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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
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. 6 Hence, both the District Court and
Commonwealth Court actions were allowed to proceed simultaneously.
Fifth Circuit
Barnhardt Marine Ins., Inc. v. New England International Surety of America,
Inc., 961 F.2d 529 (5th Cir. 1992). Insurance broker brought action as subrogee
against insolvent insurer and its president and chairman of the board to
recover unearned premiums paid after insolvency. Citing the McCarran‐
Ferguson Act, 15 U.S.C. § 1011, the court affirmed an administrative stay
pending resolution of all proceedings in the state liquidation court on the
grounds of Burford abstention. Burford v. Sun Oil, 319 U.S. 315, 63 S. Ct. 1098
(1943). The action against the president and chairman of the board individually
for mismanagement and under capitalization was also properly stayed,
because the derivative claim involved the same assets which the Commissioner
was required to collect and distribute in the liquidation proceeding. Pursuit of
those claims in federal court would "usurp" Louisiana's control over the
liquidation proceeding, permit plaintiff to obtain an unfair advantage over
other claimants, and "encroach" into the Commissioner's exclusive power as
liquidator.
Brown v. Link Belt Division of FMC Corp., 666 F.2d 110 (5th Cir. 1982). The court
affirmed a stay of all claims against an insolvent insurer, that was placed in
liquidation during the pendency of the actions.
Eighth Circuit
Beasley v. Keiper, 2002 WL 1078388 (8th Cir. 2002). The Eighth Circuit denied
defendant’s request to stay a pending appeal when defendants’ insurer, PHICO
Insurance Company, became subject to a liquidation order, determining that all
the work of defense counsel already had been done, the case was fully briefed
and ready for decision without argument, there were no additional expenses
chargeable to the insurance company, and further processing by the relevant
state authorities of claims against the insurance company would in no way be
impeded by the court’s affirming the decision in the case.
6 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).