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Texas
Brodhead v. Dodgin, 824 S.W.2d 616 (Tex App.‐‐Austin 1991). Upon rejection of
their proof of claim by the receiver of Mission National, the insolvent excess
carrier, injured claimants sued the receiver in the liquidation proceeding. The
receiver argued for dismissal, claiming the action was an intervention in the
liquidation proceeding not permitted by the insurance code. The court
severed the action from the liquidation proceeding, and assigned it a separate
suit number. The court held that the provision of the insurance code which
required the filing of a separate suit in the same court in which the liquidation
proceeding was pending was not a jurisdictional statute, but rather a
mandatory and exclusive venue provision. Accordingly, the trial court had
jurisdiction to order the action severed. The court rejected the receiver's policy
defenses finding that when an insurance carrier denies all liability and refuses
to defend, the receiver for that carrier cannot thereafter rely upon policy
defenses to defeat the claim. The court also rejected the receiver's claim that
because the insolvent primary carrier had not paid its policy limits, the
insolvent excess carrier was not liable.
Gibbs v. Wheeler, 306 S.W.2d 929 (Tex. Civ. App. 1957), writ ref. n.r.e. The
court held that the receiver received the promissory note from the insolvent
insurer subject to any equities and defenses available against the note in the
hands of the insurer.
Wisconsin In re Liquidation of Inter‐State Exchange, 211 Wis. 258, 247 N.W. 839 (1933).
Subscribers to the stock of a voluntary association challenged the disallowance
of their claims for the return of the securities they had posted to comply with
Wisconsin's statutes regarding the incorporation and formation of a voluntary
association. The court held that the securities posted by these claimants with
the attorney‐in‐fact of the association were not obligations of the association
nor would the policyholders of the association be assessed for the claims of
these stockholders.
In Re The Ancillary Liquidation of Mission Ins. Co., Before the Wisconsin
Insurance Security Fund, WISF #71‐2025. A claim for attorney fees against the
Wisconsin Insurance Security Fund was denied because the duty of an excess
insurance carrier to defend and indemnify its insured arises only where: (1) the
occurrence which is the subject matter of the lawsuit is within the excess
policy's coverage; and (2) the primary insurer's policy limits are exhausted or
the primary insurer refuses to provide a defense.
Policyholders' Claims
Third Circuit General Glass Industries Corp. v. Monsour Medical Foundation, 973 F.2d 197
(3rd Cir 1992). Plaintiff, on behalf of its 300 workers, brought RICO, ERISA
and 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