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procured new policies in a solvent company for the agent's clients. It was held
that the agent did not have a right to offset the unearned premiums due the
agent's customers against the claim of the Indiana liquidator, since the policies
were not cancelled by operation of law until the Indiana company was
declared insolvent by the Indiana court.
Transfer of Obligations to Another Insurer or Reinsurer
Fourth Circuit
Charleston Area Med. Ctr. v. Blue Cross & Blue Shield, 6 F.3d 243 (4 th Cir.
1993). Blue Cross and Blue Shield of West Virginia, Inc. (the “Charleston
Plan”) notified the Commissioner of the West Virginia Department of
Insurance that the company was economically impaired as defined in the
West Virginia Code. The Commissioner and the CEO of the Charleston Plan
asked the Blue Cross and Blue Shield Association (the “Association”) to find
qualified merger or affiliation candidates but few were identified.
Blue Cross and Blue Shield Mutual of Ohio, Inc. (the “Cleveland Plan”) and
the Charleston Plan began negotiating and signed a letter of intent
expressing their desire to affiliate. After a due diligent examination of the
Charleston Plan, the Cleveland Plan determined the affiliation was imprudent
because of the severe financial problems of the Charleston Plan.
Subsequently, the Cleveland Plan devised a new approach which included (1)
a controlling affiliation with Blue Cross and Blue Shield of West Central West
Virginia, Inc. (the “Parkersburg Plan”), (2) state liquidation of the Charleston
Plan, (3) acquisition of the liquidated assets of the Charleston Plan, and (4)
consolidation of those assets with the Parkersburg Plan to create a new Blue
Cross and Blue Shield entity in West Virginia. Having few other options, the
State of West Virginia put the Charleston Plan into liquidation and its assets
were purchased free of encumbrances. The new conglomerate became
Mountain State Blue Cross and Blue Shield, Inc. and took over payments for
health care providers for services rendered to former Charleston Plan
subscribers after October 11, 1990.
The hospitals and other creditors to which the Charleston Plan owed money
for services prior to October 12, 1990 were left with claims against liquidated
assets of the Charleston Plan. The hospitals claimed the Cleveland Plan, by
abandoning its intention to affiliate with the Charleston Plan, forced the
Charleston Plan into liquidation and, thus, is liable for tortuous interference
with the hospitals’ contracts with the Charleston Plan.
The court held that to prove proximate cause, in this tortuous interference
with a contract case against a solvent health insurer that acquired the
insolvent insurers assets after liquidation, the hospitals had to show by a
preponderance of the evidence that “but for” acts of the solvent insurer,
they would have been paid. The court concluded that the hospitals failed to
prove that claim and, thus, the Cleveland Plan was entitled to judgment as a
matter of law.
Seventh Circuit Sybron Transition Corp. v. Security Ins. of Hartford, 258 F.3d 595 (7th 2001).
Under New York’s time‐on‐the‐risk approach to allocating insurance coverage
for diseases with long latency periods, insurer’s liability is not increased by
insolvency of successor insurer.
California McConnell v. Industrial Indemnity Co., 219 Cal. App. 2d 809, 333 Cal. Rptr. 418
(1963). The insurance commissioner persuaded a group of insurance