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Stamp v. Inamed Corp., 777 F. Supp. 623 (N.D. Ill. 1991). The Liquidator of the
insolvent Cooperative Health Plan brought an action against the defendant,
which become the sole shareholder of Cooperative pursuant to a merger
agreement. The complaint alleged a breach of a contract that called for the
defendant to provide capital contributions and subordinated loans as
necessary for compliance with the financial requirements set by the Illinois
Department of Insurance. Furthermore, the Liquidator alleged that the
defendant failed to provide a promised loan that Cooperative had
represented and relied upon in its application for approval of a purchase
agreement which it submitted to the Illinois Department of Insurance.
The defendant first argued in its motion to dismiss that the plaintiff did not
have standing to sue because Cooperative neither constituted a party nor a
third‐party beneficiary of the agreement. The court disagreed and found that
the agreement between the parties clearly manifest[ed] an intention to
directly benefit Cooperative because the defendant promised to maintain
Cooperative's solvency and viability for two years. Thus, the plaintiff fell
within an exception to the privity rule barring those not party to a contract
from suing because they received a direct benefit from the contract.
Defendant also argued that Cooperative/the Liquidator lacked standing to
sue because Cooperative was defendant's wholly‐owned subsidiary and an
entity cannot sue itself. The court rejected defendant's attempt to use
"reverse piercing" to treat it and Cooperative as a single entity because the
defendant "freely chose to form a subsidiary and consequently...cannot reap
the benefits of incorporation while at the same time side‐stepping its
reciprocal pit‐falls." Therefore, as a separate corporate entity, the plaintiff
had standing to sue.
New York Application of Bohlinger, 199 Misc. 941, 106 N.Y.S.2d 953 (1951), affirmed, 280
A.D. 517, 113 N.Y.S.2d 755, affirmed, 305 N.Y. 258, 112 N.E.2d 280, cert. denied,
346 U.S. 857, rehearing denied, 346 U.S. 913. In the proceeding by the
insurance commissioner for an order to dissolve the corporate existence of a
fraternal benefit society, where the society received ample notification of the
charges against it and of the contents of the report by the insurance examiner
and it availed itself of the right to a hearing, the requirements of due process
were met.
In re National Surety Co., 283 N.Y. 68, 27 N.E.2d 505 (1940), motion denied, 284
N.Y. 593, 29 N.E.2d 668, cert. denied, 311 U.S. 707. When the general
corporation law provided for the continued existence of a dissolved
corporation for the purpose of winding up its affairs, and the insurance code
directly conflicted with this, the court held that the insurance code was
controlling. The corporate existence of a surety company ceases on the date
the insurance commissioner obtains an order directing the immediate
cessation of its corporate existence. The dissolution of the insurer abates all
litigation to which the corporation was either plaintiff or defendant, so that
judgments entered thereafter were void.
In re National Surety Co., 176 Misc. 53, 26 N.Y.S.2d 370 (1941). Upon the entry of
the order of liquidation, the corporate existence of an insurance company
ends. Pending actions against the company and those later instigated are
abated.
Pennsylvania Commonwealth ex rel. Chidsey v. Keystone Mutual Casualty Co., 366 Pa. 149,
76 A.2d 867 (1950). Policyholders of a mutual insurance company are