Download PDF - Goodmans

participate in the settlement negotiations. In disallowing the practice, the
United States Court of Appeals for the Eighth Circuit found that 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.
Ninth Circuit
Bank Of New York v. Freemont General Corp 523 F.3d 902 (9th Cir. 2008). A
parent insurance holding company unlawfully transferred funds belonging to
a insolvent subsidiary insurance company and held in escrow account as a
statutory deposit from a bank to itself without gaining approval from state
insurance official. The bank reinstated the statutory deposit and brought
suit for conversion and intentional interference with contract against the
parent holding company. In an action for conversion, the court held, that
because the bank knowingly permitted the transfer, the bank itself could not
bring a claim for conversion. The court, however, permitted the bank to
proceed on an intentional interference with contract claim against the
parent holding company.
Insurance Commissioner. v. Altus Fin. S.A., 540 F.3d 992 (9th Cir. 2008).
Commissioner sought damages from a corporation that had conspired to
fraudulently purchase assets of insolvent insurer. In a jury trial the court had
excluded evidence of damages based on the value of offers submitted by other
bidders for the assets. Based on the evidence permitted by the court, jury
found that the commissioner had suffered no compensatory damages as a
result of the actions of the conspiring party, but that the actions of the
conspirator entitled the commissioner to $700 million in punitive damages. The
Ninth Circuit held the absence of an award of compensatory damages
established that the commissioner did not suffer actual damages and thus was
not entitled to punitive damages. The court also held that the trial court had
improperly excluded evidence of damages based on the alternative bids and
that the commissioner was entitled to pursue the theory at the damages phase
of the new trial.
Arkansas Baldwin‐United Corp. v. Garner 283 Ark. 385, 678 S.W.2d 754 (1984). The
insurance commissioner, as receiver of three insolvent insurance companies
owned by one corporation, proposed a rehabilitation plan which was approved
by the court. The parent corporation appealed the plan's provisions that: (i) the
rehabilitation court had exclusive jurisdiction over the assets of the companies,
and (ii) the rehabilitation court would refuse to honor a judgment obtained in
any other forum. In affirming the lower court's decision, the Supreme Court of
Arkansas announced that nothing contained in the McCarran‐Ferguson Act or
the Bankruptcy Act prohibits a state form determining the rights of an insurance
company's creditors. Furthermore, the appellate court added, the lower court
properly ordered that all claims to the companies' assets be adjudicated in the
rehabilitation court.
California
Garamendi v. Executive Life Ins. Co., 17 Cal. App. 4th 504 (Ct. App. 1993). The
California Court of Appeals found that a court overseeing an insurance
insolvency proceeding has in rem jurisdiction over a third party's assets
when that party has an "identity of interest" with the insolvent insurer, even
if the party is not involved in the business of insurance. Prior to insolvency,
the insurer formed and funded a separate partnership for the purpose of
real estate investment. The court found that because the insurer had a
substantial part of its business tied up in the partnership for the purpose of
investing its capital, and this partnership accounted for 10% of the insurer's
real estate investment, there was an "identity of interest" between the
insurer and the partnership.