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Commonwealth court action and declared that the Federal action be stayed
during the pendency of the liquidation proceedings. The retention of
jurisdiction by the District Court was hoped to avoid any applicable statute of
limitations defense.
University of Maryland v. Peat Marwick & Co., 923 F.2d 265 (3rd Cir. 1991).
The Third Circuit vacated an Order dismissing the policy holders'
Amended Complaint and remanded to the Pennsylvania District Court an
action brought against the independent auditor (Peat Marwick) of insolvent
Mutual Fire, Marine and Inland Insurance Company, holding that Burford and
Colorado River abstention doctrines did not apply to bar the Federal action
because (1) it did not appear that the Commonwealth court would have
jurisdiction over the policyholder(s)' claims in the insolvency estate but rather a
third party (Peat Marwick); (2) the policyholder(s)' claims were distinct from
those brought by the Commissioner of Insurance on behalf of the insolvent
insurer in the Commonwealth court action; and (3) the action was at law, not in
equity, and sought only money damages. 4 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Arkansas
Baldwin‐United Corp. v. Garner, 283 Ark. 385, 678 S.W.2d 754 (1984). The
insurance commissioner, as receiver of three insolvent insurance companies
owned by one corporation, proposed a rehabilitation plan which was approved
by the court. The parent corporation appealed the plan's provisions that: (i)
the rehabilitation court had exclusive jurisdiction over the assets of the
companies, and (ii) the rehabilitation court would refuse to honor a judgment
obtained in any other forum. In affirming the lower court's decision, the
Supreme Court of Arkansas announced that nothing contained in the
McCarran‐Ferguson Act or the Bankruptcy Act prohibits a state from
determining the rights of an insurance company's creditors. Furthermore, the
appellate court added, the lower court properly ordered that all claims to the
companies' assets be adjudicated in the rehabilitation court.
Fewell v. Pickens, 346 Ark. 246, 57 S.W.3d 144 (2001). Insurance Commissioner
sought liquidation of an insurance company, and the parent company and
shareholder opposed. The Arkansas Supreme court held that the statutory
requirements that the Commissioner must apply for an order to show cause and
the trial court must conduct a full hearing on that application only apply to the
commencement of delinquency proceedings; and that the trial court was not
required to issue a show‐cause order before holding a hearing on the Insurance
Commissioner's petition for liquidation.
Harkey v. Wood, 421 S.W.2d 340 (Ark. 1967). In rejecting the Arkansas
insurance commissioner's petition for a mandamus against a judge of the
circuit court, the Arkansas Supreme Court held that the denial or granting of a
petition for liquidation can only occur after a full hearing. Since it did not
appear that the hearing had yet been concluded at the trial court level, the
commissioner could not force the trial court judge to make a decision.
Mendel v. Garner, 283 Ark. 473, 678 S.W.2d 759 (1984). Policyholders of an
insolvent carrier appealed a provision in the rehabilitation plan that cut off
their rights to surrender their policies for the cash surrender value. In
upholding the plan, the Supreme Court of Arkansas held: "The rehabilitation of
4 On remand, the Pennsylvania District Court dismissed plaintiff's case based on a statute of
limitations and lack of causation grounds. 1991 U.S. District LEXIS 13561 (9/25/91).