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insureds paid by the reinsurer after the date of liquidation for the purpose of
attaining "class 3" status as a policyholder, beneficiary or insured.
Delaware
District of Columbia
Reliance v. Plum Creek Timber Co., L.P., 2004 WL 838634 (Del. Super. 2004). An
action was brought by Plum Creek on behalf of its 65,000 beneficial owners
against the Washington Insurance Guaranty Association (“WIGA”). Plum Creek
had a directors’ and officers’ insurance policy issued by Reliance Insurance
Company (“Reliance”). An action was brought against Plum Creek and Reliance
assumed its defense. Two years later Reliance was declared insolvent and the
insurance guaranty associations of the states where the claims arose assumed
Plum Creek’s defense. At issue was the amount WIGA was obligated to cover
for Plum Creek’s outstanding liabilities. WIGA contended that its liability to Plum
Creek was limited to a total of $299,000. The court held that “WIGA [wa]s
obligated to satisfy the claims of each of Plum Creek’s approximately 65,000
Unitholders, up to the total policy limits of $25,000,000 prorated among the
individual Unitholders, with no individual Unitholder receiving an amount in
excess of the statutory cap of $299,000.” Id. at *4.
Zhou v. Jennifer Mall Restaurant, Inc., 699 A.2d 348 (D.C. 1997). Plaintiffs the
Zhous were injured by drunk driver overserved by defendant Jennifer Mall
Restaurant. The driver’s carrier settled for $200,000. The restaurant’s liquor
liability carrier was the insolvent Union Indemnity; the policy had limits of
$300,000. The Zhous’ injuries were stipulated to be in excess of that
amount. The District of Columbia Insurance Guaranty Association took the
position that its maximum statutory liability of $300,000 was met by the
payment of $100,000 to the Zhous since it should get credit for the $200,000
paid by the driver’s insurer. The Zhous argued that the DC Insurance
Guaranty Act should be liberally construed as a “remedial” statute. Held, the
Act would be construed according to its plain meaning. The Zhous demand
for $200,000 additional from the DCIGA was a “covered claim” because it
was a “claim” or “cause of action”; DCIGA’s interpretation read the work
claim as a “loss” and the insurance professionals who drafted the statute are
deemed to know the difference between the words “claim” and “loss.” The
“nonduplication of recovery” and “exhaustion” requirements of the Act did
not apply because the Zhous “claim” against the drunk driver (for the
negligence of the driver) was not the same as their “claim” against the
restaurant (for its negligence in serving the driver). Although there was one
“loss” in this instance (the Zhous’ injuries), there were two “claims.” The
claim against the drunk driver was not a “covered claim” but the claim
against the restaurant was a covered claim. Thus there would be only one
payment for a covered claim when DCIGA paid the entire $300,000.
Florida Gibson v. Resolution Trust Corporation, 750 F. Supp. 1565 (S.D. Fla. 1990).
Premiums paid to an insurance company are not held in trust for the benefit of
the insured, but are assets of the insurance company available to satisfy the
insurance company's general debts. Accordingly, an insolvent insurer cannot
hold paid premiums in trust for an insured; rather, the premiums are assets of
the estate and are subject to general creditors.
Westcott v. Thompson, 819 F. Supp. 1056 (M.D. Fla. 1993). A Multiple‐
Employer Welfare Arrangement was placed into liquidation in Florida. The
claim of a beneficiary of the plan was denied by the receiver, and such denial
was approved by the liquidation court. The federal court held that the
participant’s ERISA claims were barred by the failure to pursue the state
claims process.
Illinois
O'Brien v. General American Life Ins. Co., 345 Ill. App. 264, 103 N.E.2d 193 (Ill.
App. Ct. 1951). Plaintiffs sued the balance of a claim for total disability under
for policy issued by an insolvent Missouri life insurance company. The Missouri