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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