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Powers and Duties of the Rehabilitator or Liquidator
U.S. Supreme
Second Circuit
Third Circuit
Relf v. Rundle, 103 U.S. 222 (1879). The Louisiana policyholders of an insolvent
insurer instituted a proceeding in Louisiana for the appointment of a receiver,
and five days later, the Missouri insurance commissioner instituted
proceedings against the same insurer and was appointed liquidator. The
liquidator intervened in the Louisiana state court proceedings and filed a
petition for removal to the federal court. The U.S. Supreme Court, in
upholding the Missouri liquidator's right to remove the case to federal court,
reviewed the legal standing of the Missouri liquidator noting that the liquidator
(1) is not an officer of a Missouri state court but is a statutory receiver entitled
to hold and dispose of all of the assets of an insolvent insurance company for
the benefit of insureds; and (2) is the statutory successor of the insolvent
company; (3) is an officer of the state and represents the state in insolvency or
performing its public duties in winding up the affairs of an insolvent company;
(4) has authority from statute and not from a decree of the court; (5) is a
trustee of an express trust; and (6) every Louisiana policyholder and creditor is
charged with the knowledge that the insurer would be dissolved under
Missouri laws and the Missouri commissioner appointed liquidator.
Corcoran v. Ardra Ins. Co., Ltd., 842 F.2d 31 (2d Cir. 1988). The court dismissed
an appeal claiming that the district court had abused its discretionary power
when it decided to abstain from exercising jurisdiction. New York's complex
administrative and judicial system for regulating and liquidating domestic
insurers, the court explained, is the type of regulatory scheme that indicates
the court should seriously consider abstention from asserting jurisdiction when
it faces a novel question. It added that state courts should first define the
powers of the Superintendent.
Fidelity & Deposit Co. of Maryland v. Hunt, 107 F.2d 42 (3rd Cir. 1939). The
insurance commissioner liquidating an insurance company is required to
liquidate, as an asset, a claim for alleged embezzlement against the company's
president and to maintain a lien on the stock of the president.
General Glass Industries Corp. v. Monsour Medical Foundation, 973 F.2d 197
(3rd Cir 1992). Plaintiff, on behalf of its 300 workers, brought RICO, ERISA and
Commonwealth tort claims against the Company's employee health insurer in
liquidation (Keystone Medical Services and its successor, Monsour Medical
Foundation). The Third Circuit vacated so much of the District Court's order
dismissing plaintiff's claims that were broader than, or different from, those
asserted by the Pennsylvania Commissioner of Insurance in the
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