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the insolvency clause of a reinsurance agreement provided that all proceeds of
reinsurance vested in the receiver of an insolvent ceding carrier and are
considered an asset of the insolvent estate. The reinsurer could not "reduce its
obligation by taking advantage of the willingness of the insured and the
insured's obligee to take less because of the insolvency." 751 F.2d at 965.
Hentschel v. Fidelity and Deposit Company of Maryland, 87 F.2d 833 (8th Cir.
1937). An insurer in the process of a voluntary dissolution reinsured all of its
business with another insurer and appointed a liquidating trustee. The
defendant surety company challenged the liquidating trustee's right to
maintain an action on a surety bond. The court held that the Missouri
insurance commissioner had no interest in the dissolution of the insurer since
its policyholders had been properly protected pursuant to the reinsurance
agreement and the only remaining interested parties were the creditors and
stockholders, which did not constitute a matter of public concern. The court
specifically noted that the Missouri commissioner had concluded that no public
interest made it necessary to administer the remaining assets of the
corporation.
Lakin, et al. v. Prudential Sec., Inc., 348 F.3d 704 (8th Cir. 2003). Receivers of
various insolvent insurance companies sued a federally chartered savings bank
in Missouri state court alleging negligence, breach of contract, and breach of
fiduciary duties. After the case was removed to federal court, defendant moved
to dismiss, which was granted, and the court denied the receiver’s motion for
jurisdictional discovery. On appeal, the Eighth Circuit affirmed in part and
reversed in part, holding that plaintiffs’ allegations were insufficient to establish
specific personal jurisdiction over the defendants. However, the court also
found that plaintiffs could likely establish general personal jurisdiction if they
were permitted to take such jurisdictional discovery, and further held the
assertion of jurisdiction over defendants would comport with due process.
Motlow v. Southern Holding & Securities Corporation, 95 F.2d 721 (8th Cir.
1938), cert. denied, 305 U.S. 609. By an order of liquidation of a New York
court, title to a cause of action for setting aside fraudulent transfers by an
insolvent insurance company was vested in the insurance commissioner as the
statutory successor of the insurance company for purposes of liquidation. The
commissioner is subject to the direction, supervision and control of the court
entering the liquidation order over the insolvent insurer's estate.
Ninth Circuit
Eleventh Circuit
Alabama
Watson v. Garamendi, 262 F. App’x. 805 (9th Cir. 2008). Policyholders brought
action to compel commissioner to distribute estate assets under an
enhancement agreement. The Ninth Circuit held Cal. Ins. Code § 1037(f)
precluded the action for lack of standing.
Hunt v. American Bank & Trust of Baton Rouge, L.A., 606 F. Supp. 1348 (N.D.
Ala. 1985) aff'd, 783 F.2d 1011 (11th Cir. 1986). The court of appeals affirmed the
district court's decision that the receiver's suit for securities law violations,
fraud and RICO were time barred under statutes of limitations. The standard
applied in discovery of alleged activities is due diligence and the court found
that in this case the receiver had information available in the insurance
department's files more than two years before the complaint was filed.
American Benefit Life Ins. Co. v. Ussery, 373 So.2d 824 (Ala. 1979). When the
Attorney General, on behalf of state of Alabama and purportedly on behalf of
the insurance commissioner, appealed final order of rehabilitation court
establishing assets and liabilities of an insolvent insurer, the court held that