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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.