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Pennsylvania
Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 62 Dauph.
366, (1952), affirmed, 373 Pa. 105, 95 A.2d 664, (1952), cert. denied, Haines v.
Pennsylvania, 346 U.S. 852, rehearing denied, 346 U.S. 917 (1953). An insurance
company was found to have waived its technical rights to notice and hearing
where its officers had admitted the company was in a hazardous condition and
had requested that the insurance commissioner take over its affairs, where the
company's counsel has waived issuance of a notice in a proceeding before the
Attorney General and had consented to a court order to deliver the company's
property to the commissioner. In this case the court was justified in ordering
the commissioner to take over the company's property for liquidation.
Foster v. Westmoreland Casualty co., 115 Pa. Commonwealth 393, 540 A.2d 347
(1988). The Insurance Commissioner's petition requesting an insurer be placed
into involuntary dissolution and liquidated was sufficiently specific in that it
alleged insolvency and hazardous financial condition as general grounds for
liquidation, set forth specific results of an investigation conducted by an
independent actuarial firm, and alleged improper actions of key officers of the
insurer. The Commissioner can directly petition the court for a liquidation
order. Appropriate administrative notice and hearing are provided where the
Commissioner requests a judicial declaration of insolvency in conjunction with
a pending liquidation proceeding.
Texas
Washington American Life Ins. Co. v. State, 545 S.W.2d 291 (Tex. Civ. App.
1977). Two companies which appealed the original ex parte peremptory
orders placing them in ancillary receivership by filing answers and presenting
evidence at a hearing were found to have waived any defects in the orders.
The court held that the decision to appoint a receiver is in the sound discretion
of the court and the trial court did not abuse its discretion in appointing a
receiver or setting the amount of supersede as bonds.
Powers and Duties of the Rehabilitator or Liquidator ‐ Constitutionality
Seventh Circuit
General Railway Signal Company v. Corcoran, 748 F. Supp. 639 (N.D. Ill.
1990), reversed in part by General Railway Signal Company v. Corcoran, 921
F.2d 70 (7th Cir. 1991). American Fidelity Fire Insurance (AFFI) was a surety
on two performance bonds given by Transit Systems Technology, Inc. in
favor of a public transit agency in California and a private bus company in
New York. The United States Small Business Association (SBA) issued Surety
Bond Guarantee Agreements in connection with these performance bonds.
AFFI sued General Railway, alleging that it had breached obligations to
perform on the California and New York contracts, causing AFFI to pay out
on its bonds. AFFI was successful in these claims in the Illinois state court. In
the meantime, AFFI became insolvent, and liquidation proceedings were
initiated in New York. Joseph Corcoran, the Superintendent of Insurance of
the State of New York, was named Liquidator. The SBA notified General
Railway that it was making a claim to the proceeds of the Illinois state
judgment. General Railway filed an interpleader action, claiming that it was
subject to multiple liability on the same funds.
The Liquidator moved to dismiss the interpleader action, arguing that
diversity jurisdiction did not exist because the Liquidator (i.e., the
Superintendent) was not a citizen of any state. The court disagreed, and
held that it could exercise diversity jurisdiction over the case. The court held
that the Superintendent was also not eligible for sovereign immunity under