debtor. See, fn 3 supra.

Under Chapter 15, if the Foreign Proceeding is pending in a country where the debtor has a mere presence,
such as assets, but in which the debtor does not conduct any nontransitory economic operation, that Foreign
Proceeding is not eligible for recognition from the United States under Chapter 15. 11 U.S.C. §1502(7).
In addition to the requirement that the proceeding for which recognition is sought be a Foreign Main
Proceeding or a Foreign Nonmain Proceeding, as defined in section 1502, the Foreign Proceeding must relate to
a “Debtor” as defined in section 1502(1) 12 and the petition for recognition must be filed by a “Foreign
Representative” as defined in section 101(24) 13 in the Bankruptcy Code’s generic definitions section. Further,
the Petition for Recognition must conform to the procedural requirements set forth in section 1515.
If a foreign proceeding meets the eligibility requirements for recognition under Chapter 15 and the U.S.
bankruptcy court issues an order of recognition pursuant to Chapter 15, the foreign representative will be able
to seek certain relief in aid of the foreign proceeding from the U.S. bankruptcy court. If the foreign proceeding
is recognized as a Foreign Main Proceeding, certain relief obtains automatically, including injunctive relief. 11
U.S.C. §1520. The U.S. bankruptcy court has no discretion to deny the section 1520 Foreign Main Proceeding
automatic relief unless the court determines that to grant such relief would be “manifestly contrary to the
public policy of the United States.” 11 U.S.C. §1506. The legislative history of Chapter 15 limits the use of the
“public policy out” to “the most fundamental policies of the United States.” 14
If the foreign proceeding is recognized as a Foreign Nonmain Proceeding relief is not automatic, it is in the
discretion of the bankruptcy court. The same relief also is available to a recognized Foreign Main Proceeding
on a discretionary basis. 11 U.S.C. §1521. In both proceedings, if requested by the Foreign Representative, the
bankruptcy court is empowered to grant “any appropriate relief” “where necessary to protect the assets of the
debtor or the interests of creditors.” Id. The “any appropriate relief” is not open‐ended, however.
For example, the court may not extend to the Foreign Representative authority to perform certain acts
provided under U.S. bankruptcy law to debtors or trustees in plenary cases pending under the other chapters
of the Bankruptcy Code ~ including, among others, the right to avoid and recover for the benefit of creditors
preferential or fraudulent transfers. 11 U.S.C. §1521(a)(7). The court also may not enjoin a police or regulatory
act of a governmental unit, including a criminal action or proceeding. 11 U.S.C. §1521(d).
Moreover, if the proceeding is a Foreign Nonmain Proceeding, the court may only grant the discretionary relief
provided for by section 1521 if the court is “satisfied that the relief relates to assets that, under the law of the
United States, should be administered in the foreign nonmain proceeding or concerns information required in that
proceeding.” 11 U.S.C. §1521(c)(emphasis added).
4. Case Law Digest: Significant Re/Insurance Chapter 15 Court Decisions
The U.S. bankruptcy courts have granted Chapter 15 recognition and relief in aid of every non‐U.S. re/insurance
related proceeding for which a petition has been filed to date.
12 For purposes of Chapter 15, “debtor” is defined to mean “an entity that is the subject of a foreign
proceeding.” 11 U.S.C. §1502(1). The term “entity” is a defined term in the generic definitions section of the
Bankruptcy Code (section 101) and, thus, applicable throughout the Bankruptcy Code, and is defined to include
“person, estate, trust, governmental unit, and United States Trustee.” 11 U.S.C. §101(15). For purposes of the
Bankruptcy Code, “Person” is defined to include “individual, partnership and corporation” (11 U.S.C. §101(41))
and “Governmental Unit” is defined to mean “United States; State; Commonwealth; District; Territory;
municipality, foreign state; department, agency, or instrumentality of the United States…, a State, a
Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic
government” (11 U.S.C. §101(27). The “United States Trustee” is an arm of the U.S. Department of Justice
briefed to administer and oversee cases filed under the Bankruptcy Code.
13 “The term ‘foreign representative’ means a person or body, including a person or body appointed on an interim
basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor’s assets
or affairs or to act as a representative of such foreign proceeding.” 11 U.S.C. §101(24).
14 See generally H.R. 109‐31(I), at 109. See also, In re Ephedra Products Liability Litigation, 349 B.R. 333 (S.D.N.Y.
2006).

As previously noted, of the seventeen (17) re/insurance related Chapter 15 cases filed through the end of
February 2009, thirteen (13) have involved non‐U.S. run‐off schemes of arrangement, three (3) have involved
liquidation or winding‐up proceedings, and one (1) was filed in aid of a UK administration proceeding. Formal
objection by third parties, including in some instances policyholders, has been lodged in four (4) of the
seventeen (17) re/insurance related Chapter 15 proceedings. These objections challenged either recognition of
the foreign proceeding ab initio or the grant of some aspect of the relief requested in aid of the foreign
proceeding.
Reported court decisions have issued in two (2) of the formally contested cases, Condor Insurance Ltd. 15 and
the jointly administered Chapter 15 cases respecting Tri‐Continental Exchange Ltd, Alternative Market Exchange
Ltd, Combined Services, Ltd. 16 While no reported decisions issued in the remaining two contested re/insurance
Chapter 15 cases, the objections filed in those cases, orders entered and hearing transcripts are instructive and
available on the case dockets ~ In re Greyfriars Insurance Company Limited, et al. (“WFUM pool cases”), Chapter
15 Case Nos. 07‐12934‐43 (Bankruptcy Court for the Southern District of New York, filed September 18, 2007) and
In re Hatteras Reinsurance Ltd., Chapter 15 Case No. 06‐11304 (Bankruptcy Court for the Southern District of New
York, filed June 8, 2006).
Notably, even absent objection lodged by a party in interest in a Chapter 15 case, the U.S. bankruptcy court is
obligated to make an independent determination, as though it were an objector‐in‐fact, that the Chapter 15
petition meets the eligibility requirements for recognition and relief. Typically, such decisions are not officially
reported. 17
However, the Bankruptcy Court for the Southern District of New York reported its decision in the first
re/insurer related Chapter 15 case, that respecting the run‐off scheme for La Mutuelle du Mans Assurances IARD
(UK Branch) MMA Account. 18 The Court reported its decision because the case was the first commercial
Chapter 15 case to be adjudicated by any U.S. court, the first to involve an evidentiary hearing conducted by a
U.S. court as “objector,” and the first to result in issuance of an order interpreting the key components of
Chapter 15 ~ including notably the applicability of Chapter 15 to books of re/insurance business in run‐off and to
solvent schemes of arrangement for re/insurance run‐off.
The La Mutuelle du Mans, Condor, Tri‐Continental et al, Greyfriars et al, and Hatteras Reinsurance cases are
discussed briefly below.
La Mutuelle du Mans Assurances IARD (UK Branch) MMA Account (In re
Petition of Lloyd), No. 05‐60100(BRL), 2005 WL 3764946 (Bankr. S.D.N.Y. Dec. 7,
2005). The “MMA” account case was the first Chapter 15 case respecting a
commercial non‐U.S. debtor to be adjudicated. It issued the first Chapter 15
order, in which the court notably determined that a solvent scheme of
arrangement respecting re/insurance run‐off is a “foreign proceeding” under
new Chapter 15 entitled to recognition and relief. It also was the first Chapter 15
case in which a full evidentiary hearing was held, including the taking of
testimony from witnesses both by counsel and the Court, and in which findings
of fact and conclusions of law were issued by the Court on the record at the
hearing, 19 further supported by Order entered and formally reported.
In addition to recognition of a solvent run‐off scheme, the U.S. Bankruptcy
Court determined that a book of marine insurance business is an “entity”
constituting a “debtor” for purposes of Chapter 15, and that the center of main
interest of such debtor rested in the UK and was “lodged within the
jurisdiction” of the High Court of England and Wales. The U.S. Bankruptcy Court
15 In re Condor Insurance Limited, 2008 WL 2858943 (Bankr. S.D. Miss. July 17, 2008), aff’d, 2009 WL 321627 (S.D.
Miss. Feb. 9, 2009).
16 In re Tri‐Cont. Exch. Ltd., 349 B.R. 627 (Bankr. E.D. Cal. 2006).
17 The dockets of Chapter 15 cases are available via services such as Westlaw and Lexis and official court dockets
are electronically accessible through the U.S. PACER system (www.pacer.psc.uscourts.gov).
18 In re Petition of Lloyd, 2005 WL 3764946 (Bankr. SDNY Dec. 7, 2005).
19 The transcript of the evidentiary hearing on the MMA Chapter 15 petition is published on the docket of the
case.

further explored in significant detail the nature, range and extent of notice
provided to scheme creditors and other parties in interest both through the
scheme process in the UK and the U.S. Chapter 15 case, and found such notice
to have adequately afforded due process to all concerned.
In re Tri‐Cont. Exch. Ltd., 349 B.R. 627 (Bankr. E.D. Cal. 2006). A judgment
creditor claimed to have a lien on funds tied up in an insurance asset forfeiture
proceeding in the United States respecting debtors in involuntary winding‐up
proceedings in St. Vincent and the Grenadines (“SVG”). The judgment creditor
objected to recognition of the SVG proceedings as foreign main proceedings
and to the grant of broad authority to the debtors’ foreign administrators to
administer and realize the debtors’ assets located within the territorial
jurisdiction of the United States, including the turnover to the foreign
administrators of the proceeds of the U.S. asset forfeiture case.
Despite the fact that the debtors had perpetrated insurance scams primarily in
the U.S. and Canada, the Bankruptcy Court for the Eastern District of California
determined that St. Vincent and the Grenadines were the center of the debtors’
main interests and thus the winding up proceedings were entitled to
recognition as Chapter 15 foreign main proceedings, with all attendant
automatic relief and additional discretionary relief. The Bankruptcy Court
further determined that “all creditors in this instance will be better served by, as
contemplated by 11 U.S.C. §1521(a)(5), entrusting administration and realization of
assets to the foreign representatives without imposing a superfluous, and
potentially inconsistent, trance of judicial supervision.” 349 B.R. 627, 629 (Bankr.
E.D. Cal. 2006).
In re Condor Insurance Limited, 2008 WL 2858943 (Bankr. S.D. Miss. July 17,
2008), aff’d, 2009 WL 321627 (S.D. Miss. Feb. 9, 2009). Joint Official Liquidators
of a Nevis corporation that had been engaged in insurance and surety bond
business obtained Chapter 15 recognition of the Nevis proceeding as a foreign
main proceeding. Thereafter they filed an adversary proceeding in the Chapter
15 case seeking to recover assets they allege had been fraudulently transferred
to the United States from a non‐debtor. The Bankruptcy Court for the Southern
District of Mississippi granted the non‐debtor defendant’s motion to dismiss the
adversary proceeding finding that the court lacked subject matter jurisdiction to
entertain it.
The Joint Official Liquidators appealed the bankruptcy court’s decision to the
District Court, which affirmed. The Court determined that the strict language of
Chapter 15 prohibited a U.S. bankruptcy court from allowing a foreign
representative under Chapter 15 to invoke U.S. bankruptcy avoidance law,
noting the obligation of the U.S. court to defer to the law of the foreign
proceeding and to not impose U.S. law in such instances. The District Court
noted that if the Nevis Liquidators had filed an avoidance action in Nevis under
Nevis law and judgment was granted in that action the Liquidators could seek
recognition and enforcement of that judgment in the United States through
Chapter 15.
The Court further noted that the only way the Nevis Liquidators could take
advantage of U.S. bankruptcy avoidance law would be if they commenced a full
plenary U.S. Bankruptcy Code Chapter 7 or Chapter 11 case, which may be done
after recognition of a foreign proceeding under Chapter 15 if the Chapter 15
debtor otherwise would be eligible to be a debtor under the U.S. Bankruptcy
Code absent Chapter 15. Non‐U.S. re/insurers doing business in the United
States, however, while eligible for recognition and relief under Chapter 15 are
not eligible to be debtors under other sections of the U.S. Bankruptcy Code,
pursuant to 11 U.S.C. §109(b)(3)(a).

WFUM Pool Solvent Schemes ~ In re Greyfriars Insurance Company Limited, et
al., Chapter 15 case numbers 07‐12934 through 07‐12943 filed September 18,
2007, United States Bankruptcy Court for the Southern District of New York,
jointly administered as Chapter 15 case number 07‐12934.
Petitions for recognition and relief via U.S. Chapter 15 were filed in aid of the UK
run‐off schemes of solvent members of what was known as the “WFUM Pool”
~ In re Greyfriars Insurance Company Limited, Sovereign Insurance (UK) Limited,
Allianz Insurance PLC, Heddington Insurance (UK) Limited, Mitsui Sumitomo
Insurance Company (Europe) Limited, The Ocean Marine Insurance Company
Limited, Oslo Reinsurance Company (UK) Limited, The Sea Insurance Company
Limited, Tokio Marine Europe Insurance Limited, and Wausau Insurance
Company (UK) Limited. The Chapter 15 cases were jointly administered by the
Bankruptcy Court under Chapter 15 case number 07‐12934.
U.S. policyholders objected to Chapter 15 recognition of these UK schemes in
essentially a one page objection asserting that the U.S. bankruptcy court should
not grant Chapter 15 recognition and relief unless the court first conducts “a full
and fair inquiry into the protections that the schemes would have for all
policyholder claimants.” 20
The U.S. Bankruptcy Court for the Southern District of New York entered an
Order granting recognition and relief to the solvent schemes without even
mentioning the objection lodged. 21
The petitioners had countered the objection by highlighting that UK High Court
sanctioned the schemes after completion of the requisite scheme process,
which determination was res judicata, and the U.S. bankruptcy court was not
empowered to relitigate issues that had a full and fair opportunity to be litigated
in a UK scheme proceeding. The U.S. court’s power under the circumstances,
they argued, was limited to assessing whether or not the Chapter 15 petition
fulfills the Chapter eligibility requirements for recognition and relief.
Hatteras Reinsurance Ltd., ~ Chapter 15 case number 06‐11304 filed June 8,
2006, United States Bankruptcy Court for Southern District of New York. The
U.S. Bankruptcy Court for the Southern of New York granted recognition as a
foreign main proceeding to the Bermuda involuntary winding‐up of Hatteras
Reinsurance Ltd. filed by the Bermuda Monetary Authority, according to
documents, “on grounds that the company had failed to comply with certain
conditions attached to its certificate of registration.” Limited objections were
filed during the course of the proceedings including to the grant of preliminary
injunctive relief and the disposition of individual creditor disputes including
respecting setoff rights and commutation, which ultimately were settled by
court approved and recognized agreements.
5. Policyholder Articulated Objections to Chapter 15 Relief in Aid of Solvent Schemes
of Arrangement
Schemes of arrangement for re/insurance business in run‐off increasingly have been promoted as an effective
and efficient way of realizing conclusion of what in many instances would be a twenty year plus process, with
attendant expense, in a far shorter and less expensive timeframe. Such schemes now regularly are effected in
20 Objections dated October 16, 2007 to Chapter 15 petitions of In re Greyfriars Ins. Co. Ltd., et al., Chapter 15
case numbers 07‐12934 through 07‐12944 filed September 18, 2007 in the Bankruptcy Court for the Southern
District of New York.
21
Order entered October 23, 2007 granting recognition of all but the Allianz scheme as foreign main
proceedings and recognizing the Allianz scheme as a foreign non‐main proceeding. Docket number 23 in jointly
administered case number 07‐12934, United States Bankruptcy Court for the Southern District of New York.

the United Kingdom and other countries for both individual run‐off situations as well as pools. One U.S. State,
Rhode Island, has enacted legislation allowing for such schemes, yet untested.
Opposition to schemes has focused on schemes related to solvent entities, the core contention being that
there is sufficient value available to pay all claims in full including “incurred but not reported” (IBNR) and other
“future” claims under the policies in run‐off, and, thus, the truncated resolution of such claims via the scheme
process benefits equity holders in the solvent entities to the detriment of claimants. As explored in the other
chapters of the cross‐border section of this volume, policyholders and other claimants in the United States
have been at the forefront of challenging solvent run‐off schemes proposed outside of the United States, most
notably in the United Kingdom.
Opponents unable to defeat such schemes within the non‐U.S. proceedings have announced in conferences
and articles on several occasions over the last several years the intent to attempt to defeat the non‐U.S.
schemes “through the back door” by attacking the implementation of such schemes in the United States via
U.S. Bankruptcy Code Chapter 15. They reason that if the scheme proponents are unable to stay actions
against the schemed entity or protect scheme assets within the United States there is no benefit to pursuing
the scheme ab initio.
Scheme opponents have indicated that their main objections to recognition and relief in aid of such schemes
through U.S. Chapter 15 include the following:
• U.S. courts do not have jurisdiction over solvent schemes
• Solvent schemes are not ‘foreign proceedings’ eligible for Chapter 15 relief
• The scheme process does not afford claimants due process
• Schemes violate the sanctity of contractual rights in violation of U.S. law
Moreover, opponents assert that U.S. courts in adjudicating petitions for assistance to non‐U.S. schemes via
Chapter 15 are not foreclosed from considering objections to schemes sanctioned by a non‐U.S. court.
Each of these points is considered below.
a. U.S. Bankruptcy Courts Do Not Have Jurisdiction to Grant Chapter 15
Recognition and Relief In Aid of Solvent Schemes of Arrangement
POINT: U.S. bankruptcy courts do not have jurisdiction to grant Chapter 15 recognition and relief in aid of
solvent schemes of arrangement
COUNTERPOINT:
The U.S. Bankruptcy Code does not require that a debtor be
insolvent to be eligible for relief, other than a debtor under Chapter 9 of the
Bankruptcy Code, which debtor must be a municipality. Indeed, section
109(c) which specifies who may be a debtor under Chapter 9 of the
Bankruptcy Code is the only place in the Code where insolvency is expressly
a requisite. Bankruptcy Code section 101(4) provides that the term
“municipality” means a political subdivision or public agency or
instrumentality of a State within the United States. Accordingly, insolvency
would never be a prerequisite for recognition as a “foreign proceeding” via
U.S. Chapter 15.
b. Solvent Schemes Are Not “Foreign Proceedings” Eligible for Chapter 15
Relief
POINT: Solvent schemes are not “foreign proceedings” eligible for Chapter 15 relief
COUNTERPOINT:
U.S. bankruptcy courts have determined that schemes of

arrangement, including solvent run‐off schemes, are “foreign proceedings”
~ under both the definition of that term under former Bankruptcy Code
section 304 22 as well as under the even more expansive definition of
“foreign proceeding” applicable to Chapter 15 23 contained in Bankruptcy
Code section 101(23). 24 A scheme is a collective proceeding for the benefit of
creditors generally pursuant to a law relating to the adjustment of debts
conducted under the supervision of a foreign court with the goal of
crystallizing and liquidating claims.
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
POINT: 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
COUNTERPOINT:
U.S. bankruptcy courts are very sensitive to due process in all
proceedings under the U.S. Bankruptcy Code. The courts regularly found
due process to have been provided in solvent scheme cases filed under
former section 304 and continue to go to great pains to ensure due process
in solvent scheme cases filed under new Chapter 15. Indeed, Chapter 15 itself
mandates that petitioners make extra effort to ensure that all creditors are
duly notified of the petition and proceedings. See, e.g. 11 U.S.C. §1504.
Moreover, the Bankruptcy Court for the Southern District of New York in the
very first Chapter 15 case seeking relief in aid of a foreign solvent scheme of
arrangement, La Mutuelle du Mans Assurances, set the standard for careful
assessment of the provision of notice and an opportunity to be heard in the
foreign proceeding, finding that due process was inherent in the scheme and
sanction processes.
d. Schemes Violate the Sanctity of Contractual Rights in Violation of U.S. Law
POINT: Schemes violate the sanctity of contractual rights in violation of U.S. law
COUNTERPOINT:
The treatment of claims in a non‐U.S. scheme is a matter of the
governing law of the scheme, not a matter of U.S. law. Chapter 15 is not
intended to impose U.S. law on non‐U.S. proceedings and the U.S.
bankruptcy court is not empowered to do so. If the non‐U.S. law is
“manifestly contrary to the public policy of the United States,” 25 at most the
22
See, e.g., recognition of solvent schemes as foreign proceedings under former section 304 in: In re Osiris
Insurance Limited, Case No. 98‐45518 (Bankr. S.D.N.Y. Nov. 16, 1998); In re Board of Directors of Hopewell Intern.
Ins., Ltd., 238 B.R. 25 (Bankr. S.D.N.Y. 1999), aff’d, 275 B.R. 699 (S.D.N.Y. 2002); In re Ramus Insurance Ltd., Case
No. 01‐12160 (Bankr. S.D.N.Y. June 7, 2001); In re the Nichido Fire & Marine Insurance Co., Ltd., Case No. 01‐15987
(Bankr. S.D.N.Y. Feb. 13, 2002); In re Assurantiemaatschappij “De Zeven Provincien” NV, Case No. 02‐16430
(Bankr. S.D.N.Y. Mar. 28, 2003); In re Marlon Insurance Co., Ltd., Case No. 03‐42343 (Bankr. S.D.N.Y. Nov. 6,
2003); In re Arig Insurance Co., Ltd., Case No. 03‐17057 (Bankr. S.D.N.Y. Dec. 9, 2003); In re Ludgate Insurance Co.,
Ltd., Case No. 04‐10590 (Bankr. S.D.N.Y. Apr. 8, 2004); In re Aviation & General Insurance Co., Ltd., Case No. 04‐
13499 (Bankr. S.D.N.Y. Aug. 5, 2004); In re The Prudential Assurance Co., Ltd., Case No. 4‐14884 (Bankr. S.D.N.Y.
Sept. 9, 2004); In re Unione Italiana (UK) Reinsurance Co., Ltd., Case No. 04‐17989 (Bankr. S.D.N.Y. June 8, 2005);
In re Mercantile & General Reinsurance Co., Ltd., Case No. 05‐14076 (Bankr. S.D.N.Y. Sept. 7, 2005); In re DAP
Holding N.V., 05‐18816 (Bankr. S.D.N.Y. Oct. 27, 2005).
23 See cases in Section B Chart, infra.
24 ‘Foreign Proceeding’ for purposes of Chapter 15 means “a collective judicial or administrative proceeding in a
foreign country, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which
proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the
purpose of reorganization or liquidation.” 11 U.S.C. §101(23).
25 11 U.S.C. §1506.

U.S. court can refuse to aid the enforcement of that law, it may not impose
U.S. law in its stead. In any event, alteration of contractual rights not only is
not anathema to U.S. bankruptcy law it is a component of such law. For
example, contracted for provisions requiring consent of the non‐debtor
party before the contract may be assumed and assigned are voided by U.S.
Bankruptcy Code section 365(f) as unlawful anti‐alienation provisions. Other
subsections of section 365 prohibit the non‐debtor party to the contract
from refusing to perform or from terminating the contract upon the
debtor’s breach thereof notwithstanding contractual provisions providing
such rights. Moreover, the alteration of value of recoveries scheme
objectors complain of regularly is affirmed under the U.S. Bankruptcy Code
even over the objection of rejecting creditors where the requisite number
and value of claims vote to approve a plan of reorganization providing for
such altered recovery.
e. UK Court Sanction of Solvent Schemes Does Not Preclude U.S. Bankruptcy
Court Consideration of Objections
POINT: UK court sanction of solvent schemes does not preclude U.S. bankruptcy court consideration of
objections.
COUNTERPOINT:
This contention has been raised and rejected by the Bankruptcy
Court for the Southern District of New York in the jointly administered
Chapter 15 cases respecting the run‐off schemes of participants in the
“WFUM pool” ~ In re Greyfriars et al, Chapter 15 Case Nos. 07‐12934‐43
(Bankr. S.D.N.Y. filed September 18, 2007). At bottom, the U.S. bankruptcy
court is not permitted to relitigate objections which have been or could have
been raised by the objectors in the non‐U.S. proceeding. See In re Bd of
Directors of Telecom Argentina, S.A., 2006 WL 3378687 (S.D.N.Y. 2006), aff’d,
528 F.3d 162 (2d Cir. 2008)(res judicata applies re recognition of foreign
proceedings). Nor is the U.S. court empowered to grant relief within the
Chapter 15 proceeding which should have been sought and could have been
granted in the non‐U.S. proceeding under the law of that jurisdiction. See In
re Condor Insurance Limited, 2008 WL 2858943 (Bankr. S.D. Miss. July 17,
2008), aff’d, 2009 WL 321627 (S.D. Miss. Feb. 9, 2009).

5. Chapter 15 ~ Official Text
1501. Purpose and scope of application.
SUBCHAPTER I ‐ GENERAL PROVISIONS
1502. Definitions.
1503. International obligations of the United States.
1504. Commencement of ancillary case.
1505. Authorization to act in a foreign country.
1506. Public policy exception.
1507. Additional assistance.
1508. Interpretation.
SUBCHAPTER II ‐ ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE COURT
1509. Right of direct access.
1510. Limited jurisdiction.
1511. Commencement of case under section 301 or 303.
1512. Participation of a foreign representative in a case under this title
1513. Access of foreign creditors to a case under this title
1514. Notification to foreign creditors concerning a case under this title
SUBCHAPTER III ‐ RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
1515. Application for recognition.
1516. Presumptions concerning recognition.
1517. Order granting recognition.
1518. Subsequent information.
1519. Relief that may be granted upon filing petition for recognition
1520. Effects of recognition of a foreign main proceeding.
1521. Relief that may be granted upon recognition.
1522. Protection of creditors and other interested persons.
1523. Actions to avoid acts detrimental to creditors.
1524. Intervention by a foreign representative.
SUBCHAPTER IV ‐ COOPERATION WITH FOREIGN COURTS AND FOREIGN REPRESENTATIVES
1525. Cooperation and direct communication between the court and foreign courts or
foreign representatives.
1526. Cooperation and direct communication between the trustee and foreign courts or
foreign representatives.
1527. Forms of cooperation.
SUBCHAPTER V ‐ CONCURRENT PROCEEDINGS
1528. Commencement of a case under this title after recognition of a foreign main
proceeding.
1529. Coordination of a case under this title and a foreign proceeding
1530. Coordination of more than 1 foreign proceeding.
1531. Presumption of insolvency based on recognition of a foreign main proceeding
1532. Rule of payment in concurrent proceedings.

§1501. Purpose and scope of application
CHAPTER 15 26
ANCILLARY AND OTHER CROSS‐BORDER CASES
(a)
The purpose of this chapter is to incorporate the Model Law on Cross‐Border Insolvency so as to
provide effective mechanisms for dealing with cases of cross‐border insolvency with the objectives of
–
(1) cooperation between –
(A)
(B)
courts of the United States, United States trustees, trustees, examiners, debtors in
possession; and
the courts and other competent authorities of foreign countries involved in crossborder
insolvency cases;
(2) greater legal certainty for trade and investment;
(3) fair and efficient administration of cross‐border insolvencies that protects the interests of all
creditors, and other interested entities, including the debtor;
(4) protection and maximization of the value of the debtors’ assets; and
(5) facilitation of the rescue of financially troubled businesses, thereby protecting investment and
preserving employment.
(b) This chapter applies where –
(1) assistance is sought in the United States by a foreign court or a foreign representative in
connection with a foreign proceeding;
(2) assistance is sought in a foreign country in connection with a case under this title;
(3) a foreign proceeding and a case under this title with respect to the same debtor are pending
concurrently; or
(4) creditors or other interested persons in a foreign country have an interest in requesting the
commencement of, or participating in, a case or proceeding under this title.
(c) This chapter does not apply to –
(1) a proceeding concerning an entity, other than a foreign insurance company, identified by
exclusion in section 109(b);
26 Chapter 15 was incorporated into U.S. bankruptcy law as part of the 2005 broad‐based amendments to the
United States Bankruptcy Code (Title 11 of the United States Code, 11. United States Code §§ 101 et seq.) made
by Public Law No. 109‐8 titled “The Bankruptcy Abuse Prevention and Consumer Protection Act of
2005”(“BAPCPA”), Pub. L. No. 109‐8. Chapter 15 was added to Title 11 of the U.S. Code through Section 801 of
the 2005 BAPCPA. Chapter 15 became effective on 17 October 2005 and made applicable to all cases
commenced on and after that date. The Legislative History to BAPCPA includes an explanation of the intent
and purpose of the United States Congress in enacting each section within Chapter 15, as well as guidance for
their interpretation and application. This Legislative History of Chapter 15 generally is set forth in the Report of
the U.S. House of Representatives on BAPCPA at House Report No. 109‐31, Pt. 1, 109th Cong., 1st Sess. (2005)
(“House Report” or “Legislative History”).

(d)
§1502. Definitions.
(2) an individual, or to an individual and such individual’s spouse, who have debts within the limits
specified in section 109(e) and who are citizens of the United States or aliens lawfully admitted
for permanent residence in the United States; or
(3) an entity subject to a proceeding under the Securities Investor Protection Act of 1970, a
stockbroker subject to subchapter III of chapter 7 of this title, or a commodity broker subject to
subchapter IV of chapter 7 of this title.
The court may not grant relief under this chapter with respect to any deposit, escrow, trust
fund, or other security required or permitted under any applicable State insurance law or regulation
for the benefit of claim holders in the United States.
For the purposes of this chapter, the term –
SUBCHAPTER I
General Provisions
(1) “debtor” means an entity that is the subject of a foreign proceeding;
(2) “establishment” means any place of operations where the debtor carries out a nontransitory
economic activity;
(3) “foreign court” means a judicial or other authority competent to control or supervise a foreign
proceeding;
(4) “foreign main proceeding” means a foreign proceeding pending in the country where the
debtor has the center of its main interests;
(5) “foreign nonmain proceeding” means a foreign proceeding, other than a foreign main
proceeding, pending in a country where the debtor has an establishment;
(6) “trustee” includes a trustee, a debtor in possession in a case under any chapter of this title, or a
debtor under chapter 9 of this title;
(7) “recognition” means the entry of an order granting recognition of a foreign main proceeding or
a foreign nonmain proceeding under this chapter; and
(8) “within the territorial jurisdiction of the United States”, when used with reference to property
located within the territory of the United States and intangible property deemed under
applicable nonbankruptcy law to be located within that territory, including any property subject
to attachment or garnishment that may properly be seized or garnished by an action in a Federal
or State court in the United States.
§1503. International obligations of the United States.
To the extent that this chapter conflicts with an obligation of the United States arising out of any treaty
or other form of agreement in which it is a party with one or more other countries, the requirements of
the treaty or agreement prevail.
§1504. Commencement of ancillary case.
A case under this chapter is commenced by the filing of a petition for recognition of a foreign proceeding
under section 1515.
§1505. Authorization to act in a foreign country.

A trustee or another entity (including an examiner) may be authorized by the court to act in a foreign
country on behalf of an estate created under section 541. An entity authorized to act under this section
may act in any way permitted by the applicable foreign law.
§1506. Public policy exception.
Nothing in this chapter prevents the court from refusing to take an action governed by this chapter if the
action would be manifestly contrary to the public policy of the United States.
§1507. Additional assistance.
(a)
Subject to the specific limitations stated elsewhere in this chapter the court, if recognition is
granted, may provide additional assistance to a foreign representative under this title or under other
laws of the United States.
(b)
In determining whether to provide additional assistance under this title or under other laws of
the United States, the court shall consider whether such additional assistance, consistent with the
principles of comity, will reasonably assure –
(1) just treatment of all holders of claims against or interests in the debtor’s property;
(2) protection of claim holders in the United States against prejudice and inconvenience in the
processing of claims in such foreign proceeding;
(3) prevention of preferential or fraudulent dispositions or property of the debtor;
(4) distribution of proceeds of the debtor’s property substantially in accordance with the order
prescribed by this title; and
(5) if appropriate, the provision of an opportunity for a fresh start for the individual that such
foreign proceeding concerns.
§1508. Interpretation.
In interpreting this chapter, the court shall consider its international origin, and the need to promote an
application of this chapter that is consistent with the application of similar statutes adopted by foreign
jurisdictions.
§1509. Right of direct access.
SUBCHAPTER II
Access of Foreign Representatives and Creditors to the Court
(a)
A foreign representative may commence a case under section 1504 by filing directly with the
court a petition for recognition of a foreign proceeding under section 1515.
(b)
If the court grants recognition under section 1517, and subject to any limitations that the court
may impose consistent with the policy of this chapter –
(1) the foreign representative has the capacity to sue and be sued in a court n the United States;
(2) the foreign representative may apply directly to a court in the United States for appropriate
relief in that court; and
(3) a court in the United States shall grant comity or cooperation to the foreign representative.

(c)
(d)
A request for comity or cooperation by a foreign representative in a court in the United States
other than the court which granted recognition shall be accompanied by a certified copy of an order
granting recognition under section 1517.
If the court denies recognition under this chapter, the court may issue any appropriate order
necessary to prevent the foreign representative from obtaining comity or cooperation from courts in
the United States.
(e)
(f)
Whether or not the court grants recognition, and subject to sections 306 and 1510, a foreign
representative is subject to applicable nonbankruptcy law.
Notwithstanding any other provision of this section, the failure of a foreign representative to
commence a case or to obtain recognition under this chapter does not affect any right the foreign
representative may have to sue in a court in the United States to collect or recover a claim which is the
property of the debtor.
§1510. Limited jurisdiction.
The sole fact that a foreign representative files a petition under section 1515 does not subject the foreign
representative to the jurisdiction of any court in the United States for any other purpose.
§1511. Commencement of a case under section 301 or 303.
(a) Upon recognition, a foreign representative may commence –
(b)
(1) an involuntary case under section 303; or
(2) a voluntary case under section 301 or 302, if the foreign proceeding is a foreign main proceeding.
The petition commencing a case under subsection (a) must be accompanied by a certified copy
of an order granting recognition. The court where the petition for recognition has been filed must be
advised of the foreign representative’s intent to commence a case under subsection (a) prior to such
commencement.
§1512. Participation of a foreign representative in a case under this title.
Upon recognition of a foreign proceeding, the foreign representative in the recognized proceeding is
entitled to participate as a party in interest in a case regarding the debtor under this title.
§1513. Access of foreign creditors to a case under this title.
(a)
Foreign creditors have the same rights regarding the commencement of, and participation in, a
case under this title as domestic creditors.
(b)
(1) Subsection (a) does not change or codify present law as to the priority of claims under section
507 or 726, except that the claim of a foreign creditor under those sections shall not be given a
lower priority than that of general unsecured claims without priority solely because the holder of
such claim is a foreign creditor.
(2)
(A)
Subsection (a) and paragraph (1) do not change or codify present law as to the
allowability of foreign revenue claims or other foreign public law claims in a proceeding
under this title.

(B)
Allowance and priority as to a foreign tax claim or other foreign public law claim shall
be governed by any applicable tax treaty of the United States, under the conditions and
circumstances specified therein.
§1514. Notification to foreign creditors concerning a case under this title.
(a)
Whenever in a case under this title notice is to be given to creditors generally or to any class or
category of creditors, such notice shall also be given to the known creditors generally, or to creditors
in the notified class or category, that do not have addresses in the United States. The court may order
that appropriate steps be taken with a view to notifying any creditor whose address is not yet known.
(b)
Such notification to creditors with foreign addresses described in subsection (a) shall be given
individually, unless the court considers that, under the circumstances, some other form of notification
would be more appropriate. No letter or other formality is required.
(c)
When a notification of commencement of a case is to be given to foreign creditors, such
notification shall –
(d)
(1) indicate the time period for filing proofs of claim and specify the place for filing such proofs of
claim;
(2) indicate whether secured creditors need to file proofs of claim; and
(3) contain any other information required to be included in such notification to creditors under this
title and the orders of the court.
Any rule of procedure or order of the court as to notice or the filing of a proof of claim shall
provide additional time to creditors with foreign addresses as is reasonable under the circumstances.
§1515. Application for recognition.
SUBCHAPTER III
Recognition of a Foreign Proceeding and Relief
(a)
A foreign representative applies to the court for recognition of a foreign proceeding in which the
foreign representative has been appointed by filing a petition for recognition.
(b) A petition for recognition shall be accompanied by –
(1) a certified copy of the decision commencing such foreign proceeding and appointing the foreign
representative;
(2) a certificate from the foreign court affirming the existence of such foreign proceeding and of the
appointment of the foreign representative; or
(3) in the absence of evidence referred to in paragraphs (1) and (2), any other evidence acceptable to
the court of the existence of such foreign proceeding and of the appointment of the foreign
representative.
(c)
A petition for recognition shall also be accompanied by a statement identifying all foreign
proceedings with respect to the debtor that are known to the foreign representative.
(d)
The documents referred to in paragraphs (1) and (2) of subsection (b) shall be translated into
English. The court may require a translation into English of additional documents.
§1516. Presumptions concerning recognition.

(a)
(b)
If the decision or certificate referred to in section 1515(b) indicates that the foreign proceeding is
a foreign proceeding and that the person or body is a foreign representative, the court is entitled to so
presume.
The court is entitled to presume that documents submitted in support of the petition for
recognition are authentic, whether or not they have been legalized.
(c)
In the absence of evidence to the contrary, the debtor’s registered office, or habitual residence
in the case of an individual, is presumed to be the centre of the debtor’s main interests.
§1517. Order granting recognition.
(a)
Subjection to section 1506, after notice and a hearing, an order recognizing a foreign proceeding
shall be entered if –
(1) such foreign proceeding for which recognition is sought is a foreign main proceeding or foreign
nonmain proceeding within the meaning of section 1502;
(2) the foreign representative applying for recognition is a person or body; and
(3) the petition meets the requirements of section 1515.
(b) Such foreign proceeding shall be recognized –
(1) as a foreign main proceeding if it is pending in the country where the debtor has the center of its
main interests; or
(2) as a foreign nonmain proceeding if the debtor has an establishment within the meaning of
section 1502 in the foreign country where the proceeding is pending.
(c)
A petition for recognition of a foreign proceeding shall be decided upon at the earliest possible
time. Entry of an order recognizing a foreign proceeding constitutes recognition under this chapter.
(d)
The provisions of this subchapter do not prevent modification or termination of recognition if it
is shown that the grounds for granting it were fully or partially lacking or have ceased to exist, but in
considering such action the court shall give due weight to possible prejudice to parties that have relied
upon the order granting recognition. A case under this chapter may be closed in the manner
prescribed under section 350.
§1518. Subsequent information.
From the time of filing the petition for recognition of a foreign proceeding, the foreign representative
shall file with the court promptly a notice of change of status concerning
(1) any substantial change in the status of such foreign proceeding or the status of the foreign
representative’s appointment; and
(2) any other foreign proceeding regarding the debtor that becomes known to the foreign
representative.

§1519. Relief that may be granted upon filing petition for recognition.
(a)
From the time of filing a petition for recognition until the court rules on the petition, the court
may, at the request of the foreign representative, where relief is urgently needed to protect the
assets of the debtor or the interests of creditors, grant relief of a provisional nature, including –
(b)
(1) staying execution against the debtor’s assets;
(2) entrusting the administration or realization of all or part of the debtor’s assets located in the
United States to the foreign representative or another person authorized by the court, including
an examiner, in order to protect and preserve the value of assets that, by their nature or because
of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; and
(3) any relief referred to in paragraph (3), (4), or (7) of section 1521(a).
Unless extended under section 1521(a)(6), the relief granted under this section terminates when
the petition for recognition is granted.
(c)
It is a ground for denial of relief under this section that such relief would interfere with the
administration of a foreign main proceeding.
(d)
The court may not enjoin a policy or regulatory act of a governmental unit, including a criminal
action or proceeding, under this section.
(e)
(f)
The standards, procedures, and limitations applicable to an injunction shall apply to relief under
this section.
The exercise of rights not subject to the stay arising under section 362(a) pursuant to paragraph
(6), (7), (17), or (27) of section 362(b) or pursuant to section 362(n) shall not be stayed by any order of
a court or administrative agency in any proceeding under this chapter.
§1520. Effects of recognition of a foreign main proceeding.
(a) Upon recognition of a foreign proceeding that is a foreign main proceeding –
(b)
(1) sections 361 and 362 apply with respect to the debtor and the property of the debtor that is
within the territorial jurisdiction of the United States;
(2) sections 363, 549, and 552 apply to a transfer of an interest of the debtor in property that is
within the territorial jurisdiction of the United States to the same extent that the sections would
apply to property of an estate.
(3) unless the court orders otherwise, the foreign representative may operate the debtor’s business
and may exercise the rights and powers of a trustee under and to the extent provided by sections
363 and 552; and
(4) section 552 applies to property of the debtor that is within the territorial jurisdiction of the
United States.
Subsection (a) does not affect the right to commence an individual action or proceeding in a
foreign country to the extent necessary to preserve a claim against the debtor.
(c)
Subsection (a) does not affect the right of a foreign representative or an entity to file a petition
commencing a case under this title or the right of any party to file claims or take other proper actions
in such case.

§1521. Relief that may be granted upon recognition.
(a)
Upon recognition of a foreign proceeding, whether main or nonmain, where necessary to
effectuate the purpose of this chapter and to protect the assets of the debtor or the interests of the
creditors, the court may, at the request of the foreign representative, grant any appropriate relief,
including –
(b)
(1) staying the commencement or continuation of an individual action or proceeding concerning the
debtor’s assets, rights, obligations or liabilities to the extent they have not been stayed under
section 1520(a);
(2) staying execution against the debtor’s assets to the extent it has not been stayed under section
1520(a);
(3) suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to
the extent this right has not been suspended under section 1520(a);
(4) providing for the examination of witnesses, the taking of evidence or the delivery of information
concerning the debtor’s assets, affairs, rights, obligations or liabilities;
(5) entrusting the administration or realization of all or part of the debtor’s assets within the
territorial jurisdiction of the United States to the foreign representative or another person,
including an examiner, authorized by the court;
(6) extending relief granted under section 1519(a); and
(7) granting any additional relief that may be available to a trustee, except for relief available under
sections 522, 544, 545, 547 548, 550, and 724(a).
Upon recognition of a foreign proceeding, whether main or nonmain, the court may, at the
request of the foreign representative, entrust the distribution of all or part of the debtor’s assets
located in the United States to the foreign representative or another person, including an examiner,
authorized by the court, provided that the court is satisfied that the interests of creditors in the United
States are sufficiently protected.
(c)
In granting relief under this section to a representative of a foreign nonmain proceeding, the
court must be satisfied that the relief relates to assets that, under the law of the United States, should
be administered in the foreign nonmain proceeding or concerns information required in that
proceeding.
(d)
The court may not enjoin a policy or regulatory act of a governmental unit, including a criminal
action or proceeding, under this section.
(e)
(f)
The standards, procedures, and limitations applicable to an injunction shall apply to relief under
paragraphs (1), (2), (3), and (6) of subsection (a).
The exercise of rights not subject to the stay arising under section 362(a) pursuant to paragraph
(6), (7), (17), or (27) of section 362(b) or pursuant to section 362(a) shall not be stayed by an order of a
court or administrative agency in any proceeding under this chapter.
§1522. Protection of creditors and other interested persons.
(a)
The court may grant relief under section 1519 or 1521, or may modify or terminate relief under
section (c), only if the interests of the creditors and other interested entities, including the debtor, are
sufficiently protected.
(b)
The court may subject relief granted under section 1519 or 1521, or the operation of the debtor’s
business under section 1520(a)(3), to conditions it considers appropriate including the giving of security
or the filing of a bond.

(c)
(d)
The court may, at the request of the foreign representative or an entity affected by relief
granted under section 1519 or 1521, or at its own motion, modify or terminate such relief.
Section 1104(d) shall apply to the appointment of an examiner under this chapter. Any examiner
shall comply with the qualification requirements imposed on a trustee by section 322.
§1523. Actions to avoid acts detrimental to creditors.
(a)
Upon recognition of a foreign proceeding, the foreign representative has standing in a case
concerning the debtor pending under another chapter of this title to initiate actions under sections
522, 544, 545, 547, 550, 553, and 724(a).
(b)
When a foreign proceeding is a foreign nonmain proceeding, the court must be satisfied that an
action under subsection (a) relates to assets that, under United States law, should be administered in
the foreign nonmain proceeding.
§1524. Intervention by a foreign representative.
Upon recognition of a foreign proceeding, the foreign representative may intervene in any proceedings in
a State or Federal court in the United States in which the debtor is a party.
SUBCHAPTER IV
Cooperation With Foreign Courts and Foreign Representatives
§1525. Cooperation and direct communication between the court and foreign courts or
foreign representatives.
(a)
Consistent with section 1501, the court shall cooperate to the maximum extent possible with a
foreign court or a foreign representative, either directly or through the trustee.
(b)
The court is entitled to communicate directly with, or to request information or assistance
directly from, a foreign court or a foreign representative, subject to the rights of a party in interest to
notice and participation.
§1526. Cooperation and direct communication between the trustee and foreign courts or
foreign representatives.
(a)
Consistent with section 1501, the trustee or other person, including the examiner, authorized by
the court, shall, subject to the supervision of the court, cooperate to the maximum extent possible
with a foreign court or a foreign representative.
(b)
The trustee or other person, including an examiner, authorized by the court is entitled, subject
to the supervision of the court, to communicate directly with a foreign court or a foreign
representative.
§1527. Forms of cooperation.
Cooperation referred to in sections 1525 and 1526 may be implemented by any appropriate means,
including –
(1) appointment of a person or body, including an examiner, to act at the direction of the court;
(2) communication of information by any means considered appropriate by the court;
(3) coordination of the administration and supervision of the debtor’s assets and affairs;

(4) approval or implementation of agreements concerning the coordination of proceedings; and
(5) coordination of concurrent proceedings regarding the same debtor.
SUBCHAPTER V
Concurrent Proceedings
§1528. Commencement of a case under this title after recognition of a foreign main
proceeding.
After recognition of a foreign main proceeding, a case under another chapter of this title may be
commenced only if the debtor has assets in the United States. The effect of such case shall be restricted
to the assets of the debtor that are within the territorial jurisdiction of the United States and, to the
extent necessary to implement cooperation and coordination under sections 1525, 1526, and 1527, to other
assets of the debtor that are within the jurisdiction of the court under sections 541(a) of this title, and
1334(e) of title 28, to the extent that such other assets are not subject to the jurisdiction and control of a
foreign proceeding that has been recognized under this chapter.
§1529. Coordination of a case under this title and a foreign proceeding.
If a foreign proceeding and a case under another chapter of this title are pending concurrently regarding
the same debtor, the court shall seek cooperation and coordination under sections 1525, 1526, and 1527,
and the following shall apply:
(1) If the case in the United States pending at the time the petition for recognition of such foreign
proceeding is filed –
(A)
(B)
any relief granted under section 1519 and 1521 must be consistent with the relief granted
in the case in the United States; and
section 1520 does not apply even if such foreign proceeding is recognized as a foreign
main proceeding.
(2) If a case in the United States under this title commences after recognition, or after the date of
the filing of the petition for recognition, of such foreign proceeding –
(A)
(B)
any relief in effect under section 1519 and 1521 shall be reviewed by the court and shall
be modified or terminated if inconsistent with the case in the United States; and
if such foreign proceeding is a foreign main proceeding, the stay and suspension
referred to in section 1520(a) shall be modified or terminated if inconsistent with the relief
granted in the case in the United States.
(3) In granting, extending, or modifying relief granted to a representative of a foreign nonmain
proceeding, the court must be satisfied that the relief relates to assets that, under the laws of
the United States, should be administered in the foreign nonmain proceeding or concerns
information required in that proceeding.
(4) In achieving cooperation and coordination under sections 1528 and 1529, the court may grant any
of the relief authorized under section 305.
§1530. Coordination of more than 1 foreign proceeding.
In matters referred to in section 1502, with respect to more than 1 foreign proceeding regarding the
debtor, the court shall seek cooperation and coordination under sections 1525, 1526, and 1527, and the
following shall apply:

(1) Any relief granted under section 1519 or 1521 to a representative of a foreign nonmain proceeding
after recognition of a foreign main proceeding must be consistent with the foreign main
proceeding.
(2) If a foreign main proceeding is recognized after recognition, or after the filing of a petition for
recognition, of a foreign nonmain proceeding, any relief in effect under section 1519 or 1521 shall
be reviewed by the court and shall be modified or terminated if inconsistent with the foreign
main proceeding.
(3) If, after recognition of a foreign nonmain proceeding, another foreign nonmain proceeding is
recognized, the court shall grant, modify, or terminate relief for the purpose of facilitating
coordination of the proceedings.
§1531. Presumption of insolvency based on recognition of a foreign main proceeding.
In the absence of evidence to the contrary, recognition of a foreign main proceeding is, for the purpose of
commencing a proceeding under section 303, proof that the debtor is generally not paying its debts as
such debts become due.
§1532. Rule of payment in concurrent proceedings.
Without prejudice to secured claims or rights in rem, a creditor who has received payment with respect to
its claim in a foreign proceeding pursuant to a law relating to insolvency may not receive a payment for
the same claim in a case under any other chapter of this title regarding the debtor so long as the payment
to other creditors of the same class is proportionately less than the payment the creditor has already
received.

B. United Kingdom ‐‐ The Position in the UK
Vivien Tyrell
Edwards Angel Palmer & Dodge UK LLP
1. Introduction
There are a series of statutes and statutory instruments forming the legislative framework of insurer/reinsurer
insolvency in the UK. These include legislation introduced as a result of EU regulation as well as indigenous
statutes which have grown up over many years. Such legislation has, of course, been supplemented over time
by an extensive body of case law. We have set out below a working compilation of cases which reflect the
significant and interesting ways in which insurer/reinsurer insolvency and restructuring law has developed. The
list of cases is not exhaustive but it is our intention that they will provide a summary of the way in which
significant issues have been dealt with. Case references are provided for access to the full judgments which in
turn may refer to further decisions on the relevant point in question.
As far as the legislation is concerned we give a brief summary of the purpose and scope of each relevant act
and statutory instrument to provide an understanding of the workings of the insurer/reinsurer insolvency and
restructuring regime in the UK.
2. Insolvency
In the case of re/insurer insolvency, insolvency regimes (administration, provisional liquidation and liquidation)
are brought into play under the Insolvency Act 1986 (the '1986 Act') (which applies to all types of corporate
entities) coupled with the further specific legislation described below. The 1986 Act creates powers enabling
the legislature to introduce statutory instruments to deal with specific and detailed matters arising in the
implementation of the Act. Those statutory instruments of relevance to re/insurance insolvency are the
Insolvency Rules 1986 (the '1986 Rules') (applying to all types of entities) which sit alongside the specific
Insurers (Winding Up) Rules 2001, SI 2001/3635 (the '2001 Rules'). In cases where the 2001 Rules do not deal
with a particular point, the 1986 Rules are to be relied upon. However, if there is a conflict between 2001 Rules
and the 1986 Rules the former will prevail.
Further statutory instruments are implemented under the Financial Services & Markets Act 2000 (the 'FSMA'):‐
1. The Financial Services & Markets Act 2000 (Insolvency) (Definition of "Insurer") Order 2001, SI 2001/2634 –
This provides a definition of "insurer" for the purposes of Part XXIV, of the FSMA, which relates to
insolvency.
2. The Financial Services & Markets Act 2000 (Administration Orders relating to Insurers) Order 2002, SI
2002/1242 – This has the effect of allowing administration orders to be made in the case of insurance
companies (without it insurance companies were treated as a special case). It however precludes the
administration of an insurance company from being commenced by appointment, either by the holder of a
charge or the board of directors; in other words administration in the case of a re/insurance company must
be by court order. It also clarifies the rules of set‐off and states that those rules do not apply to sums due
from an insurer to another party where an application for an administration order has been made in
relation to the insurer at the time those sums become due.
The Insurers (Reorganisation and Winding Up) Regulations 2004, SI 2004/353 (the 2004 Regulations) are an
example of a statutory instrument introduced not under UK statute but as a result of EU legislation. The 2004
Regulations were introduced following the European Council Directive 2001/17/EC on the reorganisation and
winding up of insurance undertakings. (Virtually identical regulations were introduced in 2003 which were
subject to some amendment and reintroduced in 2004). The 2004 Regulations specify the circumstances and
location in which an "EEA insurer" (as defined in the European Third Directive on Non‐Life Insurance
(92/49/EEC)) can be wound up in the UK. Mirror image legislation has been passed in all the other member
states following the same Directive. In addition to establishing the priority distribution of assets in a winding up
of an insurer operating in more than one EEA State (see below), there are provisions aimed at the abolition of
forum shopping and duplication of costs and effort by insolvency practitioners appointed as office holders
over an estate. For example, there are provisions allowing office holders appointed in one EEA State to use the

laws of another EEA state to bring in assets and otherwise conduct the administration of the estate. These
regulations are subject to certain specified local laws eg in the areas of set‐off and registration of and
maintenance of real property rights. There are also functional requirements aimed at transparency dealing
with obligations to notify creditors and advertise the insolvency in affected EEA states.
It is often the case that an insurance company will also write reinsurance business. One of the important
effects of the 2004 Regulations is the departure from the long established principle of pari passu (equal
footing) distribution to creditors. Under these Regulations direct insureds are given priority above all other
creditors (including reinsurance creditors) on a winding up (ie liquidation) of the company. Since the
implementation of the immediate predecessor of these regulations (the 2003 Regulations referred to above)
stronger parallels can be drawn between the UK requirements of distribution of insolvent insurer estates and
the regime in the various States throughout the US. This change was significant in the thinking of UK creditors
of the UK branch of the Home Insurance Company (see case summary Home Insurance Co, Re [2005] EWHC
2485 below).
3. Non EU Cross‐Border
There are two main pieces of legislation relevant to office holders of re/insurance companies outside the
European Economic Area (EEA): the Cross‐Border Insolvency Regulations 2006, SI 2006/1030 and section 426 of
the 1986 Act. With regard to the former, it is a prerequisite that the insurance company in question is not an
EEA insurer within the meaning of regulation 2 of the 2004 Regulations namely as defined in the European
Third Directive mentioned above. A re/insurance company incorporated in Canada or the United States can
therefore be assisted by the courts of the UK on application of its office holder on the basis that it is not an EEA
insurer. The 2006 Regulations arise from the UNCITRAL Model Law on Cross‐Border Insolvency and are
sometimes described as the UK's equivalent of Chapter 15 of the US Bankruptcy Code. The 2006 Regulations
allow relief to be granted upon the foreign insolvency being recognised as a "foreign proceeding" in a UK
court. Once recognised, the foreign office holder ie "foreign representative" may obtain wide ranging relief
from the UK court eg injunctions staying the commencement and continuation of actions against the
company's assets and examination of witnesses and additional relief which normally would be available to a
British insolvency office holder under the law of Great Britain. Distribution of the assets located in Great Britain
may be, by court order, allowed to be made by the foreign representative. All of the above and further
assistance are subject to the many conditions set out in the 2006 Regulations.
The reciprocity provisions in section 426 of the 1986 Act have been available to office holders in certain
designated relevant countries for many years. The list of relevant countries include the Channel Islands, Isle of
Man and Guernsey as well as most of the British Commonwealth countries. Under this section, reciprocity is
granted on the basis that the courts having jurisdiction in relation to insolvency law in any part of the UK must
assist the courts having the corresponding jurisdiction in any part of the UK or any relevant country or territory.
This is done usually in the form of a letter of request from the foreign court to the UK court. This letter of
request gives authority to the court which receives the letter of request to apply in relation to the matters
specified in the letter of request the insolvency law applicable by either court in relation to comparable
matters falling within its jurisdiction. An example of the UK court assisting an office holder in a relevant country
would be the granting of an order by the UK court to the foreign liquidator to examine witnesses under section
236 of the 1986 Act and to take any action or issue proceedings available to an office holder under insolvency
law in the UK or under the insolvency law of the relevant country.
4. Schemes of Arrangement
One section of the case summaries appearing below relate to the creditor reorganisation mechanism of the
scheme of arrangement. The concept of a compromise or arrangement being reached by a company with its
creditors en masse is found in many jurisdictions. It has been available in the UK for well over 100 years in
various shapes and forms. In recent years in the case of corporate entities, this mechanism has arisen under
what was Section 425 of the UK's Companies Act 1985. With the introduction of the Companies Act 2006 (the
'2006 Act') during the course of 2005 and 2007, the statutory authority for schemes of arrangement is now
found in Part 26 of the 2006 Act. Its terms as far as compromises or arrangements with creditors are
concerned are identical to Section 425 (although the layout is a little different). All the case law therefore
applying to class issues and other aspects of schemes of arrangement therefore remain applicable.
The key requirements of the scheme mechanism are that:

1. majority votes in favour of the scheme must be obtained at a court convened creditors' meeting (or
multiple meetings of each separate class of creditors); those votes being a simple majority in number
representing 75% or more in value of those creditors present and voting in person or by proxy at the
meeting(s)), and
2. the court sanctions the scheme as being fair.
The scheme of arrangement, as we can see, is a creature of companies law not insolvency law. It has been used
outside the insurance sphere for many years by solvent companies to effect restructurings. In the insurance
field the solvent scheme is based on estimation schemes which originally were implemented in the context of
insolvent liquidations. UK insolvency law requires contingent debts to be estimated as at the commencement
of the liquidation and the scheme of arrangement mechanism has often been deployed to fulfill that
requirement in the case of insolvent re/insurers by allowing a water‐tight estimation of all creditors' claims in
circumstances where the identity and value of such claims were of necessity often unknown. For example,
some creditors might also be debtors of the company and until an acceptable valuation of both the inwards
claims and the outwards recoveries could be effected it may not be known whether a creditor is indeed a net
creditor or debtor of the company (ie owes money to the company). The insolvent estimation scheme principle
was then used in the field of solvent schemes. However, as the cases below explain (see in particular Hawk
Insurance Co Ltd [2001] EWCA Civ 241 and BAIC, Re [2005] EWHC 1621 (Ch)) there are differences in nature
between the two types of schemes which have a significant affect on identifying different classes of creditors.
Because of the requirement for the above majorities to be achieved at all class meetings of creditors the
question of which creditors comprise a separate class has proved to be hotly disputed often by creditors
wishing to oppose a scheme in whole or in part.
In broad terms a separate class of creditors arises where the rights of such creditors are not so dissimilar as to
make it impossible for them to consult together with a view to their common interests (Sovereign v Dodd
(1892) 2 QB 573). Furthermore, the starting point to determine whether they can so consult requires the
company to look at creditors' rights before and after the implementation of the scheme. If the rights of groups
of creditors are affected differently by the terms of the scheme on the face of it those groups will form
separate classes and require separate class meetings. The purpose is to prevent the will of the majority
overwhelming the will of a minority. However, in Hawk the Court of Appeal warned that creditors should not
be split into too many classes such as to make the scheme process unworkable nor should the will of a minority
override the intentions of the rest of the creditors.
5. Case Law Digest
a. Schemes of Arrangement
Re Alba Life Ltd [2006] EWHC 3507 (Ch). Alba Life Ltd applied to the High Court
for the sanction of a Part VII transfer of its long term business to Phoenix Life
Ltd. The application was supported by a report of an independent expert. The
FSA had declined to be represented at the hearing. The transfer was opposed
by a number of individual policyholders. The transfer was approved and it was
stressed that the court was not concerned with whether the scheme proposed
was the best possible scheme, but rather with whether the proposed scheme
was fair to the different classes of policyholders and whether they would be
adversely affected by it. Sir Andrew Morrit VC also mentioned in the course of
his judgment that in cases such as this, where the scheme was extremely
complex, it would be beneficial if the FSA appeared before the court, so that the
actuarial and other assumptions made by the independent expert could be
robustly examined by a well informed party. He suggested that the FSA ought
to re‐consider its apparent policy of not appearing at Part VII transfer sanction
hearings.
Anglo American Insurance Co Ltd, Re [2001] 1 B.C.L.C. 755. L, Liquidators of a
company (AA) applied for approval of a scheme of arrangement with its
creditors, AA was insolvent but L sought to implement the scheme outside of
liquidation to save costs and maximise returns. The scheme was approved and
its was held; (1) division into classes had to be assessed on a case by case basis

whilst bearing in mind factors of fairness, the influential power of the majority
within a class and practical common sense. When applying those tests the
courts decided it was not helpful or necessary to divide the classes further,
Sovereign Life Assurance Co (In Liquidation) v Dodd [1892] 2 Q.B. 573 CA
applied; (2) the court had power under the Companies Act 1985 s.425 to make a
scheme binding after liquidation and therefore there was no reason why the
court should not be allowed to approve the scheme prior to liquidation, Bank of
Credit and Commerce International SA (In Liquidation) (No. 3), Re [1992] B.C.C.
715 CA (Civ Div) and Kempe v Ambassador Insurance Co (In Liquidation) [1998] 1
W.L.R. 271 PC (Ber) applied; and (3) although the scheme contravened the
provisions of the Insolvency Rules 1986 part 4 r4.90 in relation to the
Policyholders Protection Board, the court had the power to approve it and
accordingly they did.
Atlantic Computer Systems Plc, Re [1992] Ch. 505. In this case Administrators of
ACS appealed against the judgment of Mr Justice Ferris such that funders had a
right or entitlement to periodical payments due to them under leasing
agreements during the administration period. The appeal was dismissed and it
was held that the position under an administration was intended to be a
temporary regime where there was a moratorium on enforcing debts against
the company to allow time for the administrators to lay proposals before the
creditors. It was held that the funders did not have an absolute right to be paid
under the headleases. Section 11(3)(c) of the 1986 Act prevented steps to
repossess goods "in the company's possession under any hire purchase
agreement except with consent or leave". The equipment in question remained
in ACS' possession for the purposes of s.11(3)(c). The court could and would
exercise its discretion under s.11 to grant the funders leave to bring proceedings
for repossession.
Re BCCI SA (No 3) [1993] BCLC 1490. In this case the liquidators of BCCI sought
the sanction of the court in respect of a pooling agreement (which provided
that BCCI's assets would be pooled with another company's) and in respect of a
contribution agreement whereby the government of Abu Dhabi (the majority
shareholder of BCCI) would contribute $1,500m to the funds available to the
creditors and would then be admitted as creditors of BCCI, so that the
government of Abu Dhabi would receive approximately 20‐25% of its
contribution back. The creditors committee opposed the agreement, stating
that the court had no jurisdiction to go against its wishes, and that the proposed
agreement could only be effected by way of a s425 scheme of arrangement. At
first instance, the agreement was approved. On appeal, this decision was
upheld. Although the views of the creditors ought normally to be accepted,
there was nothing in the Insolvency Act which made those views binding on the
court. Although it was preferable for arrangements such as this (which
departed from the pari passu principle) to be effected under s425 of the
Companies Act 1985, on the facts, it was not feasible to call a meeting of BCCI's
creditors, and so the compromise was an acceptable procedure.
British Aviation Insurance Co Ltd, Re [2005] EWHC 1621 (Ch). Held: An
application for a sanction of a scheme of arrangement by B, an insurance
company, was refused (1) the approval of a scheme was a three‐stage process;
(i) summoning a meeting; (ii) convening the meeting; and (iii) sanctioning the
scheme, Hawk Insurance Co Ltd, Re [2001] EWCA Civ 241 considered. The first
stage application to the court for directions regarding how meetings should be
summoned was purely procedural. It was B's responsibility to identify the
classes of creditors correctly and show that the meetings would be summoned
and conducted in an acceptable way. Any deficiencies in notification for the first
stage did not affect the court's jurisdiction to sanction a scheme nor were they a
critical factor in the court's exercise of its discretion when approving a scheme.
(2) The fact that policyholders may have both accrued, and incurred but not

eported claims, was not of great importance in deciding whether all the
policyholders formed a single class. Furthermore the fact that a creditor might
fall into more than one class did not mean that the separate classes were
inappropriate. In a solvent scheme where a solvent liquidation was not a
realistic alternative, those with accrued claims and those with incurred but not
reported claims had sufficiently different interests such that it was not possible
for them sensibly to consult together in their common interest. The simple fact
that B had excluded certain parts of its business from the scheme did not
support the argument that the meeting had not been properly convened, B had
the right to choose the creditors with whom it wished to enter into the
arrangement. (3) A low turn out at the meeting was not a valid reason for
refusing to endorse the majority vote. However if the court had jurisdiction to
sanction the scheme it would not have done so as the votes cast did not fairly
represent the creditors and the supposed benefits of the scheme were largely
benefits to B.
BTR Plc, Re [1999] 2 B.C.L.C. 675. A scheme was sanctioned on the grounds
that; (1) the court's function in sanctioning the scheme under s.425 included
reviewing a majority decision should circumstances warrant this and not merely
to check that the majority acted bona fide. Furthermore the court could not
sanction a scheme that the majority had approved if it contained a defect,
National Bank Ltd Re 1966 1 W.L.R. 819 Ch D applied; (2) even though
shareholders might have differing interests, as opposed to differing rights, no
more than one meeting of holders of the schemes shares was required where
there was only one class of holders of scheme shares for the purposes of the
scheme in issue; (3) the chairman was entitled to use his proxy votes against the
motion for adjournment and; (4) the Act gave BTR the choice to choose
between a s.425 scheme or a takeover procedure under s.428.
Re Capital Annuities Ltd [1979] 1 WLR 170. Capital Annuities Limited was an
authorised insurance company which carried on long term insurance business.
In 1976 it presented a winding up petition to the court, and the Policyholders
Protection Board prepared a scheme under the Policyholders Protection Act
and sought orders to reduce the company's liabilities under its long term
policies under the Insurance Companies Act 1974. It was held by the court that
no such order could be granted, as it was a condition precedent to the exercise
of the powers to reduce liabilities of a long term insurer that the company
should have been proved to be unable to pay its debts. The fact that the
company did not have sufficient liquid assets to pay its present debts where
repayment had not be demanded did not prove its inability to pay its debts.
Dallhold Estates (UK) Pty Ltd, Re [1992] B.C.C. 394. The court has jurisdiction to
make an administration order against an overseas company following a request
under the Insolvency Act 1986 s.426 providing the section 8 requirements were
met and the court did not find compelling reasons not to make the order.
Re DAP Holding NV [2006] BCC 48. The applicant Dutch companies had applied
for the sanction of schemes of arrangement under s425 Companies Act 1985.
The required statutory majorities had been obtained at the creditors meetings.
The only issue before the court was whether, in light of the fact that none of the
companies had its centre of main interest or an establishment in England and
Wales, the court had jurisdiction to sanction the schemes. It was held that the
schemes would be sanctioned. S425 applied to any company which was liable to
be wound up in England and Wales. The court had jurisdiction to wind up a
foreign company in the context of sanctioning a scheme so long as it had
"sufficient connection to England and Wales".
Re Dorman, Long and Company, Limited. [1934] Ch. 635. In this case two
schemes of arrangement were prepared, one between Dormans, its 5½ per

cent. debenture stockholders and its shareholders, and the other between
South Durham and its debenture stockholders and shareholders, each scheme
being conditional on the Court's sanctioning the other before the end of 1933.
On June 19, the Court ordered that Dormans and South Durham should convene
separate meetings of their debenture stockholders and classes of shareholders
to consider the respective schemes, and possibly approve them by letter
enclosing a print of the scheme and a proxy in the form settled in Chambers.
The confirmation of the schemes by the Court was sought under ss. 153 and 154
of the Companies Act, 1929.
Held: (1) when determining whether a compromise or arrangement should be
sanctioned, the Court must be satisfied that the resolutions in favour of it are
passed by the statutory majority in value and number, as required by s. 153, subs.
2, of the Companies Act, 1929 , and that the proposal is such as intelligent and
honest members of the classes concerned, acting in respect of their own
interests, would approve. (2) that s. 153 of the Companies Act, 1929 , gives a
general right to vote by proxy, using any proper form of proxy, and the proxies
need not be sent to the company's offices before the meeting. (3) that directors
who, pursuant to the Court's order, receive proxies for or against a scheme,
must use them. (4) that it is the Court's duty carefully to scrutinize complicated
schemes and that, in this case, Dormans' circular was insufficient, and
misleading in its reference to the approval of the scheme by the trustees for the
stockholders, and should have stated the amount of the revaluation. (5) that
the description in South Durham's circular of the auditors' report as if it were a
valuation of South Durham's assets was justified only if the report was prepared
solely in order to ascertain the relative values of the assets of Dormans and
South Durham, the opinions of South Durham's board were justified on an
optimistic view and the board had acted reasonably and in the best interests of
those concerned.
Drax Holdings Ltd. Re [2003] EWHC 2743 (Ch). Applications were made for the
court to summon creditor's meetings and sanction schemes of arrangement
under s.425 Companies Act 1985. The two companies involved were foreign, D
was incorporated in the Cayman Islands in 1999 as a subsidiary of a US company
AES, and P was incorporated in Jersey. D was unable to meet its debt liabilities in
relation to the purchase of a power station. P participated in the financial
arrangements in relation to the purchase of this power station and because the
D group could not make payments on its bonds P was unable to meet its own
obligations to the banks. D and P entered standstill agreements with their
creditors and schemes of arrangement were proposed under which creditors
were to receive a mixture of new secured indebtedness of a new Jersey
company, cash and shares in the new holding company – the ultimate owner of
the power station. The schemes were conditional on approval in the Cayman
Islands and Jersey in the case of D and P respectively and in England. The issue
for the English court was whether it had jurisdiction to sanction the schemes in
relation to foreign companies.
Held, allowing the application that D and P were unregistered companies which
the court had jurisdiction to wind up under the Insolvency Act 1986 and could be
the subject of orders under s.425 of the 1985 Act in accordance with s.425(6).
The conditions under s.221(1) of the 1986 Act were discretionary when deciding
whether to wind up the companies and the court did not have to be satisfied
that they had been met for the purposes s.425. Accordingly it was not a
question of jurisdiction and the companies could be wound up within s.425(6).
The court would not exercise jurisdiction in accordance with s.425 in respect of a
foreign company unless there was a sufficient connection with England. There
were many factors which showed that the exercise of jurisdiction was
legitimate and appropriate, in particular the fact that simultaneous orders
would made if the schemes were sanctioned in the courts of Cayman Islands

and Jersey. The English schemes would make those schemes effective by
binding creditors who were subject to English jurisdiction.
English & American Insurance Co Ltd, Re [1994] 1 B.C.L.C 649. Where a person,
in this case an insurance company, receives money which he is bound to keep
separate from his other funds, he becomes a trustee of that fund. In this case
the insurance company went into liquidation and the liquidators applied for a
determination of the question whether the funds relating to the insurance were
held on trust for the associate. The court held that they were held on trust as
the agreement expressly required the fund to be held separately. Moreover the
fact that the insurance company was not liable to tax for the fund further
supported this.
Re English, Scottish, and Australian Chartered Bank [1893] 3 Ch. 385. A
chartered banking company with its principal business in Australia was ordered
to be wound up in this country. A scheme of reconstruction was proposed that
would establish a new bank, which was to defray the liabilities of the old bank
with certain exceptions. The Judge directed meetings of the shareholders and
creditors to ascertain their wishes as to the scheme. With the great majority of
the creditors being resident in Australia, the Judge made an order directing a
form of proxy to be sent by the Official Receiver by telegraph to Australia
appointing specified persons to vote for or against the scheme at the London
meeting. This was done and the result declared at the meeting in London, more
than the statutory number of the creditors were in favour of the scheme
however if the Australian votes were not counted the resolution in favour of the
scheme would not have been carried. The Judge sanctioned the scheme and
some of the Scotch and English creditors appealed on the grounds that: (1) that
the scheme was improvident and unfair towards the creditors generally; (2) that
the Judge had no power to order that the outcome of the Australian proxies be
communicated by telegram and that they should have been produced at the
meeting; (3) that the Australian proxy papers were irregular in naming a
particular person as agent for the voter; (4) some of the proxy papers, which
were stamped with a penny stamp did not display the day of the meeting at
which they were to be used and therefore, they were void under sect. 80 of the
Stamp Act, 1891.
Held, (1) in accordance with the principles established in re Alabama, New
Orleans, Texas and Pacific Junction Railway Company ([1891] 1 Ch. 213), the court
would follow the majority opinion of the creditors because there was nothing
unreasonable or unfair in the scheme as between different classes of creditors;
(2) that the Judge had power under the Joint Stock Companies Arrangement
Act, 1870, s. 2 , to direct the particulars of the Australian proxies to be
telegraphed to the Official Receiver and the proxies to be counted at the
meeting. There was no requirement that the proxy papers be produced at the
meeting; (3) that the proxy papers were not irregular on account of the agent
being named on the form; and (4) that the proxies that did not contain the day
of meeting would be fine providing they were stamped with a ten shilling stamp
within thirty days of their being received in England under sect. 15, sub‐sect. 3, of
the Stamp Act, 1891.
Equitable Life Assurance Society (No. 1), Re [2002] B.C.C. 319. An application
was made under s.425(1) Companies Act 1985 for an order that meetings of
classes of creditors of E, a company, be convened as per the court's directions. E
proposed three relevant classes of creditors, namely, GAR policyholders ‐ those
with policy rights in relation to guaranteed annuity rates, Non‐GAR policyholders
– those without such rights and those who may have had claims in respect of
misselling. The court had to determine the value of each creditor's claim for
voting which would affect the value of the majority in value at a class meeting. E

argued that s.425 permitted the court to direct that creditors could vote in
different ways for different parts of their claims.
Held: The application was successful and the classes E proposed were put
forward on a preliminary basis to allow creditors with similar interests to consult
together, Hawk Insurance Co Ltd, Re [2001] EWCA Civ 241 applied. E's proposals
for determining the voting value were also accepted and it was agreed that the
wording used within s.425 permitted split voting. It was noted that to prohibit
trustees and nominees from voting different shares in different ways would be
problematic and therefore for the same reasoning the principle should apply in
this case.
Equitable Life Assurance Society (No. 2), Re [2002] EWHC 140 (Ch). The court
was asked to sanction a scheme of arrangement under the Companies Act 1985
s.425. E had sought an order for the calling of meetings of the company's
varying class of creditors. The court approved the order and the meetings were
held, 97 per cent of those voting, who altogether held 98% of the value of
voting rights, were in favour of the scheme.
The court granted the application and the scheme was sanctioned. This
consisted of three stages; (1) the application to the court to order the meetings;
(2) the meeting itself; and (3) an application for the court's sanction providing it
was approved by more than a 75 per cent majority. It was held that when there
are separate classes of creditors the court should give directions appropriate for
each class of creditor at the first stage, as per Hawk Insurance Co Ltd, Re [2001]
EWCA Civ 241. The test outlined was whether an intelligent and honest member
might reasonably approve the scheme, unless there had been some material
oversight or miscarriage as per National Bank Ltd, Re [1966] 1 W.L.R. 819 Ch D
and English Scottish and Australian Chartered Bank, Re [1893] 3 Ch. Given that
there were more than 220,000 votes received in favour of the scheme the court
held that it would be remarkable if the scheme could be viewed as one that no
honest and intelligent member could reasonably approve.
Esal (Commodities) Ltd (In Liquidation, Re (1988) 4 B.C.C. 475. When petitioning
creditors provide the liquidator with documents in accordance within the
provisions contained within the Companies Act 1985 s.561 the liquidator can
disclose them to other liquidators, trustees, directors, professional advisers of
the company or of subsidiary or sub‐subsidiary companies anywhere else in the
world, for any purpose beneficial to the winding‐up, and those subsidiary or subsubsidiary
companies are permitted to disclose them if required to do so in
other legal proceedings.
Felixstowe Dock & Railway Co v United States Lines Inc [1989] Q.B. 360. A US
company that was in severe financial difficulties filed chapter 11 bankruptcy
proceedings to freeze all claims against it and provide time for them to
reorganise themselves under the court's supervision. The English plaintiffs
obtained freezing inunctions to prevent the company withdrawing it's assets
from the jurisdiction. The company applied to have the injunctions set aside on
the grounds that the English court should recognise the order of the US court. It
was held that the US court order restraining litigation by creditors did not
prevent the English court from freezing the company's UK assets in ancillary
English proceedings. Chapter 11 proceedings were only one of the
considerations and irreparable harm might be done to UK creditors if the
company's assets were removed from the jurisdiction and the company had
shown an intention to withdraw from its European operations. Moreover the
injunctions did not grant priority and the assets were in safe hands.
Re Friends Provident Life Office [1999] 1 All ER Comm 28. Two group
companies, Friends Provident Life Office (FLPO) and Friends Provident Linked

Life Assurance Limited (FPLLA) both carried on long term insurance business.
Due to tax rules, unit linked policies issued by FLPO were reinsured by FPLLA,
with the relevant funds being held by FPLLA. In 1990, the tax rules which gave
rise to this arrangement changed, so that it would be beneficial for
administrative purposes for the arrangements to be dissolved. Although this
could have been achieved by FPLLA surrendering the reinsurance and a transfer
of the assets to FLPO, this would have given rise to considerable tax costs.
Therefore, an application was made for the court to sanction a transfer of the
business under Schedule 2C of the Insurance Companies Act 1982. The Court of
Appeal held that the transfer of reinsurance of long term business did fall within
the definition of long term business for the purposes of Schedule 2C. The Court
went on to hold, overruling the trial judge, that a reinsurer could transfer its
rights and liabilities to its insured in the way proposed in the scheme. The
reinsurance contract was not simply cancelled, it was discharged by operation
of law as after the scheme there was a merger of rights and liabilities in the
same person. Accordingly the Court of Appeal sanctioned the scheme.
Re Great Britain Mutual Life Assurance Society (1880) LR 16 Ch D 246. This case
concerned the winding up of an unregistered mutual assurance society which
had become insolvent. A winding up order was granted, but subsequently a
committee of policy holders applied to the court requesting that it exercise its
powers under s22 of the Life Assurance Companies Act 1870 to reduce the
amounts of the contracts of the society instead of winding it up. It was held by
the Court of Appeal, that in circumstances such as these, where the winding up
of the society would cause substantial losses to the policyholders, which could
be significantly reduced if the contracts were reduced and the company
continued to function, the court ought to discharge the winding up order and
call a meeting of the policyholders to ascertain their opinions regarding the
reduction of the contracts as an alternative to winding up.
Hawk Insurance Co Ltd, Re [2001] EWCA Civ 241. The provisional liquidators
appealed against the court's refusal to sanction a scheme of arrangement under
s.425 Companies Act 1985. The court found that the scheme weighted claims for
distribution purposes and that the creditors could not be treated as a single
class and therefore, without a meeting for each class, the court could not
sanction the scheme. Held: The appeal was allowed such that; (1) before
ordering a creditors' meeting the Companies Court should first consider
whether there should be more than one meeting; (2) to decide this they should
question whether the scheme was a single arrangement made up of different
parts, or whether it was a number of different arrangements with different
classes or groups of creditors with distinct and dissimilar rights; and (3) from the
facts of the case and after consideration of all of the evidence it seemed that
the creditors all had similar interests and therefore one meeting was adequate,
Sovereign Life Assurance Co (In Liquidation) v Dodd [1892] 2 Q.B. 573 CA
considered.
Home Insurance Co, Re [2005] EWHC 2485. A company (C) submitted that a
scheme should not be sanctioned under Companies Act 1984 s.425 due to
uncertainty regarding its lawfulness under the law of New Hampshire and that
there would be financial implications if the scheme was sanctioned in the UK
but was rejected by the New Hampshire courts. Held: The application was
granted; (1) the procedural requirements for a scheme of arrangement had
been fulfilled and the court refused to agree that the activities a court
conducted in its own jurisdiction could be said to trespass upon or conflict with
the activities of the other. Moreover the court of first instance was not
concerned with the law of New Hampshire and instead considered the scheme
from the point of view of English law which permitted the sanctioning of the
scheme; (2) C's claim for wasted money was unmerited, even if the scheme was
not sanctioned, no money would be saved as a result. Instead the scheme

would be sanctioned having taken into account the various matters that would
be proper for a UK court to take into account in sanctioning a scheme of
arrangement, British aviation Insurance Co Ltd, re [2005] EWHC 1621 applied.
International Bulk Commodities Ltd, Re [1993] Ch. 77. It was held that a receiver
appointed under the terms of a debenture entered into by an overseas
company was an administrative receiver for the purposes of the Insolvency Act
1986 s.29(2) . The definition of "Company" was extended by implication to
include an overseas company liable to be wound up pursuant to the provisions
of Pt. V of the Act. Accordingly their powers were determined by the Act and
not the contractual provisions with the debenture under which the receivers
were appointed.
Kempe v Ambassador Insurance Co [1998] 1 W.L.R. 271. Held: Although a
scheme of arrangement between a company and its creditors under the
Bermudian Companies Act 1991 s.99, which corresponded with the Companies
Act 1985 s.425, required the court's approval to be brought into effect, that
approval did not create a court order. Accordingly the court did not have
jurisdiction to extend the time limits that had been set by the scheme for
appealing against the liquidators' refusal of part of a creditor’s claim. For a
scheme to be given binding force by statute, s.99 of the 1991 Act required; (1)
the liquidators to propose a scheme; (2) the creditors to agree it; and (3) the
court to sanction it. The court had an inherent jurisdiction to correct mistakes in
the document detailing the scheme however it could not amend its substance
by imposing an arrangement on the creditors to which they had not agreed. If
creditors regarded a fixed time limit as unsatisfactory they should raise the issue
by way of objection when the scheme was under consideration following a
request for the court's sanction.
Kingscroft Insurance Co Ltd, Re [1994] B.C.C. 343. Orders under s.236 for the
production of books and documents and for private examination by provisional
liquidators under s.236 ceased to be effective when winding up petitions were
dismissed and the provisional liquidators ceased to hold office. Once the office
came to an end, so did the office‐holder’s powers.
Law Guarantee Trust and Accident Society v Munich Re‐insurance Company
[1911] 1 Ch 138. In this case Munich Re entered into a proportional reinsurance
agreement with the Law Guarantee Trust under which it agreed to reinsure a
certain proportion of the risks arising under debenture guarantees issued by
Law Guarantee Trust. Subsequently, Law Guarantee Trust entered into a
scheme of arrangement with its creditors. Munich Re disclaimed liability under
the reinsurance on the grounds that the risk reinsured had been radically altered
by the scheme of arrangement. It was held by Warrington J that a reinsurer was
not released from liability in the present circumstances simply because the
guarantor company in question had entered into a scheme of arrangement.
There was no alteration of the risk, the contingency of a scheme of
arrangement or liquidation was an element of the risk reinsured.
Re London County Commercial Reinsurance Office Ltd (1925) LI L Rep 206. In
this case an issue arose as to whether claims made under a scheme of
arrangement should be made and paid in sterling, or whether (as some of the
underlying contracts permitted payments to be made in foreign currencies)
claims could be made in a foreign currency. If the claims were to be made in
sterling, there was also an issue as to when the conversion to sterling from the
foreign currency should be made (whether on the date on the liquidation or the
date of the scheme of arrangement). Mr Justice Romer held that the proofs
must be made in sterling, and the claims made in sterling. However, no
judgment was reached as regards the date on which the conversion to sterling
should be made.

MB Group Plc, Re (1989) 5 B.C.C. 684. To effect a merger with C, MB proposed a
scheme of arrangement. Before approving the scheme the court wanted to
ensure that all material changes that had occurred between the announcement
of the proposed scheme and the meeting to approve it were made known to
those persons entitled to vote. At an extraordinary general meeting the scheme
was approved by the requisite majority of shareholders but it was not approved
by the requisite majority of warrant holders. MB decided to carry on with the
scheme regardless and sought the court's approval to the reduction in its capital
by cancelling its ordinary shares. EI, who held ordinary shares and warrants in
MB, rejected the scheme however a holding company, CGIP, with a substantial
interest in C agreed to purchase EI's shares and warrants in MB with the
consequence that EI's objections to the scheme were withdrawn.
Held, the scheme was approved and even though MB's articles did not allow the
reduction of its share capital below GBP 50,000, a purposive construction would
be made to allow for such a reduction. Any material changes in circumstances
made between the announcement of the proposals and the shareholders'
meeting had to be disclosed to all those entitled to vote at the meeting. The
shareholders were informed of the decision to proceed regardless of the
warrant holders' failure to approve the proposal. It was held that it was not
necessary to hold a further meeting to consider the effect of the proposed tax
changes which could affect the shareholders' position as they were merely
executive proposals and were not contained in any draft legislation. It was
further held that the agreement between EI and CGIP was not a material
change of circumstance that would require new consideration by the
shareholders on the grounds that there was not an offer by MB or C that was
more advantageous to EI than any other shareholder.
Minster Assets Plc, Re (1985) 1 B.C.C. 99299. A circular was sent to the
shareholders of a company recommending a scheme of arrangement that had
been proposed and detailing the director's interests as required by the
Companies Act 1948 s.207(1)(a). After the circular was issued, but before the
scheme was approved, the directors started dealing in their shares with the
effect that the information in the circular changed. The company petitioned to
sanction the scheme. It was held that the material representations made in the
circular regarding the director's interests must be accurate at the time the
circular was issued and remain accurate until after the scheme was approved at
the shareholder's meeting. Where there had been changes in the directors
interests before the scheme was sanctioned but after the circular was disclosed,
before they could sanction the scheme, the court would have to be sure that no
reasonable shareholder would have altered his decision as to how to act on the
scheme if the changes in interest were disclosed. In the present case the
changes would not have had such an effect and accordingly the scheme was
approved.
National Bank Ltd, Re [1966] 1 W.L.R. 819. In this case, a failure to disclose
information exempt from the disclosure in the company's account under the
Companies Act 1948 sch.8 on a motion to approve an arrangement was not held
to preclude approval when the evidence shows that the arrangement is fair and
disclosure of the information might damage the Shareholders. Furthermore,
where the failure involves the purchase of all the shares by an outsider, it does
not necessarily mean that it falls within s.209 of the Companies Act 1948 and
requires a majority vote of 10 per cent in favour. It was held in this case that a
motion by a banking company to approve a scheme involving such a purchase,
without such a vote and not disclosing such information, should be approved.
Re Nelson & Co [1905] 1 Ch 551. Nelson & Co Ltd was a tea dealing company
which also offered its customers pensions payable during widowhood. The
company's pension scheme was essentially a sales tactic, and was based on no

proper actuarial basis, often ignoring the age and like expectancy of the
husband whose life was insured under the pension policy. As a result, the
reserves it held were entirely inadequate for the liabilities it faced, and a winding
up petition was presented. At the winding up hearing, a scheme was proposed
to reduce the company's contracts under the Life Assurance Companies Act
1870, and for existing customers of the company to be taken on by a newly
formed separate company, Nelson Trading Company, with the insurance to be
continued to be provided by Nelson & Co. It was held that the proposed scheme
would not be sanctioned on the grounds that it did not fall within s22 of the Life
Assurance Companies Act, as it involved the entering into contracts with a new
company, rather than the reduction of contracts with the original company. It
was also stated that the reduction proposed was one of inequality as between
creditors, which was not permitted by the act.
Re North & South Insurance Corporation, Ltd (1933) 47 Ll. L. Rep. 356. In this
case a petition was brought under the Assurance Companies (Winding up) Act,
1933, by the Board of Trade for the compulsory winding‐up of the North & South
Insurance Corporation, Ltd., on the ground that the company was insolvent. The
petition had been adjourned for arrangements to be made to place the
company in an absolutely stable financial position and now again came before
his Lordship. Mr Justice Maugham submitted that the solvency or insolvency of
an insurance company had to be ascertained by, among other things, a most
careful scrutiny of the funds which had been set aside out of premium income
for the purpose of meeting claims. He recognised that the Court had for a long
time been reluctant to make orders for the winding up a company on the
ground of insolvency, where there was a chance either of a reasonable scheme
of arrangement or of some steps being taken which would enable the company
to carry on business without causing grave injustice or hardship to creditors.
However in this case the judge came to the conclusion that in all the
circumstances of the case the prospects of an adjournment being fruitful are
small and the risk of injustice or injury to various members of the public is
substantial and may be very serious.
Held: the company beyond all doubt was insolvent; it had lost all of its share
capital and there was also at least a sum of £60,000 required to satisfy its
liabilities, including the making of proper provision of the meeting of claims
which have not yet matured. The question whether there should be an
adjournment or not was held to be a question for which the Court had
discretion. Mr Justice Maugham submitted that he would not be properly
exercising his discretion in the matter if he allowed the company to continue to
function, even with the protection of the limited character proposed and
accordingly, he held in favour of a winding‐up order.
Old Silkstone Collieries, Re [1954] Ch. 169. In this case a company had articles
which provided that special rights that were attached to a class of stock could
be abrogated or modified providing an extraordinary resolution was passed at a
separate general meeting of such stockholders. In this case the preference
rights were provided by s.25 of the Coal Industry Nationalisation Act 1946. In a
circular dated 28 July 1950 the Board of the directors of the company
recommended repayment to preference stockholders and stated that it was
their intention that any rights that preference stockholders had under s.25 of
the 1946 Act should be retained. By a special resolution dated 22 August 1950
passed at an extraordinary general meeting of the company the capital was
reduced and the court confirmed the reduction. However the resolution
expressly preserved the right of preference stockholders to claim under section
s.25 of the 1946 Act. A circular on 21 September 1951 also recommended
payment to preference stockholders and there was again a provision reserving
rights under s.25 of the 1946 Act. A further resolution saving the preferential
rights was passed on 16 October 1951. On 24 April 1951 however the Board

issued a third circular which stated that the Board had considered preferential
rights and decided that the rights of the preference stockholders under s.25 had
no monetary value and they therefore proposed reduced repayments at par
only. There was no special meeting of preferential stockholders to approve this
but nonetheless this was approved by an extraordinary meeting of the
company on 10 May 1953 with the effect that the capital of the company could
be reduced by repaying each stockholder the whole paid‐up capital of his
holding.
On petition for confirmation of this it was held that; (1) the special resolutions of
August 22 1950 and October 16 1951 attached special rights to the preferential
stock which were contractual in nature and evidenced the intention that the
preferential stockholders should be entitled to claim under section 25 on the
basis that they remained proprietors of the amount of stock which they would
have held had there been no reduction of their capital at all; (2) these special
rights were abrogated by the special resolution of 19 May 1953 and accordingly
in order to carry out the desired reduction it was necessary to gather the
approval of the preference stockholders in accordance with the company's
articles – this had not occurred and therefore the resolution for reduction was
not passed validly; (3) it was further held that it would be inequitable for the
Board to reverse what had gone before as the preference stockholders would
have already acted upon the representations contained in the first two
resolutions; (4) accordingly the court should refuse the petition.
Osiris Insurance Ltd, Re [1999] 1 B.C.L.C 182. An application was made by Osiris
for an order under the Companies Act 1985 to sanction a scheme of
arrangement. An issue arose as to the validity of the meeting at which the
policyholders voted in favour of the scheme. Held: the meeting was conducted
validly because the creditors were of one type even though the contracts which
gave rise to their liabilities were different and their interests did not conflict. The
court was required to apply the standard of an "intelligent and honest man" in
the role of one of the creditors deciding whether to approve the scheme.
Furthermore a substantial number of policy holders had voted in favour of the
scheme and sufficient efforts had been made to bring the scheme to the
attention of other creditors.
Pan Atlantic Insurance Co Ltd, Re [2003] EWHC 1969. Provisional liquidators
petitioned for the sanction of a scheme which contained a clause permitting the
resolution of disputes by an independently appointed adjudicator whose
decision would be final and binding. The scheme also introduced time limits for
the claims. The court held that such restrictions did not infringe the creditor's
rights under the Human Rights Act 1998 Sch. 1 Part I Art. 6 because the
creditors' right of access to court was not totally restricted and any decision
made by the adjudicator would only be final and binding to the extent that was
permitted by law. It was also likely that most creditors expected a time bar to
exist and the scheme was on the whole beneficial to creditors. It was held to be
unclear whether the Insurers (Reorganisation and Winding Up) Regulations
2003 would apply as all creditors were insurance creditors. It was held that even
if there were other creditors as well as insurance creditors, the Regulations
would not apply because the liquidators had been appointed before the
Regulations came into force.
Practice Statement (Ch D: Schemes of Arrangements with Creditors). The Vice
Chancellor issued a practice statement to be followed on applications under the
Companies Act 1985 s.425 where a court sanction is sought for a scheme of
arrangement between a company and its creditors. The purpose of the
statement was to enable issues regarding the composition of classes of
creditors and the summoning of meetings to be identified and resolved early on
in proceedings.

To achieve this the following practices were detailed; (1) the applicant was
responsible for deciding if more than one creditors meeting was required and if
it was ensuring that the meetings were constructed of an appropriate class of
creditors such that the creditors rights were similar enough so that they could
consult together with a view to their common interest; (2) the applicant could
bring an application before a judge or the registrar but applications before the
registrar should be listed before a judge and where appropriate applications
before the registrar should be adjourned to a judge; (3) the applicant was
responsible for drawing any issues in relation to the constitution of the
creditors' meeting, or any other issue that might affect the procedure, to the
judge's attention as quickly as possible. Unless there was good reason not to,
the applicant should draw to the attention of any person affect by the scheme
of its purpose and of the creditors' meeting including the composition of the
meeting; (4) the court would then decide whether more than one meeting was
required and determine the composition of such meeting; (5) if a creditors issue
required attention the court would consider whether to give directions to
resolve the issue and; (6) directions to resolve such creditors issues could
include orders giving persons affected by an order a deadline by which they
must have applied to vary or discharge the order, with a creditors' meeting to
take place if such an application was not made.
RMCA Reinsurance Ltd, Re [1994] B.C.C. 378. A court may order a creditors'
meeting to consider a scheme of arrangement even where there is only one
person capable of falling within the relevant class. The Companies Act 1985
s.425 does not provide a limit as to where a creditors' meeting may be held. In
this case two reinsurance companies incorporated in Singapore, A, sought
orders for the convening of a meeting under s.425 for a scheme of arrangement
proposed by the companies' creditors. There was only one person who fell
within the class of creditors and the court had to decide whether a meeting
where only one creditor was in attendance could be held validly. The place of
such a meeting was also considered. It was held that it was possible under s.425
to order a meeting where only one person was capable of falling within the
class of creditors. Furthermore, although s.425 did not expressly specify where
the appropriate place for such a meeting was it was held that it need not be in
the UK.
Smith v UIC Insurance Co Ltd. UIC was the claimant in an arbitration against S,
the representative member of a reinsurance syndicate. Provisional liquidators
were appointed for UIC and S then applied for security of costs in accordance
with Companies Act 1985 s.726. A problem arose such that UIC only had
sufficient assets to pay S's costs if S was ranked ahead of its unsecured
creditors. The application was refused and the court granted S costs in full paid
out of UIC's assets in priority over the other unsecured creditors because the
provisional liquidators were only empowered to pursue S by virtue of their
appointment by the court. Moreover, justice demanded that if S succeeded he
should not be out of pocket and if the provisional liquidators sought the benefit
of proceedings they should bear the risk if unsuccessful. S had however failed to
show that his costs would not be paid and the provisional liquidators had
asserted that they intended to pay his costs in priority to the unsecured
creditors. To remedy this a declaration was made which provided that UIC
would pay S's arbitration costs as an expense of the provisional liquidation in
priority to the unsecured creditors.
Sovereign Marine & General Insurance Co Ltd, Re [2006] EWHC 1335 (Ch). (1)
For the purposes of s.425 a company was "any company liable to be wound up
under this Act". "Act" in s.425(6)(a) incorporated the Insolvency Act 1986 s.220
which was wide enough to include a company in a foreign state and s.221(1)
which allowed for an unregistered company to be wound up. "Liable to be
wound up" referred to whether this was possible under the 1986 Act. An English

court had jurisdiction to sanction a scheme of arrangement in relation to an EEA
insurer provided it had sufficient connection with England and there was
nothing in European legislation that deprived it of that jurisdiction. The court
therefore had jurisdiction to sanction schemes of arrangement in relation to
companies incorporated in France and Ireland.
(2) The test for identifying a class of creditors was that the rights within it were
not so dissimilar as to make it impossible for them to consult together with a
view to their common interest, Re Hawk Insurance applied. When trying to
determine whether a single class existed an appropriate comparator must be
identified to establish what the creditor's rights would have been without the
scheme, British Aviation Insurance Co Ltd considered. In this case two separate
classes were determined, one for votes in relation to the creditor's unpaid
agreed claims, other claims not requiring estimation, unpaid additional claims
and outstanding claims and secondly in relation to the creditor's incurred but
not yet reported claims.
Sovereign v Dodd (1892) 2 QB 573. In this case a creditor, Mr Dodd, objected to
the sanction of a scheme as there had only been one meeting of creditors and
yet the scheme purported to bind what was in reality two classes of creditors.
The first class consisted of those people whose life policies had not yet matured,
and the second class was made up of those people whose policy had already
matured before the scheme of arrangement was proposed. It was held by the
Court of Appeal that there were indeed two classes of creditors and the scheme
was not sanctioned. In reaching this verdict, the Court of Appeal commented
that a class of creditors "must be confined to those persons whose rights are not
so dissimilar as to make it impossible for them to consult together with a view to
their common interest".
Telewest Communications Plc [2004] EWHC 924 (Ch). One of the points
considered was in relation to the strength of different creditors' rights.
Objecting creditors claimed that they were disadvantaged because their
contracts were in US dollars and the scheme imposed a provision that required
creditors' contractual currencies to be exchanged at a rate to prevail on a future
date. The judge held that the opposing bondholders did not have "embedded"
rights to a particular exchange rate which differed from that adopted by the
scheme. Instead the rights held were those arising from the imposition of
insolvency rules which take effect on the company's liquidation and were not
rights in the sense of rights being particular to the bondholders in question. The
judge also reinforced the principle established in Hawk such that the differences
in the rights of creditors may be material and certainly more than de minimis
without them leading to separate classes.
Transcontinental Underwriting Agency v Grand Union Insurance Co [1987] 2
Lloyd's Rep. 409. The court was asked to determine whether a broker who had
signed a retrocession agreement could himself sue on an agreement. It was
held that an agent, in this case the broker, who has signed a retrocession
agreement may sue on it himself and will hold the proceeds on behalf of his
principal.
Re Trix Ltd [1970] 1 WLR 1422. This case concerned a group of 12 associated
companies which had each entered into separate compromise agreements. The
agreement of all of the creditors had not been obtained to the agreements, so
an application was made to authorise the distributions sought despite this lack
of complete consent. The judge refused to grant the summons, and in so doing
stated that the correct way to deal with the situation in hand would have been a
single scheme of arrangement for all of the group companies. The judge was of
the view that it would have been entirely proper to have one scheme of
arrangement, commenced by the issue of a single originating summons.

. Insolvency
AA Mutual International Insurance Co Ltd, Re [2004] EWHC 2430 (Ch). AA
Mutual International Insurance Co Ltd (AA) sought an administration order
under the Insolvency Act 1986 Schedule B1. AA had been authorized to
underwrite insurance business by the UK authorities in 1979; however, the
company went into run‐off in 1987. At that point, it was no longer authorised to
underwrite insurance business but was authorised to continue to carry out
contracts of insurance. In this case, the High Court considered whether it had
jurisdiction under European legislation to make such an order. It found that AA
was an "insurance undertaking" within the meaning of the European Council
Directive 2001/17 Article 2(a) as it had received authorisation to carry on such
business by the UK under European Council Directive 73/239 Article 6. In
addition, administration was found to be a "reorganisation measure" under
Article 2(c) of Directive 2001/17; and, under Articles 2(g) and 4 of the same
Directive, the High Court had exclusive jurisdiction to decide reorganisation
measures in relation to AA. As AA was authorised under the Financial Services
and Markets Act 2000 Part IV, it was a UK insurer which fell within the Insurers
(Reorganisation and Winding Up) Regulations 2004. In this case, the court
found that an administration order would achieve the best result for AA's
creditors and so the order was made as the conditions of Schedule B1 of the
Insolvency Act 1986 were satisfied.
Ackman and Others, and Scher and others v The Policyholders Protection Board
[1992] 2 Lloyd's Rep. 321, CA. A series of professional indemnity policies were
issued to lawyers, doctors and accountants (the Professionals) practicing in
North America. The insurance companies who issued these policies
subsequently became insolvent and as a result the Professionals claimed against
the Policyholders Protection Board. As a result, the Court of Appeal was asked
to consider several issues regarding the meaning of the Policyholders Protection
Act 1975 (the Act). It held that a policy was a "U.K. policy" as long as the insurer
was carrying out insurance business which was part of the insurer's U.K.
authorised business whether or not it was performed in the U.K. The second
issue in question was who was a "private policyholder" within the meaning of
the Act. The Court of Appeal held that a professional corporation did not qualify
as a "private policyholder". Finally, the Court of Appeal decided that "any
liability" within the meaning of the Act meant any liability (actual or contingent)
which could, under the terms of the policy, give rise to or capable of giving rise
to a liability on the part of the insurer. In addition, the Court of Appeal held that
such a liability must have occurred during the policy period but prior to the
commencement of the liquidation.
A Company (No. 013734 of 1991), Re [1992] 2 Lloyd's Rep. 415. The Petitioner in
this case was a reassured with claims against the above reinsurance company
(R). The Petitioner itself was in liquidation and claimed against R under two
reinsurance excess of loss contracts. Directions had been made in the
liquidation of the Petitioner valuing or settling contingent claims of an uncertain
value and one of the questions in this case was the extent to which such valued
or settled contingent claims amounted to a "loss settlement" or "compromise
settlement" in respect of which R was obliged to pay. R disputed liability and
quantum but the Petitioner sought a winding‐up order against R on the basis
that there was a minimum undisputed amount due on which to base the
winding‐up petition. There were two main limbs to R's argument: (1) that it was
a precondition of liability that the Petitioner should have actually paid its
underlying assureds, and (2) that the valuation by the court's order in the
Plaintiff's liquidation could not amount to a "loss settlement" or "compromise
settlement" within the reinsurance contracts.

The Judge (Roger Kaye Q.C.) allowed R's application to strike out the windingup
Petition on the basis that there were complex issues to be tried showing that
R bona fide disputed the Petitioner's claims on serious grounds. Obiter, the
Judge did say that in the context of winding‐up "paid" must mean "liable to
pay" even if the assured only receives a dividend of its claim. If this had been the
only issue, the petition would not have been struck out. However, there was
also the dispute relating to whether valuation amounted to a "loss settlement"
or "compromise settlement". In that regard, the Judge also made an obiter
reference to the reasonableness in principle of a "loss settlement" embracing
IBNR and outstanding claims such that they could form the basis of a windingup
order. (See also Cleaver v Delta American Reinsurance Co (In Liquidation)
summarised below.
Banco de Portugal v Waddell (1880) 5 App. Cas 161. One company which carried
on business in both England and Portugal became insolvent. Prior to its
insolvency the company had issued bills of exchange. The question before the
Court of Appeal in this case, was whether the creditors holding such bills could
prove in both the English and Portuguese proceedings. The court held that, by
virtue of section 37 of the Bankruptcy Act 1869, the creditors were not
permitted to double proof. They held that such a double proof was permissible
only under the legislation when there were two distinct estates to be wound up.
In this case, there was one business only which happened to be carrying on in
two places. This meant that if there was a surplus after the creditors were
satisfied in Portugal then the surplus would belong to the English trustee of the
estate (i.e. the estates were not separate). As such, the creditors could not
prove in the English proceedings without giving credit for the amount they
received in the Portuguese proceedings.
Re Bank of Credit and Commerce International SA (No. 9) [1994] 2 B.C.L.C 636.
The English appointed liquidators of BCCI, a company incorporated in
Luxembourg, and one of its affiliate companies were granted a worldwide
Mareva injunction against two foreign individuals, M and K. It was alleged that
M and K we accomplices to frauds committed by senior BCCI executives. The
liquidators gave an undertaking to the English court that they would not utilize
the Mareva injunction anywhere other than England without leave of the
English Court. M and K appealed this decision and asked that the undertaking be
extended to the commencement of proceedings in other jurisdictions. The
Court of Appeal found that the liquidators should not be hindered from
providing information in the prosecution of fraud. However, it also found that in
order to prevent multiple suits the English court's permission should be sought
in order to commence proceedings in jurisdictions other than Luxembourg.
Bradley v Eagle Star [1989] A.C. 957. This was an appeal to the House of Lords
concerning at what point an insured's right to claim under a liability policy will be
transferred to a third party under the Third Parties (Rights against Insurers) Act
1930 (the 1930 Act). The purpose of the 1930 Act is to give a third party claimant
against an insured the right to claim on that insured's liability policy in place of
the insured when the insured becomes insolvent. This means that the third
party can be paid in full in respect of his claim rather than the insurance
proceeds falling into insured's estate. In this case, Bradley had been employed
by a cotton mill from 1933 to 1970. In 1970, he was diagnosed with byssinosis, a
disease caused by inhaling cotton dust. The mill was wound up in 1975 and the
company dissolved in 1976. In 1984 Bradley brought a claim against Eagle Star,
the mill's liability insurers, on the basis that the mill's right to claim on its Eagle
Star policy had been transferred to Bradley under the 1930 Act. He sought preaction
disclosure of the Eagle Star policy, which is a right given to third party
claimants under the 1930 Act. The House of Lords ruled that a third party did not
receive rights under the 1930 Act until that third party had established the

insured's liability. Thus, Bradley had first to establish that the mill was liable to
him for causing his illness before he would obtain any rights under the 1930 Act.
Brown & Davies v Galbraith [1972] 1 WLR 997. In this case the defendant's car
was damaged in an accident and the defendant took it to the plaintiff company
for repairs. The defendant's insurer then sent an assessor, who authorised
repairs to a certain price and provided the plaintiffs with a document
authorising such repairs stating that an excess of £25 was to be paid by the
defendant. The document stated that the defendant's consent should be
sought concerning the repairs, which it was not. The repairs were carried out,
but the defendant stated the repairs were inadequate, so the insurers refused
to pay. The plaintiffs therefore sued the defendant for the full value of the
repairs and in the meantime the insurers became insolvent. It was held by the
Court of Appeal that the situation had created two contracts, one between the
insurers and the plaintiffs whereby the insurers agreed to pay for the repairs
excess £25 and a second, implied contract between the plaintiffs and the
defendant that the repairs would be carried out quickly and with due care and
skill. However, this second implied contract did not provide that the defendant
should pay for the repairs beyond the £25 excess if the insurers failed to do so.
Cambridge Re [1992] 2 Lloyd's Rep. 415. This claim concerned a petition from a
reinsured in the liquidation proceedings of a reinsurer. Under the terms of the
reinsurance agreement, the reinsurer was liable to indemnify the reinsured for
Ultimate Net Loss. Ultimate Net Loss was defined in the contract as being "the
sum actually paid by the Reinsured in settlement of losses or liability…" The
court at first instance stated, in the context of a winding up, that "paid" must
mean "liable to pay." Consequently, the fact that the claims had not yet been
paid was not a barrier to a claim. This point was not disputed by the Court of
Appeal. The Court of Appeal did, however, find that the valuation of the claims
could be disputed on substantial ground and could not proceed without making
it clear “beyond peradventure and without more that the [reinsurer] was
indebted in the sum claimed.”
Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207. In this
case Rothmans used Freeman Mathews as an advertising agency to advertise its
various tobacco brands in newspapers and on posters and billboards. Freeman
Mathews undertook all Rothmans' placement work which involved buying
advertising space in newspapers and magazines. For this week Freeman
Mathews was paid an annual fee, paid monthly, and was reimbursed any fees it
incurred in the previous month at the same time. Freeman Matthews got into
financial difficulty, and so in July 1983 a special account was set up into which
Rothmans paid a sum of money to cover the next month's placing fees. On 3
August 1983 Freeman Mathews went into creditors' voluntary liquidation and
the special account was frozen by the liquidator. The third parties which had
been due to be paid from the special account threatened to sue Rothmans for
the fees, and to protect its advertising campaign, Rothmans paid the fees. In so
doing, it discovered that some of the May invoices had not been paid, despite
Rothmans paying an equivalent sum to Freeman Mathews in June. It refused to
pay those invoices. Rothmans brought an action for the balance of the special
account and the liquidator counterclaimed for £780,000, being the July
instalment of the yearly fee plus debts incurred by Freeman Matthews on
Rothmans' behalf. The liquidator resisted payment of the special account funds
on the grounds that the agreement creating was void as contrary to public
policy or because it purported to create a charge over the company's book
debts and such charge had not been registered.
Mr Justice Peter Gibson held that Rothmans was entitled to the balance of the
special account. This was because it was held on a Quistclose trust basis, and the
funds were never the property of Freeman Mathews. He went on to say that

the agreement would not be avoided and it was not a charge on the company's
book debts, but even it had been Rothman's equitable rights would not have
been affected. The liquidator's claim for £780,000 was upheld.
Centre Reinsurance International Co v Curzon Insurance Ltd [2006] UKHL 45.
The administers of T&N Limited appealed against the decision of the Court of
Appeal which had allowed T&N Limited's reinsurers to claim certain expenses as
an expense of the administration. Prior to entering administration, T&N entered
into a contract of insurance covering asbestos liability (the ALP). The ALP
permitted the respondent, who were the reinsurers of the ALP, to handle
asbestos claims brought against T&N if T&N suffered an insolvent event. The
ALP also stated that, upon this transfer of claims handling rights, the reinsurers
were permitted to be reimbursed for claims handling costs. The reinsurers had
successfully argued in the Court of Appeal that these costs should be paid
according to section 19(5) of the Insolvency Act 1986 (i.e. as a super‐priority over
the administrators remuneration and expenses). The House of Lords found that
there was no reason why such liabilities should be given priority over T&N's
other debts. It held that section 19(5) permitted administrators to confer
authority on another party to act on behalf of the company or the company
could, prior to administration, confer authority on another to act on its behalf
which the administrators could now revoke.
Re Charge Card Services Ltd [1986] 3 All E.R. 289. In this case a credit card
company, Charge Card Services Ltd (C), became insolvent. C had supplied credit
cards to customers (the Customers) who used the cards to pay for motor fuel at
certain retailers (the Retailers). In order to fund the business, C entered into an
agreement with Commercial Credit Services. Condition 3B of that agreement
allowed any credit balance in C's account to be held by Commercial Credit
Services in certain situations. In February 1985, C went into liquidation. As a
result two issues came before the court. First, as a result of the liquidation, the
Retailers were not paid by C for fuel supplied to Customers. The Retailers
argued that, in these circumstances, the Customers were liable to the Retailers
for the shortfall. The court held that the Customers had provided consideration
for their purchases by paying with the card. As a result, the Retailers could not
pursue the Customers for their loss. The second issue heard by the court
regarded the meaning of Condition 3B. Upon C's insolvency, Commercial Credit
Services retained a substantial amount of money from C's account. The court
held that Condition 3B allowed a right of set off against the liquidator which was
permitted as long as it did not exceed that which was permitted under the
Bankruptcy Act 1914 section 31. The court held that this set off did not exceed
the statute and was consequently permitted.
Charter Reinsurance Company Ltd (In Liquidation) v Fagan [1997] A.C. 313. In an
insolvency regime, where, of necessity, there will be no disbursement of claims
to creditors in the normal course of business but rather dividends distributed to
them, the reinsurer in this case was nonetheless obliged to pay amounts
representing reinsurance cover in respect of creditors' claims despite the fact
that the ultimate net loss clause in the reinsurance contract referred to "sums
actually paid". The House of Lords decided that the use of the words "sums
actually paid" concluded they did not create a precondition of prior
disbursement and that the reinsurers had to pay the amounts claimed.
Re City Equitable Fire Insurance Company Ltd [1930] 2 Ch 293. Two insurance
companies entered into a reinsurance agreement under which the reinsurer
reinsured a share of all insurances written by the insurer in its fire department.
The treaty provided that the insurer was entitled to retain 40% of the premiums
due to the reinsurer in the first year of the treaty as a deposit to secure the
reinsurer's obligations. The insurer was to pay 3.5% pa on any part of the deposit
that was not used to satisfy the reinsurer's obligations. Subsequently, the

einsurer was wound up. The liquidators claimed that the insurer was bound to
pay over the deposit and interest in full. The insurer claimed that is was entitled
to set off both the deposit and interest against sums due to it from the reinsurer
under other treaties and contracts. It was held by the Court of Appeal that the
interest on the deposit was a debt due from the insurer to the reinsurer and it
therefore fell within s31 Bankruptcy Act 1914 and could be set off in the normal
way. However, the deposit was money handed over to the insurer for a specific
purpose and the balance remaining after satisfying that specific purpose
continued to be excluded from the course of account between the parties and
could not, therefore, be subject to set off.
Re City of London Insurance Co Ltd [1932] 1 Ch 226. City of London Insurance
Company was ordered to be wound up by the Court in 1922. The majority of its
shares were held at the date of winding‐up by another company also in
liquidation. The liquidator of City of London Insurance Company therefore made
two calls, the first of 1s. a share in 1925 and the second, of 1s. 6d. a share in 1927,
on the B contributories who held the shares before they had been transferred
to the insolvent company. The proceeds of these calls, together with the other
assets of the company, were insufficient to pay all its creditors in full, but, they
exceeded by some £10,000 the total amount of the debts and liabilities of the
company contracted at the date when the B contributories ceased to be
members of the company. It was held by Eve J that under s157 of the
Companies Act 1929 the surplus did not form part of the assets of the company
and must be refunded to the B. contributories. To do otherwise would be to
impose a greater liability on the B contributories than allowed by statute.
Cleaver v Delta American Reinsurance Co (In Liquidation) [2001] UKPC 6. This
case concerned an appeal to the Privy Council (Cayman Islands) by an insurance
company in liquidation in Cayman (the Appellant) against an order that monies
paid by its bank under the provisions of a letter of credit to Delta (an American
Insurance Company) were not part of the Appellant's assets for the purposes of
a liquidation.
The Appellant was categorised as a foreign or alien insurer under New York
Insurance Law and therefore had provided the requisite deposit security with
the District Court of New York in relation to proceedings brought in that State
by Delta against the Appellant for certain breaches of a retrocession agreement.
The Appellant's case was that Delta had to take account of any monies received
by way of hotchpot before becoming entitled to any dividend in the Cayman
liquidation otherwise Delta would have an unfair advantage compared to other
creditors.
The Privy Council dismissed the appeal saying that the hotchpot principle could
not be applied since the monies paid by the bank had been paid under a letter of
credit security and that the monies received by Delta were never the sort of
monies which would have been available for distribution in the liquidation.
Another question also considered in this case was the extent to which liabilities
of a reinsurer can be accelerated with the result that settlements including
outstanding claims and IBNR can be payable by reinsurers. Reliance was placed
on the specific wording of the contract in this case.
Company (No. 007816 of 1994), Re [1995] 2 B.C.L.C. 539. The Secretary of State
for Trade and Industry presented petitions for the winding‐up of six insurance
companies under the Insolvency Act 1986 s.124A on the ground that they had
been carrying on unauthorised business in the UK contrary to the Insurance Act
1982 s.2(1). He argued that public policy required that the companies were
wound up. The secretary of state submitted that the 2 UK companies had no
identifiable worth and did not have sufficient funds to write insurance. He also

submitted that cover had been provided to clients without notification that the
policies were issued by an offshore insurer not authorised to do business in the
UK and this was in breach of s 74(2) of the 1982 Act. The court dismissed the
petitions and held that the UK companies had acted solely as brokers and
intermediaries and took no part in underwriting decisions. S 2(1) if the 1982 Act
did not prevent the placing of UK risks with unauthorised insurers and because
no unauthorised business had occurred in the UK all of the allegations against
each company failed. The court submitted that when evaluating a public
interest petition it was necessary to weigh up the interests of the petitioner
against those of the opposing parties by considering evidence and their
submissions. However, the evidence of the Secretary of State should not be
afforded any greater weight and should be tested in the same way as the other
submissions.
Continental Assurance Co of London Plc (In Liquidation) (No. 3), Re [2000]
B.C.C. 65. Continental Assurance Co of London Plc (Continental) entered into
voluntary liquidation. Continental's joint liquidators subsequently valued and
admitted claims under eight prize indemnity insurance policies. In order to value
the claims, the liquidators followed the Insurance Companies (Winding Up)
Rules 1985 Sch. 1 paragraph 2(2)(b). However, Continental's reinsurers
challenged this valuation on the basis that paragraph 2(2)(a) should have been
used instead of 2(2)(b). As a result, the joint liquidators sought the court's
directions. The court held that it was unclear how the 1985 Rules applied to
voluntary liquidations. However, the court found that it was possible to add
words to the Rules in order to make them applicable to voluntary liquidations. It
found that the reference to the date of the winding up order should be read as
the a reference to the resolution which started the winding up under the
Insolvency Act 1986 and the point at which the company went into liquidation.
As a result, the 1985 Rules applied to Continental's liquidation and the correct
basis of valuation for prize indemnity contracts was paragraph 2(2)(b).
Re Dallhold Estates (UK) plc Ltd [1992] B.C.L.C. 621. This was a petition to place
Dallhold Estates (Dallhold), a company incorporated in Australia, into
administration in England. The Australian Court issued a letter of request to the
English Court under s 426 of the Insolvency Act 1986 (the Act), following an
application to the Australian Court by the Australian provisional liquidator of
Dallhold and Dallhold's parent company, to place Dallhold into administration in
England. The court ruled that it had jurisdiction to make an administration order
against an overseas company following a request under the 426 of the Act, if
the conditions set out in s8 of the Act – the conditions for making an
administration order ‐ are satisfied. The purpose of s 426 is to give the English
court jurisdiction that it might not ordinarily have. In such circumstances,
provided the usual conditions for placing a company into administration are met
(s 8 of the Act), the court should make an order unless there are compelling
reasons not to do so.
Dynamics Corp of America (In Liquidation)(No. 2), Re [1976] 1 W.L.R. 757. This
case is authority for the proposition that in a compulsory winding‐up in the UK
where there is a contract between the company and its creditor subject to
foreign law, any payments in foreign currency due under the contract are to be
converted into pounds sterling at the date of the winding‐up order. In this case,
the company, Dynamics Corporation, was incorporated in the State of New York
carrying on business in both the US and the UK. It had dollar creditors in the US
and sterling creditors in the UK. A winding‐up Order was made against the
company in May 1973. Under a scheme of arrangement approved in New York in
November 1974, each creditor was to receive 28.5% of his debt along with
certain shares in the common stock of the company and his dividend
entitlement in the English liquidation.

There had been a movement in exchange rates from the time when the
winding‐up petition was presented in the UK when the pound was equivalent to
US$2.42 to the date of the winding‐up Order when it had increased to US$2.56.
After that date there were large fluctuations in the two currencies. It was held
at first instance (Oliver, J) that the date of the winding‐up order was to be the
date on which the exchange rate was to be struck. The basis of this decision was
that the notional discharge of any debts due to creditors was the date of the
winding up order and the exchange rate to be applied had to be consistent and
be the same for all creditors. Please note, however, that in an ex parte
application seeking approval of a scheme of arrangement, in another liquidation
(the Reinsurance Company of Mauritius Ltd – unreported) good reason was
adduced to depart from this arose where creditors lodged their claims over time
as and when they fell due. The court considered that applying exchange rates at
the time of each claim being made gave a truer picture of the estimate of future
claims which had to be made also at the time of the winding‐up order.
Re Eddystone Marine Insurance Company [1892] 2 Ch 423. Company A insured a
ship and reinsured part of the risk to company B. The reinsurance contained a
pay as paid clause in the following form: "a reinsurance…to pay as may be paid
thereon". The ship in question sustained insured losses. Both company A and B
went into liquidation before company A had paid any sums under the insurance.
The liquidator of company A claimed in the liquidation of company B for the
amount due under the reinsurance. It was held by Stirling J that payment by
company A on the underlying insurance was not a condition precedent to it
recovering against company B under the reinsurance.
Epikouriko Kefalaio v Anaptyxis (C28/03) [2006] All E.R. (EC) 112 The Greek
Council of State sought a preliminary ruling regarding whether Greek Statute
complied with Council Directives 73/239 and 79/267. A Greek insurance company
was insolvent and Greek legislation allowed some of the company's assets to be
released in order to pay employee claims. The European Court of Justice held
that the Greek law did not contravene the directives as there was no
requirement that the assets of an insolvent insurance company should pay
insurance claims only. Moreover, The court stated that Directive 2001/17 Article
10(1) allowed Member States to rank employee claims above those of insureds.
Re Equity & Provident Ltd [2002] 2 B.C.L.C 78. The Secretary of State sought to
wind up Equity and Provident Ltd (E&P), a motor insurer, on public interest
grounds under section 124A of the Insolvency Act 1986 (IA 86). E&P had failed to
cooperate with Secretary of State's requests for information, had mislead
consumers about the scope of the motor cover it was providing and had been
soliciting investments from consumers when not authorised to do so. The Court
found that its power to wind up a company on the grounds of public interest
must be used sparingly and carefully. However, E&P's failure to cooperate with
the Secretary of State, in particular the deliberately evasive conduct of one of its
directors including using a number of different aliases, was sufficient reason to
wind up the company on public interest grounds.
Re Focus Insurance co Ltd [1997] 1 B.C.L.C. 219. The Bermudian liquidators of
Focus Insurance Co Ltd (F) obtained judgement against a former director of F,
H, for $20million and a Mareva injunction against the disposal of the assets. In
order to enforce this judgement in England, the liquidators made an application
to the English Court using s. 426(4) of the Insolvency Act 1986. The English Court
found that it had a mandatory obligation, under s. 426(4), to assist the courts of
any "relevant country or territory" of which Bermuda was one. However, the
English Court found that granting the requested order would create a
inconsistency with the duties of H's trustee in bankruptcy. The English Court
also found that granting the order would raise an element of oppression as H
may have been obliged to provide the same information to both the Bermuda

liquidators and in the English bankruptcy proceedings. As a result, the
Bermudian liquidators' application was dismissed.
R. (on the application of Geologistics Ltd) v Financial Services Compensation
Scheme [2003] EWCA Civ 1905. The Financial Services Compensation Scheme
(FSCS) appealed against the High Court's decision that it was liable to indemnify
a policyholder for defence costs as a result of the Policyholders Protection Act
1975 sections 6(4) and 6(5). The policyholder in question had taken out
employers liability insurance with a company which subsequently became
insolvent. The employers liability policy in question provided for an indemnity in
respect of the costs incurred in defending a claim. The Court of Appeal held that
FSCS was liable to the policyholder for its defence costs as the policy in question
provided cover for them and section 6(5) obliged FSCS to indemnify costs which
were incurred in respect of a "liability subject to compulsory insurance."
Hardy v Fothergill [1888] LR 13 App Cas 351. The assignee of a lease agreed to
indemnify the assignors against any damages for breach of their covenants with
the lessor. Eight years before the end of the lease, the assignee went into
insolvency proceedings. The assignors had no notice of these proceedings and
therefore tendered no proof in the liquidation. At the end of the lease term the
assignors paid damages under the lease, and sought to recover the sums from
the assignee under the indemnity. The issue that rose to be decided was
whether this claim was barred under s49 of the Bankruptcy Act 1869 as it was a
provable debt in the bankruptcy, if it was not provable, the assignors would still
have a good claim against the assignee. It was held by the House of Lords that
section 31 of the Bankruptcy Act 1869 made a future and contingent liability a
debt provable in a liquidation, unless a court order declared it to be a liability
incapable of being fairly estimated. Accordingly, the debt in question was
discharged by the statutory liquidation of the assignee.
Harrington Motor Co Ltd Ex p. Chaplin, Re [1928] Ch. 105. The applicant
recovered judgment for damages and costs in an action against a limited
company for personal injuries caused to him by the negligence of one of its
servants. Before execution could be levied the company went into liquidation,
and the insurance company with which the company in liquidation was insured
against third party risks paid the amount of the damages and costs to the
liquidator. Held, (affirming the decision of Eve J.), that the applicant had no
right at law or in equity either as against the insurance company or as against
the liquidator to require that the money so paid should be handed over to him;
but that the money formed part of the assets of the company, available for
distribution among its general creditors in the winding up, including the
applicant.
HIH Casualty & General Insurance Ltd, Re [2008] UKHL 21. The Australian
Liquidators (C) appealed against a Court of Appeal decision which refused to
transfer assets held in England to Australia in order that those assets could be
distributed according to an Australian statutory scheme. However, Australian
insolvency law differed from that in place in England as the Australian law
allowed insurance and reinsurance creditors to be paid in priority to ordinary
unsecured creditors where in England the company's assets would be
distributed pari passu among all unsecured creditors. The House of Lords found
that sections 426(4) and 426(5) of the Insolvency Act 1986 gave the English
court jurisdiction to grant C's request. However, it found that the English court
could not deprive creditors proving in an English liquidation of their statutory
rights. Therefore, the House of Lords held that the English assets should be
transferred to Australia once the English liquidators had discharged the debts of
those creditors who, under English insolvency scheme, were entitled to
preferential payment. The Lords found that there was nothing unacceptably
discriminatory or contrary to public policy in the Australian statute and the fact

that Australia was listed as a "relevant country or territory" in section 426
indicated that the Australian statutory scheme was acceptable.
Re Home and Colonial Insurance Company Ltd [1930] 1 Ch 102. The Home and
Colonial Insurance Company (HCIC) had entered into a reinsurance contract
with company A. Subsequently, HCIC was wound up and the liquidator agreed
to pay company A's large claim on the reinsurance (following the practice of
HCIC) despite the fact that provisions of the Stamp Act 1891 treated the
reinsurance as invalid. Another creditor therefore brought a misfeasance action
against the liquidator. It was held that a liquidator is not, apart from in the case
of negligence, liable for wrongly admitting a claim by an alleged creditor.
However, in the present circumstances, the liquidator had not fulfilled his duty
of investigating the claim and was therefore liable for misfeasance under s215 of
the Companies Act 1908; the fact that the articles of association of HCIC
provided that officers of the company would only be liable in case of fraud was
irrelevant.
Home and Overseas Insurance Co Ltd v Mentor Insurance Co (U.K.) Ltd [1989] 1
Lloyd's Rep. 473. In this case, several contracts of reinsurance were entered
into by parties P (as reinsurers) and D (as the reinsured). The contracts of
reinsurance all contained an arbitration clause which allowed the arbitrators to
interpret the reinsurance as an "honourable engagement." P subsequently
went into voluntary liquidation while many claims by D against it were still
outstanding. As a result, D sought summary judgement in relation to the claims.
The Court of Appeal held that the defence raised by P raised serious issues
which could not be addressed in summary judgment proceedings;
consequently, the matter would be referred to arbitration. The Court of Appeal
additionally held that the words "honourable engagement" in the arbitration
clause allowed the arbitrators to review the general purpose of the contract
and, if necessary, depart from the literal and ordinary meaning of the contract's
words.
Hughes v Hannover Ruckversicherungs‐Aktiengesellschaft [1997] 1 B.C.L.C. 497.
The joint provisional liquidators of Electric Mutual Liability Insurance (E) sought
injunctive relief from the English Court using s. 426(4) of the Insolvency Act
1986. E was a captive insurance company of General Electric Co (GE) which
provided insurance to GE and its subsidiaries. After GE became aware of large
toxic tort liabilities, E transferred its domicile from the US to Bermuda. It then
transferred all of its viable business to a subsidiary and petitioned to be wound
up in the Bermuda courts. Hannover Ruckversicherungs AG (HG) had provided
reinsurance to E for some of its business and, following E's actions, sought to
commence US arbitration proceedings in order to rescind the reinsurance. It
was against these arbitration proceedings that E's provisional liquidators sought
aid from the English Court. The Court of Appeal held that, although s.426(4)
allowed the English court to assist, the English Court was permitted to use its
usual discretion and was not bound to assist with such a request if it was against
public policy or contrary to justice. As the proceedings had no relation to
England the Court of Appeal refused the provisional liquidators' request.
Jubilee International Inc v Farlin Timbers Pte Ltd [2005] EWHC 3331. Jubilee
International Inc (J) was a Panamanian one‐ship company who had ceased
trading after it sank cargo belonging to Farlin Timbers Ptd Ltd (F). The parties
had entered into an agreement prior to the incident which contained an
arbitration clause. However, following the incident, F filed a winding up petition
against J and was subsequently granted a world wide freezing order over J's
assets. J applied to have the winding up petition struck out. The court held that
the winding up petition should be adjourned in order to allow the arbitration to
take place as there were real matters to be tried between the parties and they
had specifically contracted to use arbitration if a dispute arose. However, the

court did not strike out the petition as there was a real risk of injustice for F as
English assets could be paid to other creditors before the arbitration was
complete. In these circumstances and as J was trading only for the purpose of
winding up its affairs, the court held that the petition should be advertised while
the arbitration took place.
Re London County Commercial Reinsurance Office, Limited [1922] 2 Ch. 67. In
this case, during the winding up of a reinsurance company, claims were made
under 1) a class of policy issued by the company in the form of reinsurance on a
printed form adapted to marine insurance which provide insurance for the
payment of money "in the event of peace not being declared between Great
Britain and Germany on or before 31 March 1918." A slip was attached to the
policy that stated that it was not part of the policy and that it should not be
attached to it but that it was binding on the underwriters ‐ the assured did
however have authority to remove it should they wish. It also stated that in the
event of a claim the policy would be sufficient proof of interest; and 2) a class of
marine policy to reinsure a ship against marine risks with a slip attached to it
which was similar to the ones attached to the peace policies ‐ this slip had been
removed from some of the policies at the date of the claim.
Held: (1) the slip which was attached to the policies at the time of issuing and
signing caused it to form part of the policies despite the slip stating otherwise
and therefore the policies were void by section 4 Marine Insurance Act 1906 ‐
regardless of whether the slip was detached at the date of the claim; (b) even if
one assumed that the voluntary liquidator was an officer of the court, he was
not bound by any principle of equity or honourable dealing to admit claims
under those policies which the Legislature had declared void; (c) that because
the long slip presented to the insurers required the insertion of a ppi clause (as
contained within the slip) , unless there was evidence of unilateral or common
mistake, the policies ought not to be rectified by striking out the ppi clause on
the ground that the short slip did not stipulate for a ppi clause; (d) that the
consideration for the payment of the premium having wholly failed, claims
brought by section 84 of the Marine Insurance Act 1906 for premiums paid be
allowed by the liquidator.
McMahon v AGF Holdings (UK) Ltd [1997] L.R.L.R. 159. The National Employers
Mutual General Insurance Association Ltd (N) provided motor and liability
insurance. When N became insolvent it sold its entire book of business to AGF
Holdings (UK) Ltd (AGF). As part of this transfer, AGF provided N with an
indemnity against liabilities under the transferred policies. Subsequent to the
transfer, AGF became aware of N's solvency position. AGF then became
concerned that monies it might pay to N under the indemnity may never reach
policyholders. As a result, AGF established the Direct Payment Arrangement
(DPA) under which AGF paid policyholders directly. The court was asked to
decide whether N had suffered a loss. The court found that N had not suffered a
loss as the DPA had provided relief from N's liability to policyholders and as such
N would no longer require the indemnity provided by AGF.
Re National Standard Life Assurance Corporation [1917] 1 Ch 193. In this case the
court was asked to rule on whether the £20,000 deposited in Court by the
company in question under the Assurance Companies Acts 1872 and 1909
formed part of the general assets of the company and was available for the
general costs of the winding up and of deposits made by the liquidator as
security for costs. It was held that on a simple construction of the acts in
question, the £20,000 was indeed part of the general assets of the company.
Profits and Income Insurance Co Ltd, Re [1929] 1 Ch. 262. In this case, on the
resignation of the actuary and secretary of an insurance company which, in
addition to other branches of insurance business, carried on the business of

ordinary life assurance, both by the issue of policies upon human life and by the
granting of annuities upon human life, the directors passed a resolution
granting him a pension. The company was subsequently ordered to be wound
up compulsorily and the late actuary, having lodged a proof in respect of his
pension, died before the proof was dealt with. Held, that the annuity was an
annuity within the meaning of the Assurance Companies Act, 1909, and must be
valued, as at the date of the winding‐up order, in the manner indicated in that
statute.
Re Renishaw Iron Company Ltd [1917] 1 Ch 199. In this case it was held that
under the Workmen's Compensation Act 1906, where an employer became
insolvent and that employer had taken out insurance for workmen's
compensation, the claim of workmen for compensation is against the insurers
only regardless of whether the insurer is also insolvent, and the workmen
cannot prove in the liquidation of their employer.
Scher and others v The Policyholders Protection Board [1993] 2 Lloyd's Rep. 533,
HL. This was an appeal to the House of Lords regarding what constituted a
"U.K. Policy" under the Policyholders Protection Act 1975 (the Act). A series of
professional indemnity policies were issued to lawyers, doctors and accountants
(the Professionals) practicing in North America. The insurance companies who
issued these policies subsequently became insolvent and as a result the
Professionals claimed against the Policyholders Protection Board. The House of
Lords agreed with the Court of Appeal that a policy would qualify as a "U.K.
Policy" if the insured's performance under the contract would have formed part
of its U.K. authorised insurance business.
Scottish Eagle, Re [2005] EWHC 2683 (Ch). This was an application to sanction
schemes of arrangement under section 425 of the Companies Act 1985
proposed by two insurers, namely Scottish Eagle and La Mutuelle Demans
Assurances (La Mutuelle). La Mutuelle's scheme related to business written by
its branch in the UK. Creditors must approve a proposed scheme at a specially
convened meeting (or meetings) before the court can sanction that scheme. A
separate meeting must be held for each class of creditor. Creditors can only be
in the same class if their are rights regarding the scheme are not so dissimilar
that they are able to consult together with a view to their common interest. If
the incorrect number of meetings are held, the court has no jurisdiction to
sanction the scheme. Where the scheme of arrangement was a realistic
alternative to the scheme, Lewison J in British Aviation Insurance Co Ltd, Re
[2005] EWHC 1621 (Ch) had ruled that creditors holding accrued claims and
creditors holding non‐accrued claims had sufficiently similar interests that they
could consult together with a view to their common interest at a single meeting.
It was not possible to say that it was a realistic alternative to La Mutuelle's
scheme that its UK branch could be placed into a solvent liquidation. As a result,
it appeared following Re BAIC, that separate meetings ought to have been held
for its creditors holding accrued claims and its creditors holding IBNR claims.
However, the judge ruled that each case was fact specific and the court must
view the issue of classes "broadly and realistically". In the case of La Mutuelle,
the judge ruled that the calculation required to arrive at the quantification of
both types of claim (accrued and IBNR) was so similar ‐ due to the type of
business written by La Mutuelle ‐ that there was no reason why creditors
holding each type of claim could not consult together. Thus, only a single
meeting was required.
Stein v Blake (No. 1) [1996] A.C. 243. This House of Lord's decision related to
individual bankruptcy but the ratio of Lord Hoffmann in his opinion was applied
in the field of estimation of creditors' claims and debtors' amounts due in the
field of insurance insolvency. In this case, the court had to decide whether or
not Stein's trustee in bankruptcy could assign Stein's claim against Blake back to

Stein so that he could pursue it. Blake argued that the assignment could not
take place until his own counterclaim had been set off i.e. an account was to be
made of the extent to which each of the two parties was liable to pay the other.
The House of Lords concluded that where a trustee in bankruptcy had
automatically acquired a claim to a net balance following set off, he could assign
that net balance back to the bankrupt. As part of his rationale Lord Hoffmann
contrasted the position between (1) the statutory set off provisions which
created a machinery allowing for creditors' claims against an estate to be
accelerated i.e. estimated for the purposes of set off, and (2) a debtor's future
or contingent debt due to the insolvent where no such machinery exists and
therefore it cannot be estimated. This proposition is now qualified in the case of
corporate insolvency in Rule 4.90(8) of the Insolvency Rules 1986 which came
into force by amendment on 1 April 2005.
Stocznia Gdanska SA v Latreefers Inc & Others [2000] C.P.L.R. 65. Latreefers
was a company incorporated in Liberia. Judgment was obtained by Stocznia
Gdanska ("SG") for US$11 million in respect of certain shipping contracts and
petitioned to wind‐up Latreefers in the UK. There were two aspects to this case
(1) the question of whether a Liberian company could be put into liquidation in
the UK and (2) whether another party could be ordered to pay costs. We are
concerned with (1). Latreefers appealed against the winding‐up order saying
that the judge did not have jurisdiction to make the order as Latreefers had no
assets in the UK and also it had not been shown that SG would benefit from the
winding‐up in the UK. The Court of Appeal held that it was not a precondition to
the winding‐up of a foreign company that it should have assets in the UK. Given
the existence of possible claims for misfeasance in wrongful trading as well as
fraudulent trading against Latreefers' directors, it was possible that the windingup
would bring about a benefit to SG and Latreefers' other creditors. This case
was referred to in the case of Drax Holdings Ltd [2003] EWHC 2743 (CH)
summarised below.
Transit Casualty Co (In receivership) v Policyholders Protection Board [1992] 2
Lloyd's Rep. 358 (Note). This case relates to the estimation of creditors' "long
tail" claims against an insolvent insurance company. Five insurance companies
proposed a Scheme of Arrangement under the then applicable S.425 of the
Companies Act 1985 (now Part 26 of the Companies Act 2006). In view of the
fact that creditors' "long tail" claims would not be ascertained until long after a
typical policy had expired, the Policyholder Protection Board which, on a
liquidation of the company stepped in to pay policy holders in full, needed to
know the value of such claims. The court heard representations from the
Policyholders' Protection Board and the companies in question. One of the
points which the Court had to consider was whether the Insurance Companies
(Winding‐Up Rules) 1985 (now replaced by the Insurers (Winding‐Up) Rules
2001) (the 2001 Rules) were a "complete and exhaustive code" for the valuation
of claims. The court held that such rules did amount to such a code and that
such "long tail" liabilities were to be valued under Paragraph 2(b) of Schedule 1
by applying a just estimate of those claims. The 2001 Rules in this respect are
identical to the 1985 Rules so that this case continues to apply.
UIC Insurance Co Ltd (In Provisional Liquidation), Re [2007] B.P.I.R. 589. The
provisional liquidators of UIC Insurance Co Ltd applied to fix their remuneration
for two periods. The court found that many of the provisional liquidators' fees
were excessive and often disproportionate. As a result, the court imposed a
reduction on the amount which was to be paid to the provisional liquidators.

1. Canada – Insurance Regulation
C. Canada ‐‐ Canadian Insurance Regulation
Graham D. Smith and Gale Rubenstein
Goodmans LLP
In Canada insurance business is carried on by way of one of two vehicles: (i) as a company incorporated in
Canada under the federal Insurance Companies Act 1 or a similar statute of a Canadian province, or (ii) as a nonincorporated
branch of a “foreign insurance company” (i.e., a non‐Canadian company) under the federal
Insurance Companies Act, pursuant to the authorization of the federal Superintendent of Financial Institutions.
Where the business is carried on through a company incorporated federally or provincially in Canada, it is
subject to regulation by the federal Superintendent of Financial Institutions or the corresponding provincial
regulator, respectively. Where the business is carried on as a branch of a foreign insurance company, it is
subject to the regulation of the federal Superintendent of Financial Institutions.
2. Canada – Insurance Insolvency 2
Under the federal Insurance Companies Act and the corresponding provincial legislation, the applicable
regulator has the power to take control of an insurance company. In the case of a Canadian branch of a
foreign insurance company, the federal Superintendent of Financial Institutions has this power. Control may
be taken in a wide range of circumstances, including insolvency. 3
In the case of the insolvency of any Canadian insurance company, whether incorporated federally or
provincially, and in the case of the winding‐up of a Canadian branch of a foreign insurance company, the
federal legislature has exclusive jurisdiction, and the federal Winding‐up and Restructuring Act 4 governs.
Canada’s more omnibus pieces of insolvency and restructuring legislation, the Bankruptcy and Insolvency Act 5
and the Companies’ Creditors Arrangement Act 6 , do not govern in the case of the insolvency of a Canadian
insurance company or a Canadian branch of a foreign insurance company.
The judicial authority to conduct and supervise the insolvency of a Canadian insurance company, or a Canadian
branch of a foreign insurance company, lies with the superior court of the province where the head office is
located or, in the case of a Canadian branch, where its chief place of business is located. The court will appoint
a professional liquidator as the court’s officer to carry out the winding‐up. The liquidator must be a federally
licensed trustee in bankruptcy. 7
The making of a winding‐up order does not destroy a company’s corporate status, but the company must
cease to carry on its business, except so far as necessary, in the opinion of the liquidator, for its beneficial
winding‐up. 8 On the appointment of the liquidator, all the powers of the directors cease, except to the extent
sanctioned by the court or the liquidator, 9 and the liquidator has the power and authority to deal with the
assets of the company, with the approval of the court. 10 Title to the assets of the company or its Canadian
branch does not vest in the liquidator, unlike the case under Canada’s bankruptcy legislation, however the
liquidator has full power and authority to deal with the assets of the company or the branch with the approval
of the supervising court.
1
S.C. 1991, c. 47, as amended.
2
For an overview of the Canadian insurance insolvency regime, see Gale Rubenstein and Robert O.
Sanderson’s chapter on Canada in Cross‐Frontier Insolvency of Insurance Companies, Gabriel Moss Q.C., Editor,
Sweet & Maxwell Limited: London, 2001.
3
See, e.g., the Insurance Companies Act, section 679.
4
Winding‐up and Restructuring Act, R.S.C. 1985, c. W.11.
5
R.S.C. 1985, c. B.3.
6
R.S.C. 1985, c. C.31
7
Winding‐up and Restructuring Act, sections 2, 11 and 23;
8
Winding‐up and Restructuring Act, section 19.
9
Winding‐up and Restructuring Act, section 31
10
Winding‐up and Restructuring Act, sections 33 and 35.

Part III of the Winding‐up and Restructuring Act sets out specific priority distribution schemes for insurance
companies and Canadian branches of foreign insurance companies. 11 In general terms, the order of priorities
is: (i) costs of the liquidation, (ii) eligible employee wages, (iii) claims under insurance policies (including
reinsurance obligations), (iii) ordinary creditor claims, and (iv) post‐liquidation interest. The Winding‐up and
Restructuring Act also allows for the transfer of the assets of the Canadian branch to the liquidator of the non‐
Canadian company, but only with the approval of the federal Superintendent of Financial Institutions.
3. Special Provisions for Winding‐up of Canadian Insurance Companies with Non‐
Canadian Branches
Some Canadian insurance companies carry on business in a non‐Canadian jurisdiction though an
unincorporated branch, which is subject to the regulation of the non‐Canadian jurisdiction (e.g., a ‘port‐ofentry’
state of the United States of America). Typically, the Canadian insurance company will have been
required to deposit assets in the non‐Canadian jurisdiction for the protection of the policyholders and creditors
of the non‐Canadian branch business. Where a Canadian insurance company is ordered to be wound‐up, the
Winding‐up and Restructuring Act requires the Canadian liquidator to take possession or control of all the
company’s assets and distribute them, without drawing any distinction between assets and liabilities within
Canada and those outside Canada. 12 The Act does not distinguish between policyholders and creditors inside
Canada and those outside Canada for the purpose of distributions of the assets in an insolvency. A liquidator
of a Canadian insurance company is therefore required, in the first instance, to carry out its duties for the
benefit of all policyholders and creditors of the company, regardless of their residence or jurisdiction.
However, where a court‐appointed officer in the non‐Canadian branch jurisdiction exercises control over the
assets of the non‐Canadian branch, and does not have a duty to claimants outside that jurisdiction (e.g., those
in Canada), the Winding‐up and Restructuring Act provides a mechanism for the Canadian liquidator to
effectively put the non‐Canadian court officer to an election. 13 If the mechanism is triggered, the non‐Canadian
officer must elect to either (i) transfer the assets in the non‐Canadian branch jurisdiction to the Canadian
liquidator (thereby entitling the non‐Canadian branch policyholders and creditors to participate fully in the
liquidation in Canada), or (ii) to retain the non‐Canadian branch assets, thereby triggering a deemed forfeiture
by the policyholders of the non‐Canadian jurisdiction of any claim to share in the assets in the Canadian estate.
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
Canada (Attorney‐General) v. Reliance Insurance Company, [2008] O.J. No. 795
(Ontario Superior Court – Commercial List); leave to appeal refused [January 25,
2008 – Ontario Court of Appeal No. M35682]. Once a winding‐up order has
been made, including in respect of a Canadian branch of a foreign insurance
company, the proceedings are governed by the Winding‐up and Restructuring
Act.
Canada (Attorney‐General) v. Reliance Insurance Company, [2008] O.J. No. 795
(Ontario Superior Court – Commercial List); leave to appeal refused [January 25,
2008 – Ontario Court of Appeal No. M35682]. The jurisdiction of the Canadian
court is not defeated because a liquidation order has already been made in the
company’s country of origin. The Canadian court then administers the assets of
the company that are within its jurisdiction.
Kansa General International Insurance Co. (liquidator of) v. Maska U.S. Inc.,
[1998] Q.J. No. 1410 (Quebec Court of Appeal). Whatever assets a foreign
11
12
13
Winding‐up and Restructuring Act, Part III
Winding‐up and Restructuring Act, section 33.
Winding‐up and Restructuring Act, section 164.

insurance company had to maintain in Canada to operate a Canadian branch
comes under the jurisdiction of the Canadian court, regardless of the place of
origin of any claim against these assets.
ii.
The Canadian Stay of Proceedings
Canada Deposit Insurance Corp., v. Canadian Commercial Bank, [1990] A.J. No.
723 (Alberta Queen’s Bench). A winding‐up order creates a stay of all
proceedings against the Canadian company. This includes a proceeding in a
foreign jurisdiction against the Canadian company in liquidation and the
conducting of examinations of the liquidator of the Canadian company for the
purpose of the foreign proceeding. Leave of the Canadian court is first required
to proceed.
Kansa General International Insurance Co. (liquidator of) v. Maska U.S. Inc.,
[1998] O.J. No. 1410 (Quebec Court of Appeal). The Canadian court may
authorize the Canadian liquidator to withdraw from funding the defence of an
alleged insured in a foreign proceeding, and may compel the coverage issues to
be determined by the Canadian court, notwithstanding a determination on
coverage by a foreign court made without leave of the Canadian court.
Canada (Attorney‐General) v. Reliance Insurance Co., [2007] O.J. No. 3820
(Ontario Superior Court – Commercial List); leave to appeal refused [January 25,
2008 – Ontario Court of Appeal No. M35682]. The Canadian stay of proceedings
applies to stay an arbitration involving a claim of the Canadian branch to
reinsurance proceeds, notwithstanding a pre‐insolvency contractual provision
for arbitration. The Canadian court has jurisdiction to hear a dispute involving
reinsurance and set‐off in respect of the Canadian branch business,
notwithstanding a pre‐insolvency contractual arbitration clause.
iii.
Set‐off
Canada (Attorney General) v. Reliance Insurance Co., [2008] O.J. No. 795
(Ontario Superior Court – Commercial List); leave to appeal refused [July 14,
2008 – Ontario Court of Appeal No. M36173]. Where the liquidator of a
Canadian branch of a foreign insurance company seeks to collect an amount
owing in respect of the branch’s business, the counterparty may invoke a
contractual set‐off against the foreign insurance company notwithstanding that
the indebtedness did not arise out of the Canadian branch’s business, provided
the set‐off otherwise meets the requirements of the Canadian insolvency
legislation.
Canada (Attorney General) v. Reliance Insurance Co., [2008] O.J. No. 795
(Ontario Superior Court – Commercial List); leave to appeal refused [July 14,
2008 – Ontario Court of Appeal No. M36173]. The strict timing requirements of
the Winding‐up and Restructuring Act must be met before a counter‐party may
assert a set‐off against the Canadian branch. If the counter‐party’s obligation
was not due or accruing due at the commencement of the Canadian liquidation,
then it cannot be set‐off against the amount owed to the Canadian branch in
liquidation, notwithstanding a contractual set‐off provision.
iv.
Distribution of Assets
The National Benefit Assurance Co., [1928] 3 D.L.R. 289. In the liquidation of a
Canadian branch of a foreign insurance company, a policyholder of a class of
insurance that falls outside the classes authorized by the Canadian license does
not have a claim against the Canadian branch in liquidation.

v. Proceedings in Canada to Assist Non‐Canadian Insolvency Officers
Where There is No Canadian Branch
Note: The Canadian Bankruptcy and Insolvency Act and Companies’ Creditors Arrangement Act each contain
provisions to enable a Canadian court to recognize and assist non‐Canadian insolvency officers in their duties.
However, these statutes may not apply in the case of an insolvency officer of a non‐Canadian insurance
company. Where a non‐Canadian insolvency officer of an insurance company without a Canadian branch seeks
recognition of non‐Canadian proceedings and the assistance of a Canadian court, Canadian common law
comity principles will apply.
Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of), [2001] 3 S.C.R.
907 (Supreme Court of Canada). Where a non‐Canadian jurisdiction is the
primary insolvency jurisdiction, the Canadian court may, but need not, defer to
the primary insolvency jurisdiction. The “plurality” approach governs over the
universalist approach, and the Canadian court exercises a discretion whether to
defer to and assist the non‐Canadian jurisdiction. A security interest or lien
recognized under Canadian law may prevail over the insolvency law of the
primary jurisdiction.
Pro‐Swing Inc. v. Elta Golf Inc., [2006] 2 S.C.R. 612 (Supreme Court of Canada).
To be recognized in Canada, a foreign order must have been rendered by a
court of competent jurisdiction and must be final (but see Re Cavell, below, as
to the finality requirement). Recognition in Canada is subject to judicial
discretion to ensure that the order does not disturb the structure and integrity
of the Canadian judicial system.
Re Cavell, 2006 CanLII 16529 (Ontario Court of Appeal). The fundamental
considerations for a Canadian court to determine whether to recognize and
enforce a foreign order pursuant to private international law are the principles
of ‘real and substantial connection’ and ‘order and fairness’. The foreign order
must be clear and certain, but not necessarily a final order, provided there is
little risk of injustice or public confidence being undermined if it is subsequently
changed or voided.
b. Solvent Schemes of Arrangement – Canada
Note: There have been no Canadian‐initiated solvent schemes of arrangement to date. It is an open question
whether a solvent scheme of arrangement could be initiated for an insurance company under Canadian law.
However, Canadian courts have ruled on the recognition and enforceability of a solvent scheme of
arrangement for a non‐Canadian reinsurer with a branch in Canada.
Re Cavell, 2006 CanLII 16529 (Ontario Court of Appeal). Where a U.K. reinsurer
sought recognition, enforcement and a supporting stay of proceedings from a
Canadian court in support of a solvent scheme of arrangement to be
implemented under s. 425 of the Companies Act 1985, the Ontario Court of
Appeal held that there was no Canadian statutory basis to recognize the order
of the U.K. court made under the U.K. legislation. (Specifically, the Canada‐U.K.
Convention providing for the Reciprocal Recognition and Enforcement of
Judgments in Civil and Commercial Matters was held not to apply.) However, the
proceedings of the U.K. court could be recognized on the basis of private
international law and comity, since the U.K. court order was “undoubtedly clear
and certain”, it presented “little if any risk of injustice” to the Canadian branch
reinsureds, there was “little risk of undermining public confidence” if the initial
order and procedure set by the U.K. court were changed subsequent to the
recognition order, there was a real and substantial connection between the U.K.
proceeding and the subject‐matter ‐ a scheme of arrangement proposed by a

U.K. company under U.K. law – and it would affect all creditors of the reinsurer,
only a small percentage of which were in Canada.
Re Cavell, 2006 CanLII 16529 (Ontario Court of Appeal). The Canadian court may
impose conditions on the recognition of a non‐Canadian scheme of
arrangement, including that the scheme adjudicator must reach a valuation
based on Canadian rules applying to valuations, there will be a right of judicial
appeal if the scheme adjudicator fails to apply the Canadian rules, and the
scheme administrator and the scheme adjudicator must act in good faith and
treat the Canadian policyholders fairly.
Re Cavell, 2006 CanLII 16529 (Ontario Court of Appeal). The Canadian court, in
recognizing a foreign solvent scheme of arrangement, will not interfere with or
fetter the Canadian regulator’s powers over the release of any deposit that the
non‐Canadian insurer was required to make in Canada to protect policyholders
of the Canadian branch.
Re Cavell, 2006 CanLII 16529 (Ontario Court of Appeal). There is no right for
Canadian branch policyholders to form a separate class for voting purposes
under a foreign solvent scheme of arrangement because assets were deposited
in Canada for their protection.

D. Bermuda ‐‐ The Bermuda Perspective
Kehinde George and Larry Mussenden
Attride‐Stirling & Woloniecki
1. Chapter 15
The decision of the US Bankruptcy Court in the case of Bear Sterns 40 as upheld on appeal by the US District
Court 41 is likely to make chapter 15 relief unavailable for the insolvency officeholders of many Bermudian
companies.
Bermuda, like the Cayman Islands, has the concept of exempted companies which by law are not permitted to
carry on business in Bermuda except: with persons outside Bermuda, with other exempted companies for the
furtherance of their business outside Bermuda, and reinsurance of companies incorporated in Bermuda.
Therefore, the implications of the Bear Sterns decision for Bermudian exempted companies are similar to the
implications for the Cayman Islands companies affected by the decision.
Whilst several of Bermuda’s exempted companies have a substantial presence in Bermuda with large staffs
and office buildings, but there are many which do not. Every Bermudian company is required to have a
registered office in Bermuda at which its registers of members and directors and officers, minute books certain
records of account are to be kept. If it does not have any resident directors, it must have a secretary who is
resident in Bermuda and a resident representative. In addition, (re)insurance companies are required to
maintain a principal office in Bermuda (which would be their business office as opposed to the registered
office). (Re)insurance companies that do not manage themselves may be managed by a Bermuda based
insurance manager, in which case they may use the office of the insurance manager as their principal office.
They must appoint a principal representative in Bermuda who is required to keep the affairs of the company
under constant review and has certain reporting obligations to the regulator. It remains to be seen whether
the minimum presence of a company in Bermuda allowed under Bermudian law would be sufficient, on the
Bankruptcy Court’s interpretation, to justify recognition of insolvency or reorganisation proceedings of that
company as foreign main proceedings, or if not, whether it would be sufficient to constitute an establishment
for the purpose of recognition as non‐main proceedings.
The US Court has suggested that if the foreign proceedings were not recognized as main or non‐main
proceedings under chapter 15, the foreign representative can commence proceedings under chapter 7 or
chapter 11. However, the alternative options are likely to be unattractive to the Bermudian representative,
whose principal goal in coming to the US is to obtain protection for the company and its assets against
proceedings in the US, with the aim of requiring creditors to make their claims in the liquidation or scheme in
the company’s jurisdiction of registration. Also, chapter 7 and chapter 11 proceedings may not be available to
foreign insurance companies.
2. Parallel Proceedings
Restructurings of groups of companies which include Bermudian companies by means of parallel proceedings
under chapter 11 of the US Bankruptcy Code (“chapter 11”) and provisional liquidation proceedings in Bermuda
have occurred since the 1999 case of In the matter of ICO Global Communications (Holdings) Ltd [199] Bda L.R.
69. Whilst chapter 11 proceedings are not available to insurance companies, parallel proceedings were used to
effect the restructuring of a group of insurance companies where the top holding companies were Bermudian
companies ‐ Trenwick Group Ltd Trenwick America Corporation, et al. Chapter 11 Case No. 03‐12635 (MFW) (Jointly
Administered) and In the matter of LaSalle Re Holdings Ltd, In the matter of Trenwick Group Ltd, Supreme Court
of Bermuda, Companies Winding‐Up, 2003: Cases Nos. 339 and 340.
40
In re Bear Sterns High‐Grade Structured Credit Strategies Master Fund, Ltd (in provisional liquidation)
Chapter 15 Case No. 07‐12383 and In re Bear Sterns High‐Grade Structured Credit Strategies Enhanced Leverage
Master Fund, Ltd (in provisional liquidation) Chapter 15 Case No. 07‐12384 (Bankr. S.D.N.Y. September 5, 2007)
41
374 B.R. 122 (Bankr. S.D.N.Y. 2007), aff’d U.S. Dist. LXIS 41456, Nos. 07‐12383 and 07‐12384 (S.D.N.Y.
May 22, 2008).

Under Bermudian law, the scheme of arrangement (“scheme”) is the principal tool for effecting restructurings.
However, in relation to groups of companies which have substantial operations and creditors in the USA, the
preferred route for restructuring is proceedings under chapter 11. Therefore, Bermuda has developed the
practice of effecting restructurings of companies or groups of companies which are amenable to the
jurisdiction of the US Courts and which include Bermudian companies, by way of parallel chapter 11
proceedings and provisional liquidation proceedings in Bermuda; with a view to the restructuring being
effected by a plan of reorganisation in the chapter 11 proceedings and (where necessary) parallel schemes in
Bermuda in respect of the Bermudian companies in the group.
Winding‐up proceedings are commenced in Bermuda and provisional liquidators appointed in respect of the
Bermudian companies, at the same time as chapter 11 proceedings are commenced in the relevant district of
the US Bankruptcy Court in respect of all the group companies involved in the restructuring, including the
Bermudian companies. The provisional liquidation facilitates the chapter 11 restructuring. A key aspect is that
upon the presentation of the petition and appointment of the provisional liquidators, a statutory moratorium
against creditor actions comes into effect and supports the moratorium imposed by the chapter 11
proceedings.
Under the order appointing the provisional liquidators, the board of directors is allowed to continue to control
the company’s business, and the provisional liquidators’ powers are limited to the role of overseeing the board
in their continuation of the business and in effecting a reorganization of the company, under the supervision of
the Bermudian and US Courts. The hearing of the winding‐up petition is adjourned.
In addition to facilitating the restructuring the provisional liquidators’ role is to ensure that the restructuring
efforts are only allowed to continue as long as this remains in the interests of the creditors of the Bermudian
companies. The provisional liquidators report regularly to the Bermuda Court on the progress of the
restructuring and if they consider that the board is not acting in the best interests of the company and its
creditors, they can seek an appropriate order from the Court.
In the matter of ICO Global Communications (Holdings) Limited there were parallel proceedings in the USA,
Bermuda and the Cayman Islands. There was a challenge to the jurisdiction of the Bermuda Court to make the
order appointing provisional liquidators with the role outlined above. In dismissing the challenge, the Chief
Justice gave a judgment in which he approved the use of parallel proceedings. He considered that the Court
had a wide discretion under Bermuda’s company law to make the order. He did not accept that a chapter 11
reorganisation would, by its very nature, destroy the rights of creditors and shareholders or that the Bermuda
Court should necessarily claim primacy in winding‐up proceedings affecting a Bermudian company. He
considered that where the aim of proceedings was to enable a refinancing of the company the Bermudian
Court “should co‐operate with Courts in other jurisdictions which have the same aim in relation to the affairs of
the company”. And that it was not a question of surrendering jurisdiction so much as “harmonisation of
effort”.
Once the restructuring has been formulated by management and approved by the provisional liquidators, it is
effected by a plan of reorganisation in the chapter 11 proceedings and (where necessary) schemes in Bermuda.
The plan compromises the claims of the creditors of the companies subject to chapter 11 proceedings, and the
schemes act as a further protective mechanism by compromising the claims of creditors who may not be
bound by the plan as a result of not being subject to the jurisdiction of the US Court.
3. Recognition of Foreign Proceedings in Respect of a Bermudian Company
In the matter of Dickson Group Holdings Limited [2008] Bda L.R. 34 the issue of recognition of foreign insolvency
proceedings in respect of a Bermudian incorporated company was considered. A winding‐up order had been
made against a Bermudian incorporated company and permanent liquidators appointed by the Hong Kong
Court. The liquidators then applied in the Bermuda Court for leave to promote a scheme of arrangement in
Bermuda in parallel with a Hong Kong scheme of arrangement. The Bermuda Court acknowledged that it had
co‐operated with foreign insolvency Courts in the context of restructurings where a Bermudian company has
been subject to parallel proceedings in Bermuda and the US. The Bermuda Court considered it unprecedented
to recognise and enforce insolvency orders of a foreign Court in respect of a Bermudian company where there
no parallel proceedings were commenced in Bermuda and the foreign proceedings were a “full blown”
liquidation rather than a restructuring. However, the Court granted recognition to the Hong Kong proceedings
and granted the application for leave to promote the scheme on the basis that it was being asked to assist the

Hong Kong Court to restructure the company and was not being asked to recognize a foreign winding‐up order
which purported to wind up, for all purposes, the business of a Bermudian incorporated company. The Court
took into account the fact that (a) the company was registered as an overseas company in Hong Kong where
its principal business and a majority of its assets were located; (b) the company’s estate was not a large one;
(c) there was no suggestion of any prejudice to local interests; and concluded that there was no reason why
the Court should decline to assist the Hong Kong liquidators merely because no winding‐up proceedings had
been started in Bermuda.
4. Liquidation of Alien Insurers
The winding‐up provisions of Part XIII Bermuda Companies Act 1981 apply to overseas insurance companies
operating in Bermuda under a permit issued under the Companies Act section 134 or under the Non‐Insurance
Undertakings Act 1967 by virtue of section 4(1A) of the Companies Act. Therefore, the Bermuda Court has
jurisdiction to wind up such permit companies.
In the matter of Convertix Corporation Ltd, Informission Group Inc v Convertix Corporation [2000] Bda L. R. 75 ‐
There is no express statutory provision in Bermuda law giving the Bermuda Court jurisdiction to wind up a
foreign company which does not have a permit to operate its business in Bermuda. However, in this case the
Bermuda Court accepted that under the provisions of the Companies Act 1981 and also the External Companies
(Jurisdictions in Actions) Act 1985, that it has winding‐up jurisdiction over any overseas company which is
deemed to be conducting business in Bermuda because it has an office here (section 133 Companies Act 1981)
but is doing so unlawfully without a permit, providing the petitioner can make out a ground for winding up
under section 161 of the Companies Act 1981.
The Bermuda Court has also accepted that if its of the opinion that it is just and equitable that the company
should be wound up and where, applying English authorities, the test of “sufficient connection” with Bermuda
is satisfied. Therefore, In the matter of Anglo American Insurance Co Ltd, Supreme Court of Bermuda,
Companies (Winding‐Up) 2000 No. 365, November 16, 2000, the Court appointed provisional liquidators in
ancillary winding‐up proceedings in relation to an English reinsurer which had a majority of its directors
resident in Bermuda and whose management was conducted from Bermuda.
5. Ancillary Proceedings
There is no statutory provision under Bermudian law for the recognition of foreign insolvency proceedings,
although the Bermuda Court will generally recognise the authority of an insolvency officeholder appointed in
proceedings in the place of incorporation of a foreign company to act on behalf of the company in Bermuda. If
a foreign officeholder needs to exercise his powers as such in Bermuda, this may be achieved by starting
ancillary winding‐up proceedings against the company in the Bermuda Court (if the Bermuda Court has
jurisdiction to based on the “sufficient connection test) and obtaining the appointment of provisional
liquidators. Usually the foreign officeholder would be appointed together with a Bermuda resident liquidator.

Case Law Digest Supplement
PROPERTY & CASUALTY GUARANTY FUNDS
Purpose & Construction of Guaranty Association Laws
Purpose & Construction of Guaranty Association Laws – In General
Nebraska Nebraska Life & Health Ins. Ass’n v. Dobias, 247 Neb. 900, 531 N.W.2d 217 (1995).
Provisions of Act requiring a liberal construction “does not grant us a license to
add words . . . .”
Ohio Lake Hospital Systems v. Ohio Ins. Guar. Ass’n, 69 Ohio St. 3d 521, 634 N.E.2d 611
(1994). “There is no need to liberally construe a statute whose meaning is
unequivocal and definite.”
Direct Insurance
Line of Business
Florida Zinke‐Smith v. Florida Ins. Guar. Ass’n, 304 So.2d 507 (Fla. Dist. Ct. App. 1974).
The insured qualified as a self‐insured, but had a policy with a large deductible.
The court held the policy was not reinsurance, but direct insurance analogous to
collision coverage with a deductible.
Oklahoma
Pennsylvania
South Carolina
Wichita National Life Ins. Co. v. State of Oklahoma, Unpublished (Ok. Civ. App.
1991). Amounts due under a reinsurance contract from an insolvent insurer are
not covered.
Garcia v. Pennsylvania Financial Responsibility Assigned Claims Plan, 455 Pa.
Super. 360, 688 A.2d 209 (1997). 15 USC 3901, et seq., specifically excludes
policies issued by Risk Retention Groups from coverage under the Model Act.
South Carolina Prop. & Cas. Ins. Guar. Ass’n v. Carolinas Roofing & Sheet Metal
Contractors Self‐Ins. Fund, 315 S.C. 555, 446 S.E.2d 422 (1994). The insured had a
policy with a large deductible and the court held the arrangement was one of
reinsurance and not direct insurance.
Excluded Lines – Health
Alabama Alabama Ins. Guar. Ass’n v. Stephenson, 514 So.2d 1000 (Ala. 1987). The
Association was denied credit for payments made by a health insurer because
the statute excluded health insurance from coverage.
Indiana
Indiana Ins. Guar. Ass’n v. Davis, 768 N.E.2d 902 (Ind. Ct. App. 2002). Under
Indiana Code § 27‐6‐8‐11’s non‐duplication of recovery provisions, the calculation
of “amount payable” does not take into account types of direct insurance
excluded under § 27‐6‐8‐4. Accordingly, the Associations’ obligations may not
be reduced by paid health insurance benefits because such insurance is
expressly excluded under § 27‐6‐8‐4.
Excluded Lines – Mortgage Guaranty
Louisiana
Commercial National Bank in Shreveport v. Louisiana Ins. Guar. Ass’n, 19th
Judicial Dist., Parish of East Baton Rouge, La. (1993). The court held the
Association liable for return premiums on policies covering loan payments,
stating that the policies were not mortgage guaranty, an excluded line, but
were for credit life.

Excluded Lines – Ocean Marine
Louisiana
Backhus v. Transit Cas. Co., 549 So.2d 283 (La. 1989). Insurance for claims under
the Longshoreman’s Act is ocean marine and as such is excluded from coverage
under the Model Act.
Excluded Lines – Credit or Surety
Louisiana
Serigne v. Magnolia Fire & Cas. Co., 650 So.2d 422 (La. Ct. App. 1995). Appeal
bonds are surety bonds and thus excluded from coverage.
Excluded Lines – Warranties
Florida
Falcon Termite & Pest Control v. Fla. Ins. Guar. Ass’n, 589 So.2d 331 (Fla. Dist. Ct.
App. 1991). A policy covering the insured for liability under warranties it issued
was held to be liability insurance and not excluded as a warranty.
Definitions
Insolvent Insurer – Issued a Policy
Virginia
Virginia Prop. & Cas. Guar. Ass’n v. Robinson, 246 Va. 97, 431 S.E.2d 45 (1993). A
Canadian insurer, not admitted in the U.S., had an arrangement with a U.S.
insurer to certify to the Interstate Commerce that the U.S. insurer insured the
Canadian insurer’s truckers. No policy was issued and it was held that the
certificate was not a policy and thus the Fund was not liable when the U.S.
insurer was declared insolvent.
Insolvent Insurer – Licensed
Iowa
Osborne v. Edison, 211 N.W.2d 696 (Iowa 1973). Claims against a non‐admitted
insurer writing on an excess and surplus lines basis are not covered.
Insolvent Insurer – Final Order of Liquidation
Michigan
Young v. Shull, 385 N.W.2d 789 (Mich. Ct. App. 1986). An Order of Liquidation
does not become final until all appeals are exhausted. If no appeal is taken, it
becomes final on the date issued.
Insolvent Insurer – Court of Competent Jurisdiction
Florida
Florida Ins. Guar. Ass’n v. State ex rel. Dept. of Ins., 400 So.2d 813 (Fla. Dist. Ct.
App. 1981). The Florida Commissioner lacked authority to declare an Illinois
insurer insolvent prior to the time the Illinois courts had acted.
New Jersey New Jersey Property‐Liability Ins. Guar. Ass’n v. Sheeran, 137 N.J. Super. 345, 349
A.2d 92 (1975). A New York insurer had sufficient minimum contacts with the
State of North Carolina to allow its courts to declare the insurer insolvent.
Covered Claim – Unpaid Claim
Arizona
Betancourt v. Arizona Prop. & Cas. Fund, 170 Ariz. 296, 823 P.2d 1304 (Ariz. Ct.
App. 1991). “Bounced” claim drafts issued by an insolvent insurer are covered
claims.

Florida
Florida Ins. Guar. Ass’n. v. Dolan, 355 So.2d 141 (Fla. Dist. Ct. App. 1978). The
insured gave the claimant an independent guaranty of payment of a judgment
and the court held the claim was no longer unpaid.
Massachusetts Ferrani v. Toto, 9 Mass. App. Ct. 483, 402 N.E.2d 107 (1980), aff’d, 383 Mass. 36,
417 N.E.2d 427 (1981). The purpose of requiring that a claim is unpaid is to
prevent duplicative payments.
North Carolina
Ruhlen Agency v. North Carolina Guar. Ass’n, (N.C. Gen. Ct. 1991). The insured
no longer had an unpaid claim when the agent reimbursed the insured.
Ohio P.I.E. Mut. Ins. Co. v. Ohio Guar. Ass’n, 66 Ohio St. 3d 209, 611 N.E.2d 313 (1993).
Where there were other insurers liable on the claim, payments by the two
solvent insurers rendered the claim paid and the solvent insurers were denied
recovery from the Association.
Covered Claim – Within the Coverage
Arkansas
Harold Ives Trucking Co. v. Pickens, 355 Ark. 407, 139 S.W.3d 471 (2003). The
Arkansas Supreme Court, as a matter of first impression, interpreted the
Property and Casualty Insurance Guaranty Act and held that an insured was an
“affiliate” of its parent corporation within the meaning of Act which defines
“covered claim” to exclude an unpaid claim if the aggregate net worth of the
insured or third party liability claimant and all of its “affiliates” as calculated on a
consolidated basis exceeds $50 million.
California Kortmeyer v. California Ins. Guar. Ass’n, 9 Cal. App. 4th 1285, 12 Cal. Rptr. 2d 71
(1992). A claim must meet the requirements of the policy’s coverage before it is
to be paid.
Illinois Illinois Ins. Guar. Fund v. Santucci, 384 Ill. App. 3d 927, 894 N.E.2d 801 (2008).
The Illinois Insurance Guaranty Fund’s obligation are limited to “covered claims”
under 215 Ill. Comp. State. 5/537.2, which include unpaid claims for a loss arising
out of and within the coverage of an insurance policy to which the Fund applies
and which is in force at the time of the occurrence giving rise to the unpaid claim
under 215 Ill. Comp. State. 5/534.3(a). Under these provisions, where an
individual is not the “person insured” under his insolvent insurance company’s
policy, the individual’s claim is not a covered claim for which the Fund is
obligated. Additionally, as a matter of first impression, the Fund is not bound by
assumption of defense without reservation of rights by an insurer on same day
the insurer is found insolvent. The Fund assumes policy obligations of insolvent
insurers only to the extent that those obligations are statutorily defined covered
claims.
Pennsylvania Univ. Health Services, Inc. v. Pennsylvania Prop. & Cas. Ins. Guar. Ass’n, 67 Pa. D.
& C. 4th 56, 2004 WL 1005011 (Pa. Com. Pl. 2004). University Health Services,
Inc. (“UHS”) had a claims‐made policy with PHICO Insurance Company
(“PHICO”) with a reporting tail option. The reporting tail option provided
coverage after the policy expired for claims‐made relating to events that took
place during the policy period. PHICO was declared insolvent and the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
assumed PHICO’s coverage obligations. UHS received several claims that took
place during the policy period, but were not reported until more than thirty days
after the determination of PHICO’s insolvency. PPCIGA denied coverage of the
claims, reasoning that its obligations extended no further than claims that arose
within thirty days after the determination of the insolvency. The court found
that since the policy was a claims‐made policy, the occurrences happened
during the policy period, and prior to the insolvency, the claims were thus

Covered Claim – Unearned Premium
covered claims and PPCIGA was obligated to provide coverage for the reporting
tail claims.
Georgia
United Budget Co. v. Georgia Insurers Insolvency Pool, 253 Ga. 435, 321 S.E.2d
333 (1984). A claim for an unearned premium was returned to the premium
financing company.
New Jersey Broadway Bank & Trust Co. v. New Jersey Property‐Liability Ins. Guar. Ass'n, 146
N.J. Super. 80, 368 A.2d 983 (1976). A claim for an unearned premium that
results from insolvency of an insurer is a covered claim.
Covered Claim – Subject to the Applicable Limits
Alaska Guinn v. Ha, 591 P.2d 1281 (Alaska 1979). The court would not require a
prejudgment interest award beyond the policy limits, apart from bad faith
attributable to insurer.
Pennsylvania
Washington
Bell v. Slezak, 571 Pa. 333, 812 A.2d 566 (2002). A settlement was agreed to
between the plaintiff and defendant where it was understood that part of the
money was to come from the Doctor’s malpractice insurance carrier. Prior to
the disbursement of funds the malpractice insurer was declared insolvent
triggering the statutory obligations of the Pennsylvania Property Insurance and
Casualty Guaranty Association (“PPICGA”). PPICGA refused to tender payment
claiming it was entitled to an offset of the medical expenses paid by the
plaintiff’s health insurer. The court noted that both first and third‐party
claimants may possess covered claims. Further, the court held that the health
insurer’s payment of the patient’s medical bills entitled PPCIGA to a setoff.
Since the plaintiff received an amount greater than the limit of the defendant’s
insurance policy limits, PPCIGA’s obligation for payment of the plaintiff’s claim
was extinguished.
Vaughn v. Vaughn, 23 Wash. App. 527, 597 P.2d 932 (1979). The liability of the
Fund was limited to the applicable limits of the policy, as mandated by state
statute.
Miscellaneous Covered Claims
Florida
Florida Ins. Guar. Ass’n v. Price, 485 So.2d 453 (Fla. Dist. Ct. App. 1986). Attorney
fees incurred after the liquidation order were allowed.
Pennsylvania Matusz v. Safeguard Mut. Ins. Co., 340 Pa.Super. 116, 489 A.2d 868 (1985).
Attorney fees incurred after the liquidation order were allowed.
Residency and Location
Iowa
Texas
Wyoming
Kroblin Refrigerated Xpress, Inc. v. Iowa Ins. Guar. Ass’n, 461 N.W.2d 175 (Iowa
1990). The court held that a corporation’s residence is its principal place of
business.
Nunez v. Autry, 884 S.W.2d 199 (Tex. App. 1994). Where neither the claimant
nor the insured were residents of the state, the Fund was not liable for an
accident in the state, according to the state statute.
Wyoming Ins. Guar. Ass’n v. Woods, 888 P.2d 192 (Wyo. 1994). An insured may
only have one residence and not multiple residences.

Statutorily Excluded Claims – Punitive Damages
Indiana Wisconsin Ins. Sec. Fund v. Labor and Indus. Review Comm’n, 2005 WI App 242,
288 Wis.2d 206, 707 N.W.2d 293. Wisconsin Labor and Industry Review
Commission ordered employer to reimburse worker’s health insurance carrier
after finding worker’s injury compensable. Where employer’s workers’
compensation insurance carrier is insolvent, Wis. Stat. § 646.31(11), which
provides that a subrogated insurer may not assert a claim against the insured of
an insurer in liquidation, precludes order mandating insured employer
reimburse worker’s subrogated insurer.
Missouri
Pannel v. Missouri Ins. Guar. Ass’n, 595 S.W.2d 339 (Mo. Ct. App. 1980). The
court ruled that the state statute clearly insulated the Association from claims of
liability for exemplary damages.
Statutorily Excluded Claims – Amounts Due Other Insurers as Subrogation Recoveries or
Otherwise
California
Florida
E.L. White, Inc. v. City of Huntington Beach, 138 Cal. App. 3d 366, 187 Cal. Rptr.
879 (1982). The court held that the insurer could not subrogate, as precluded by
state statute.
Don Reid Ford, Inc. v. Feldman, 421 So.2d 184 (Fla. Dist. Ct. App. 1982), after a
Fund pays a claim, it has the right to subrogate the claim as if it were the insurer,
subject to the statute of limitations.
Cordani v. Roulis, 395 So.2d 1276 (Fla. Dist. Ct. App. 1981). The court rejected an
attempt by a solvent insurer to subrogate against the insured of an insolvent
insurance company.
Illinois
Pierre v. Davis, 165 Ill.App.3d 759, 520 N.E.2d 743 (1987). The court held that the
state statute did not intend that the Fund would allow a solvent insurer to be
reimbursed by Fund proceeds.
Nebraska Alsobrook v. Jim Earp Chrysler‐Plymouth, Ltd., 274 Neb. 374, 740 N.W.2d 785
(2007). Car owner filed lawsuit against mechanic after a retaining nut
disconnected from the connection post on his car causing him to crash. The car
owner filed a claim with his own insurer, who paid the claim less the $1,000
deductible. After this payment, the car owner filed a lawsuit against the
mechanic seeking damages which included the $1,000 deductible. The car
owner’s attorney filed a motion with the Nebraska Property and Liability
Insurance Guaranty Association (the “Association”) asserting that Property and
Liability Insurance Guaranty Association Act (the “Act”) provided for payment
of certain claims against insolvent insurance companies. The Association
determined that the vehicle owner’s subrogation claim was not a covered claim
under the Act. The Act provided that a covered claim could not be any amount
due any insurer pursuant to a subrogation claim. The Supreme Court of
Nebraska held that it is clear that the claim is not a “covered claim” as that term
is defined in the Act, and that the language of the Act reveals that the
Legislature intended that the Act protect not only the claimants making claims
on the Association, but also the insured of an insolvent insurance company.
New Jersey
Sandson’s Bakery v. Glover, 162 N.J.Super. 225, 392 A.2d 640 (1978). The court
rejected an attempt by a solvent insurer to subrogate against the insured of an
insolvent insurance company.

Oregon
Corvallis Aero Service, Inc. v. Villalobos, 81 Or. App. 137, 724 P.2d 880 (1986). The
court held that the state statute did not intend that the Fund would allow a
solvent insurer to be reimbursed by Fund proceeds.
Statutorily Excluded Claims – Net Worth
Sixth Circuit Borman’s, Inc. v. Michigan Prop. & Cas. Guar. Ass’n, 925 F.2d 160 (6th Cir. 1991).
The court considered the constitutionality of a state statute which excluded
from coverage insureds whose net worth exceeded a statutory maximum and
upheld the statute as constitutional.
Georgia Georgia Insurers Insolvency Pool v. Elbert County, 258 Ga. 317, 368 S.E.2d 500
(1998). The court held that the net worth exclusion is applicable to a county.
Illinois Community Unit Sch. Dist. 200 v. Illinois Ins. Guar. Fund, 358 Ill. App. 3d 1056, 832
N.E.2d 472 (2005). School district sought to have the Insurance Guaranty Fund
pay its workers’ compensation claims after its workers’ compensation carrier
become insolvent. The Fund denied coverage based on 215 Ill. Comp. Stat.
5/534/3(b)(iv), which excludes otherwise covered claims where the insured’s
aggregate net worth, including affiliates, exceeds $25 million. Because the
statute does not define “net worth,” the court embraced its commonly
understood meaning. The court then rejected the School District’s position that
legislative restrictions on its funds precluded consideration of all of its assets in
determining its net worth.
Cresswood Farm, Inc. v. Illinois Ins. Guar. Fund, 2004 WL 838037 (N.D. Ill. Apr. 19,
2004). After insured’s worker’s compensation policy insurer became insolvent,
the Insurance Guaranty Fund assumed responsibility for insured’s employee’s
pending claim. When the Fund determined that insured’s net worth exceed $25
million it refused further payments. Under 215 Ill. Comp. Stat. 5/534/3(b)(iv), the
“affiliated net worth exclusion,” the Fund calculated insured’s net worth by
reference to all of the insured’s affiliates based on relationships of control.
Insured challenged the exclusion as a violation of the due process and equal
protection clauses of the federal and state constitutions. Under rational basis
review, the court found that the exclusion served as an eligibility requirement
rather than a mechanism to transfer liability for workers’ compensation claim to
non‐liable affiliates. Insureds do not have an absolute entitlement to payment
under the Fund in the event that their insurer becomes insolvent.
Michigan
Oakland County Bd. of County Road Comm'rs v. Michigan Prop. & Cas. Guar.
Ass’n, 456 Mich. 590, 575 N.W.2d 751 (1998). The court held that the net worth
exclusion is applicable to both public and governmental entities.
Rhode Island Rhode Island Insurers' Insolvency Fund v. Leviton Mfg. Co., Inc., 716 A.2d 730
(R.I. 1998). State statute permitted the Fund to recover all amounts paid on
behalf of an insured with a net worth beyond a threshold. The statute was
found to be constitutional.
Court Excluded Claims – Attorney’s Fees
Arizona
Florida
Cooper Claim Services, Inc. v. Arizona Ins. Guar. Ass’n, 22 Ariz. App. 156, 524 P.2d
1329 (1974). The court addressed the question of whether or not adjuster fees
were covered and held that an adjuster’s services for an insurance company
prior to insolvency were not recoverable.
Florida Ins. Guar. Ass’n v. Price, 485 So.2d 453 (Fla. Dist. Ct. App. 1986). The
court held that court costs incurred prior to insolvency were not covered claims
payable by the Fund.

Massachusetts Comm’r of Ins. v. Massachusetts Insurers Insolvency Fund, 373 Mass. 798, 370
N.E.2d 1353 (1997). The court held that appraiser fees are excluded from
coverage, which were furnished prior to the insolvency.
Michigan
Ohio
Metry, Metry, Sanom & Ashore v. Michigan Prop. & Cas. Guar. Ass’n, 403 Mich.
117, 267 N.W.2d 695 (1978). The court held that attorney fees for defense of the
insured prior to insolvency are not covered claims to be paid by the Association.
Ohio Ins. Guar. Ass’n v. Simpson, 1 Ohio App. 3d 112, 439 N.E.2d 1257 (1981). The
court held that attorney fees for defense of the insured prior to insolvency are
not covered claims to be paid by the Association.
Court Excluded Claims – Pre‐Judgment Interest
Alaska
Guinn v. Ha, 591 P.2d 1281 (Alaska 1979). The court found that pre‐judgment
interest constituted compensatory damages and held that compensatory
damages were subject to the policy limits; therefore, no additional award above
the policy limits would be made.
Court Excluded Claims – Bad Faith Claims
California
Isaacson v. California Ins. Guar. Ass’n, 44 Cal.3d 775, 750 P.2d 297 (1988). The
court held that there was no legislative intent to hold the Fund liable for a claim
under the Unfair Practices Act.
Florida Rivera v. Southern American Fire Ins. Co., 361 So.2d 193 (Fla. Dist. Ct. App. 1978).
The claimant sought recovery from the Fund for the “bad faith” of the insolvent
insurer. The court held that the Fund was not liable for the torts of its members’
insurers.
Obligation to Pay Covered Claims – In General
Powers and Duties of the Association
New Jersey
Pennsylvania
Posso v. Acceleration Nat’l Ins. Co., 402 N.J. Super 381, 954 A.2d 520 (2008). The
claim arose out of a work‐ related accident where the plaintiff brought action
against the New Jersey Property‐Liability Insurance Guaranty Association
(“NJPLIGA”) seeking to recover statutory benefits on his claim against an
insolvent uninsured motorist (“UM”) insurer even though a workers’
compensation carrier had a workers’ compensation lien for an amount over
$300,000. The court held that NJPLIGA was required to pay the statutory
benefits ($300,000) pursuant to UM coverage in a policy issued by a now
insolvent insurer. It further found that NJPLIGA was not entitled to any credit
based upon the workers’ compensation lien asserted.
Carrozza v. Greenbaum, M.D., 591 Pa. 196, 916 A.2d 553 (Pa. 2007). A patient
brought an action against two doctors. One doctor’s insurer was declared
bankrupt and the Pennsylvania Property and Casualty Insurance Guaranty
Association (“PPCIGA”) assumed responsibility for that doctor’s defense.
Judgment was entered for the plaintiff and the second doctor’s solvent insurer
was found jointly and severely responsible for the entire verdict. The second
insurer appealed. The appeals court considered “where two defendants are
found jointly and severally liable, one defendant has sufficient insurance
coverage to satisfy the entire judgment, and the other defendant’s insurer is
insolvent, may a court direct the judgment creditor to seek satisfaction
exclusively from the solvent insurer, this effectively discharging the [PPCIGA] of
all liability?” Id. at 201‐202. The court held that PPCIGA assumed the liabilities of
the insolvent insurer. Therefore, it stood in the shoes of the insolvent insurer for

purposes of joint and several liability. Accordingly, similar to other joint and
several liability situations, the judgment creditor may seek satisfaction of the
judgment from PPCIGA for the whole judgment or the statutory cap on
PPCIGA’s liability, whichever is lower. The court reasoned that if PPCIGA was
also held liable, the burden of one insurer’s insolvency is spread across all
Pennsylvania insurers, which is within the purposes of creating PPCIGA.
West Virginia The West Virginia Insurance Guaranty Association v. Potts, 214 W.Va. 332, 589
S.E.2d 216 (2003). In a prior case of the same name, the West Virginia Insurance
Guaranty Association (WVIGA) sought declaratory judgment that claims by
patient, her husband, and their three children in connection with physician's
failure to diagnose breast cancer represented only one covered claim under the
West Virginia Insurance Guaranty Act. The Supreme Court of Appeals reversed
and remanded lower court ruling to enter an order consistent with the opinion
that loss of consortium claims presented for payment under WVIGA by a
medical malpractice victim's spouse and children are separate and distinct
covered claims, and each compensable claim is subject to the statutory per
claim limit of $300,000 up to the maximum liability of the insurance policy issued
by the insolvent insurer. On remand, the WVIGA moved to interplead $70,000
as total payment for the additional covered claims. Mrs. Potts had previously
received $400,000 from the medical defendants and WVIGA had reimbursed
those defendants for $300,000, its statutory maximum on the claim.
Nonetheless, Mrs. Potts sought an additional $300,000 from WVIGA. The lower
court entered summary judgment in favor of WVIGA holding that the money
previously distributed to the Medical defendants by WVIGA in Potts I was in
partial satisfaction of the Appellants’ claims and could be offset against further
claims by the Appellants. The patient, husband, and children appealed. The
Supreme Court of Appeals held that WVIGA's payment of $300,000 to insured
tort‐feasors satisfied its obligation, and, thus, patient was not entitled to
payment from the WVIGA in addition to amounts already paid by the tortfeasors
pursuant to settlement agreement.
Obligation to Pay Covered Claims – Defense of Claims
Eighth Circuit
Rodgers v. Missouri Ins. Guar. Ass’n, 841 F.2d 858 (8th Cir. 1988). An insured of
an insolvent insurer failed to give timely notice to the Fund that an adverse
summary judgment had been entered. The court held that the Fund could not
be bound by the judgment because there was no reasonable opportunity to
defend.
California Saylin v. California Ins. Guar. Ass’n, 179 Cal. App. 3d 256, 224 Cal. Rptr. 493
(1986). The Fund is generally obligated to defend an insured to the same extent
as would the insolvent insurer.
Louisiana
Rhode Island
Texas
Horton v. State Farm Ins. Co., 641 So.2d 993 (La. Ct. App. 1994). The Fund does
not have a duty to defend an insured on a non‐covered claim, excluded from
coverage by statute, such as a subrogation claim.
Bassi v. Rhode Island Insurers’ Insolvency Fund, 661 A.2d 77 (R.I. 1995). The
Fund has no duty to defend a claim that is not timely filed.
Texas Prop. & Cas. Ins. Guar. Ass’n v. Southwest Aggregates, Inc., 982 S.W.2d
600 (Tex. Ct. App. 1998). The court held that the Fund had no duty to defend
where a solvent insurer had a duty to defend. The insured must exhaust those
rights first.
Obligation to Pay Covered Claims – Late Filed Claims

Illinois
Matter of Ideal Mut. Ins. Co., 218 Ill.App.3d 1039, 578 N.E.2d 1235 (1991). The
Liquidator’s acceptance of late filed claim does not bar the Fund from defeating
the claim.
Ohio Lake Hospital System v. Ohio Ins. Guar. Ass’n, 69 Ohio St. 3d 521, 634 N.E.2d 611
(1994). The court held that the deadline date for filing of claims is strict.
Deemed to Be the Insurer
Ohio Ins. Guar. Ass’n v. Berea Roll & Bowl, Inc., 19 Ohio Misc. 2d 3, 482 N.E.2d
995 (1984). The court held that the deadline date for filing of claims is strict.
Nebraska Nebraska Life & Health Ins. Guar. Ass’n v. Dobias, 247 Neb. 900, 531 N.W.2d 217
(1995). The Fund is a guarantor of an insolvent insurer to the extent of the
statute, not as its legal successor.
New Hampshire
New Jersey
South Carolina
New Hampshire Ins. Guar. Ass’n v. Pitco Friolator, Inc., 142 N.H. 573, 705 A.2d
1190 (1998). The Fund is a guarantor of an insolvent insurer to the extent of the
statute, not as its legal successor.
Lampley v. Davis Machine Corp., 219 N.J. Super. 540, 530 A.2d 1254 (1987). After
the insolvency of an insurer, the Fund was granted authority to pay 40% of
covered claims. The court held that the Fund’s control over the settlement is
limited by the extent of its liability.
Bell v. Senn Trucking Co. of Newberry, 308 S.C. 364, 418 S.E.2d 310 (1992). The
court held a Fund was subject to the jurisdiction of a different state court
because the insolvent insurer would have been.
Assessments
Minnesota
New Jersey
Matter of May 8, 1987 Assessment by Minnesota Ins. Guar. Ass’n, 428 N.W.2d
824 (Minn. Ct. App. 1988). This case considered whether an assessment would
apply to insurers who were authorized to write insurance policies in conjunction
with federally reinsured crop insurance. The court held that the assessment was
made before the federal preemption became effective and that the insurers
were obligated to pay for the assessment levied before the effective date of the
statute.
In the Matter of the Appeal by American Millennium Insurance Company
Regarding Its 2005 And 2006 UCJF Assessments, Order No. A07‐102 (State of
N.J., Dep’t of Banking and Ins. January 17, 2007). This dispute is currently
pending decision from the New Jersey Superior Court, Appellate Division. It
involves the same issues as the above mentioned dispute and has been
consolidated with it.
In the Matter of the Appeal by American Millennium Insurance Company
Regarding Its 2002, 2003 And 2004 UCJF Assessments, Order No. A06‐111 (State
of N.J., Dep’t of Banking and Ins. June 19, 2006). American Millennium Insurance
Company (“American”) appealed the New Jersey Property‐Liability Insurance
Guaranty Association’s (“NJPLIGA”) assessments of it to cover the obligations
of the Unsatisfied Claim and Judgment Fund (“UCJF”). The Commissioner found
that there was no statutory basis for American’s argument that the
assessments should be based on the proportional benefit received from the
UCJF Fund. This dispute is currently pending decision from the New Jersey
Superior Court, Appellate Division. It has been consolidated with the below
referenced matter.

Affiliated FM Ins. Co. v. State, 338 N.J. Super. 540, 770 A.2d 741 (2001). A group
of property and liability insurance companies, which did not write automobile
insurance, brought an action against the State alleging the Good Driver
Protection Act (“GDPA”) was unconstitutional. The GDPA required the New
Jersey Property‐Liability Insurance Guaranty Association (“NJPLIGA”) to collect
assessments from its members as loans to the State as a contribution to the
accrued debt of the Automobile Full Insurance Underwriting Association
(“JUA”). The court held the insurers had no contract rights harmed by the
GDPA deferring repayment of loan assessments by the NJPLIGA to assist the
JUA and the assessments were legal.
Matter of American Reliance Ins. Co., 251 N.J. Super 541, 598 A.2d 1219 (1991).
Several New Jersey property and casualty insurance companies appealed the
New Jersey Property‐Liability Insurance Guaranty Association’s (“NJPLIGA”)
assessments under the Fair Automobile Insurance Reform Act (“FAIR Act”)
claiming the assessments were an unconstitutional taking and violated their
equal protection rights and due process rights. The court held that the act did
not violate the insurance companies’ constitutional rights. Specifically, it held
that imposition of assessments upon all the members of the NJPLIGA to create
revenue to pay for the New Jersey Full Insurance Underwriting Association
(“JUA”) did not damage the contractual right of the insurance companies.
Further, even if the companies contractual rights were impeded, it would be
justified because the Act focuses on an important public purpose. The court
noted that all insurers benefit from a stable insurance market and the plaintiffs
could not reasonably resist payment of the assessments because they might
not have derived a direct economic benefit.
New Mexico
New Mexico Life Ins. Guar. Ass’n v. Moore, 93 N.M. 47, 596 P.2d 260 (1979). The
Fund brought an action against nonprofit health care plans that were developed
under a state statute giving them a special status. The court held that the plans
were not subject to insurance laws and did not have to pay an assessment.
Wisconsin In re Liquidation of Am. Eagle Ins. Co., 2005 WI App 177, 286 Wis.2d 689, 704
N.W.2d 44. During proceedings involving an insolvent town mutual insurer
under a liquidation order, Insurance Security Fund assessed the town mutual’s
reinsurer under its interpretation of Wis. Stat. § 646.31(2)(a) such that town
mutual stand as policyholders in relation to their reinsurers. Fund argued that
“ceding” in § 646.31(2)(a)’s “ceding assessable domestic insurer” means
“reinsuring” based on various definitions of reinsurance. Based on express
legislative history, the court of appeals agreed with the Fund that it has
authority to assess reinsurers of town mutuals.
Effect of Paid Claims – In General
Effect of Paid Claims
New Mexico New Mexico Life Ins. Guar. Ass’n v. Quinn & Co., Inc., 111 N.M. 750, 809 P.2d 1278
(1991). The court held that pursuant to the assignments, the Fund was entitled
to sue for the entire amount of any claims held by the policy holder.
Oklahoma State ex rel. Grimes v. Oklahoma Prop. & Cas. Ins. Guar. Ass’n, 796 P.2d 352
(Okla. Ct. App. 1990). The court concluded that the Fund’s claims were to be
equal priority with the policyholder claims.
Exhaustion
Non‐Duplication of Recovery

Arkansas
Illinois
Hurst, et al. v. Dixon, 182 S.W.3d 102 (Ark. 2004). Auto accident victim brought
suit against a truck driver and the owner. The truck driver and owner’s liability
insurer, Reliance, was declared insolvent during the pendency of the lawsuit,
and the Pennsylvania Court of Commonwealth issued a liquidation order. The
truck driver and owner sought a “setoff” or credit for uninsured motorist
benefits, medical payments and workers’ compensation paid to the victim. The
Arkansas Supreme Court ultimately held that the tortfeasors were not entitled
to setoff or credit under the Mississippi Insurance Guaranty Association law
without a showing of a covered claim against the insolvent liability insurer
where, in this case, the Insurance Guaranty Association was not a party and had
not assumed the defense of the alleged tortfeasors.
Roth v. Illinois Ins. Guar. Fund, 366 Ill. App. 3d 787, 852 N.E.2d 289 (2006). In
addition to receiving medical benefits from his own HMO, plaintiff, who was in
car accident with insured, settled with insured’s automobile liability insurer.
Before the settlement was paid, insurer became insolvent and plaintiff filed a
claim with the Insurance Guaranty Fund. The Fund denied the claim, arguing
plaintiff was required to setoff any other insurance received based on the
accident. Under 215 Ill. Comp. Stat. 5/546(a), which requires a claimant to
exhaust all coverage provided by “other insurance” if the claim arises from the
same facts or loss before recovering from the Fund, the court found any Fund
payment would be a duplication of recovery because plaintiff had received
benefits in excess of the settlement.
Norbert v. Centex Homes Corp., 247 Ill. App. 3d 267, 616 N.E.2d 1342 (1993). The
court held that the insured must first exhaust rights under own liability
insurance before proceeding against the Fund.
Spearman v. State Sec. Ins. Co., 57 Ill. App. 3d 393, 372 N.E.2d 1008 (1978). The
court held that the insured must first exhaust rights under own uninsured
motorist coverage before proceeding against the Fund.
Minnesota
Oregon
Pennsylvania
Van Guilder v. Nat’l Freight, Inc., 686 N.W.2d 339 (Minn. 2004), abrogated on
other grounds, Goodyear Tire & Rubber Co. v. Dynamic Air, Inc., 702 N.W.2d 237
(Minn. 2005). The Supreme Court of Minnesota held that Minnesota Insurance
Guaranty Association Act’s exhaustion provision was not limited to first‐person
coverage, but rather requires the solvent insurer of a joint tortfeasor to exhaust
its available insurance coverage before the solvent insurer is entitled to
reallocation of any uncollectible portion of the judgment.
Carrier v. Hicks, 316 Or. 341, 851 P.2d 581 (1993). Where the claimant received an
uninsured motorist arbitration award which was less than the policy limits, the
court held this to be a failure to exhaust and precluded further recovery from
the Fund.
Schmidt v. Workers’ Comp. Appeal Bd., 835 A.2d 877 (Pa. Commw. Ct. 2003). An
employer, who paid workers’ compensation benefits to its injured employee,
was entitled to subrogate against amounts the employee received from the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
in a settlement for injuries sustained on the job. The plaintiff brought the suit
against a third party whose insurer had been declared insolvent and PPCIGA had
assumed its obligations. The court reasoned that the non‐duplication provision
of the PPCIGA Act did not specify a workers’ compensation policy as a policy
subject to the exhaustion requirement. The court further noted that the nonduplication
provision did not specify a workers’ compensation policy as being
subject to its exhaustion provision. Additionally, there was no evidence PPCIGA
ever reduced its settlement to the injured worker to account for the workers’
compensations he had received.

Heninger v. Riley, 317 Pa. Super. 570, 464 A.2d 469 (1983). The court held that
the insured must first exhaust their rights under own uninsured motorist
coverage before proceeding against the Fund.
Credit
Alabama
Alabama Ins. Guar. Ass’n v. Stephenson, 514 So.2d 1000 (Ala. 1987). The court
held that the health insurance benefits paid by the health insurer to the injured
party were not payments that the Fund could credit against its liability.
California California Ins. Guar. Ass’n. v. Liemsakul, 193 Cal. App. 3d 433, 238 Cal. Rptr. 346
(1987). The claimant had $25,000 in uninsured motorist coverage available, but
settled for $15,000. The court held that the Fund was entitled to the full $25,000
credit.
Ross v. Canadian Indemnity Ins. Co., 142 Cal. App. 3d 396, 191 Cal. Rptr. 99 (1983).
The primary insurer was insolvent. The court held the secondary carrier was
liable as the primary insurer and relieved the Fund from liability.
Colorado
Delaware
Illinois
Colorado Ins. Guar. Ass’n v. Harris, 827 P.2d 1139 (Colo. 1992). In interpreting the
Colorado statute, the court held that the claimant’s below policy limit
settlement did not preclude further action against the Fund.
Marra v. Wilson, 2003 WL 367831 (Del. Super. Ct. 2003). The court considered
how a “statutorily‐mandated credit is to be applied when a tortfeasor’s source
of insurance has been declared insolvent before liability has been determined.”
Id. at *1. The plaintiffs recovered $100,000 from their own insurer and claimed
the credit should be applied to the total amount of damages they were entitled
to. The Delaware Insurance Guaranty Association (“DIGA”) argued the credit
should be applied to its statutory maximum exposure of $300,000. Defendants,
at the time of the accident, were insured by Reliance who was later declared
insolvent and DIGA assumed its responsibilities. Plaintiffs filed a claim with their
uninsured motorist carrier and received $100,000. The court held that Delaware
law supported that the $100,000 must be deducted from DIGA’s $300,000 limit.
Burton v. Ramos, 341 Ill. App. 3d 122, 792 N.E.2d 362 (2003). After a default
arbitration award was entered in favor of uninsured motorist and against
insured, the Insurance Guaranty Fund undertook insured’s defense when his
automobile liability insurer became insolvent. In part, the Fund sought a set‐off
against the judgment equal to the limits of uninsured motorist’s uninsured
motorist policy. The language of 215 Ill. Comp. Stat. 5/546(a) provides for a setoff
against the Fund’s obligation by the amount recoverable up to the policy
limit under “other insurance” even if such an insured does not even file a claim
or actually receive payment from the insurer. The legislative policy behind §
546(a) requires that the insured and not the Fund bear the loss to which the
insured is entitled.
Lucas v. Illinois Ins. Guar. Ass’n, 52 Ill. App. 3d 237, 367 N.E.2d 469 (1977). The
court held that the amount the insured received by collecting uninsured
motorist benefits must be deducted from the policy limits of the insolvent
insurer’s policy and that the Fund was only liable for the amounts remaining in
the reduced limits.
Indiana
Pendleton v. Aguilar, 827 N.E. 2d 614 (Ind. Ct. App. 2005). Trial court erred in
entering post‐verdict set‐off of collateral source reimbursement where evidence
of such reimbursement was submitted to jury that was instructed on nonduplication
of recovery. Any set‐off under collateral source rule satisfies Illinois’
Insurance Guaranty Fund law’s non‐duplication provision, 215 Ill. Comp. Stat.

5/546, because of Illinois’ intent to prevent duplication of recovery and protect
the public by maintaining its Fund.
Indiana Ins. Guar. Ass’n v. Blickensderfer, 778 N.E.2d 439 (Ind. Ct. App. 2002).
Physicians sued for medical malpractice filed declaratory judgment against the
Insurance Guaranty Association, alleging the Association had a duty to defend
and indemnify them based on their medical malpractice insurer’s insolvency.
Association refused to defend and indemnify under Indiana Code § 27‐6‐8‐11’s
non‐duplication of recovery provisions because claimant’s health insurance
provider had paid claimant in excess of physicians’ malpractice limits. The court
found that § 27‐6‐8‐11’s requirement to exhaust claims against other insurance
policies was modified by the phrase “covered claims” to the exclusion of
claimant’s claims for direct health insurance benefits because these benefits did
not arise out of and were not within the coverage of an insurance policy of an
insolvent insurer. Consequently, the Association was not entitled to a setoff.
Additionally, because claimant had not been paid all the benefits he was entitled
to under the Association’s laws, the Association was obligated to indemnify and
defend physicians.
Iowa Stecker v. Iowa Ins. Guar. Ass’n, 465 N.W.2d 887 (Iowa 1991). The court
determined that the legislature intended both uninsured and underinsured
motorist coverages to be included in the category of risks.
Missouri Garrett v. Overland Garage & Parts, Inc., 882 S.W.2d 188 (Mo. Ct. App. 1994).
The court held that a lower court’s verdict was to be reduced by the amount of
the workers’ compensation award that had been received.
New Jersey George Dapper, Inc. v. New Jersey Prop. Liab. Ins. Guar. Ass’n, 2008 WL 2445261
(N.J. Super. Ct.2008). Dapper appealed from a trial court order granting
summary judgment to New Jersey Property‐Liability Insurance Guaranty
Association (“NJPLIGA”), the Appellate Court affirmed. Legion Insurance
Company had been declared insolvent in 2003 and NJPLIGA assumed its
obligations. NJPLIGA’s liability was capped at $300,000 and it was required to
reduce its coverage by the amount of uninsured motorist (“UM”) coverage
benefits received by the injured party. As a result, NJPLIGA was only liable for
$50,000 dollars. The Supreme Court held that NJPLIGA would no longer be
entitled to set‐offs against its cap and the UM benefits received by the injured
party. NJPLIGA argued that its obligation should be determined by the state of
law as of the date of the settlement. As a result, it argued the calculation of
$50,000 should not change. The Appellate court upheld this argument that the
settlements are not invalidated by subsequent changes in the law.
Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504, 800 A.2d 54 (2002). At
issue was the amount of credit the New Jersey Property‐Liability Insurance
Guaranty Association (“NJPLIGA”) was entitled to receive because of the
Pennsylvania Property and Casualty Insurance Guaranty Association’s
(“PPCIGA") primary liability. The plaintiff had several actions filed against it and
sought coverage from its insurance companies, three of which became
insolvent. As a result, NJPLIGA and PPCIGA were added as defendants to the
action. The court held that NJPLIGA was entitled to a credit equal to the
statutory maximum amount payable by PPCIGA. It reasoned that the holding
was in conformity with the New Jersey Legislature’s intent in creating NJPLIGA
Oklahoma
Pennsylvania
Oglesby v. Liberty Mut. Ins. Co., 832 P.2d 834 (Okla. 1992). The court held that
the Fund should be credited for any amounts that the insured received from the
solvent insurer.
Brostoski v. Lucchino, 2003 Pa. Super. 406, 835 A.2d 751 (2003). The
Pennsylvania Property Insurance and Casualty Guaranty Association (“PPICGA”)

assumed the obligations of Dr. Lucchino’s insolvent insurer. The medical
malpractice case settled for $35,000. PPICGA argued that its obligation should
be reduced to $29,308.15 to reflect an offset of monies that was paid on behalf
of the plaintiff’s health insurer. At issue was the non‐duplication of recovery
provisions of 40 P.S. § 991.1817. The court held that monies recovered by a
patient from his health insurance did not constitute an offset against the
amount payable by the PPICGA. It reasoned that the settlement monies
awarded to the plaintiff were for pain and suffering and not for his medical
expenses covered by his health insurer. Additionally, the plaintiff’s claim for
medical expenses had been withdrawn prior to settlement.
Corrigan v. Methodist Hosp., 234 F. Supp. 2d 494 (E.D. Pa. 2002). In a
malpractice action the defendant’s primary malpractice insurer was declared
insolvent and the Pennsylvania Property Insurance and Casualty Guaranty
Association (“PPCIGA”) assumed its obligations. The defendants asserted that
pursuant to the PPCIGA Act (“Act”) they were entitled to an offset for the
amounts paid on behalf of the plaintiff’s workers’ compensation carrier
covering the plaintiff’s employment. The court stated that the Act does not
intend to place a claimant in the same position they would have been had their
insurance company remained solvent. Instead, the Act creates a way by which
limited recovery can be had when no recovery could have been possible due to
the insolvency. Consequently, the court found that where a claimant receives
insurance benefits under workers’ compensation, a court may shape the verdict
by applying the offset provision.
Strickler v. Desai, 571 Pa. 621, 813 A.2d 650 (P2002). Dr. Desai was sued in a
medical malpractice action. The Doctor’s insurer was declared insolvent and the
Pennsylvania Property and Casualty Insurance Guaranty Association (“PPCIGA”)
became obligated to cover the claims and defend the Doctor. After the
insolvency, the plaintiffs entered into and the court approved a settlement
between the parties. PPCIGA refused to fund the settlement because it would
allow the plaintiffs to get a double recovery. The plaintiffs demanded medical
expenses in their complaint, but later admitted they received medical expenses
from Aetna, their health insurer. PPCIGA claimed it was entitled to reduce the
amount of its obligation by the amount the plaintiffs received from Aetna, who
already paid medical costs in excess of the amount PPCIGA was obligated to
pay. Since Aetna already reimbursed the plaintiffs for medical expenses, PPCIGA
argued it would result in duplicate payments for the same expense. The court
determined that “[b]ecause [plaintiffs] sought medical expenses in the
complaint and settled all of the claims in the complaint, we deem the
settlement to include amounts attributable to medical expenses.” Id. at 631. The
court affirmed the lower court’s ruling that PPCIGA was entitled to offset the
amount of medical expenses Aetna paid from the amount of its liability.
Price v. Pennsylvania Prop. & Cas. Ins. Guar. Ass’n, 2002 Pa. Super. 74, 795 A.2d
407 (2002). As individual plaintiffs, parents sought compensation for their
daughter’s incurred medical expenses in a negligence action. The doctors’
insurer was declared insolvent and the Pennsylvania Property and Casualty
Insurance Guaranty Association (“PPCIGA”) assumed its obligations. The
parents settled with PPCIGA and specifically agreed that the settlement was
intended to cover both present and future damages. PPCIGA argued it was
entitled to an offset of the monies the plaintiffs received from the parent’s
insurer. The court held since the parents demanded personal compensation in
the negligence action, the medical expenses sought were also covered by the
settlement. Therefore, PPCIGA was entitled to an offset up to the amount
recovered from the parent’s insurer and to the extent the father had a claim for
coverage.

Fanning v. Davne, 2002 Pa. Super. 45, 795 A.2d 388 (2002). Appellant, the
Pennsylvania Property and Casualty Insurance Guaranty Association
(“PPCIGA”), argued a jury reward received by the appellee should be offset by
the amount the appellee already received from his workers’ compensation
carrier, and the award should be molded to zero. The court noted that the
damages awarded to the appellee were for pain and suffering, not for the
medical bills or wage loss. The appellee’s pain and suffering caused by the
defendant was not covered by any other type of insurance. Therefore, the nonduplication
provision in the PPCIGA did not apply because the jury award was
for pain and suffering and not for medical bills or lost wages. Thus, PPCIGA was
not entitled to an offset and had to fulfill the obligations of the defendant’s
insolvent professional liability insurance company.
Kuether v. Loev, 51 Pa. D. & C. 4th 124, 2001 WL 113034 (Pa. Commw. Ct. 2001).
The court denied plaintiff’s petition to enforce settlement in this case where a
set‐off was required under the facts and law. The court distinguished this case
from McCarthy v. Bainbridge, 739 A.2d. 200 (Pa. Super. 1999) because this case
involved a setoff of amounts already received by plaintiffs under their health
insurance, which was specifically set forth in the statute. Whereas, McCarthy
involved life insurance not specifically set forth in the statute.
Vermont International Collection Service v. Vermont Prop. & Cas. Ins. Guar. Ass’n, 555
A.2d 978 (Vt. 1988). The court held that the amount received from the solvent
insurer reduces the total claim but is not a direct credit against the Fund. The
claimant is entitled to recover from the Fund its unpaid loss.
Wyoming
Wyoming Ins. Guar. Ass’n v. Allstate Ins. Co., 844 P.2d 464 (Wyo. 1992). The
court held under the particular facts that the policy of the insolvent insurer was
“collectible insurance” (since covered by the Fund) and thus the permissive
user’s policy was only excess over any other “collectible insurance”.
Coverage By Multiple Funds
Montana Palmer by Diacon v. Montana Ins. Guar. Ass'n, 239 Mont. 78, 779 P.2d 61 (1989).
Payments made from the first Fund are a credit against the liability of the
second Fund to avoid double recovery.
Oklahoma
Oglesby v. Liberty Mut. Ins. Co., 832 P.2d 834 (Okla. 1992). If fund coverage
conflicts, if the claim is a worker’s compensation claim, then the state of
residence of the claimant controls.
Tax Exemption
Tax Exemption – In General
Maryland
Workmen’s Compensation Comm’n v. Prop. & Cas. Ins. Guar. Corp., 74 Md.App.
99, 536 A.2d 714 (1988). The State’s Subsequent Injury Fund levied an
assessment on an Association. The court held the Association was immune
from such levies because they were fees or taxes.
Immunity
Immunity – In General
California
Isaacson v. California Ins. Guar. Ass’n, 44 Cal. 3d 775, 244 Cal. Rptr. 655, 750 P.2d
297 (1988). One of the claims was for a violation of the Unfair Practices Act. The
court concluded there was no legislative intent to hold the Association liable for
a claim under the Act.

Florida
Hawaii
Fernandez v. Florida Ins. Guar. Ass’n, 383 So.2d 974 (Fla. Dist. Ct. App. 1986). A
claimant alleged that the Association had been guilty of bad faith in refusing to
settle a claim where there was a resulting judgment over the policy limits. The
court determined that refusing to settle was one of the immune duties;
therefore, there could be no bad faith action.
Mendes v. Hawaii Ins. Guar. Ass’n, 87 Hawai'i 14, 950 P.2d 1214 (1998). In a claim
brought against the Fund alleging breach of duty of good faith and fair dealing
and tortious breach of contract, the court held the Fund was immune by statute
for claims based on the actions of the Fund through its agents and employees.
Immunity
Stay of Proceedings – In General
California Reed v. California Ins. Guar. Assn, 200 Cal. App. 3d 1269, 246 Cal. Rptr. 561
(1988). The court addressed the issue of who was responsible for setting aside
a default judgment. The court held that setting aside a default judgment was
within the normal course of defense assumed by the Fund.
Florida Jimmy Langs Auto Service v. Proctor, 667 So.2d 334 (Fla. Dist. Ct. App. 1995).
The action was stayed during appeal.
Pennsylvania Shay v. Flight C Helicopter Services, Inc., 2003 Pa. Super. 86, 822 A.2d 1 (2003).
The plaintiff challenged the trial court’s decision to limit delay damages.
Damages were held to be the responsibility of the Pennsylvania Property and
Casualty Insurance Guaranty Association (“PPCIGA”) at a pro rata portion based
upon PPCIGA’s statutory limit of liability. The defendant was insured under a
general liability insurance policy issued by American Eagle Insurance Company
(“American”). The plaintiff filed a wrongful death action against the defendant.
A year later American was declared insolvent and the trial court stayed the
proceeding for 90 days until PPCIGA could assume the defense. The jury
returned a verdict for the plaintiff and the plaintiff filed a petition for delay
damages, which were granted by the trial court. The appeals court reversed the
lower court’s decision because PPCIGA did not have an opportunity to argue its
position regarding the amount of damages, no notice was served, and no
appearance was made on behalf of PPCIGA. Consequently, the court held that
since PPCIGA was not a party to the underlying action the trial court did not
have the authority to order delay damages against PPCIGA.
Texas
Willard v. David, 881 S.W.2d 907 (Tex. Ct. App. 1994). In this case, the suit was
pending against the insured on the date of insolvency. The court stayed the
action for the six month period, which allows time for the Fund to prepare a
defense.
Miscellaneous
In General
Minnesota Goodyear Tire & Rubber Co. v. Dynamic Air, Inc., 702 N.W.2d 237 (Minn. 2005).
The Supreme Court of Minnesota held a party insured by an insolvent insurer
may be liable to a claimant for any portion of the claim that constitutes the
difference between the $300,000 statutory maximum available from MIGA and
the liability limit of the insurer’s policy.
Minnesota Ins. Guar. Ass’n v. Integra Telecom, Inc., 697 N.W.2d 223 (Minn. Ct.
App. 2005). Minnesota Insurance Guaranty Association sought reimbursement
of a workers comp claim against the insured after MIGA reached a settlement

without the insured’s consent. The Minnesota Court of Appeals held that MIGA
had authority under Minnesota Guaranty Association Act to settle and seek
reimbursement of the employee’s claim without the insured’s consent.
Illinois
Gines v. Ivy, 358 Ill. App. 3d 6007, 832 N.E.2d 937 (2005). Passenger in singleautomobile
accident sued driver. After driver’s automobile liability insurer
became insolvent and insurer‐provided attorneys were permitted to withdraw,
the circuit court entered a default judgment against driver. Subsequently, the
Insurance Guaranty Fund appointed driver’s former attorneys to represent
driver again and driver then successfully moved to vacate the default judgment.
Passenger appealed. The court found that the default judgment was either
barred by 215 Ill. Comp. Stat. 5/551’s 120‐day stay or required to be set aside by
215 Ill Comp. Stat. 5/537.7(b)’s 12‐month rule. Additionally, the court found the
Fund had standing under the express language of 215 Ill Comp. Stat. 5.537.7(b)
to move to vacate the default judgment on driver’s behalf.
IPF Recovery Co. v. Illinois Ins. Guar. Fund, 356 Ill. App. 3d 658, 826 N.E.2d 943
(2005). Where policy or contact of insurance does not contain a limitations
period regarding the time in which an insured may bring suit neither the tolling
provision of 215 Ill. Comp. Stat. 5/143.1, which tolls such periods from the date of
proof of loss until the date the claim is denied in whole or in part, nor the policy
behind it apply to the policy or contract.
Thomas v. Centeon Bio‐Services, Inc., 2003 WL 827408 (N.D. Ill. Mar. 3, 2003).
Based on the rule in Kotecki v. Cyclops Welding Corp., 136 Ill.2d 155 (1992), an
employer’s liability in a third‐party contribution claim is limited to the amount it
pays out in workers’ compensation benefits. Accordingly, where employer’s
insurer is insolvent and the Insurance Guaranty Fund has assumed its
obligations, a payment from employer to tortfeasor, who is covered by an
existing policy, is not in effect a payment from the Fund to a solvent insurer in
violation of 215 Ill. Comp. Stat. 5/534‐3(b)(v).
People ex rel. Shapo v. Agora Syndicate, Inc., 323 Ill. App. 3d 543, 752 N.E.2d 1186
(2001). Director of Insurance brought liquidation action against insurance
syndicate. Based on custodial accounts held in compliance with 215 Ill. Comp.
Stat. 5/107.27 and 107.26(b), syndicate was insolvent on a cash flow basis.
Syndicate argued that adherence to the sections’ requirements precluding a
finding of insolvency. Because funds in custodial accounts that were not readily
accessible to syndicate, syndicate was insolvent. Where Director finds that
insurer is insolvent, the Director has the discretion under the express language
of § 192(4) to request an order of liquidation, rather than seek rehabilitation.

Case Law Digest Supplement
LIFE & HEALTH GUARANTY FUNDS
Purpose
Purpose – In General
Nebraska Unisys Corp. v. Neb. Life & Health Ins. Guar. Ass’n, 673 N.W.2d 15 (Neb. 2004).
Employer brought a declaratory judgment action seeking a determination of the
contracts issued by insolvent insurer were annuity contracts covered by the Life
& Health Insurance Guaranty Association Act and that the resident participants
in the employee retirement plan were entitled to compensation under the Act
for amounts still owed by the insurer. The court held that resident employee
participants whose retirement contributions purchased contracts were entitled
to protection under the Act. In addition, the court held that the Insurance
Guaranty Association must be treated as any other litigant and, accordingly,
plaintiff was entitled to pre‐ and post‐judgment interest in conjunction with the
favorable judgment it obtained against the Insurance Guaranty Association.
Federal Jurisdiction – Preemption
Rhode Island
Kachanis v. United States, 844 F. Supp. 877 (D.R.I. 1994). Guaranty Association
Act is “enacted for the purpose of regulating insurance” and as such is
exempted from federal preemption by the McCarren‐Ferguson Act.
Limits of Liability
New Mexico Krahling v. First Trust National Ass’n, 123 N.M. 685, 944 P.2d 914 (1997).
Executive Life GICs were not covered annuities within the meaning of New
Mexico’s statutory definition because payment was not dependent on the
continuation of human life. In construing the statute and the stated purpose for
which it was enacted, the New Mexico Court of Appeals held that any
construction must be reasonable and in accordance with the plain language of
the statute which was clear as it applied to GICs.
Insurer of Last Resort
Delaware In re Liquidation of Notational Heritage Life Ins. Co., 728 A.2d 52 (Del. Ch. 1998).
The Delaware Life and Health Insurance Guarantee Association Act creates a
scheme for the protection of life and health insurance policyholders in the event
the company issuing the policy fails in the performance of its contractual
obligations due to its impairment or insolvency.
Michigan
Henry L. Meyers Moving & Storage v. Michigan Life & Health Ins. Guar. Ass’n,
222 Mich. App. 675, 566 N.W.2d 632 (1997). Based upon legislative history and
Model Act, statutory limitation for benefits under unallocated annuity contracts
issued to a plan protected by the PBGC applied to all plans with PBGC coverage,
not just those to whom the PBGC had paid benefits. Benefits from a guaranty
association should be a last resort; benefits are not intended for those who are
already adequately protected.
Coverage and Limitations
Applicable Law

Oklahoma
Oklahoma Life & Health Ins. Guar. Ass’n v. Hilti Retirement Sav. Plan, 939 P.2d
1110 (Okla. 1997). Executive Life GICs were unallocated annuities under Model
Act definition and excluded from coverage in the Oklahoma Life and Health
Insurance Guaranty Association Act. The 1991 amendments excluding the
contracts applied to contracts issued before statutory effective date because
Executive Life’s insolvency, the operative event, occurred after amendments
became effective. Because the association acts in a similar capacity to a state
agency, its interpretation of the provisions of the guaranty association act
should be treated like that of an agency and given “highest respect” by the
courts.
Attorney’s Fees
Nebraska Nebraska Life & Health Ins. Guar. Ass’n v. Dobias, 247 Neb. 900, 531 N.W.2d 217
(1995). Despite a liberal interpretation of the Act, guaranty association is not
responsible for attorneys’ fees and interest awarded against insurer before
insolvency.
Bad Faith Damages
Georgia Crider v. Georgia Life & Health Ins. Guar. Ass’n, 188 Ga. App. 407, 373 S.E.2d 30
(1988). Notwithstanding a liberal construction mandate, “contractual
obligations” for guaranty association coverage purposes did not include bad
faith damages and attorneys’ fees.
Constitutionality of Exclusions and Limitations
Eighth Circuit
Liberty State Bank v. Minnesota Life & Health Guar. Ass’n, 149 F.3d 832 (8th Cir.
1998). Amendment to Minnesota’s Act expressly excluded municipal GICs from
the Act’s coverage. Retroactive application of the amendment to plaintiff’s
claim was constitutionally permissible because the amendment was an
appropriate curative measure to clarify coverage of an unanticipated product
and, as a purely statutory right, payment under the Act can be retroactively
modified or eliminated unless it is vested.
Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass'n, 110 F.3d 547 (8th Cir.
1997) (en banc). The retroactive application of amendment which limited
guaranty association coverage for unallocated annuities to state residents did
not violate the contract or due process clauses of the U.S. Constitution. Rights
against guaranty associations are statutory in nature, not contractual. The
contract clause is thus not involved. The amendment did not violate due
process because it was rationally related to the legitimate state interest of
“regulating the insurance industry, easing the economic burden on its own
residents, and insuring the economic life of an association created by its statute
to protect its residents.”
Michigan
Henry L. Meyers Moving & Storage v. Michigan Life & Health Ins. Guar. Ass'n,
222 Mich. App. 675, 566 N.W.2d 632 (1997). Michigan court ruled that a
coverage exclusion in the Michigan Guaranty Association Act which excluded
GICs issued to employee benefit plans protected by the PBGC, was applicable to
a plan for which PBGC coverage had not been triggered. Because PBGC
coverage was available to the plaintiff's pension plan upon termination, the plan
came under the exclusion even though the plan had not been terminated.
Application of the amendment containing the exclusion to contracts which
predated the statutory effective date was not retroactive because the
provisions in effect at the time of the insurer’s insolvency govern the
Association’s liability, and the plaintiffs had no vested right in guaranty
association protection prior to the insurer’s insolvency.

Texas
Messagephone, Inc., et al v. Texas Life, Accident, Health & Hospital Serv. Ins.
Guar. Ass’n, 966 S.W.2d 133 (Tex. Ct. App. 1998). Messagephone Inc. (“MPI”)
purchased unallocated annuity contracts from insurer, and assigned those
annuity contracts to a trust using them as collateral for several non‐recourse
loans. MPI filed a proof of claim after insurer was placed in receivership in 1989,
but did not disclose the existence of the trust. The Association, having elected
to handle insurer’s claims, denied coverage for the annuity contracts based on
exclusions in 1991 amendments. Statutory amendments can be retroactively
applied without constitutional defect unless vested rights are destroyed or
impaired. There is no vested right to guaranty fund coverage. Moreover, the
annuity contracts were GICs containing no mortality guarantees, and would
have excluded form coverage under the 1989 statute.
Enhancement of Rehabilitation Plans
California
Illinois
Rigney v. National Org. of Life & Health Ins. Guar. Assn’s, No. 102756 (Cal. Dist.
Ct. App. Nov. 4, 1997). Class action plaintiff who opted into enhancement plan
brought suit against NOLHGA and several guaranty associations alleging that
the guaranty associations did not fulfill their statutory obligations, and were
released from their obligations in violation of due process. The court dismissed
the action finding it improper both on procedural grounds and on the merits.
The court went on to conclude that the op‐in/opt‐out process more than
satisfied due process. The dismissal was affirmed on appeal with the court of
appeals going on to state that the plaintiff had failed to appeal the judgment
approving the rehabilitation plan and could not now challenge the Plan in
subsequent litigation.
Lawrence v. Illinois Life & Health Ins. Guar. Ass’n, 293 Ill. App. 3d 489, 688 N.E.2d
675 (1997). Illinois plaintiff was bound by the terms of California court judgment
approving rehabilitation to which he had opted‐in. California court decision was
entitled to full faith and credit from Illinois courts. Plaintiff was subject to the
personal jurisdiction of the California rehabilitation court based on his insurance
contract with the California domiciled insurer, and that the California
proceedings did not violate due process because plaintiffs had both the
opportunity to participate at hearing and the opportunity to opt‐out of
rehabilitation plan.
Limits of Liability and Coverage Exclusions
Fifth Circuit
Eighth Circuit
Alaska
Texas Life, Accident, Health & Hosp. Serv. Ins. Guar. Ass'n v. Gaylord
Entertainment Co., 105 F.3d 210 (5th Cir. 1997). GICs issued to employersponsored
retirement plans are unallocated annuity contracts, and are covered
by guaranty association in the amount of $5 million per contract holder, not per
employee‐participant in the plan.
Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass'n, 110 F.3d 547 (8th Cir.
1997) (en banc). The retroactive application of amendment which limited
guaranty association coverage for unallocated annuities to state residents did
not violate the contract or due process clauses of the U. S. Constitution. Rights
against guaranty associations are statutory in nature, not contractual. The
contract clause is thus not involved. The amendment did not violate due
process because it was rationally related to the legitimate state interest of
“regulating the insurance industry, easing the economic burden on its own
residents, and insuring the economic life of an association created by its statute
to protect its residents.”
Unisys Corp. v. Burke, No. 3AN‐97‐2685 (Alaska Super. Ct. June 25, 1998). Plan
administrator and trustee sued Alaska insurance commissioner and Alaska Life
and Health Insurance Guaranty Association seeking participant level coverage

for portions of plan which were invested in four ELIC group annuity contracts,
arguing that participants were beneficial owners of the ELIC contracts, and thus
satisfied the Act’s prerequisite for ownership in order to obtain coverage.
Plaintiffs also alleged the ELIC contracts represented allocated annuities
because they guaranteed annuity benefits to an individual. The Association
prevailed on summary judgment arguing alternatively a statute of limitation
defense, and that the ELIC contracts were unallocated annuity contacts for
which the contract holder failed to meet the prerequisite of being an Alaska
resident.
Indiana
Bennett v. Indiana Life & Health Ins. Guar. Ass'n, 688 N.E.2d 171 (Ind. Ct. App.
1997). The trustee of a pension benefit plan holds the assets of the plan in trust
for the exclusive benefit of the plan participants, who are, in turn, the beneficial
or equitable owners of any contracts held in trust for their benefit. Resident
plan participants are residents to whom contractual obligations are owed under
Indiana guaranty association law. The term “life,” against which statutory
obligations and coverage limitations are measured, refers to the lives of resident
plan participants rather than the GIC contract holders who may be benefit plan
trustees.
New Mexico Krahling v. First Trust National Ass'n, 123 N.M. 685, 944 P.2d 914 (1997).
Executive Life GICs were not covered annuities within the meaning of New
Mexico’s statutory definition because payment was not dependent on the
continuation of human life. In construing the statute and the stated purpose for
which it was enacted, the New Mexico Court of Appeals held that any
construction must be reasonable and in accordance with the plain language of
the statute which was clear as it applied to GICs.
Oklahoma
Oklahoma Life & Health Ins. Guar. Ass’n v. Hilti Retirement Sav. Plan, 939 P.2d
1110 (Okla. 1997). Executive Life GICs were unallocated annuities under Model
Act definition and excluded from coverage in the Oklahoma Life and Health
Insurance Guaranty Association Act. The 1991 amendments excluding the
contracts applied to contracts issued before statutory effective date because
Executive Life’s insolvency, the operative event, occurred after amendments
became effective. Because the association acts in a similar capacity to a state
agency, its interpretation of the provisions of the guaranty association act
should be treated like that of an agency and given “highest respect” by the
courts.
Rhode Island Kachanis v. United States, 844 F. Supp. 877 (D.R.I 1994). “Covered claim”
includes claims for which the claimant has already received benefits under the
Federal Employee Compensation Act (“FECA”); guaranty association cannot
refuse claim, but can apply non‐duplication of coverage rules. United States lien
to recover FECA benefits was part of claim.
South Carolina
South Carolina Life and Accident and Health Ins. Guar. Ass'n v. Liberty Life Ins.
Co., 331 S.C. 268, 500 S.E.2d 193 (1998). Reserve deposit fund agreements were
not covered annuities under the South Carolina Life and Health Insurance
Guaranty Association Act because they did not specifically provide for periodic
payments to individuals. The option to purchase an annuity does not make the
funding agreements annuities, notwithstanding ten‐year guaranty of periodic
payment settlement option contained therein. Moreover, the reserve deposit
fund agreements are not eligible for coverage as supplemental contracts since
they are wholly independent of the life insurance policies issued.
Washington Unisys Corp. v. Senn, 99 Wash. App. 391, 994 P.2d 244 (2000). Plan
administrator and trustee filed suit against the Washington insurance
commissioner and the Washington Life and Disability Insurance Guaranty
Association seeking participant level coverage for the portions of the plan which

were invested in four group annuity contracts. Plaintiffs assert that their
resident plan participants are the owners of, or beneficiaries, assignees or
payees of annuity contracts under the Washington act. The association
prevailed on summary judgment, arguing that the statute of limitation for
Unisys claim had expired. Unallocated annuities are covered under the
Washington Life and Disability Insurance Guaranty Association Act, but only if
the contract owner is a Washington resident.
Member Insurer
Maine Liberty Mutual Ins. Co. v. Superintendent of Ins., 689 A.2d 600 (Me. 1997).
Amendments to Maine Guaranty Association assessment laws were not
retroactively applied to insurer who withdrew before statutory effective date.
Operative event which triggered application of the statute was a postamendment
assessment of the insurer for an insolvency which occurred before
it withdrew from the state. Insurer’s withdrawal from the market did not
change its liability under the Act for pre‐withdrawal insolvencies.
Nebraska Harvey v. Nebraska Life & Health Ins. Guar. Ass’n, No. S‐08‐520 (Neb. 2009).
Where broker of viatical settlements was not licensed with state department of
insurance, the Association was not obligated to guarantee plaintiffs’ purchase
request agreements to invest in viatical settlements with the broker when it
become insolvent. Because broker was not authorized to transact
New Mexico New Mexico Life Ins. Guar. Ass'n v. Moore, 93 N.M. 47, 596 P.2d 260 (1979).
Non‐profit health care plans, including HMOs, are service benefit organizations,
distinguishable from indemnity benefit commercial insurers, and such plans are
not member insurers subject to the Act.
Oklahoma
Intervenor Policy Holders of Am. Indem. Trust v. Oklahoma Life & Health Ins.
Guar. Ass'n, 825 P.2d 1341 (Okla. 1992). Unqualified putative ERISA trust was
never a licensed member insurer, despite the fact that its contracts were sold by
licensed brokers or dealers; policyholders were not entitled to coverage when
the trust became insolvent. The Commissioner and the association had neither
the duty nor the ability to cause the trust to become a member.
Nature of Liability – Statutory
Eighth Circuit
Liberty State Bank v. Minnesota Life & Health Guar. Ass’n, 149 F.3d 832 (8th Cir.
1998). Amendment to Minnesota’s Act expressly excluded municipal GICs from
the Act’s coverage. Retroactive application of the amendment to plaintiff’s
claim was constitutionally permissible because the amendment was an
appropriate curative measure to clarify coverage of an unanticipated product
and, as a purely statutory right, payment under the Act can be retroactively
modified or eliminated unless it is vested.
Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass’n, 110 F.3d 547 (8th Cir.
1997) (en banc). The retroactive application of amendment which limited
guaranty association coverage for unallocated annuities to state residents did
not violate the contract or due process clauses of the U.S. Constitution. Rights
against guaranty associations are statutory in nature, not contractual. The
contract clause is thus not involved. The amendment did not violate due
process because it was rationally related to the legitimate state interest of
“regulating the insurance industry, easing the economic burden on its own
residents, and insuring the economic life of an association created by its statute
to protect its residents.”
Illinois
Illinois Life & Health Ins. Guar. Ass’n v. Boozell, No. 96‐CH‐4219 (Ill. Cir. Ct. Nov.
22, 1996). District Court denied guaranty association petition for administrative

eview of Illinois Insurance Department’s finding that participation in the
Executive Life Rehabilitation Plan did not fulfill the Association’s statutory
obligations. Court held that the Insurance Department’s decision was not
against manifest weight of the evidence in light of significantly lowered interest
rates and conditions limiting policyholder access to the funds under the Plan.
Because plan did not discharge statutory obligations, association was obligated
to pay benefits to policyholder who opted out of the plan.
Minnesota Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass'n, 518 N.W.2d 557
(Minn. 1994). Amendment of statute's definition of “contractual obligation’
effected a substantive change in the law; the right to payment in favor of
annuity contract holders is purely a “statutory,” not “contractual,” right.
Texas
Messagephone, Inc., et al v. Texas Life, Accident, Health & Hospital Serv. Ins.
Guar. Ass’n, 966 S.W.2d 133 (Tex. Ct. App. 1998). Messagephone Inc. (“MPI”)
purchased unallocated annuity contracts from insurer, and assigned those
annuity contracts to a trust using them as collateral for several non‐recourse
loans. MPI filed a proof of claim after insurer was placed in receivership in 1989,
but did not disclose the existence of the trust. The Guaranty Association, having
elected to handle insurer’s claims, denied coverage for the annuity contracts
based on exclusions in 1991 amendments. Statutory amendments can be
retroactively applied without constitutional defect unless vested rights are
destroyed or impaired. There is no vested right to guaranty fund coverage.
Moreover, the annuity contracts were GICs containing no mortality guarantees,
and would have excluded form coverage under the 1989 statute.
PBGC Exclusion
Michigan
Henry L. Meyers Moving & Storage v. Michigan Life & Health Ins. Guar. Ass'n,
222 Mich. App. 675, 566 N.W.2d 632 (1997). Based upon legislative history and
Model Act, statutory limitation for benefits under unallocated annuity contracts
issued to a plan protected by the PBGC applied to all plans with PBGC coverage,
not just those to whom the PBGC had paid benefits. Benefits from a guaranty
association should be a last resort; benefits are not intended for those who are
already adequately protected.
Punitive Damages and Tort Liability
Georgia Crider v. Georgia Life & Health Ins. Guar. Ass'n, 188 Ga. App. 407, 373 S.E.2d 30
(1988). Notwithstanding a literal construction mandate, “contractual
obligations” for guaranty association coverage purposes did not include bad
faith damages and attorneys’ fees.
Mississippi Rowley v. First Columbia Life Ins. Co., 741 F. Supp. 1259 (S.D. Miss. 1989).
“Contractual obligations” in Mississippi’s Life and Health Insurance Guaranty Act
do not include punitive damages and attorneys’ fees awarded to plaintiffs in a
default judgment against now‐insolvent insurer.
Reinsurance Exception
Alabama
Southtrust Bank v. Alabama Life & Disability Ins. Guar. Ass'n, 578 So.2d 1302 (Ala.
1991). Reinsurance agreement between trust and insurance company was not
covered “disability insurance;” insurer only protected trust and did not provide
insurance to human beings.
Residency

Alaska
Arizona
Illinois
Unisys Corp. v. Burke, No. 3AN‐97‐2685 (Alaska Super. Ct. June 25, 1998). Plan
administrator and trustee sued Alaska insurance commissioner and Alaska Life
and Health Insurance Guaranty Association seeking participant level coverage
for portions of plan which were invested in four ELIC group annuity contracts,
arguing that participants were beneficial owners’ of the ELIC contracts, and thus
satisfied the Act’s prerequisite for ownership in order to obtain coverage.
Plaintiffs also alleged the ELIC contracts represented allocated annuities
because they guaranteed annuity benefits to individuals. The Association
prevailed on summary judgment arguing alternatively a statute of limitation
defense, and that the ELIC contracts were unallocated annuity contacts for
which the contract holder failed to meet the prerequisite of being an Alaska
resident.
Arizona Life & Disability Ins. Guar. Fund v. Honeywell, Inc., 190 Ariz. 84, 945 P.2d
805 (1997). Although GICs were issued to trustees of employee retirement plan,
court found individual plan participants to be equitable owners of the GICs.
Accordingly, the GICs fell within the coverage provision for annuity contracts
issued to state residents, and the Arizona association was obligated to cover
losses to pension plan caused by GICs.
Illinois Life & Health Ins. Guar. Ass'n v. Boozell, 289 Ill. App. 3d 621, 682 N.E.2d
291 (1997). A pension trust that purchased GICs from an insurer that
subsequently became insolvent was not an Illinois resident at the time the
insolvency occurred and therefore was not entitled to coverage from that
state’s guaranty association.
Dynamic Systems, Inc. v. Boozell, No. 95‐CH‐10657 (Ill. App. Ct. May 27, 1997).
Virginia 401K plan sought coverage under Illinois law for three pension GICs
issued by Illinois insurer. The Illinois association having denied the claims, the
plan appealed to the Illinois Department of Insurance. The Director held that
the Illinois association was liable, but only as to plan participants residing in
Maryland, where the issuer was not licensed. In subsequent proceedings, the
Circuit Court determined that the GICs were unallocated annuity contracts and
were not covered by Illinois law. The court also upheld the Director’s denial of
coverage for plan participants residing in Virginia or another state where the
issuer was licensed.
Indiana
Bennett v. Indiana Life & Health Ins. Guar. Ass’n, 688 N.E.2d 171 (Ind. Ct. App.
1997). The trustee of a pension benefit plan holds the assets of the plan in trust
for the exclusive benefit of the plan participants, who are, in turn, the beneficial
or equitable owners of any contracts held in trust for their benefit. Resident
plan participants are residents to whom contractual obligations are owed under
Indiana guaranty association law. The term “life,” against which statutory
obligations and coverage limitations are measured, refers to the lives of resident
plan participants rather than the GIC contract holders who may be benefit plan
trustees.
Michigan Unisys Corp. v. Commissioner of Ins., 236 Mich. App. 686, 601 N.W.2d 155 (1999).
Retirement plan administrator and trustee filed suit against the insurance
commissioner and the guaranty association seeking participant level coverage
under certain group annuity contracts, asserting that their resident plan
participants were the covered owners, or beneficiaries, assignees or payees of
these annuity contracts. The guaranty association denied liability on the
grounds that the contracts were unallocated annuities as defined under the
statute and that the plan trustee, as contract holder, was not a state resident.
The court entered summary judgment for the association finding that the
contracts were unallocated annuities within the plain meaning of the statute.
The court summarily rejected the plaintiffs’ beneficial ownership argument, and

eferred to numerous exhibits, including the plan’s IRS 5500 tax forms, which
demonstrated that the nonresident plan trustee was the contract holder.
Texas Unisys Corp. v. Texas Life, Accident, Health & Hospital Serv. Ins. Guar. Ass’n, 943
S.W.2d 133 (TX. Ct. App. 1997). Executive Life GICs were “unallocated annuity
contracts” as defined in the Texas Guaranty Association Act based on Model Act
definition. Because the contracts at issue were issued to and owned by bank
pension trustees rather than individuals, they met the definition of unallocated
annuity contract. Because none of the contracts were held by a Texas resident
they were not covered by the Association. The court rejected Unisys’ argument
for coverage based on the fact that the statutory exclusion did not specifically
name GICs. The court also rejected Unisys’ argument that pension plan
participants were the beneficial owners of the contracts.
Washington Unisys Corp. v. Senn, 99 Wash. App. 391, 994 P.2d 244 (2000). Plan
administrator and trustee filed suit against the Washington insurance
commissioner and the Washington Life and Disability Insurance Guaranty
Association seeking participant level coverage for the portions of the plan which
were invested in four group annuity contracts. Plaintiffs assert that their
resident plan participants are the owners of, or beneficiaries, assignees or
payees of annuity contracts under the Washington act. The association
prevailed on summary judgment, arguing that the statute of limitation for
Unisys claim had expired. Unallocated annuities are covered under the
Washington Life and Disability Insurance Guaranty Association Act, but only if
the contract owner is a Washington resident.
Retroactive Application of Amendments
Eighth Circuit
Liberty State Bank v. Minnesota Life & Health Guar. Ass’n, 149 F.3d 832 (8th Cir.
1998). Amendment to Minnesota’s Act expressly excluded municipal GICs from
the Act’s coverage. Retroactive application of the amendment to plaintiff’s
claim was constitutionally permissible because the amendment was an
appropriate curative measure to clarify coverage of an unanticipated product
and, as a purely statutory right, payment under the Act can be retroactively
modified or eliminated unless it is vested.
Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass'n, 110 F.3d 547 (8th Cir.
1997) (en banc). The retroactive application of amendment which limited
guaranty association coverage for unallocated annuities to state residents did
not violate the contract or due process clauses of the U.S. Constitution. Rights
against guaranty associations are statutory in nature, not contractual. The
contract clause is thus not involved. The amendment did not violate due
process because it was rationally related to the legitimate state interest of
“regulating the insurance industry, easing the economic burden on its own
residents, and insuring the economic life of an association created by its statute
to protect its residents.”
Michigan
Henry L. Meyers Moving & Storage v. Michigan Life & Health Ins. Guar. Ass'n,
222 Mich. App. 675, 566 N.W.2d 632 (1997). Michigan court ruled that a
coverage exclusion in the Michigan Guaranty Association Act which excluded
GICs issued to employee benefit plans protected by the PBGC, was applicable to
a plan for which PBGC coverage had not been triggered. Because PBGC
coverage was available to the plaintiff’s pension plan upon termination, the plan
came under the exclusion even though the plan had not been terminated.
Application of the amendment containing the exclusion to contracts which
predated the statutory effective date was not retroactive because the
provisions in effect at the time of the insurer’s insolvency govern the
Association’s liability, and the plaintiffs had no vested right in guaranty
association protection prior to the insurer’s insolvency.

Minnesota Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass'n, 518 N.W.2d 557
(Minn. 1994). Amendment of statute’s definition of “contractual obligation”
effected a substantive change in the law; the right to payment in favor of
annuity contract holders is purely a “statutory,” not “contractual,” right.
Oklahoma
Oklahoma
Texas
Oklahoma Life & Health Ins. Guar. Ass’n v. Hilti Retirement Sav. Plan, 939 P.2d
1110 (Okla. 1997). Executive Life GICs were unallocated annuities under Model
Act definition and excluded from coverage in the Oklahoma Life and Health
Insurance Guaranty Association Act. The 1991 amendments excluding the
contracts applied to contracts issued before statutory effective date because
Executive Life’s insolvency, the operative event, occurred after amendments
became effective. Because the association acts in a similar capacity to a state
agency, its interpretation of the provisions of the guaranty association act
should be treated like that of an agency and given “highest respect” by the
courts.
Oklahoma Life & Health Ins. Guar. Ass’n v. Hilti Retirement Sav. Plan, 939 P.2d
1110 (Okla. 1997). Executive Life GICs were unallocated annuities under Model
Act definition and excluded from coverage in the Oklahoma Life and Health
Insurance Guaranty Association Act. The 1991 amendments excluding the
contracts applied to contracts issued before statutory effective date because
Executive Life’s insolvency, the operative event, occurred after amendments
became effective. Because the association acts in a similar capacity to a state
agency, its interpretation of the provisions of the guaranty association act
should be treated like that of an agency and given “highest respect” by the
courts.
Messagephone, Inc., et al v. Texas Life, Accident, Health & Hospital Serv. Ins.
Guar. Ass’n, 966 S.W.2d 133 (Tex. Ct. App. 1998). Messagephone Inc. (“MPI”)
purchased unallocated annuity contracts from insurer, and assigned those
annuity contracts to a trust using them as collateral for several non‐recourse
loans. MPI filed a proof of claim after insurer was placed in receivership in 1989,
but did not disclose the existence of the trust. The Guaranty Association, having
elected to handle insurer’s claims, denied coverage for the annuity contracts
based on exclusions in 1991 amendments. Statutory amendments can be
retroactively applied without constitutional defect unless vested rights are
destroyed or impaired. There is no vested right to guaranty fund coverage.
Moreover, the annuity contracts were GICs containing no mortality guarantees,
and would have excluded form coverage under the 1989 statute.
Settlement
Illinois
Lawrence v. Illinois Life & Health Ins. Guar. Ass’n, 293 Ill. App. 3d 489, 688 N.E.2d
675 (1997). Illinois plaintiff was bound by the terms of California court judgment
approving rehabilitation to which he had opted‐in. California court decision was
entitled to full faith and credit from Illinois courts. Plaintiff was subject to the
personal jurisdiction of the California rehabilitation court based on his insurance
contract with the California domiciled insurer, and that the California
proceedings did not violate due process because plaintiffs had both the
opportunity to participate at hearing and the opportunity to opt‐out of
rehabilitation plan.
Unallocated Annuity Contracts
Fifth Circuit
Texas Life, Accident, Health & Hosp. Serv. Ins. Guar. Ass'n v. Gaylord
Entertainment Co., 105 F.3d 210 (5th Cir. 1997). GICs issued to employersponsored
retirement plans are unallocated annuity contracts, and are covered
by guaranty association in the amount of $5 million per contract holder, not per
employee‐participant in the plan.

Alaska
Arizona
California
Illinois
Unisys Corp. v. Burke, No. 3AN‐97‐2685 (Alaska Super. Ct. June 25, 1998). Plan
administrator and trustee sued Alaska insurance commissioner and Alaska Life
and Health Insurance Guaranty Association seeking participant level coverage
for portions of plan which were invested in four ELIC group annuity contracts,
arguing that participants were beneficial owners’ of the ELIC contracts, and thus
satisfied the Act’s prerequisite for ownership in order to obtain coverage.
Plaintiffs also alleged the ELIC contracts represented allocated annuities
because they guaranteed annuity benefits to an individual. The Association
prevailed on summary judgment arguing alternatively a statute of limitation
defense, and that the ELIC contracts were unallocated annuity contacts for
which the contract holder failed to meet the prerequisite of being an Alaska
resident.
Arizona Life & Disability Ins. Guar. Fund v. Honeywell, Inc., 190 Ariz. 84, 945 P.2d
805 (1997). Although GICs were issued to trustees of employee retirement plan,
court found individual plan participants to be equitable owners of the GICs.
Accordingly, the GICs fell within the coverage provision for annuity contracts
issued to state residents, and the Arizona association was obligated to cover
losses to pension plan caused by GICs.
Unisys Corp. v. California Life & Health Ins. Guar. Ass'n, No. 387566, slip op. (Cal.
Super. Ct., Sept. 27, 1995) aff’d, 63 Cal. App. 4th 634, 74 Cal. Rptr. 2d 106 (1998)
(finding that California Act excluded coverage for all GICs, whether allocated or
unallocated). Executive Life GICs were “unallocated annuity contracts” under
Model Act definition and as such excluded from Guaranty Association Act by
exclusionary provisions based on the definition.
Dynamic Systems, Inc. v. Boozell, 312 Ill. App. 3d 326, 726 N.E.2d 1156 (Ill. App. Ct.
2000). Trustees of nonresident employee savings plan in Maryland purchased
investment contracts from Illinois insurer, who was licensed in Maryland, at
employee’s election. The plan sought coverage for the contracts when the
insurer became insolvent. Because the contracts were issued to the trust as
“contractholder,” they were unallocated annuity contacts under 215 Ill. Comp.
Stat. 5/531.05(15) because the contacts had been neither issued to nor owned by
an individual. Accordingly, under 215 Ill. Comp. Stat. 5/531.03(1)(b)’s exclusionary
provisions, nonresident status of plan and trust precluded coverage under Life
and Health Insurance Guaranty Association Law. The court rejected nonresident
coverage based on a theory of equitable ownership because the plan
participants had no control over the contracts and were not named as owners.
Dynamic Systems, Inc. v. Boozell, No. 95‐CH‐10657 (Ill. App. Ct. May 27, 1997).
Virginia 401K plan sought coverage under Illinois law for three pension GICs
issued by Illinois insurer. The Illinois association having denied the claims, the
plan appealed to the Illinois Department of Insurance. The Director held that
the Illinois association was liable, but only as to plan participants residing in
Maryland, where the issuer was not licensed. In subsequent proceedings, the
Circuit Court determined that the GICs were unallocated annuity contracts and
were not covered by Illinois law. The court also upheld the Director’s denial of
coverage for plan participants residing in Virginia or another state where the
issuer was licensed.
Indiana
Bennett v. Indiana Life & Health Ins. Guar. Ass’n, 688 N.E.2d 171 (Ind. Ct. App.
1997). The trustee of a pension benefit plan holds the assets of the plan in trust
for the exclusive benefit of the plan participants, who are, in turn, the beneficial
or equitable owners of any contracts held in trust for their benefit. Resident
plan participants are residents to whom contractual obligations are owed under
Indiana guaranty association law. The term “life,” against which statutory
obligations and coverage limitations are measured, refers to the lives of resident

plan participants rather than the GIC contract holders who may be benefit plan
trustees.
Maryland Board of Trustees v. Life & Health Ins. Guar. Corp, 335 Md. 176, 642 A.2d 856
(1994). Utilizing liberal construction of the statute, the court held that GICs
issued by ELIC are annuities for purposes of coverage under version of the
Model Act with no reference to unallocated annuity contracts; it is a question of
fact whether the annuity features of the contract are too indefinite to be
enforced.
Michigan Unisys Corp. v. Commissioner of Ins., 236 Mich. App. 686, 601 N.W.2d 155 (1999).
Retirement plan administrator and trustee filed suit against the insurance
commissioner and the guaranty association seeking participant level coverage
under certain group annuity contracts, asserting that their resident plan
participants were the covered owners, or beneficiaries, assignees or payees of
these annuity contracts. The guaranty association denied liability on the
grounds that the contracts were unallocated annuities as defined under the
statute and that the plan trustee, as contract holder, was not a state resident.
The court entered summary judgment for the association finding that the
contracts were unallocated annuities within the plain meaning of the statute.
The court summarily rejected the plaintiffs’ beneficial ownership argument, and
referred to numerous exhibits, including the plan’s IRS 5500 tax forms, which
demonstrated that the nonresident plan trustee was the contract holder.
Oklahoma
Pennsylvania
South Carolina
Oklahoma Life & Health Ins. Guar. Ass’n v. Hilti Retirement Sav. Plan, 939 P.2d
1110 (Okla. 1997). Executive Life GICs were unallocated annuities under Model
Act definition and excluded from coverage in the Oklahoma Life and Health
Insurance Guaranty Association Act. The 1991 amendments excluding the
contracts applied to contracts issued before statutory effective date because
Executive Life’s insolvency, the operative event, occurred after amendments
became effective. Because the association acts in a similar capacity to a state
agency, its interpretation of the provisions of the guaranty association act
should be treated like that of an agency and given “highest respect” by the
courts.
Unisys Corp. v. Pennsylvania Life & Health Ins. Guar. Ass'n, 667 A.2d 1199 (Pa.
Commw. Ct. 1995), aff’d, 684 A.2d 546 (Pa. 1996). Under version of the Model
Act with no reference to unallocated annuity contracts, the GICs were held to
be covered annuity contracts. The guaranty association was only liable to the
trustee who was a state resident.
South Carolina Life and Accident and Health Ins. Guar. Ass’n v. Liberty Life Ins.
Co., 331 S.C. 268, 500 S.E.2d 193 (1998). Reserve deposit fund agreements were
not covered annuities under the South Carolina Life and Health Insurance
Guaranty Association Act because they did not specifically provide for periodic
payments to individuals. The option to purchase an annuity does not make the
funding agreements annuities, notwithstanding ten year guaranty of periodic
payment settlement option contained therein. Moreover, the reserve deposit
fund agreements are not eligible for coverage as supplemental contracts since
they are wholly independent of the life insurance policies issued.
Texas Unisys Corp. v. Texas Life, Accident, Health & Hospital Serv. Ins. Guar. Ass’n, 943
S.W.2d 133 (TX. Ct. App. 1997). Executive Life GICs were “unallocated annuity
contracts” as defined in the Texas Guaranty Association Act based on Model Act
definition. Because the contracts at issue were issued to and owned by bank
pension trustees rather than individuals, they met the definition of unallocated
annuity contract. Because none of the contracts were held by a Texas resident
they were not covered by the Association. The court rejected Unisys’ argument
for coverage based on the fact that the statutory exclusion did not specifically

name GICs. The court also rejected Unisys’ argument that pension plan
participants were the beneficial owners of the contracts.
Messagephone, Inc., et al v. Texas Life, Accident, Health & Hospital Serv. Ins.
Guar. Ass’n, 966 S.W.2d 133 (Tex. Ct. App. 1998). Messagephone Inc. (“MPI”)
purchased unallocated annuity contracts from insurer, and assigned those
annuity contracts to a trust using them as collateral for several non‐recourse
loans. MPI filed a proof of claim after insurer was placed in receivership in 1989,
but did not disclose the existence of the trust. The Guaranty Association, having
elected to handle insurer’s claims, denied coverage for the annuity contracts
based on exclusions in 1991 amendments. Statutory amendments can be
retroactively applied without constitutional defect unless vested rights are
destroyed or impaired. There is no vested right to guaranty fund coverage.
Moreover, the annuity contracts were GICs containing no mortality guarantees,
and would have excluded form coverage under the 1989 statute.
Washington Unisys Corp. v. Senn, 99 Wash. App. 391, 994 P.2d 244 (2000). Plan
administrator and trustee filed suit against the Washington insurance
commissioner and the Washington Life and Disability Insurance Guaranty
Association seeking participant level coverage for the portions of the plan which
were invested in four group annuity contracts. Plaintiffs assert that their
resident plan participants are the owners of, or beneficiaries, assignees or
payees of annuity contracts under the Washington act. The association
prevailed on summary judgment, arguing that the statute of limitation for
Unisys claim had expired. Unallocated annuities are covered under the
Washington Life and Disability Insurance Guaranty Association Act, but only if
the contract owner is a Washington resident.
Unlicensed Insurer
Illinois Dynamic Systems, Inc. v. Boozell, No. 95‐CH‐10657 (Ill. App. Ct. May 27, 1997).
Virginia 401K plan sought coverage under Illinois law for three pension GICs
issued by Illinois insurer. The Illinois association having denied the claims, the
plan appealed to the Illinois Department of Insurance. The Director held that
the Illinois association was liable, but only as to plan participants residing in
Maryland, where the issuer was not licensed. In subsequent proceedings, the
Circuit Court determined that the GICs were unallocated annuity contracts and
were not covered by Illinois law. The court also upheld the Director’s denial of
coverage for plan participants residing in Virginia or another state where the
issuer was licensed.
Assessments
Construction
Minnesota Minnesota Life & Health Ins. Guar. Ass'n v. Department of Commerce, 400
N.W.2d 769 (Minn. Ct. App. 1987). In the context of assessing its member
insurers based upon premiums collected, the Minnesota association greatly
reduced the assessment base by excluding GICs and DACs as uncovered annuity
contracts under the Minnesota Act. The court, however, used the Act’s liberal
construction language to find coverage for unallocated annuities and ordered
the association to recalculate assessments for all member insurers.
Attorney’s Fees
Nebraska Nebraska Life & Health Ins. Guar. Ass'n v. Dobias, 247 Neb. 900, 531 N.W.2d 217
(1995). Despite a liberal interpretation of the Act, guaranty association is not

esponsible for attorneys’ fees and interest awarded against insurer before
insolvency.
Contractual Obligations
Georgia Crider v. Georgia Life & Health Ins. Guar. Ass'n, 188 Ga. App. 407, 373 S.E.2d 30
(1988). Notwithstanding a liberal construction mandate, “contractual
obligations” for guaranty association coverage purposes did not include bad
faith damages and attorneys’ fees.
Guaranteed Investments Contracts
California Unisys Corp. v. California Life & Health Ins. Guar. Ass’n, 63 Cal. App. 4th 634, 74
Cal. Rptr. 2d 106 (1998). In concluding that the California Life and Health
Insurance Guaranty Act excludes from coverage all GICs, whether allocated or
unallocated, the California Court of Appeal stated, “[t]he rule of liberal
construction does not permit us to stand clear statutory language on its head.”
Maryland Board of Trustees v. Life & Health Ins. Guar. Corp, 335 Md. 176, 642 A.2d 856
(1994). Utilizing liberal construction of the statute, the court held that GICs
issued by ELIC are annuities for purposes of coverage under the Act; it is a
question of fact whether the annuity features of the contract are too indefinite
to be enforced.
Minnesota Minnesota Life & Health Ins. Guar. Ass'n v. Department of Commerce, 400
N.W.2d 769 (Minn. Ct. App. 1987). In the context of assessing its member
insurers based upon premiums collected, the Minnesota association greatly
reduced the assessment base by excluding GICs and DACs as uncovered annuity
contracts under the Minnesota Act. The court, however, used the Act’s liberal
construction language to find coverage for unallocated annuities and ordered
the association to recalculate assessments for all member insurers.
New Mexico Krahling v. First Trust Notational Ass’n, 123 N.M. 685, 944 P.2d 914 (1997).
Executive Life GICs were not covered annuities within the meaning of New
Mexico’s statutory definition because payment was not dependent on the
continuation of human life. In construing the statute and the stated purpose for
which it was enacted, the New Mexico Court of Appeals held that any
construction must be reasonable and in accordance with the plain language of
the statute which was clear as it applied to GICs.
Limits of Liability
Missouri
Department of Mental Health v. Continental Sec. Life Ins. Co. v. Missouri Life &
Health Ins. Guar. Ass'n, 835 S.W.2d 349 (Mo. Ct. App. 1992). Although statutes
creating guaranty associations are to be liberally construed to protect against
insolvent insurers, courts may not construe the Association’s responsibility to be
anything beyond the clear wording of the legislative enactment.
New Mexico Krahling v. First Trust National Ass’n, 123 N.M. 685, 944 P.2d 914 (1997).
Executive Life GICs were not covered annuities within the meaning of New
Mexico’s statutory definition because payment was not dependent on the
continuation of human life. In construing the statute and the stated purpose for
which it was enacted, the New Mexico Court of Appeals held that any
construction must be reasonable and in accordance with the plain language of
the statute which was clear as it applied to GICs.
Purpose of the Statute

New Mexico Krahling v. First Trust National Ass’n, 123 N.M. 685, 944 P.2d 914 (1997).
Executive Life GICs were not covered annuities within the meaning of New
Mexico’s statutory definition because payment was not dependent on the
continuation of human life. In construing the statute and the stated purpose for
which it was enacted, the New Mexico Court of Appeals held that any
construction must be reasonable and in accordance with the plain language of
the statute which was clear as it applied to GICs.
Contractual Obligations
Definitions
Georgia Crider v. Georgia Life & Health Ins. Guar. Ass'n, 188 Ga. App. 407, 373 S.E.2d 30
(1988). Notwithstanding a literal construction mandate, “contractual
obligations” for guaranty association coverage purposes did not include bad
faith damages and attorneys’ fees.
Minnesota Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass'n, 518 N.W.2d 557
(Minn. 1994). Amendment of statute’s definition of “contractual obligation”
effected a substantive change in the law; the right to payment in favor of
annuity contract holders is purely a “statutory,” not “contractual,” right.
Mississippi Rowley v. First Columbia Life Ins. Co., 741 F. Supp. 1259 (S.D. Miss. 1989).
“Contractual obligations” in Mississippi’s Life and Health Insurance Guaranty Act
do not include punitive damages and attorneys’ fees awarded to plaintiffs in a
default judgment against now‐insolvent insurer.
Insolvent Insurer
New Mexico Matter of Rehabilitation of Western Investors Life Ins. Co., 100 N.M. 370, 671
P.2d 31 (1983). Guaranty association is not responsible to policyholders of
company which was unable to fulfill its contractual obligations on the Act’s
effective date; legislature’s use of this language signals an intent to exclude all
disabled companies, not only those which had been declared insolvent.
Member Insurer
Maine Liberty Mutual Ins. Co. v. Superintendent of Ins., 689 A.2d 600 (Me. 1997).
Amendments to Maine Guaranty Association assessment laws were not
retroactively applied to insurer who withdrew before statutory effective date.
Operative event which triggered application of the statute was a postamendment
assessment of the insurer for an insolvency which occurred before
it withdrew from the state. Insurer’s withdrawal from the market did not
change its liability under the Act for pre‐withdrawal insolvencies.
New Mexico New Mexico Life Ins. Guar. Ass'n v. Moore, 93 N.M. 47, 596 P.2d 260 (1979).
Non‐profit health care plans, including HMOs, are service benefit organizations,
distinguishable from indemnity benefit commercial insurers, and such plans are
not member insurers subject to the Act.
Oklahoma
Intervenor Policy Holders of Am. Indem. Trust v. Oklahoma Life & Health Ins.
Guar. Ass'n, 825 P.2d 1341 (Okla. 1992). Unqualified putative ERISA trust was
never a licensed member insurer, despite the fact that its contracts were sold by
licensed brokers or dealers; policyholders were not entitled to coverage when
the trust became insolvent. The Commissioner and the association had neither
the duty nor the ability to cause the trust to become a member.
Residency

Alaska
Arizona
Indiana
Unisys Corp. v. Burke, No. 3AN‐97‐2685 (Alaska Super. Ct. June 25, 1998). Plan
administrator and trustee sued Alaska insurance commissioner and Alaska Life
and Health Insurance Guaranty Association seeking participant level coverage
for portions of plan which were invested in four ELIC group annuity contracts,
arguing that participants were beneficial owners of the ELIC contracts, and thus
satisfied the Act’s prerequisite for ownership in order to obtain coverage.
Plaintiffs also alleged the ELIC contracts represented allocated annuities
because they guaranteed annuity benefits to an individual. The Association
prevailed on summary judgment arguing alternatively a statute of limitation
defense, and that the ELIC contracts were unallocated annuity contacts for
which the contract holder failed to meet the prerequisite of being an Alaska
resident.
Arizona Life & Disability Ins. Guar. Fund v. Honeywell, Inc., 190 Ariz. 84, 945 P.2d
805 (1997). Although GICs were issued to trustees of employee retirement plan,
court found individual plan participants to be equitable owners of the GICs.
Accordingly, the GICs fell within the coverage provision for annuity contracts
issued to state residents, and the Arizona association was obligated to cover
losses to pension plan caused by GICs.
Bennett v. Indiana Life & Health Ins. Guar. Ass’n, 688 N.E.2d 171 (Ind. Ct. App.
1997). The trustee of a pension benefit plan holds the assets of the plan in trust
for the exclusive benefit of the plan participants, who are, in turn, the beneficial
or equitable owners of any contracts held in trust for their benefit. Resident
plan participants are residents to whom contractual obligations are owed under
Indiana guaranty association law. The term “life,” against which statutory
obligations and coverage limitations are measured, refers to the lives of resident
plan participants rather than the GIC contract holders who may be benefit plan
trustees.
Texas Unisys Corp. v. Texas Life, Accident, Health & Hospital Serv. Ins. Guar. Ass’n, 943
S.W.2d 133 (TX. Ct. App. 1997). Executive Life GICs were “unallocated annuity
contracts” as defined in the Texas Guaranty Association Act based on Model Act
definition. Because the contracts at issue were issued to and owned by bank
pension trustees rather than individuals, they met the definition of unallocated
annuity contract. Because none of the contracts were held by a Texas resident
they were not covered by the Association. The court rejected Unisys’ argument
for coverage based on the fact that the statutory exclusion did not specifically
name GICs. The court also rejected Unisys’ argument that pension plan
participants were the beneficial owners of the contracts.
Washington Unisys Corp. v. Senn, 99 Wash. App. 391, 994 P.2d 244 (2000). Plan
administrator and trustee filed suit against the Washington insurance
commissioner and the Washington Life and Disability Insurance Guaranty
Association seeking participant level coverage for the portions of the plan which
were invested in four group annuity contracts. Plaintiffs assert that their
resident plan participants are the owners of, or beneficiaries, assignees or
payees of annuity contracts under the Washington act. The association
prevailed on summary judgment, arguing that the statute of limitation for
Unisys claim had expired. Unallocated annuities are covered under the
Washington Life and Disability Insurance Guaranty Association Act, but only if
the contract owner is a Washington resident.
Supplemental Contracts
South Carolina
South Carolina Life and Accident and Health Ins. Guar. Ass’n v. Liberty Life Ins.
Co., 331 S.C. 268, 500 S.E.2d 193 (1998). Reserve deposit fund agreements were
not covered annuities under the South Carolina Life and Health Insurance
Guaranty Association Act because they did not specifically provide for periodic

Unallocated Annuity Contracts
payments to individuals. The option to purchase an annuity does not make the
funding agreements annuities, notwithstanding ten year guaranty of periodic
payment settlement option contained therein. Moreover, the reserve deposit
fund agreements are not eligible for coverage as “supplemental contracts”
since they are wholly independent of the life insurance policies issued.
Fifth Circuit
Alaska
Arizona
Indiana
Texas Life, Accident, Health & Hosp. Serv. Ins. Guar. Ass'n v. Gaylord
Entertainment Co., 105 F.3d 210 (5th Cir. 1997). GICs issued to employersponsored
retirement plans are unallocated annuity contracts, and are covered
by guaranty association in the amount of $5 million per contract holder, not per
employee‐participant in the plan.
Unisys Corp. v. Burke, No. 3AN‐97‐2685 (Alaska Super. Ct. June 25, 1998). Plan
administrator and trustee sued Alaska insurance commissioner and Alaska Life
and Health Insurance Guaranty Association seeking participant level coverage
for portions of plan which were invested in four ELIC group annuity contracts,
arguing that participants were beneficial owners’ of the ELIC contracts, and thus
satisfied the Act’s prerequisite for ownership in order to obtain coverage.
Plaintiffs also alleged the ELIC contracts represented allocated annuities
because they guaranteed annuity benefits to an individual. The Association
prevailed on summary judgment arguing alternatively a statute of limitation
defense, and that the ELIC contracts were unallocated annuity contacts for
which the contract holder failed to meet the prerequisite of being an Alaska
resident.
Arizona Life & Disability Ins. Guar. Fund v. Honeywell, Inc., 190 Ariz. 84, 945 P.2d
805 (1997). Although GICs were issued to trustees of employee retirement plan,
court found individual plan participants to be equitable owners of the GICs.
Accordingly, the GICs fell within the coverage provision for annuity contracts
issued to state residents, and the Arizona association was obligated to cover
losses to pension plan caused by GICs.
Bennett v. Indiana Life & Health Ins. Guar. Ass’n, 688 N.E.2d 171 (Ind. Ct. App.
1997). The trustee of a pension benefit plan holds the assets of the plan in trust
for the exclusive benefit of the plan participants, who are, in turn, the beneficial
or equitable owners of any contracts held in trust for their benefit. Resident
plan participants are residents to whom contractual obligations are owed under
Indiana guaranty association law. The term “life,” against which statutory
obligations and coverage limitations are measured, refers to the lives of resident
plan participants rather than the GIC contract holders who may be benefit plan
trustees.
Maryland Board of Trustees v. Life & Health Ins. Guar. Corp, 335 Md. 176, 642 A.2d 856
(1994). Utilizing liberal construction of the statute, the court held that GICs
issued by ELIC are annuities for purposes of coverage under a version of the
Model Act with no reference to unallocated annuity contracts; it is a question of
fact whether the annuity features of the contract are too indefinite to be
enforced.
Pennsylvania
Unisys Corp. v. Pennsylvania Life & Health Ins. Guar. Ass'n, 667 A.2d 1199 (Pa.
Commw. Ct. 1995), aff’d, 684 A.2d 546 (Pa. 1996). Under version of the Model
Act with no reference to unallocated annuity contracts, the GICs were held to
be covered annuity contracts. The guaranty association was only liable to the
trustee who was a state resident.
Texas Unisys Corp. v. Texas Life, Accident, Health & Hospital Serv. Ins. Guar. Ass’n, 943
S.W.2d 133 (TX. Ct. App. 1997). Executive Life GICs were “unallocated annuity

Federal Jurisdiction – Preemption
contracts” as defined in the Texas Guaranty Association Act based on Model Act
definition. Because the contracts at issue were issued to and owned by bank
pension trustees rather than individuals, they met the definition of unallocated
annuity contract. Because none of the contracts were held by a Texas resident
they were not covered by the Association. The court rejected Unisys’ argument
for coverage based on the fact that the statutory exclusion did not specifically
name GICs. The court also rejected Unisys’ argument that pension plan
participants were the beneficial owners of the contracts.
Creation of the Association
Rhode Island
Kachanis v. United States, 844 F. Supp. 877 (D.R.I. 1994). Guaranty Association
Act is “enacted for the purpose of regulating insurance” and as such is
exempted from federal preemption by the McCarren‐Ferguson Act.
State Agency
Oklahoma
Washington
Oklahoma Life & Health Ins. Guar. Ass’n v. Hilti Retirement Sav. Plan, 939 P.2d
1110 (Okla. 1997). Executive Life GICs were unallocated annuities under Model
Act definition and excluded from coverage in the Oklahoma Life and Health
Insurance Guaranty Association Act. The 1991 amendments excluding the
contracts applied to contracts issued before statutory effective date because
Executive Life’s insolvency, the operative event, occurred after amendments
became effective. Because the association acts in a similar capacity to a state
agency, its interpretation of the provisions of the guaranty association act
should be treated like that of an agency and given “highest respect” by the
courts.
Aetna Life Ins. Co. v. Washington Life & Disability Ins. Guar. Ass'n, 83 Wash.2d
523, 520 P.2d 162 (1974). The Association is not a public body, but is a private,
nonprofit association created under the police powers of the state to fulfill a
needed public purpose of protecting the general welfare.
Powers and Duties of the Association
Assignment
New Mexico New Mexico Life Ins. Guar. Ass'n v. Quinn & Co., Inc., 111 N.M. 750, 809 P.2d 1278
(1991). The Association may require an assignment before providing benefits.
Subject to the terms of the assignment, the association is the proper party and
has the authority to bring suit for amounts in excess of benefits paid.
Contractual Obligations
Alaska
Alaska Life & Disability Ins. Guar. Ass’n v. State of Alaska, 3 AN‐94‐6680 CIV.
(Alaska Super. Ct. April 9, 1997). Alaska Guaranty Association did not fulfill its
statutory obligations through its participation in the Executive Life
Rehabilitation Plan because the restructured contracts assumed by Aurora
differed materially from those issued by Executive Life. The Association Act
does not provide for assumption or guarantee of restructured contracts. The
only relief authorized is the imposition of a contract lien; there is no express
authorization for any other modification of the original contract. Moreover, the
Association failed to obtain the Director’s approval of its participation in the
ELIC rehabilitation plan. There must be some record showing that the Director
reached a considered decision. The Director plays a vital role in the
administration of the Act, including the responsibility to determine whether a

guaranty plan meets the technical requirements of the Act and to consider
whether the plan is in the public interest.
Discharge of Obligations
California
Illinois
Missouri
Rigney v. National Org. of Life & Health Ins. Guar. Assn’s, No. 102756 (Cal. Dist.
Ct. App. Nov. 4, 1997). Class action plaintiff who opted into enhancement plan
brought suit against NOLHGA and several guaranty associations alleging that
the guaranty associations did not fulfill their statutory obligations, and were
released from their obligations in violation of due process. The court dismissed
the action finding it improper both on procedural grounds and on the merits.
The court went on to conclude that the op‐in/opt‐out process more than
satisfied due process. The dismissal was affirmed on appeal with the court of
appeals going on to state that the plaintiff had failed to appeal the judgment
approving the rehabilitation plan and could not now challenge the Plan in
subsequent litigation.
Illinois Life & Health Ins. Guar. Ass’n v. Boozell, No. 96‐CH‐4219 (Ill. Cir. Ct. Nov.
22, 1996). District Court denied guaranty association petition for administrative
review of Illinois Insurance Department’s finding that participation in the
Executive Life Rehabilitation Plan did not fulfill the Association’s statutory
obligations. Court held that the Insurance Department’s decision was not
against manifest weight of the evidence in light of significantly lowered interest
rates and conditions limiting policyholder access to the funds under the Plan.
Because plan did not discharge statutory obligations, association was obligated
to pay benefits to policyholder who opted out of the plan.
Department of Mental Health v. Continental Sec. Life Ins. Co. v. Missouri Life &
Health Ins. Guar. Ass'n, 835 S.W.2d 349 (Mo. Ct. App. 1992). Although statutes
creating guaranty associations are to be liberally construed to protect against
insolvent insurers, courts may not construe the Association’s responsibility to be
anything beyond the clear wording of the legislative enactment.
Federal Jurisdiction – Standing
Fourth Circuit
North Carolina Life & Accident & Health Ins. Guar. Ass'n v. Alcatel Network
Systems, Inc., 876 F. Supp. 748 (E.D.N.C.), aff'd, 72 F.3d 127 (4th Cir. 1995) (Table
Decision). North Carolina Guaranty Association had no standing to assert ERISA
claims against pension plan trustees because it had not yet paid any benefits to
plan participants. Subrogation claim was not yet ripe.
Intervention
Supreme Court
Underwriters National Assurance Co. v. North Carolina Life & Accident & Health
Ins. Guar. Ass'n, 455 U.S. 691, 102 S. Ct. 1357, 71 L. Ed. 2d 558 (1982). North
Carolina Association which intervened in Indiana rehabilitation proceeding,
submitted itself to Indiana court's jurisdiction and participated in the drafting of
the rehabilitation plan was bound by Indiana court's ruling that the company,
not the Association, was entitled to deposit in North Carolina.
Maryland Maryland Life & Health Ins. Guar. Ass'n v. Perrott, 301 Md. 78, 482 A.2d 9 (1984).
Guaranty association has standing to intervene of right in receivership
proceedings to protect its rights; association must have access to information
necessary to fulfill its statutory duties.
Jurisdiction – Personal

Supreme Court
California
New York
Underwriters National Assurance Co. v. North Carolina Life & Accident & Health
Ins. Guar. Ass'n, 455 U.S. 691, 102 S. Ct. 1357, 71 L. Ed. 2d 558 (1982). North
Carolina Association which intervened in Indiana rehabilitation proceeding,
submitted itself to Indiana court's jurisdiction and participated in the drafting of
the rehabilitation plan was bound by Indiana court's ruling that the company,
not the Association, was entitled to deposit in North Carolina.
Pennsylvania Life & Health Ins. Guar. Ass'n v. Superior Court, 22 Cal. App. 4th
477, 27 Cal. Rptr. 2d 507 (1994). A foreign guaranty association does not have
minimum contacts with a foreign state when it merely assumed the obligations
of an insolvent company which previously transacted insurance business there.
In re Baldwin‐United Corp. Litigation, 122 F.R.D. 424 (S.D.N.Y 1986). Federal
district court to which claims were transferred by the Judicial Panel on
Multidistrict Litigation had personal jurisdiction over guaranty associations,
since associations were subject to jurisdiction of the district courts in their
respective states, where cases originated.
Jurisdiction – Subject Matter
Montana
Pennsylvania
Hicklin v. CSC Logic, Inc., 283 Mont. 298, 940 P.2d 447 (1997). The Pennsylvania
Life & Health Ins. Guaranty Assoc. assumed LACOP’s contractual obligations,
including the administration of a disability policy issued to Hicklin, a Montana
resident. Hicklin filed suit in Montana state court alleging improprieties with
respect to the claims handling practices of PLHIGA and CSC, which PLHIGA
retained to administer the policies. After service of process, Hicklin obtained a
default judgment. Respondents motion to vacate for lack of subject matter
jurisdiction was granted. On appeal, the Montana Supreme Court reversed and
remanded finding that Hicklin’s claims were based on the independent torts of
CSC and PLHIGA, not upon any actions or omissions by LACOP, and that the
jurisdictional limitations from the PA Liquidation act did not therefore, preclude
the District Court from having subject matter jurisdiction over PLHIGA. The
court further rejected the respondents’ assertion of statutory immunity finding
that any such immunity was merely a defense which was waived when not
timely asserted, and that any such defense did not affect the subject matter
jurisdiction of the court.
Unisys Corp. v. Pennsylvania Life & Health Ins. Guar. Ass'n, 667 A.2d 1199 (Pa.
Commw. Ct. 1995), aff’d, 684 A.2d 546 (Pa. 1996). Commonwealth court had
jurisdiction over declaratory judgment claims by plan trustee, participant and
Department of Insurance seeking guaranty association coverage for group
limited premium deposit pension accounts issued by ELIC. The contracts were
held to be annuity contracts covered by the Act. The guaranty association was
only liable to the trustee who was a state resident.
Settlement – Authority of Association
New Mexico New Mexico Life Ins. Guar. Ass'n v. Quinn & Co., Inc., 111 N.M. 750, 809 P.2d 1278
(1991). Settlement of disputed matters is squarely within the express powers of
the Association.
Standing
Fourth Circuit
North Carolina Life & Accident & Health Ins. Guar. Ass'n v. Alcatel Network
Systems, Inc., 876 F. Supp. 748 (E.D.N.C.), aff'd, 72 F.3d 127 (4th Cir. 1995) (Table
Decision). North Carolina Guaranty Association had no standing to assert ERISA
claims against pension plan trustees because it had not yet paid any benefits to
plan participants. Subrogation claim was not yet ripe.

Fifth Circuit
Texas Life, Accident, Health & Hosp. Serv. Ins. Guar. Ass'n v. Gaylord
Entertainment Co., 105 F.3d 210 (5th Cir. 1997). Guaranty association sued
pension plan administrators for breach of fiduciary duty for impudently
investing in the GICs of a failing company. Court held the guaranty association
lacked standing to sue because, while assignment of breach of fiduciary duty
claims under pension plans is not prohibited by ERISA’s pension benefits antiassignment
provision, the association’s assignment of claims was invalid.
Maryland Maryland Life & Health Ins. Guar. Ass'n v. Perrott, 301 Md. 78, 482 A.2d 9 (1984).
Guaranty association has standing to intervene of right in receivership
proceedings to protect its rights; association must have access to information
necessary to fulfill its statutory duties.
Washington Washington Life & Disability Ins. Guar. Ass’n v. Adams, 47 Wash. App. 213, 734
P.2d 932 (1987). State Life and Disability Insurance Guaranty Association, which
was creditor of the insolvent insurer, had standing to maintain action against
individual shareholders of the insurer for superadded liability under state law in
an amount equal to the par value of their shares. The shareholders contended
that the association was nothing more than an estate creditor and, as such, had
no authority to seek enforcement of the state law remedy. Court rejected
standing challenge relying upon the subrogation rights acquired by the
association under state law and the duty of the association to marshal assets.
Subrogation
Fourth Circuit
North Carolina Life & Accident & Health Ins. Guar. Ass'n v. Alcatel Network
Systems, Inc., 876 F. Supp. 748 (E.D.N.C.), aff'd, 72 F.3d 127 (4th Cir. 1995) (Table
Decision). North Carolina Guaranty Association had no standing to assert ERISA
claims against pension plan trustees because it had not yet paid any benefits to
plan participants. Subrogation claim was not yet ripe.
Delaware In re Liquidation of National Heritage Life Ins. Co., 728 A.2d 52 (Del. Ch. 1998).
Having transferred to acquiring insurer cash and promissory notes to assume
the statutorily covered contractual obligations owed to insolvent insurer’s
policyholders, the affected guaranty associations became subrogated to by
statute to the rights of the policyholders against the estate.
Washington Washington Life & Disability Ins. Guar. Ass’n v. Adams, 47 Wash. App. 213, 734
P.2d 932 (1987). Guaranty association is subrogated to rights of policyholders
and has standing to bring the action.
Vesting of Rights Against Guaranty Association
Texas
Messagephone, Inc., et al v. Texas Life, Accident, Health & Hospital Serv. Ins.
Guar. Ass’n, 966 S.W.2d 133 (Tex. Ct. App. 1998). Messagephone Inc. (“MPI”)
purchased unallocated annuity contracts from insurer, and assigned those
annuity contracts to a trust using them as collateral for several non‐recourse
loans. MPI filed a proof of claim after insurer was placed in receivership in 1989,
but did not disclose the existence of the trust. The Guaranty Association, having
elected to handle insurer’s claims, denied coverage for the annuity contracts
based on exclusions in 1991 amendments. Statutory amendments can be
retroactively applied without constitutional defect unless vested rights are
destroyed or impaired. There is no vested right to guaranty fund coverage.
Moreover, the annuity contracts were GICs containing no mortality guarantees,
and would have excluded form coverage under the 1989 statute.

Assessments
Assessments – In General
Maine Liberty Mutual Ins. Co. v. Superintendent of Ins., 689 A.2d 600 (Me. 1997).
Amendments to Maine Guaranty Association assessment laws were not
retroactively applied to insurer who withdrew before statutory effective date.
Operative event which triggered application of the statute was a postamendment
assessment of the insurer for an insolvency which occurred before
it withdrew from the state. Insurer’s withdrawal from the market did not
change its liability under the Act for pre‐withdrawal insolvencies.
Minnesota Minnesota Life & Health Ins. Guar. Ass'n v. Department of Commerce, 400
N.W.2d 769 (Minn. Ct. App. 1987). In the context of assessing its member
insurers based upon premiums collected, the Minnesota association greatly
reduced the assessment base by excluding GICs and DACs as uncovered annuity
contracts under the Minnesota Act. The court, however, used the Act’s liberal
construction language to find coverage for unallocated annuities and ordered
the association to recalculate assessments for all member insurers.
Washington
Aetna Life Ins. Co. v. Washington Life & Disability Ins. Guar. Ass'n, 83 Wash.2d
523, 520 P.2d 162 (1974). Guaranty association's power to assess foreign insurers
doing business in the state is constitutional; there is a rational basis for differing
treatment of domestic and foreign insurers; assessments are not
unconstitutional takings or retroactive taxes and do not impair existing contract
rights.
Powers and Duties of the Commissioner
Duties and Powers of the Commissioner – In General
Alaska
Alaska Life & Disability Ins. Guar. Ass’n v. State of Alaska, 3 AN‐94‐6680 CIV.
(Alaska Super. Ct. April 9, 1997). Alaska Guaranty Association did not fulfill its
statutory obligations through its participation in the Executive Life
Rehabilitation Plan because the restructured contracts assumed by Aurora
differed materially from those issued by Executive Life. The Association Act
does not provide for assumption or guarantee of restructured contracts. The
only relief authorized is the imposition of a contract lien; there is no express
authorization for any other modification of the original contract. Moreover, the
Association failed to obtain the Director’s approval of its participation in the
ELIC rehabilitation plan. There must be some record showing that the Director
reached a considered decision. The Director plays a vital role in the
administration of the Act, including the responsibility to determine whether a
guaranty plan meets the technical requirements of the Act and to consider
whether the plan is in the public interest.
Oregon Mongelli v. Oregon Life & Health Ins. Guar. Ass'n, 85 Or. App. 518, 737 P.2d 633
(1987). Commissioner’s discretionary decision not to assume the duties of the
association at a particular time will not be overturned unless there is no rational
basis for the decision.
Unlicensed Insurer
Oklahoma
Intervenor Policy Holders of Am. Indem. Trust v. Oklahoma Life & Health Ins.
Guar. Ass'n, 825 P.2d 1341 (Okla. 1992). Unqualified putative ERISA trust was
never a licensed member insurer, despite the fact that its contracts were sold by

Powers and Duties of the Association
licensed brokers or dealers; policyholders were not entitled to coverage when
the trust became insolvent. The Commissioner and the association had neither
the duty nor the ability to cause the trust to become a member.
Prevention of Insolvencies
Indiana Gibraltar Mutual Ins. Co. v. Hoosier Ins. Co., 486 N.E.2d 548 (Ind. Ct. App. 1985),
mod. on reh’g, 489 N.E.2d 592 (Ind. Ct. App. 1986). Letter to guaranty
association from agent of member insurer alleging another member was not in
compliance with state surplus requirements was not libelous. The allegations in
the letter were true and the guaranty association, because of its authority to
warn Commissioner of potential insolvencies, was not an improper party to
notify.
Subrogation
Miscellaneous Provisions
Washington Washington Life & Disability Ins. Guar. Ass’n v. Adams, 47 Wash.App. 213, 734
P.2d 932 (1987). State Life and Disability Insurance Guaranty Association, which
was creditor of the insolvent insurer, had standing to maintain action against
individual shareholders of the insurer for superadded liability under state law in
an amount equal to the par value of their shares. The shareholders contended
that the association was nothing more than an estate creditor and, as such, had
no authority to seek enforcement of the state law remedy. Court rejected
standing challenge relying upon the subrogation rights acquired by the
association under state law and the duty of the association to marshal assets.
Immunity – Policyholder Actions
Immunity
Montana
Hicklin v. CSC Logic, Inc., 283 Mont. 298, 940 P.2d 447 (1997). The Pennsylvania
Life & Health Ins. Guaranty Association assumed LACOP's contractual
obligations, including the administration of a disability policy issued to Hicklin, a
Montana resident. Hicklin filed suit in Montana state court alleging
improprieties with respect to the claims handling practices of PLHIGA and CSC,
which PLHIGA retained to administer the policies. After service of process,
Hicklin obtained a default judgment. Respondents motion to vacate for lack of
subject matter jurisdiction was granted. On appeal, the Montana Supreme
Court reversed and remanded finding that Hicklin’s claims were based on the
independent torts of CSC and PLHIGA, not upon any actions or omissions by
LACOP, and that the jurisdictional limitations from the PA Liquidation act did not
therefore, preclude the District Court from having subject matter jurisdiction
over PLHIGA. The court further rejected the respondents assertion of statutory
immunity finding that any such immunity was merely a defense which was
waived when not timely asserted, and that any such defense did not affect the
subject matter jurisdiction of the court.
Prohibited Advertisement of Act in Insurance Sales and Notice to Policyholders
Constitutionality of Act
New Mexico New Mexico Life Ins. Guar. Ass'n v. Quinn & Co., Inc., 111 N.M. 750, 809 P.2d 1278
(1991). The portion of the Act which prohibits use of the Association as part of

the sales transaction is not unconstitutional and void when applied to speech
which is lawful and not misleading.
Prospective Application
Construction of the Act
New Mexico Matter of Rehabilitation of Western Investors Life Ins. Co., 100 N.M. 370, 671
P.2d 31 (1983). Guaranty association is not responsible to policyholders of
company which was unable to fulfill its contractual obligations on the Act’s
effective date; legislature’s use of this language signals an intent to exclude all
disabled companies, not only those which had been declared insolvent.
Limits of Liability
South Carolina South Carolina Ins. Comm’n v. South Carolina Life & Health Ins. Guar. Ass’n, 267
S.C. 378, 228 S.E.2d 273 (1976). When an order of rehabilitation had been issued
prior to guaranty association’s effective date, the insurer was an impaired
insurer to whom the statute did not apply. A lien placed on the cash values of
the insurer’s policies could not be treated as an asset so as to restore the
insurer’s solvency.

APPENDIX A
Directory of State Insurance Department, Statutory and Regulatory Web Sites

State Department of Insurance Insurance Statutes Insurance Regulations
Alabama http://www.aldoi.gov http://www.aldoi.gov/Legal/
CodeofAlabama.aspx
Alaska
http://www.commerce.state.
ak.us/insurance
http://www.legis.state.ak.us/
basis/folioproxy.asp?url=htt
p://www.legis.state.ak.us/cg
i-bin/folioisa.dll/stattx08?
Arizona http://www.id.state.az.us http://www.azleg.state.az.us
/ArizonaRevisedStatutes.
asp?Title=20
Arkansas
http://insurance.arkansas.g
ov
http://www.arkleg.state.ar.u
s/SearchCenter/Pages/
arkansascode.aspx
California http://www.insurance.ca.gov http://www.leginfo.ca.gov/.ht
ml/ins_table_of_contents.ht
ml
Colorado
http://www.dora.state.co.us/
insurance
http://www.dora.state.co.us/
insurance/regs/Colorado
RevisedStatutes.htm
Connecticut http://www.ct.gov/cid http://www.cga.ct.gov/2009/
pub/title38a.htm?cidNav
=|48775|
Delaware
http://delawareinsurance.go
v
http://delcode.delaware.gov/
title18/index.shtml
http://www.aldoi.gov/Legal/
Regulations.aspx
http://www.legis.state.ak.us/
cgi-bin/folioisa.dll/aac/query
=*/doc/%7Bt5696%7D
http://www.azsos.gov/public
_services/Title_20/20-06.
pdf
http://www.insurance.arkan
sas.gov/Legal%20Dataservi
ces/divpage.htm
http://government.westlaw.
com/linkedslice/default.asp?
SP=CCR-1000
http://www.dora.state.co.us/
insurance/regs/rb.htm
http://www.ct.gov/cid/cwp/vi
ew.asp?Q=300444&cidNav
=|48775|
http://regulations.delaware.
gov/AdminCode/title18/inde
x.shtml

State Department of Insurance Insurance Statutes Insurance Regulations
Florida http://www.floir.com http://www.leg.state.fl.us/sta
tutes
Georgia http://www.gainsurance.org http://www.lexisnexis.com/hottopics/gacode
/
Hawaii
http://hawaii.gov/dcca/areas
/ins
http://hawaii.gov/dcca/areas
/ins/main/hrs
Idaho http://www.doi.idaho.gov http://www.legislature.idaho.
gov/idstat/Title41/T41.htm
Illinois
http://www.idfpr.com/DOI/de
fault2.asp
http://www.ilga.gov/legislati
on/ilcs/ilcs2.asp?ChapterID
=22
Indiana http://www.in.gov/idoi http://www.in.gov/idoi/2761.
htm
Iowa http://www.iid.state.ia.us http://www.legis.state.ia.us/I
owaLaw.html
Kansas http://www.ksinsurance.org http://www.kslegislature.org/
legsrv-statutes/index.do
https://www.flrules.org/gate
way/Department.asp?DeptI
D=4
http://rules.sos.state.ga.us/c
gibin/page.cgi?g=COMPTRO
LLER_GENERAL%2FRUL
ES_OF_COMPTROLLER_
GENERAL_OFFICE_OF_C
OMMISSIONER_OF_INSU
RANCE%2Findex.html&d=1
http://hawaii.gov/dcca/areas
/ins/main/har
http://adm.idaho.gov/admin
rules/rules/idapa18/18index.
htm
http://www.ilga.gov/commis
sion/jcar/admincode/050/05
0parts.html
http://www.in.gov/idoi/2762.
htm
http://www.legis.state.ia.us/I
AC.html
http://www.ksinsurance.org/
legal/regs_list.htm

Kentucky
State Department of Insurance Insurance Statutes Insurance Regulations
http://insurance.ky.gov/kent
ucky
http://insurance.ky.gov/kent
ucky/ALSearch/Information/l
aws.aspx
Louisiana http://www.ldi.la.gov http://www.ldi.la.gov/useful_
links.htm#title22
Maine
Maryland
Massachusetts
Michigan
http://www.maine.gov/pfr/in
surance
http://www.mdinsurance.sta
te.md.us/sa/jsp/Mia.jsp
http://www.mass.gov/?page
ID=ocaagencylanding&L=4
&L0=Home&L1=Governme
nt&L2=Our+Agencies+and+
Divisions&L3=Division+of+I
nsurance&sid=Eoca
http://www.michigan.gov/dle
g/0,1607,7-154-10555---
,00.html
http://www.maine.gov/pfr/in
surance/laws_rules.htm
http://mlis.state.md.us/#stat
http://www.mass.gov/legis/l
aws/mgl/index.htm
http://www.michigan.gov/dle
g/0,1607,7-154-
10555_13167_13168---
,00.html
http://insurance.ky.gov/kent
ucky/ALSearch/Information/l
aws.aspx
http://www.ldi.la.gov/Docs/C
ommissionersOffice/legal/ru
les/37v01.pdf
http://www.maine.gov/pfr/in
surance/laws_rules.htm
http://www.dsd.state.md.us/
comar/subtitle_chapters/31
_Chapters.htm
http://www.mass.gov/?page
ID=ocaterminal&L=5&L0=H
ome&L1=Business&L2=Ins
urance&L3=Division+of+Ins
urance+Regulatory+Informa
tion&L4=Insurance+Regulat
ions+and+Laws&sid=Eoca&
b=terminalcontent&f=doi_Le
gal_Hearings_doi_regulatio
ns&csid=Eoca
http://www.state.mi.us/orr/e
mi/admincode.asp?AdminC
ode=Department&Dpt=LG&
Level_1=Office+of+Financia
l+and+Insurance+Services

Minnesota
State Department of Insurance Insurance Statutes Insurance Regulations
http://www.state.mn.us/port
al/mn/jsp/home.do?agency=
Insurance
https://www.revisor.leg.state
.mn.us/statutes/?view=part
&start=59A&close=79A
Mississippi http://www.mid.state.ms.us http://www.sos.state.ms.us/
ed_pubs/MSCode/
Missouri
http://www.insurance.mo.go
v
http://www.insurance.mo.go
v/laws/index.htm
Montana http://www.sao.state.mt.us/ http://data.opi.mt.gov/bills/m
ca_toc/33.htm
Nebraska http://www.doi.ne.gov http://uniweb.legislature.ne.
gov/laws/browsechapters.php?chapter=44
Nevada http://doi.state.nv.us http://www.leg.state.nv.us/N
RS/Index.cfm
New Hampshire
http://www.nh.gov/insuranc
e
http://www.gencourt.state.n
h.us/rsa/html/NHTOC/NHT
OC-XXXVII.htm
https://www.revisor.leg.state
.mn.us/rules/?view=list
http://www.mid.state.ms.us/
pages/regulations.aspx
http://www.insurance.mo.go
v/laws/index.htm
http://www.mtrules.org/gate
way/ChapterHome.asp?Ch
apter=6.6
http://www.sos.ne.gov/rules
-andregs/regsearch/Rules/index.
cgi?l=Insurance_Dept_of&t
=Title-210
http://www.leg.state.nv.us/N
AC/CHAPTERS.HTML
http://www.gencourt.state.n
h.us/rules/ins.html

New Jersey
New Mexico
State Department of Insurance Insurance Statutes Insurance Regulations
http://www.state.nj.us/dobi/d
ivision_insurance/index.htm
http://www.nmprc.state.nm.
us/id.htm
http://lis.njleg.state.nj.us/cgi
-
bin/om_isapi.dll?clientID=15
4197&depth=2&expandhea
dings=off&headingswithhits
=on&infobase=statutes.nfo
&softpage=TOC_Frame_Pg
42
http://www.nmprc.state.nm.
us/statutes/CHAPTER59A_I
NSURANCE.pdf
New York http://www.ins.state.ny.us http://public.leginfo.state.ny.
us/menugetf.cgi?COMMON
QUERY=LAWS
North Carolina http://www.ncdoi.com http://www.ncga.state.nc.us/
gascripts/Statutes/StatutesT
OC.pl?Chapter=0058
North Dakota http://www.nd.gov/ndins http://www.legis.nd.gov/cen
code/t261.html
Ohio
http://www.ohioinsurance.g
ov
http://codes.ohio.gov/orc/39
Oklahoma http://www.ok.gov/oid http://www.ok.gov/oid/News
_and_Events/Notices/Statut
es_and_Rules/index.html
http://www.michie.com/newj
ersey/lpext.dll?f=templates&
fn=main-h.htm&cp=
http://www.nmcpr.state.nm.
us/nmac/_title13/title13.htm
http://www.ins.state.ny.us/re
gclinx.htm
http://reports.oah.state.nc.u
s/ncac.asp?folderName=\Tit
le%2011%20-
%20Insurance
http://www.legis.nd.gov/infor
mation/acdata/html/Title45.
html
http://codes.ohio.gov/oac/39
01
http://www.ok.gov/oid/News
_and_Events/Notices/Statut
es_and_Rules/index.html

Oregon
Pennsylvania
State Department of Insurance Insurance Statutes Insurance Regulations
http://www.cbs.state.or.us/e
xternal/ins/index.html
http://www.ins.state.pa.us/in
s/site/default.asp
http://landru.leg.state.or.us/
ors/
http://government.westlaw.c
om/linkedslice/default.asp?
SP=pac-1000
Rhode Island http://www.dbr.state.ri.us http://www.dbr.state.ri.us/di
visions/insurance/legalinfo.p
hp
South Carolina http://www.doi.sc.gov http://www.scstatehouse.go
v/code/titl38.htm
South Dakota
Tennessee
http://www.state.sd.us/drr2/r
eg/insurance
http://tn.gov/commerce/insu
rance/index.shtml
http://legis.state.sd.us/statut
es/DisplayStatute.aspx?Typ
e=Statute&Statute=58
http://www.michie.com/tenn
essee/lpext.dll?f=templates
&fn=main-h.htm&cp=tncode
Texas http://www.tdi.state.tx.us http://www.statutes.legis.sta
te.tx.us/Index.aspx
Utah
Vermont
http://www.insurance.utah.g
ov
http://www.bishca.state.vt.u
s
http://le.utah.gov/~code/TIT
LE31A/TITLE31A.htm
http://www.leg.state.vt.us/st
atutes/chapters.cfm?Title=0
8
http://www.cbs.state.or.us/e
xternal/ins/rules/oar/oar.htm
l
http://www.pacode.com/sec
ure/data/031/031toc.html
http://www.dbr.state.ri.us/rul
es/index.php#insurance
http://www.scstatehouse.go
v/coderegs/c069.htm
http://legis.state.sd.us/rules/
DisplayRule.aspx?Rule=20:
06
http://www.state.tn.us/sos/r
ules/0780/0780-01/0780-
01.htm
http://info.sos.state.tx.us/pls
/pub/readtac$ext.ViewTAC?
tac_view=3&ti=28&pt=1
http://www.insurance.utah.g
ov/legalresources/currentrul
es.html
http://www.bishca.state.vt.u
s/InsurDiv/regsbulls/insregs/
Insurregsindex.html

Virginia
Washington
State Department of Insurance Insurance Statutes Insurance Regulations
http://www.scc.virginia.gov/
division/boi/index.htm
http://www.insurance.wa.go
v
http://leg1.state.va.us/cgibin/legp504.exe?000+cod+
TOC3802000
http://apps.leg.wa.gov/rcw/d
efault.aspx?Cite=48
West Virginia http://www.wvinsurance.gov http://www.legis.state.wv.us
/WVCODE/code.cfm?chap=
33&art=1
Wisconsin http://oci.wi.gov http://oci.wi.gov/wisinsstat.h
tm
Wyoming http://insurance.state.wy.us http://legisweb.state.wy.us/s
tatutes/statutes.aspx
American Samoa
http://www.americansamoa.
gov/index.htm
http://www.asbar.org/
Guam https://www.guamtax.com http://www.justice.gov.gu/C
ompilerofLaws/GCA/title22.
html
North Mariana Islands
Puerto Rico
http://www.commerce.gov.
mp
http://www.ocs.gobierno.pr/
ocspr
http://www.commerce.gov.
mp/
http://michie.lexisnexis.com/
puertorico/lpext.dll?f=templa
tes&fn=mainh.htm&cp=prcode
http://leg1.state.va.us/000/r
eg/TOC14005.HTM
http://apps.leg.wa.gov/wac/
default.aspx?cite=284
http://www.wvinsurance.gov
/rules/rules_index.htm
http://www.legis.state.wi.us/
rsb/code/ins/ins.html
http://soswy.state.wy.us/Rul
es/Rule_Search_Main.asp
http://www.asbar.org/
http://www.justice.gov.gu/C
ompilerofLaws/GAR/012gar
.html
http://www.commerce.gov.
mp/

State Department of Insurance Insurance Statutes Insurance Regulations
Virgin Islands http://ltg.gov.vi http://www.michie.com/virgi
nislands/lpext.dll?f=templat
es&fn=mainh.htm&cp=vicode
NAIC
http://www.naic.org/state_w
eb_map.htm

© 2009 National Association of Insurance Commissioners 1
May 19, 2009

AK
Linda S. Hall
Director
(Chair, Western Zone)
Please use Anchorage as primary mailing address
State of Alaska
Dept. of Commerce, Community &
Economic Development
Division of Insurance
550 West 7 th Avenue, Suite 1560
Anchorage, Alaska 99501-3567
907-269-7900
Fax 907-269-7910
Toll Free In-State Only:
800-467-8725
PO Box 110805
Juneau, Alaska 99811-0805
907-465-2515
Fax 907-465-3422
Street Address:
333 Willoughby, 9 th Floor
Juneau, Alaska 99801
AL
Jim L. Ridling
Commissioner
(Southeastern Zone)
Alabama Department of Insurance
PO Box 303351
Montgomery, Alabama 36130-3351
Street Address:
201 Monroe Street, Suite 1700
Montgomery, Alabama 36104
334-269-3550
Fax 334-241-4192
Toll Free In-State Only:
800-433-3966
AR
Jay Bradford
Commissioner
(Southeastern Zone)
Arkansas Insurance Department
1200 West 3rd Street
Little Rock, Arkansas 72201-1904
501-371-2600
Fax 501-371-2618
Consumers:
800-852-5494
Seniors Only:
800-224-6330
Toll Free:
800-282-9134
AS
Fiaigoa A. Paogofie
Insurance Commissioner
(Western Zone)
Office of the Governor
American Samoa Government
Pago Pago, American Samoa 96799
684-633-4116
Fax 684-633-2269
AZ
Christina Urias
Director
(Western Zone)
Arizona Department of Insurance
2910 North 44th Street, Suite 210
Phoenix, Arizona 85018-7256
602-364-3100
Fax 602-364-3470
400 W. Congress St, Suite 152
Tucson, Arizona 85701
520-628-6370
Fax 520-628-6633
CA
Steve Poizner
Commissioner
(Western Zone)
California Department of Insurance
300 Capitol Mall, Suite 1700
Sacramento, California 95814
916-492-3500
Fax 916-445-5280
Toll Free In-State Only:
800-927-4357
45 Fremont Street, 23rd Floor
San Francisco, California 94105
415-538-4010
Fax 415-904-5889
300 South Spring Street
Los Angeles, California 90013
213-346-6464
Fax 213-897-9051
© 2009 National Association of Insurance Commissioners 2

CO
Marcy Morrison
Commissioner
(Western Zone)
Colorado Division of Insurance
1560 Broadway, Suite 850
Denver, Colorado 80202
303-894-7499
Fax 303-894-7455
Toll Free In-State Only:
800-930-3745
Producer Licensing:
800-275-8247
CT
Thomas R. Sullivan
Commissioner
(Vice Chair, Northeastern
Zone)
Connecticut Insurance Department
PO Box 816
Hartford, Connecticut 06142-0816
Street Address:
153 Market Street, 7th Floor
Hartford, CT 06103
860-297-3800
Fax 860-566-7410
Toll Free In-State Only:
800-203-3447
DC
Thomas E. Hampton
Commissioner
(Northeastern Zone)
Government of the District of Columbia
Dept. of Insurance, Securities, and Banking
810 First Street, N. E., Suite 701
Washington, DC 20002
202-727-8000
Fax 202-535-1196
DE
Karen Weldin-Stewart
Commissioner
(Northeastern Zone)
State of Delaware
Department of Insurance
Rodney Building
841 Silver Lake Boulevard
Dover, Delaware 19904
302-674-7300
Fax 302-739-5280
Toll Free In-State Only:
800-282-8611
FL
Adelaide ‘Alex’ Sink
Chief Financial Officer
(Southeastern Zone)
Florida Department of Financial Services
State Capitol
Plaza Level Eleven
Tallahassee, Florida 32399-0300
850-413-2850
Fax 850-413-2950
Toll Free Helpline
800-342-2762
Out-of-State Helpline
850-413-3030
FL
Kevin McCarty
Commissioner of Insurance
Regulation
NAIC Secretary-Treasurer
(Southeastern Zone)
Office of Insurance Regulation
The Larson Building
200 E. Gaines Street, Room 101A
Tallahassee, Florida 32399-0301
850-413-5914
Fax 850-488-3334
GA
John Oxendine
Commissioner
(Southeastern Zone)
Office of Insurance and Safety Fire
Commissioner
2 Martin Luther King, Jr. Drive
Floyd Memorial Bldg., 704 West Tower
Atlanta, Georgia 30334
404-656-2056
Fax 404-656-4030
Toll Free In-State Only:
800-656-2298
© 2009 National Association of Insurance Commissioners 3

GU
John Camacho
Banking Ins. Commissioner
(Western Zone)
Guam Dept. of Revenue & Taxation
Regulatory Division
PO Box 23607 GMF
Barrigada, Guam 96921
671-635-1817
Fax 671-633-2643
Street Address:
1240 Route 16 Army Drive
Barrigada, Guam 96913
HI
J.P. Schmidt
Commissioner
(Western Zone)
State of Hawaii Insurance Division
Dept. of Commerce & Consumer Affairs
PO Box 3614
Honolulu, Hawaii 96811-3614
808-586-2790
Fax 808-586-2806
Street Address:
335 Merchant Street, Room 213
Honolulu, Hawaii 96813
IA
Susan E. Voss
Commissioner
NAIC Vice President
(Midwestern Zone)
Iowa Insurance Division
330 Maple Street
Des Moines, Iowa 50319
515-281-5705
Fax 515-281-3059
Toll Free Consumer
Hotline:
877-955-1212
ID
William W. Deal
Director
(Western Zone)
Idaho Department of Insurance
PO Box 83270
Boise, Idaho 83720-0043
Street Address:
700 West State Street, 3rd Floor
Boise, Idaho 83720-0043
208-334-4250
Fax 208-334-4398
Toll Free In-State Only:
800-721-3272
IL
Michael McRaith
Director
(Midwestern Zone)
Illinois Dept. of Financial and
Professional Regulation
Division of Insurance
320 West Washington St., 4 th Floor
Springfield, Illinois 62767-0001
217-785-4515
Fax 217-524-5200
Toll Free:
877-527-9431
100 West Randolph
Suite 9-301
Chicago, Illinois 60601-3251
312-814-2427
Fax 312-814-5435
IN
Jim Atterholt
Commissioner
(Midwestern Zone)
Indiana Department of Insurance
311 W. Washington Street, Suite 300
Indianapolis, Indiana 46204-2787
317-232-2385
Fax 317-232-5251
© 2009 National Association of Insurance Commissioners 4

KS
Sandy Praeger
Commissioner
NAIC Most Immediate
Past President
(Midwestern Zone)
Kansas Insurance Department
420 S.W. 9 th Street
Topeka, Kansas 66612-1678
785-296-3071
Fax 785-296-7805
Toll Free In-State Only:
800-432-2484
KY
Sharon P. Clark
Commissioner
(Southeastern Zone)
Kentucky Department of Insurance
PO Box 517
Frankfort, Kentucky 40602-0517
Street Address:
215 West Main Street
Frankfort, Kentucky 40601
502-564-3630
Fax 502-564-1453
Toll Free:
800-595-6053
TTY:
800-462-2081
LA
James J. Donelon
Commissioner
(Secretary, Southeastern Zone)
Louisiana Department of Insurance
PO Box 94214
Baton Rouge, Louisiana 70804-9214
Street Address:
1702 N. 3 rd Street
Baton Rouge, Louisiana 70802
225-342-5423
Fax 225-342-8622
Toll Free Nation and State-
Wide Only:
800-259-5300
800-259-5301
MA
Nonnie Burnes
Commissioner
(Northeastern Zone)
Office of Consumer Affairs & Bus. Reg.
Massachusetts Division of Insurance
One South Station, 5 th Floor
Boston, Massachusetts 02110-2208
617-521-7794
Fax 617-521-7758
Consumer Hotline:
617-521-7777
MD
Ralph S. Tyler, III
Commissioner
(Northeastern Zone)
Maryland Insurance Administration
200 St. Paul Place, Suite 2700
Baltimore, Maryland 21202
410-468-2090
Fax 410-468-2020
Toll Free: 800-492-6116
Fraud Div. Toll Free:
800-846-4069
TTY: 800-735-2258
ME
Mila Kofman
Superintendent
(Northeastern Zone)
Dept. of Professional & Financial Reg.
Maine Bureau of Insurance
34 State House Station
Augusta, Maine 04333-0034
Street Address:
124 Northern Avenue
Gardiner, Maine 04345
207-624-8475
Fax 207-624-8599
Toll Free In-State Only:
800-300-5000
MI
Ken Ross
Commissioner
(Midwestern Zone)
State of Michigan
Ofc. of Financial & Insurance Regulation
(OFIR)
Attn: Office of the Commissioner
PO Box 30220
Lansing, MI 48909-7720
517-373-0220
Fax 517-335-3157
Toll Free:
877-999-6442
Street Address:
Ottawa Bldg 3 rd Floor
611 W. Ottawa
Lansing, Michigan 48933
© 2009 National Association of Insurance Commissioners 5

MN
Glenn Wilson
Commissioner
(Midwestern Zone)
Minnesota Department of Commerce
85 7 th Place East, Suite 500
St. Paul, Minnesota 55101-2198
651-296-4026
Fax 651-297-1959
MO
John M. Huff
Director
(Midwestern Zone)
Missouri Department of Insurance
Fin. Institutions & Prof. Registration (DIFP)
PO Box 690
Jefferson, Missouri 65102-0690
Street Address:
301 West High Street, Suite 530
Jefferson City, Missouri 65101
573-751-4126
Fax 573-751-1165
Toll Free In-State Only:
800-726-7390
MP
Michael Ada
Insurance Commissioner
(Zone to be determined)
Commonwealth of the N. Mariana Islands
Department of Commerce
Office of Insurance Commissioner
Caller Box 10007 CK
Saipan, MP 96950
670-664-3064
Fax 670-664-3067
MS
Mike Chaney
Commissioner
(Southeastern Zone)
Mississippi Insurance Department
PO Box 79
Jackson, MS 39205
Street Address:
501 North West Street
Woolfolk State Office Bldg., 10 th Fl.
Jackson, MS 39201
601-359-3569
Fax 601-359-2474
Toll Free In-State Only:
800-562-2957
MT
Monica J. Lindeen
State Auditor
(Western Zone)
Montana State Auditor’s Office
840 Helena Avenue
Helena, Montana 59601
406-444-2040
Fax 406-444-3497
Toll Free In-State Only:
800-332-6148
NC
Wayne Goodwin
Commissioner
(Southeastern Zone)
North Carolina Department of Insurance
1201 Mail Service Center
Raleigh, North Carolina 27699-1201
Street Address:
Dobbs Building
430 N. Salisbury Street
Raleigh, North Carolina 27603
919-733-3058
Fax 919-733-6495
Toll Free In-State Only:
800-662-7777 or
800-546-5664
ND
Adam Hamm
Commissioner
(Midwestern Zone)
North Dakota Insurance Department
600 E. Boulevard Avenue, 5 th Floor
Bismarck, North Dakota 58505-0320
701-328-2440
Fax 701-328-4880
Toll Free In-State Only:
800-247-0560
NE
Ann Frohman
Director
(Midwestern Zone)
Nebraska Department of Insurance
Terminal Building, Suite 400
941 'O' Street
Lincoln, Nebraska 68508
402-471-2201
Fax 402-471-4610
TDD: 800-833-7352
© 2009 National Association of Insurance Commissioners 6

NH
Roger A. Sevigny
Commissioner
NAIC President
(Northeastern Zone)
New Hampshire Insurance Department
21 South Fruit Street, Suite 14
Concord, New Hampshire 03301
603-271-2261
Fax 603-271-1406
Toll Free:
800-852-3416
NJ
Steven M. Goldman
Commissioner
(Chair, Northeastern Zone)
State of New Jersey
Department of Banking and Insurance
20 West State Street
PO Box 325
Trenton, New Jersey 08625-0325
609-292-7272
Fax 609-984-5273
NM
Morris J. Chavez
Superintendent
(Secretary, Western Zone)
New Mexico Public Regulation Commission
Division of Insurance
PO Drawer 1269
Santa Fe, New Mexico 87504-1269
Street Address:
PERA Building
1120 Paseo de Peralta
Santa Fe, New Mexico 87501
505-827-4601
Fax 505-476-0326
Toll Free In-State Only:
888-427-5772
NV
Scott J. Kipper
Commissioner
(Western Zone)
Nevada Division of Insurance
788 Fairview Drive, Suite 300
Carson City, Nevada 89701-5491
775-687-4270
Fax 775-687-3937
Toll Free In-State Only:
800-992-0900
Health Complaints
In State Only:
888-872-3234
Bradley Building
2501 E. Sahara Avenue, Suite 302
Las Vegas, Nevada 89104
702-486-4009
Fax 702-486-4007
NY
Eric Dinallo
Superintendent
(Northeastern Zone)
New York State
Insurance Department
25 Beaver Street
New York, New York 10004-2319
212-480-2301
Fax 212-480-2310
Toll Free:
800-342-3736
Fraud Hotline:
888-FRAUD-NY
One Commerce Plaza, Suite 1700
Albany, New York 12257
518-474-4567
Fax 518-473-4139
OH
Mary Jo Hudson
Director
(Midwestern Zone)
Ohio Department of Insurance
50 West Town Street
Third Floor, Suite 300
Columbus, OH 43215
614-644-2658
Fax 614-644-3743
Toll Free:
800-686-1526
Fraud Division:
800-686-1527
OHIIP
800-686-1578
© 2009 National Association of Insurance Commissioners 7

OK
Kim Holland
Commissioner
(Chair, Midwestern Zone)
Oklahoma Insurance Department
PO Box 53408
Oklahoma City, Oklahoma 73152-3408
Street Address:
2401 NW 23 rd St., Suite 28
Oklahoma City, Oklahoma 73107
405-521-2828
Fax 405-521-6635
Toll Free In-State Only:
800-522-0071
OR
Teresa Miller
Acting Ins. Administrator
(Western Zone)
Oregon Insurance Division
PO Box 14480
Salem, OR 97309-0405
Street Address:
350 Winter Street NE, Room 440
Salem, Oregon 97301-3883
503-947-7980
Fax 503-378-4351
Toll Free In-State Only:
888-877-4894
PA
Joel Ario
Commissioner
(Secretary, Northeastern Zone)
Insurance Department
Commonwealth of Pennsylvania
1326 Strawberry Square, 13th Floor
Harrisburg, Pennsylvania 17120
717-783-0442
Fax 717-772-1969
Toll Free In-State Only:
877-881-6388
Room 304 State Office Building
300 Liberty Avenue
Pittsburgh, Pennsylvania 15222
412-565-5020
Fax 412-565-7648
Room 1701 State Office Building
1400 Spring Garden Street
Philadelphia, Pennsylvania 19130
215-560-2630
Fax 215-560-2648
PR
Ramón Cruz-Colón
Commissioner
(Southeastern Zone)
Office of the Commissioner of Insurance
B5 Tabonuco Street
Suite 216 PMB 356
Guaynabo, Puerto Rico 00968-3029
787-304-8686
Fax 787-273-6365
RI
Joseph Torti, III
Superintendent
(Northeastern Zone)
Rhode Island Insurance Division
Dept. of Business Regulation
1511 Pontiac Avenue, Bldg 69-2
Cranston, Rhode Island 02920
401-462-9520
Fax 401-462-9602
SC
Scott H. Richardson
Director
(Chair, Southeastern Zone)
South Carolina Dept. of Insurance
PO Box 100105
Columbia, South Carolina 29202-3105
803-737-6805
Fax 803-737-6159
Street Address:
Capitol Center
1201 Main Street, Suite 1000
Columbia, South Carolina 29201
SD
Merle D. Scheiber
Director
(Secretary, Midwestern Zone)
South Dakota Division of Insurance
Department of Revenue & Regulation
445 East Capitol Avenue
Pierre, South Dakota 57501-3185
605-773-3563
Fax 605-773-5369
© 2009 National Association of Insurance Commissioners 8

TN
Leslie A. Newman
Commissioner
(Vice Chair, Southeastern
Zone)
Tennessee Dept. of Commerce & Insurance
Insurance Division
Davy Crockett Tower, Fifth Floor
500 James Robertson Parkway
Nashville, Tennessee 37243-0565
615-741-2241
Fax 615-532-6934
Toll Free In-State Only:
800-342-4029
TX
Mike Geeslin
Commissioner
(Western Zone)
Texas Department of Insurance
PO Box 149104
Austin, Texas 78714-9104
Street Address:
333 Guadalupe Street
Austin, Texas 78701
512-463-6169
Fax 512-475-2005
Toll Free In-State Only:
800-578-4677
UT
VA
Kent Michie
Commissioner
(Vice Chair, Western Zone)
Alfred W. Gross
Commissioner
(Southeastern Zone)
Utah Insurance Department
3110 State Office Building
Salt Lake City, Utah 84114-6901
Virginia State Corporation Commission
Bureau of Insurance
Commonwealth of Virginia
PO Box 1157
Richmond, Virginia 23218
Street Address:
1300 East Main Street
Richmond, Virginia 23219
801-538-3800
Fax 801-538-3829
Toll Free In-State Only:
800-439-3805
804-371-9741
Fax 804-371-9873
Toll Free In-State Only:
800-552-7945
Ombudsman/Consumer
Services (Out of State)
877-310-6560
VI
Gregory R. Francis
Lieutenant Gov./
Commissioner
(Southeastern Zone)
Office of the Lieutenant Governor
Division of Banking & Insurance
#18 Kongens Gade
St. Thomas, Virgin Islands 00802
340-774-7166
Fax 340-774-9458
1131 King Street, Suite 101
Christiansted
St. Croix, Virgin Islands 00820
340-773-6449
Fax 340-773-0330
VT
Paulette Thabault
Commissioner
(Northeastern Zone)
Vermont Insurance Division
Dept. of Banking, Ins., Securities and Health
Care Administration
89 Main Street
Montpelier, Vermont 05620-3101
802-828-3301
Fax 802-828-3306
WA
Mike Kreidler
Commissioner
(Western Zone)
Washington State
Office of the Insurance Commissioner
PO Box 40256
Olympia, Washington 98504-0256
Street Address:
5000 Capitol Way
Tumwater, Washington 98501
360-725-7000
Fax 360-586-3109
Toll Free Hotline:
800-562-6900
© 2009 National Association of Insurance Commissioners 9

WI
Sean Dilweg
Commissioner
(Vice Chair, Midwestern
Zone)
State of Wisconsin
Office of the Commissioner of Insurance
PO Box 7873
Madison, Wisconsin 53707-7873
Street Address:
125 South Webster Street
GEF III – 2 nd Floor
Madison, Wisconsin 53703-3474
608-266-3585
Fax 608-266-9935
Toll Free In-State Only:
800-236-8517
State Life Insurance Fund
800-562-5558
WV
Jane L. Cline
Commissioner
NAIC President-Elect
(Southeastern Zone)
West Virginia Offices of the Insurance
Commissioner
PO Box 50540
Charleston, West Virginia 25305-0540
Street Address:
1124 Smith Street
Charleston, West Virginia 25301
304-558-3354
Fax 304-558-0412
Toll Free In-State Only:
888-879-9842
WY
Ken Vines
Commissioner
(Western Zone)
Wyoming Insurance Department
106 East 6 th Avenue
Cheyenne, Wyoming 82002-0440
307-777-7401
Fax 307-777-2446
Toll Free In-State Only:
800-438-5768
© 2009 National Association of Insurance Commissioners 10

NAIC OFFICES
NAIC Central Office: 2301 McGee Street, Suite 800
Kansas City, Missouri 64108-2662
NAIC Executive Office
NAIC Securities Valuation Office
W:\EXEC\CMSRS\membershiplist.doc
Business Strategy, Risk Management and
Compliance of the Executive Division
816-842-3600
Fax 816-783-8175
816-783-8011
Fax 816-783-8012
Communications Department 816-783-8003
Fax 816-783-8012
Education and Training Department 816-783-8200
Fax 816-460-7544
Executive Division 816-783-8057
Fax 816-783-8012
Finance Department 816-783-8010
Fax 816-783-8144
Financial Regulatory Services Division 816-783-8415
Fax 816-783-8869
Information Systems Division 816-783-8073
Fax 816-783-8053
Insurance Products and Services 816-783-8736
Fax 816-783-8869
Legal Division 816-783-8022
Fax 816-783-8144
Market Regulation Division 816-783-8056
Fax 816-783-8869
Meetings Department 816-783-8100
Fax 816-783-8012
Membership Services Department 816-783-8008
Fax 816-783-8012
Publications Department 816-783-8300
Fax 816-460-7593
Research Division 816-783-8232
Fax 816-783-8053
Research Library 816-783-8250
Fax 816-783-8144
Hall of States Building
444 North Capitol Street, N.W.
Suite 701
Washington, D.C. 20001-1509
48 Wall Street, 6th Floor
New York, NY 10005-2906
202-471-3990
Fax 816-460-7493
212-398-9000
Fax 212-382-4207
© 2009 National Association of Insurance Commissioners 11

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
ALABAMA
Betty S. Davis
Executive Director
Alabama Insurance Guaranty Association
(205) 823-4042 Fax: (205) 979-3578 E-mail: aiga01@bellsouth.net
Time Zone: Central
Mailing Address
Street Address
Suite 200 Suite 200
2020 Canyon Road 2020 Canyon Road
Birmingham, AL 35216 Birmingham, AL 35216
ALASKA
Susan R. Daniels
Fund Administrator
Alaska Insurance Guaranty Association
(907) 338-7484 Fax: (907) 338-6364 E-mail : sdaniels@nadj.com
Time Zone: Alaska
Mailing Address
Street Address
c/o Northern Adjusters, Inc.
c/o Northern Adjusters, Inc.
Suite 100 Suite 100
1401 Rudakof Circle 1401 Rudakof Circle
Anchorage, AK 99508 Anchorage, AK 99508
ARIZONA
Michael E. Surguine
Executive Director
Arizona Insurance Guaranty Funds
(602) 364-3863 Fax: (602) 364-3872 E-mail: msurguine@azinsurance.gov
Time Zone: Mountain* Does Not Observe Daylight Savings Time.
Mailing Address
Street Address
Suite 270 Suite 270
1110 West Washington St 1110 West Washington St
Phoenix, AZ 85007 Phoenix, AZ 85007

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
ARKANSAS
Steve A. Uhrynowycz
Administrator
Arkansas Property & Casualty Guaranty Fund
(501) 371-2776 Fax: (501) 371-2774 E-mail: steve.uhrynowycz@arkansas.gov
Time Zone: Central
Mailing Address
Street Address
Suite 2 Suite 2
1023 West Capitol Avenue 1023 West Capitol Avenue
Little Rock, AR 72201 Little Rock, AR 72201
CALIFORNIA
Wayne D. Wilson
Executive Director
California Insurance Guarantee Association
(818) 844-4300, Ext. 142 Fax: (323) 782-1489
Time Zone: Pacific
Mailing Address
P.O. Box 29066
Glendale, CA 91209-9066
COLORADO
WESTERN GUARANTY FUND SERVICES
David C. Edwards
President
(303) 759-5066 Ext. 222 Fax: (303) 759-5312 E-mail: dedwards@wgfs.org
Time Zone: Mountain
Mailing Address
Street Address
Suite 408 Suite 408
1720 South Bellaire Street 1720 South Bellaire Street
Denver, CO 80222 Denver, CO 80222

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
CONNECTICUT
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916
DELAWARE
John J. Falkenbach
Executive Director
Delaware Insurance Guaranty Association
(302) 456-3656 Fax: (302) 456-3680 E-mail: jfalkenbach@deiga.com
Time Zone: Eastern
Mailing Address
Street Address
Suite 309 Suite 309
220 Continental Drive 220 Continental Drive
Newark, DE 19713 Newark, DE 19713
DISTRICT OF COLUMBIA
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
FLORIDA
AMERICAN GUARANTY FUND GROUP
Sandy Robinson
President
Florida Insurance Guaranty Association
(850) 386-9200 Fax (850) 386-1313 E-mail srobinson@agfgroup.org
Time Zone Eastern
Mailing Address
PO Box 14249
Tallahassee FL 32317
FLORIDA WORKERS’ COMPENSATION
AMERICAN GUARANTY FUND GROUP
Sandy Robinson
President
Florida Workers’ Compensation Insurance Guaranty Association
(850) 386-9200 Fax (850) 386-1313 E-mail srobinson@agfgroup.org
Time Zone Eastern
Mailing Address
PO Box 15159
Tallahassee FL 32317
GEORGIA
Michael C. Marchman
Executive Director
Georgia Insurers Insolvency Pool
(770) 621-9835 Fax: (770) 938-3296 E-mail: mmarchman@gaiga.org
Time Zone: Eastern
Mailing Address
Street Address
Suite R
Suite R
2177 Flintstone Drive 2177 Flintstone Drive
Tucker, GA 30084 Tucker, GA 30084

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
HAWAII
Blake J. Obata
Administrator
Hawaii Insurance Guaranty Association
(808) 528-1222 Fax: (808) 532-1495 E-mail: HIGAGF@lava.net
Time Zone: Hawaii Standard*
Mailing Address
Street Address
P.O. Box 4660 American Savings Bank Tower, Suite 1160
Honolulu, HI 96812-4660
1001 Bishop Street
Honolulu, HI 96813
IDAHO
WESTERN GUARANTY FUND SERVICES
David C. Edwards
President
(303) 759-5066 Ext. 222 Fax: (303) 759-5312 E-mail: dedwards@wgfs.org
Time Zone: Mountain
Mailing Address
Street Address
Suite 408 Suite 408
1720 South Bellaire Street 1720 South Bellaire Street
Denver, CO 80222 Denver, CO 80222
ILLINOIS
Anne A. Sharp
Executive Director
Illinois Insurance Guaranty Fund
(312) 422-9700 Fax: (312) 422-9750 E-mail: Asharp@IIGF.org
Time Zone: Central
Mailing Address
Street Address
Suite 1910 Suite 1910
120 South LaSalle Street 120 South LaSalle Street
Chicago, IL 60603 Chicago, IL 60603

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
INDIANA
Janis B. Funk
Executive Director
Indiana Insurance Guaranty Association
(317) 636-8204 Fax: (317) 264-2395 E-mail: jfunk@quadassoc.org
Time Zone: Eastern
Mailing Address
Street Address
Suite 1070 Suite 1070
251 East Ohio Street 251 East Ohio Street
Indianapolis, IN 46204-2143 Indianapolis, IN 46204-2143
IOWA
Kent M. Forney
General Counsel
Iowa Insurance Guaranty Association
(515) 246-5812 Fax: (515) 246-5808 E-mail: forney.kent@bradshawlaw.com
Time Zone: Central
Mailing Address
Street Address
Suite 3700 Suite 3700
801 Grand Avenue 801 Grand Avenue
Des Moines, IA 50309-8004 Des Moines, IA 50309-8004
KANSAS
WESTERN GUARANTY FUND SERVICES
David C. Edwards
President
(303) 759-5066 Ext. 222 Fax: (303) 759-5312 E-mail: dedwards@wgfs.org
Time Zone: Mountain
Mailing Address
Street Address
Suite 408 Suite 408
1720 South Bellaire Street 1720 South Bellaire Street
Denver, CO 80222 Denver, CO 80222

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
KENTUCKY
A. Scott Webster
Executive Director
Kentucky Insurance Guaranty Association
(502) 327-0819 Fax: (502)327-0859 E-mail: scott.webster@kyinsuranceguaranty.com
Time Zone: Central
Mailing Address
10605 Shelbyville Road, Suite 101
Louisville, KY 40222
LOUISIANA
John Wells
Director of Operations & Logistics
Louisiana Insurance Guaranty Association
(225) 757-1688, Ext. 219 Fax: (225) 757-1699 E-mail: jwells@laiga.org
Time Zone: Central
Mailing Address
Street Address
2142 Quail Run Drive 2142 Quail Run Drive
Baton Rouge, LA 70808-4126 Baton Rouge, LA 70808-4126
MAINE
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
MARYLAND
Joseph R. Petr
Executive Vice President
Property & Casualty Insurance Guaranty Corporation
(410) 296-1620 Fax: (410) 828-1265 E-mail: jpetr@pcigc.com
Time Zone: Eastern
Mailing Address
Street Address
Suite 600 Suite 600
305 Washington Avenue 305 Washington Avenue
Towson, MD 21204-4715 Towson, MD 21204-4715
MASSACHUSETTS
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916
MICHIGAN
Thomas R. Kujawa
Executive Director
Michigan Property & Casualty Guaranty Association
(248) 482-0381 Fax: (248) 482-0388 E-mail: tkujawa@mpcga.org
Time Zone: Eastern
Mailing Address
Street Address
P.O. Box 531266 Suite 120
Livonia, MI 48153-1266
39810 Grand River Avenue
Novi, MI 48375

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
MINNESOTA
Paul Steffen
Executive Director
Minnesota Insurance Guaranty Association
(952) 831-1908 Fax: (952) 831-1973 E-mail: psteffen@tcinternet.net
Time Zone: Central
Mailing Address
Street Address
Suite 342 Suite 342
4640 West 77th Street 4640 West 77th Street
Edina, MN 55435 Edina, MN 55435
MISSISSIPPI
John Weeks
Executive Director
Mississippi Insurance Guaranty Association
(601) 957-0072 Fax: (601) 957-0087 E-mail: jweeks@msiga.net
Time Zone: Central
Mailing Address
Street Address
Suite 401 Suite 401
713 South Pear Orchard Road 713 South Pear Orchard Road
Ridgeland, MS 39157-5004 Ridgeland, MS 39157-5004
MISSOURI
Charles F. Renn
Executive Director
Missouri Property & Casualty Insurance Guaranty Association
(573) 634-8455 Fax: (573) 634-8488 E-mail: MIGA@mo-iga.org
Time Zone: Central
Mailing Address
Street Address
Suite 102 Suite 102
994 Diamond Ridge 994 Diamond Ridge
Jefferson City, MO 65109 Jefferson City, MO 65109

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
MONTANA
WESTERN GUARANTY FUND SERVICES
David C. Edwards
President
(303) 759-5066 Ext. 222 Fax: (303) 759-5312 E-mail: dedwards@wgfs.org
Time Zone: Mountain
Mailing Address
Street Address
Suite 408 Suite 408
1720 South Bellaire Street 1720 South Bellaire Street
Denver, CO 80222 Denver, CO 80222
NEBRASKA
L. Dean Fletcher
Administrator
Nebraska Property & Liability Insurance Guaranty Association
(402) 483-2202 Fax: (402) 483-2590 E-mail: ldf3436p@aol.com
Time Zone: Central
Mailing Address
Street Address
P.O. Box 57006, Station C Suite 100
Lincoln, NE 68505
1610 South 70 th Street
Lincoln, NE 68506
NEVADA
Bruce W. Gilbert
Executive Director
Nevada Insurance Guaranty Association
(702) 368-0607 Fax: (702) 368-2455 E-mail: BGilbert@niga-pc.org
Time Zone: Pacific
Mailing Address
Street Address
Suite 100 Suite 100
3821 West Charleston Boulevard 3821 West Charleston Boulevard
Las Vegas, NV 89102-1859 Las Vegas, NV 89102-1859

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
NEW HAMPSHIRE
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916
NEW JERSEY
Joseph L. DellaFera
Chief Executive Officer
New Jersey Property-Liability Insurance Guaranty Association
(908) 382-7100, Ext. 7201 Fax: (908) 382-7150 E-mail: jdellafera@njguaranty.org
Time Zone: Eastern
Mailing Address
Street Address
222 Mount Airy Road 222 Mount Airy Road
Basking Ridge, NJ 07920 Basking Ridge, NJ 07920
NEW JERSEY WORKERS’
COMPENSATION SECURITY FUND
Grover E. Czech
Executive Director
Compensation Rating and Inspection Bureau
(973) 622-6014 Fax: (973) 297-1728 E-mail: gczech@njcrib.com
Time Zone: Eastern
Mailing Address*
Street Address
Compensation Rating and
Compensation Rating and
Inspection Bureau
Inspection Bureau
60 Park Place 60 Park Place
Newark, NJ 07102 Newark, NJ 07102
* Claim files should not be mailed to this address. Please contact the Bureau for shipping
information.

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
NEW MEXICO
Gary M. Keenan
Fund Administrator
New Mexico Insurance Guaranty Association
(505) 293-6600 Fax: (505) 293-6400 E-mail: gkeenan@keenan-assoc.com
Time Zone: Mountain
Mailing Address
Street Address
Keenan & Associates, Inc.
Keenan & Associates, Inc.
P.O. Box 14590
11501 Montgomery Boulevard, N.E.
Albuquerque, NM 87191-4590 Albuquerque, NM 87111
NEW YORK
Mark G. Peters
Special Deputy Superintendent in Charge
New York State Liquidation Bureau
(212) 341-6400 Fax: (212) 964-7963
Time Zone: Eastern
Mailing Address
Street Address
123 William Street, 2nd Floor 123 William Street, 5th Floor
New York, NY 10038 New York, NY 10038
NORTH CAROLINA
Raymond F. Evans
Managing Secretary
North Carolina Insurance Guaranty Association
(919) 783-9813 Fax: (919) 783-0355 E-mail: rfe@ncrb.org
Time Zone: Eastern
Mailing Address
Street Address
P.O. Box 176010
5401 Six Forks Road
Raleigh, NC 27619-6010 Raleigh, NC 27609-4435

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
NORTH DAKOTA
Jeffry J. Cahill
Managing Secretary
North Dakota Insurance Guaranty Association
(701) 224-9555 Fax: (701) 258-9632 E-mail: jsc46@bis.midco.net
Time Zone: Central
Mailing Address
Street Address
P.O. Box 2634
843 Munich Drive
Bismarck, ND 58502-2634 Bismarck, ND 58504
OHIO
OHIO/WEST VIRGINIA GUARANTY FUNDS
Frank Gartland
President
Ohio/West Virginia Guaranty Funds
(614) 442-6601 Fax (614) 442-0004 E-mail fgart@rrcol.com
Time Zone Eastern
Mailing Address
Street Address
1840 Mackenzie Drive 1840 Mackenzie Drive
Columbus, OH 43220 Columbus, OH 43220
OKLAHOMA
Larry W. Fitch
General Manager
Oklahoma Property & Casualty Insurance Guaranty Association
(405) 843-5454 Fax: (405) 843-5369 E-mail: LWFitch@opciga.com
Time Zone: Central
Mailing Address
Street Address
Suite 330E
Suite 330E
2601 Northwest Expressway 2601 Northwest Expressway
Oklahoma City, OK 73112 Oklahoma City, OK 73112

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
OREGON
David C. Johnson
Administrator
Oregon Insurance Guaranty Association
(503) 641-7132 Fax: (503) 641-7127 E-mail: djohnson.oiga@verizon.net
Time Zone: Pacific
Mailing Address
Street Address
Suite 426 Suite 426
10700 Southwest Beaverton Highway 10700 Southwest Beaverton Highway
Beaverton, OR 97005 Beaverton, OR 97005
PENNSYLVANIA
Stephen F. Perrone
Executive Director
Pennsylvania Property & Casualty Insurance Guaranty Association
(215) 568-1007, Ext. 18 Fax: (215) 568-0736 E-mail: sperrone@ppciga.org
Time Zone: Eastern
Mailing Address
Street Address
One Penn Center, Suite 1850 One Penn Center, Suite 1850
1617 John F. Kennedy Boulevard 1617 John F. Kennedy Boulevard
Philadelphia, PA 19103 Philadelphia, PA 19103
PENNSYLVANIA WORKERS’
COMPENSATION SECURITY FUND
Laura S. Keller
Claims Manager
Pennsylvania Workers’ Compensation Security Fund
(717) 783-8093 Fax: (717) 705-0140 E-mail: lakeller@state.pa.us
Time Zone: Eastern
Mailing Address
Street Address
Pennsylvania Insurance Department Pennsylvania Insurance Department
Bureau of Special Funds
Bureau of Special Funds
901 North 7 th Street 901 North 7 th Street
Harrisburg, PA 17102 Harrisburg, PA 17102

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
PUERTO RICO
Jose E. Camacho Postigo
Executive Director
Puerto Rico Property & Casualty Insurance Guaranty Association
(787) 775-1122 Fax: (787) 775-1138 E-mail: priga@attglobal.net
Time Zone: Eastern
Mailing Address
P.O. Box 364967
San Juan, PR 00936-4967
Street Address
Las Lomas Development
789 San Patrico Avenue
San Juan, PR 00921
RHODE ISLAND
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916
SOUTH CAROLINA
J. Smith Harrison
Executive Director/Secretary
South Carolina Property & Casualty Insurance Guaranty Association
(803) 744-4319 Fax: (803) 779-0324 E-mail: smitty@scwind.com
Time Zone: Eastern
Mailing Address
Street Address
P.O. Box 407 One Greystone Building, Suite 101
Columbia, SC 29202
240 Stoneridge Drive
Columbia, SC 29210

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
SOUTH DAKOTA
Edwin E. Evans
South Dakota Property & Casualty Insurance Guaranty Association
(605) 336-2880 Fax: (605) 335-3639 E-mail: eevans@dehs.com
Time Zone: Central
Mailing Address
Street Address
Davenport, Evans, Hurwitz & Smith Davenport, Evans, Hurwitz & Smith
P.O. Box 1030
206 West 14 th Street
Sioux Falls, SD 57101-1030 Sioux Falls, SD 57104
TENNESSEE
David Broemel
Executive Secretary
Tennessee Insurance Guaranty Association
(615) 724-3212 Fax: (615) 724-3312 E-mail: dbroemel@burr.com
Time Zone: Central
Mailing Address
Street Address
Suite 680 Suite 680
1600 Division Street 1600 Division Street
Nashville, TN 37203 Nashville, TN 37203
TEXAS
Marvin Kelly
Executive Director
Texas Property & Casualty Insurance Guaranty Association
(512) 345-9335 Fax: (512) 795-0448 E-mail: mkelly@tpciga.org
Time Zone: Central
Mailing Address
Street Address
9120 Burnet Road 9120 Burnet Road
Austin, TX 78758 Austin, TX 78758

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
UTAH
Allen Muhlestein
Executive Director
Utah Property & Casualty Insurance Guaranty Association
(801) 984-1850 Fax: (801) 984-1851 E-mail: amuhl@xmission.com
Time Zone: Mountain
Mailing Address
Street Address
P.O. Box 1626
9065 South 1300 East
Sandy, UT 84091-1626 Sandy, UT 84094
VERMONT
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916
VIRGINIA
GUARANTY FUND MANAGEMENT SERVICES
Paul M. Gulko
President
(617) 227-7020 Fax: (617) 305-0121 E-mail: pgulko@gfms.org
Time Zone: Eastern
Mailing Address
Street Address
One Bowdoin Square
One Bowdoin Square
Boston, MA 02114-2916 Boston, MA 02114-2916

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
WASHINGTON
WESTERN GUARANTY FUND SERVICES
David C. Edwards
President
(303) 759-5066 Ext. 222 Fax: (303) 759-5312 E-mail: dedwards@wgfs.org
Time Zone: Mountain
Mailing Address
Street Address
Suite 408 Suite 408
1720 South Bellaire Street 1720 South Bellaire Street
Denver, CO 80222 Denver, CO 80222
WEST VIRGINIA
OHIO/WEST VIRGINIA GUARANTY FUNDS
Frank Gartland
President
Ohio/West Virginia Guaranty Funds
(614) 442-6601 Fax (614) 442-0004 E-mail fgart@rrcol.com
Time Zone Eastern
Mailing Address
Street Address
1840 Mackenzie Drive 1840 Mackenzie Drive
Columbus, OH 43220 Columbus, OH 43220
WISCONSIN
Randy Blumer
Executive Director
Wisconsin Insurance Security Fund
(608) 242-9473 Fax: (608) 242-9472 E-mail: Randy@wisf-madison.org
Time Zone: Central
Mailing Address
Street Address
Suite 135 Suite 135
2820 Walton Commons West 2820 Walton Commons West
Madison, WI 53718-6797 Madison, WI 53718-6797

GUARANTY FUND DIRECTORY
Updated 02/09/09
E-mail directory updates
WYOMING
WESTERN GUARANTY FUND SERVICES
David C. Edwards
President
(303) 759-5066 Ext. 222 Fax: (303) 759-5312 E-mail: dedwards@wgfs.org
Time Zone: Mountain
Mailing Address
Street Address
Suite 408 Suite 408
1720 South Bellaire Street 1720 South Bellaire Street
Denver, CO 80222 Denver, CO 80222

nolhga.com :: state ga contact information
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State Guaranty Association Contact Information
Alabama Life & Disability Insurance Guaranty Association
6 Office Park Circle, Suite 200
Birmingham, AL 35223
(p) 205.879.2202 (f) 205.879.2292
Association Web site: http://www.allifega.org
State Insurance Department: http://www.aldoi.org/
Alaska Life & Health Insurance Guaranty Association
1007 West 3rd Ave., Suite 400
Anchorage, AK 99501
(p) 907.243.2311 (f) 907.277.1331
Association Web site: http://www.aklifega.org
State Insurance Department: http://www.dced.state.ak.us/insurance/
Arizona Life & Disability Insurance Guaranty Fund
1110 West Washington, Suite 270
Phoenix, AZ 85007
(p) 602.364.3863 (f) 602.364.3872
State Insurance Department: http://www.id.state.az.us/index.html
Arkansas Life and Health Insurance Guaranty Association
425 West Capitol Avenue, Suite 3700
Little Rock, AR 72201
(p) 501.375.9151 (f) 501.375.6484
Association Web site: http://www.arlifega.org
State Insurance Department: http://www.state.ar.us/insurance/
California Life & Health Insurance Guarantee Association
8383 Wilshire BoulevardSuite 815
Beverly Hills, CA 90211
(p) 323.782.0182 (f) 323.782.8108
Association Web site: http://www.califega.org
State Insurance Department: http://www.insurance.ca.gov/
Colorado Life & Health Insurance Protection Association
PO Box 36009
Denver, CO 80236
(p) 303.292.5022 (f) 303.292.4663
Association Web site: http://www.lhipa.org
State Insurance Department: http://www.dora.state.co.us/insurance/
Connecticut Life and Health Insurance Guaranty Association
11 Round Hill Road
Westerly, RI 02891-5170
(p) 860.647.1054 (f) not available
Association Web site: http://www.ctlifega.org
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State Insurance Department: http://www.state.ct.us/cid/
Delaware Life & Health Insurance Guaranty Association
Christiana Executive Campus
220 Continental Drive, Suite 309
Newark, DE 19713
(p) 302.456.3656 (f) 302.456.3680
Association Web site: http://www.delifega.org
State Insurance Department: http://www.state.de.us/inscom/default.shtml
District of Columbia Life & Health Insurance Guaranty Association
1200-G Street, NW, Suite 800
Washington, DC 20005
(p) 202.434.8771 (f) 202.347.2990
Association Web site: http://www.dclifega.org
State Insurance Department: http://disr.dc.gov/disr/site/default.asp
Florida Life & Health Insurance Guaranty Association
3740 Beach Boulevard, Suite 201-A
Jacksonville, FL 32207-3877
(p) 904.398.3644 (f) 904.398.4474
Association Web site: http://www.flahiga.org
State Insurance Department: http://www.fldfs.com
Georgia Life & Health Insurance Guaranty Association
2177 Flintstone Drive, Suite R
Tucker, GA 30084
(p) 770.621.9835 (f) 770.938.3296
Association Web site: http://www.gaiga.org
State Insurance Department: http://www.inscomm.state.ga.us/
Hawaii Life & Disability Insurance Guaranty Association
1132 Bishop StreetSuite 1590
Honolulu, HI 96813
(p) 808.528.5400 (f) 808.528.5279
Association Web site: http://www.hilifega.org
State Insurance Department: http://www.state.hi.us/dcca/ins/
Idaho Life & Health Insurance Guaranty Association
4700 N. Cloverdale Road, Suite 204
Boise, ID 83713-1068
(p) 208.378.9510
(f) not available
Association Web site: http://www.idlifega.org
State Insurance Department: http://www.doi.idaho.gov/
Illinois Life & Health Insurance Guaranty Association
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8420 W. Bryn Mawr Avenue, Suite 550
Chicago, IL 60631-3404
(p) 773.714.8050 (f) 773.714.8052
Association Web site: http://www.ilhiga.org
State Insurance Department: http://www.state.il.us/ins/default.htm
Indiana Life and Health Insurance Guaranty Association
251 East Ohio Street, Suite 1070
Indianapolis, IN 46204-2143
(p) 317.636.8204 (f) 317.264.2395
Association Web site: http://www.inlifega.org
State Insurance Department: http://www.ai.org/idoi/
Iowa Life & Health Insurance Guaranty Association
700 Walnut Street, Suite 1600
Des Moines, IA 50309-3899
(p) 515.248.5712 (f) 515.283.8018
Association Web site: http://www.ialifega.org
State Insurance Department: http://www.iid.state.ia.us/
Kansas Life & Health Insurance Guaranty Association
2909 SW Maupin Lane
Topeka, KS 66614-5335
(p) 785.271.1199 (f) 785.272.0242
Association Web site: http://www.kslifega.org
State Insurance Department: http://www.ksinsurance.org/
Kentucky Life & Health Insurance Guaranty Association
4010 Dupont Circle, Suite 232
Louisville, KY 40207
(p) 502.895.5915 (f) 502.895.6543
Association Web site: http://www.klhiga.org
State Insurance Department: http://www.doi.state.ky.us/kentucky/
Life Insurance Company Guaranty Corporation of New York
c/o New York Insurance Department Life Bureau
25 Beaver Street
New York, NY 10004
(p) 212.202.4243
(f) not available
Association Web site: http://www.nylifega.org
State Insurance Department: http://www.ins.state.ny.us/
Louisiana Life & Health Insurance Guaranty Association
450 Laurel Street Suite 1400
Baton Rouge, LA 70801
(p) 225.381.0656 (f) 225.344.1132
Association Web site: http://www.lalifega.org
State Insurance Department: http://www.ldi.la.gov/
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Maine Life & Health Insurance Guaranty Association
PO Box 881
Boothbay Harbor, ME 04538
(p) 207.633.1090 (f) 207.633.1088
Association Web site: http://www.melifega.org
State Insurance Department: http://www.state.me.us/pfr/ins/ins_index.htm
Maryland Life & Health Insurance Guaranty Corporation
PO Box 671
Owings Mills, MD 21117-0671
(p) 410.998.3907 (f) 410.998.3909
Association Web site: http://www.mdlifega.org
State Insurance Department: http://www.mdinsurance.state.md.us/
Massachusetts Life & Health Insurance Guaranty Association
PO Box 3171
Springfield, MA 01101-3171
(p) 413.744.8483 (f) 413.744.4949
Association Web site: http://www.malifega.org
State Insurance Department: http://www.state.ma.us/doi/
Michigan Life & Health Insurance Guaranty Association
1640 Haslett Road, Suite 160
Haslett, MI 48840-8683
(p) 517.339.1755 (f) 517.339.5500
Association Web site: http://www.milifega.org
State Insurance Department: http://www.michigan.gov/cis
Minnesota Life & Health Insurance Guaranty Association
4760 White Bear Parkway Suite 101
White Bear Lake, MN 55110
(p) 651.407.3149 (f) 651.407.3150
Association Web site: http://www.mnlifega.org
State Insurance Department: http://www.commerce.state.mn.us/
Mississippi Life & Health Insurance Guaranty Association
PO Box 4562
Jackson, MS 39296
(p) 601.981.0755 (f) 601.362.9544
Association Web site: http://www.mslifega.org
State Insurance Department: http://www.doi.state.ms.us/
Missouri Life & Health Insurance Guaranty Association
994 Diamond Ridge, Suite 102
Jefferson City, MO 65109
(p) 573.634.8455 (f) 573.634.8488
Association Web site: http://www.mo-iga.org
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State Insurance Department: http://www.insurance.state.mo.us/
Montana Life & Health Insurance Guaranty Association
39845 Cedar Lane
Oconomowoc, WI 53066
(p) 262.965.5761 (f) 262.965.5200
Association Web site: http://www.mtlifega.org
State Insurance Department: http://sao.state.mt.us/
Nebraska Life & Health Insurance Guaranty Association
1900 U.S. Bank Building
233 South 13th Street
Lincoln, NE 68508
(p) 402.474.6900 (f) 402.474.5393
Association Web site: http://www.nelifega.org
State Insurance Department: http://www.nol.org/home/NDOI/
Nevada Life & Health Insurance Guaranty Association
One East First StreetSuite 605
Reno, NV 89501
(p) 775.329.8387 (f) 775.323.4997
Association Web site: http://www.nvlifega.org
State Insurance Department: http://doi.state.nv.us/
New Hampshire Life & Health Insurance Guaranty Association
47 Hall Street, Suite 2
Concord, NH 03301
(p) 603.226.9114 (f) 603.224.6713
Association Web site: http://www.nhlifega.org
State Insurance Department: http://www.state.nh.us/insurance/
New Jersey Life & Health Insurance Guaranty Association
One Gateway Center, 9th Floor
Newark, NJ 07102
(p) 973.623.3989 (f) 973.623.1861
Association Web site: http://www.njlifega.org
State Insurance Department: http://www.state.nj.us/dobi/index.html
New Mexico Life Insurance Guaranty Association
PO Box 2880
Santa Fe, NM 87504-2880
(p) 505.820.7355 (f) 505.820.7356
Association Web site: http://www.nmlifega.org
State Insurance Department: http://www.nmprc.state.nm.us/insurance/inshm.htm
North Carolina Life & Health Insurance Guaranty Association
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PO Box 10218
Raleigh, NC 27605-0218
(p) 919.833.6838 (f) 919.833.9576
Association Web site: http://www.nclifega.org
State Insurance Department: http://www.ncdoi.com/
North Dakota Life & Health Insurance Guaranty Association
PO Box 2422
Fargo, ND 58108-2422
(p) 701.235.4108 (f) 480.563.0252
Association Web site: http://www.ndlifega.org
State Insurance Department: http://www.state.nd.us/ndins/
Ohio Life & Health Insurance Guaranty Association
1840 Mackenzie Drive
Columbus, OH 43220
(p) 614.442.6601 (f) 614.442.0004
Association Web site: http://www.olhiga.org
State Insurance Department: http://www.ohioinsurance.gov/
Oklahoma Life & Health Insurance Guaranty Association
201 Robert S. Kerr AvenueSuite 600
Oklahoma City, OK 73102
(p) 405.272.9221 (f) 405.236.3121
Association Web site: http://www.oklifega.org
State Insurance Department: http://www.oid.state.ok.us/
Oregon Life & Health Insurance Guaranty Association
3541 Elderberry Drive, South
Salem, OR 97302-8520
(p) 503.588.1974 (f) 503.588.2029
Association Web site: http://www.orlifega.org
State Insurance Department: http://www.oregoninsurance.org
Pennsylvania Life & Health Insurance Guaranty Association
Radnor Station Building No. 2, Suite 218
290 King of Prussia Road
Radnor, PA 19087
(p) 610.975.0572 (f) 610.975.9348
Association Web site: http://www.palifega.org
State Insurance Department: http://www.insurance.state.pa.us/
Puerto Rico Life and Disability Insurance Guaranty Association
Union Plaza Building, Suite 240
416 Ponce de Leon Avenue
Hato Rey, PR 00918
(p) 787.765.2095 (f) 787.758.7087
State Insurance Department: http://www.ocs.gobierno.pr/
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Rhode Island Life & Health Insurance Guaranty Association
The Foundry, Suite 426
235 Promenade Street
Providence, RI 02908
(p) 401.273.2921 (f) 401.273.4933
Association Web site: http://www.rilifega.org
State Insurance Department: http://www.dbr.state.ri.us/
South Carolina Life, Accident & Health Insurance Guaranty Association
PO Box 6
Silverstreet, SC 29145
(p) 803.276.0271 (f) 803.276.4199
Association Web site: http://www.sclifega.org
State Insurance Department: http://www.state.sc.us/doi/
South Dakota Life & Health Insurance Guaranty Association
PO Box 1030
Sioux Falls, SD 57101-1030
(p) 605.336.0177 (f) 605.335.3639
Association Web site: http://www.sdlifega.org
State Insurance Department: http://www.state.sd.us/dcr/insurance/
Tennessee Life & Health Insurance Guaranty Association
1200 One Nashville Place150 4th Avenue North
Nashville, TN 37219-2433
(p) 615.242.8758 (f) 615.256.8197
Association Web site: http://www.tnlifega.org
State Insurance Department: http://www.state.tn.us/commerce/
Texas Life, Accident, Health & Hospital Service Insurance Guaranty Association
6504 Bridge Point ParkwaySuite 450
Austin, TX 78730
(p) 512.476.5101 (f) 512.472.1470
Association Web site: http://www.txlifega.org
State Insurance Department: http://www.tdi.state.tx.us/
Utah Life & Health Insurance Guaranty Association
955 E. Pioneer Road
Draper, UT 84020
(p) 801.572.1218 (f) 801.572.5067
Association Web site: http://www.utlifega.org
State Insurance Department: http://www.insurance.utah.gov/
Vermont Life & Health Insurance Guaranty Association
c/o National Life Insurance Company, M-230
One National Life Drive
Montpelier, VT 05604
(p) 802.229.3553 (f) 802.229.3762
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Association Web site: http://www.vtlifega.org
State Insurance Department: http://www.bishca.state.vt.us/
Virginia Life, Accident, & Sickness Insurance Guaranty Association
c/o APM Management Services, Inc.
8001 Franklin Farms Drive Suite 238
Richmond, VA 23229
(p) 804.282.2240 (f) 804.282.1816
Association Web site: http://www.valifega.org
State Insurance Department: http://www.state.va.us/scc/division/boi/index.htm
Washington Life & Disability Insurance Guaranty Association
PO Box 2292
Shelton, WA 98584
(p) 360.426.6744 (f) 360.426.2855
Association Web site: http://www.walifega.org
State Insurance Department: http://www.insurance.wa.gov/
West Virginia Life & Health Insurance Guaranty Association
PO Box 816
Huntington, WV 25712
(p) 304.733.6904 (f) 304.733.6905
Association Web site: http://www.wvlifega.org
State Insurance Department: http://www.wvinsurance.gov
Wisconsin Insurance Security Fund
2820 Walton Commons West, Suite 135
Madison, WI 53718-6797
(p) 608.242.9473 (f) 608.242.9472
Association Web site: http://www.wilifega.org
State Insurance Department: http://oci.wi.gov/oci_home.htm
Wyoming Life & Health Insurance Guaranty Association
PO Box 36009
Denver, CO 80236
(p) 303.292.5022 (f) 303.292.4663
Association Web site: http://www.wlhiga.org
State Insurance Department: http://insurance.state.wy.us/
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