Download PDF - Goodmans

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. 5 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Fifth Circuit
Wilson v. Alliance Life Ins. Co., 108 F.2d 150 (5th Cir. 1939). This was an action
by the receiver of an Illinois insurance company against certain Texas residents
to enforce a contract to assume an obligation of third parties and to foreclose
a deed of trust on land in Texas which secured the obligation. The lender
transferred its rights to the insurer shortly after the transaction. Subsequently,
the borrower sold the land and transferred its obligation and deed to the
defendant in the present action. After the insurance company was put into
liquidation, the receiver sought to foreclose on the land against the defendant.
The receiver was entitled to bring the action against the grantee/defendant.
The foreclosure was upheld.
Seventh Circuit Eakin v. Continental Illinois Nat'l Bank and Trust Co., 875 F.2d 114 (7th Cir. 1989).
Bank, which had issued standby letter of credit to bonding company as
beneficiary, refused to make payment to bonding company, which had been
taken over by Indiana Insurance Commissioner as liquidator. Bank claimed: (1)
that the bonding company ceased to exist upon entering liquidation; (2) that
the Liquidator had not agreed to be personally liable for the debt; and (3) that
bank was entitled to certain other promises as specified in the letter. The
Seventh Circuit affirmed the district court holding (1) that under Indiana law,
the bonding company and its Liquidator are one, with the Liquidator vested
with "title to all property, contracts, and rights of action of the insurer;" (2)
that, because bank was not entitled to the personal guaranty of the bonding
company's managers, it was not entitled to Liquidator's personal guaranty;
and (3) that Liquidator's signature was adequate to secure promises to which
bank was entitled.
Keehn v. Excess Ins. Co. of America, 129 F.2d 503 (7th Cir. 1942). In a suit by the
receiver to recover upon a reinsurance contract, the court held that the
receiver was barred from an action against the reinsurer because the insolvent
insurer failed to give notice of loss in accordance with the reinsurance contract,
and a receiver acquires no greater rights than those had by the insolvent
company.
Schacht v. Brown, 711 F.2d 1343 (7th Cir. 1983), cert. denied, Arthur Anderson &
Co. v. Schacht, 104 S. Ct. 508 and 104 S. Ct. 509 (1983). The insurance
commissioner, as statutory liquidator of an insolvent company, had standing to
maintain civil action under Racketeer Influenced and Corrupt Organization Act
against officers and directors of parent corporation, who allegedly fraudulently
continued the insurer in business past its point of insolvency and looted the
insurer of its most profitable and least risky business thus aggravating the
insolvency.
Eighth Circuit Ainsworth v. General Reinsurance Corp., 751 F.2d 962 (8th Cir. 1985). A
reinsurer sought to reduce its obligation to the estate of an insolvent carrier by
making a settlement directly with the insured and without allowing the
receiver to participate in the settlement negotiations. In disallowing the
practice, the United States Court of Appeals for the Eighth Circuit found that
5 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).