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meaning, held that the Indiana claims should be given Class 6 classification
because they are the “claims of any state or local government.”
Reciprocity
Second Circuit
Fifth Circuit
Twin City Bank v. Mutual Fire Marine & Inland Ins. Co., 646 F. Supp. 1139 (S.D.
N.Y. 1986), aff'd 812 F.2d 713 (2d Cir. 1987). The New York Southern District
Court held that an insurer undergoing rehabilitation, pursuant to an Order of
Suspension issued by the Pennsylvania Commissioner, was entitled to have the
execution of an Arkansas judgment stayed in New York. The court explained
that Pennsylvania was a "reciprocal state" under New York Insurance Law
prohibiting the maintenance of any action or proceeding during the pendency
of delinquency proceedings. The court added that even if Pennsylvania was
not a reciprocal state, under the circumstances, it was appropriate to extend
comity in order to respect the pending delinquency proceedings in
Pennsylvania.
Callon Petroleum Co. v. Frontier Ins. Co., 351 F.3d 204 (5th Cir. 2003). The court
of appeals found that a summary judgment enforcing the collection of a bond
from an insolvent insurer was valid despite an out‐of‐state receiver’s subject
matter jurisdiction argument. The court stated that the insolvent insurer’s entry
into rehabilitation in another state did not automatically strip subject matter
jurisdiction. Furthermore, diversity jurisdiction was sound. The insolvent
insurer’s rehabilitator had failed to respond to the motion for summary
judgment and over a year later, moved to have the adverse judgment vacated.
The court stated the receiver’s due process argument was unpersuasive. The
court relied on the fact that the receiver was given three notices of the
judgment and had failed to act for 14 months.
Fla. Dep’t of Ins. v. Chase Bank of Tex., N.A., 274 F.3d 924 (5th Cir. 2001).
Florida’s receiver of an insolvent insurer lacked standing in Texas to bring suit on
behalf of policyholders for fraud and breach of fiduciary duty against a bank.
Policyholders had not assigned their claims to the receiver. Accordingly, the
court stated there was an absence of facts to support any acceptable basis of
representation.
Tenn. ex rel. Sizemore v. Surety Bank, 200 F.3d 373 (5th Cir. 2000). The Fifth
Circuit Court of Appeals held that an out‐of‐state insurance receiver lacked
standing in Texas. The receiver sought to obtain control of the insolvent
insurer’s Texas assets through the Tennessee courts. When the Tennessee
receiver tried to enforce his state’s liquidation order in Texas, the district court
there granted summary judgment in favor of defendant, declaring that the
Tennessee court lacked jurisdiction over assets outside of Tennessee.
Furthermore, receivership proceedings had likewise begun in Texas, and a Texas
receiver had already been designated. The court of appeals affirmed the district
court’s decision.
Seventh Circuit
Holz v. Smullan, 277 F.2d 58 (7th Cir. 1960). The New York liquidator brought
an action to require an Illinois agent to account for monies collected for
insolvent insurer. With the approval of the Illinois ancillary receiver, the agent
returned all unearned premium to policyholders, but the New York liquidator
contended the agent had no authority to make such refunds. Noting that the
Illinois ancillary liquidator had the same powers and duties with respect to
insolvent insurer's assets in Illinois as possessed by the domiciliary liquidator,
the court held that if under Illinois law the agent would have been liable to a
policyholder who brought an action to recover on one of the unearned
premiums, the agent should not be held liable to the domiciliary liquidator
because of the return of premiums to the policyholder who were entitled to