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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