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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