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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