Amicus Curiae Brief — Quackenbush v. Allstate Ins. Co.

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No. 95-244 () | yoy 30 088

_—_—_—_——_———— -~*

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In THE

Supreme Court of the United States

OctTosper Term, 1995

Cxuuck QuACKENBUSH, Insurance Commissioner of the State of

California, in his capacity as Liquidator and Trustee of the Mission

Insurance Company Trust, Mission National Insurance Company

Trust, Enterprise Insurance Company Trust, Holland-America

Insurance Company Trust and Mission Reinsurance Corporation Trust,

Petitioner,

VS.

ALLSTATE INSURANCE COMPANY,

Respondent.

Petition for Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

BRIEF OF THE COMMONWEALTH OF

MASSACHUSETTS AND THE DIRECTOR OF

INSURANCE OF THE STATE OF MISSOURI AS

AMICI CURIAE IN SUPPORT OF

PETITIONER, CHUCK QUACKENBUSH,

INSURANCE COMMISSIONER

OF THE STATE OF CALIFORNIA

Joun C. Crart Scott HARSHBARGER

RicHarD D. RHYNE Attorney General

Tuomas W. Rynarp* Commonwealth of Massachusetts

Crart Fripkin & RHYNE

310 Monroe Mark W. STAHLHUTH

Jefferson City, MO 65101 General Counsel

(314) 636-8578 Missouri Department of Insurance

(314) 636-8615 (telecopier)

Attorneys for Amici

*Counsel of Record

St. Louis Law Printing, Inc. 14239 Manchester Rd. Manchester, MO 63011 314

TABLE OF CONTENTS

Page

Interest Of Amtici Cisridl .....0000.0ccccserccsscrcsossverssesessssesssess |

Summary of Argument ................ccccseeseeneereeeeneneeerenees 5

ALQUMEM .........cccsccceeecerrsereceseeensseessscsensnressrssrensesssesneanes 7

A. Abstention is a balancing process calling for a

weighing of State and Federal interests, not a

mechanical test based on the form of action. 7

B. The State interest in acomprehensive receiver-

ship proceeding outweighs the Federal inter-

est in providing a federai forum. .................... 8

C. The equity/law distinction should have no role

in the District Court’s decision whether to

I ics ccecncscecssvsnavecsatsacescbensbsontncntomminintonate 21

ELL ITE I ny FD SRO 27

TABLE OF AUTHORITIES

Page(s)

Cases:

Arizona v. San Carlos Apache Tribe of Arizona, 463

U.S. 545, 103 S.Ct. 3200, 77 L.Ed.2d 83?

TITTIES scecsssihinatilipnsomsiidiniaioniepienacinoesenivectecsoncsooseccens 22

Attorney General v. North American Life Insurance Co.,

Be ie BFE CRIED cavectensensesencconsvesnstsescccesssovesseuen 11

Burford v. Sun Oil Co., 319 U.S. 315 (1943). ........... .$,.21,22

Clay v. Sun Insurance Office, Ltd., 363 U.S. 207, 80

A, BAe COPIED. ccncccccncasecesssscerescosoorssaccsevonevoeoenn 24

Colorado River Water Conservation District v. United

States, 424 U.S. 800,96 S.Ct. 1236, 47 L.Ed.2d 483

SEES a nee ne OT ee 21,22

Commissioner of Insurance v. Century Fire & Marine

Insurance Co., 373 Mass. 473, 476-77, 367 N.E.2d

of), a 2

Commonwealth of Pennsylvania v. Williams, 294 U.S

ene 25

Dombrowski v. Pfister, 380 U.S. 479, 85 S.Ct. 1116, 14

£56.28 22 (IDES). ..0.cncercreccsessess | 24

Doughty v. Underwriters at Lloyds, London, 6 F.3d 856

(1st Cir. 1993). 4.18

Fair Assessment in Real Estate Association v. McNary,

454 U.S. 100, (1981) 24

Fornaris v. Ridge Tool Co., 400 U.S. 41 (1970) 24

Garamendi v. Allstate Insurance Co., 47 F.3d 350 (9th

Cir. 1995) 45.19.23

Garamendi v. Executive Life Ins. Co., 21 Cal. Rptr. 2d

578 (Cal. App. 1993), review denied 1993 Cal

LEXIS 5639 (1993) .........

General Glass Industries Corp. v. Monsour Medical

Foundation, 973 F.2d 197 (3d Cir. 1992).............

Growe v. Emison, __—- U.S. ___, 113 S.Ct. 1075

Gulfstream Aerospace Corp. v. Mayacamas Corp., 485

U.S. 271, 108 S.Ct. 1133, 99 L.Ed.2d 296

ee 7

Harrison County Commissioners Court v. Moore, 420

U.S. 77, 95 S.Ct. 870, 43 L.Ed.2d 32 (1975). .......

In re Rehabilitation of Mutual Benefit Life Insurance

Co., 609 A.2d 768 (NJ. App. Div. 1992)

Juidice v. Vail, 430 U.S. 327,97 S.Ct. 1211, 51 L.Ed.2d

ESE Rae os

Klaber v. O" Malley, 90 S.W.2d 396 (Mo. 1936)

Kuecklehan v. Federal Old Line Insurance Co., 69

Wash.2d 392, 418 P.2d 443 (1966).

Lake Carriers Ass'n v. MacMullan, 406 U.S. 498, 92

S.Ct. 1749, 32 L.Ed.2d 257 (1972)

Louisiana Power & Light Co. v. City of Thibodaux, 360

U.S. 25, 79 S.Ct. 1070 (1959)

Lucas v. Manufacturing Lumbermen’s Underwriters,

163 S.W.2d 750 (Mo. 1942)..

Maryland Casualty Co. v. Commissioner of Insurance,

372 Mass. 554, 363 N.E.2d 1087 (1977)

—= §¥Y —

Medallion Insurance Co. v. Whartenbee, 568 S.W.2d

SED Gin. Aa. COGED. cncenssstieensninenneen

Middlesex County Ethics Committee v. Garden State

Bar Ass'n, 457 U.S.423, 102 S.Ct. 2515, 73 L.Ed.2d

DODGED, ccncensnrcssnsnssmnsnsscnisccnessnsintetpitiniatiaainits

Moses H. Cone Memorial Hospital v. Mercury Con-

struction Corp., 460 U.S. 1, 103 S.Ct. 927, 74

Motlow v. Southern Holding & Securities Corp., 95 F.2d

721 (8th Cir. 1938), cert. denied, 305 U.S. 609

SE: cenicieerinticimesiiibaiiatiaiieihaaeienindeitaiiaainecianialhaaieienies

New Orleans Public Service, Inc. v. Council of New

Orleans, 491 U.S. 350, 109S. Ct. 2506, 105 L.Ed.2d

, ne to Se a

Penn Central Casualty Co. v. Commonwealth of Penn-

sylvania, 294 U.S. 189 (1935). .........ccccccccesceeeerenes

Steffel v. Thompson, 415 U.S. 457, 94 S.Ct. 1209, 39

PPPOE, ceneniciciuniitnnnininiennucntsialigsiontis

Tafflin v. Levitt, 493 U.S. 455, 110 S.Ct. 792, 107

5 REESE SES STEERS 5:

Trainor v. Hernandez, 431 U.S. 434, 97 S.Ct. 1911, 52

RS eS eereees. Se

United Gas Pipe Line Co. v. Ideal Cement Co., 369 U.S.

of a ee ae )

United States Department of the Treasury v. Fabe,

U.S. ___, 113 S$.Ct. 2202, 124 L.Ed.2d 449

Willcox v. Consolidated Gas Co., 212 U.S. 19, 29 S.Ct

192, 53 L.Ed.2d 382 (1909)

Wilton v. Seven Falls Co.,__-_—s U.S. ___, LIS S.Ct. 2137

SE sincttentinhimaviennenannememnqemetaioneee

Wolfson v. Mutual Benefit Life Ins. Co., 51 F.3d 141 (8th

ES eee a Sena Ee

Younger v. Harris, 401 U.S. 37,91 S.Ct. 746, 27 L.Ed.2d

Zuickler v. Koota, 389 U.S. 241, 88 S.Ct. 391 (1967)...

Statutes:

CS Cee

Te nae

Mass. Gen. L. ch. 175, § 6 (1987). .............cccccee,

Mass. Gen. L. ch. 175, §§ 180A-180L (1987 & Supp.

Su ccannssetainninibemmentienineeenene

Mass. Gen. L. ch. 175, § 180B (1987 & Supp. 1995). ..

Mass. Gen. L. ch. 175, § 180C (1987). 000.

Mo. Rev. Stat. § 375.954 (1994). 00,

Mo. R ev. Stat. § 375.958 (1994). 00,

Mo. Rev. Stat. § 375.1160 (1994). 0.

Mo. Rev. Stat. § 375.1166 (1994). 000...

Mo. Rev. Stat. § 375.1174 (1994). 00.

Mo. Rev. Stat. § 375.1176 (1994). 000 ee.

Mo. Rev. Stat. § 375.1182.5 (1994).

Haw. Rev. Stat. § 431:15-103.5(5) (1993)...

Md. Ins. Code Ann. § 131 B(S) (Supp. 1995)

4.24

— Y¥) —

R.1. Gen. Laws § 27-14.2-2 (1994) oooccccceceeeeeeee

Wis. Stat. Ann. ch. 645, preliminary comment (West

SOUP cestnsiscnsrsntecnesinasseapeisisidiinitieatinsiadiiptentslintiininnatnises

Wis. Stat. Ann. § 645.01 (4)(a) (West 1995). 0.

Wis. Stat. Ann. § 645.01, comment on sub. (4)(a) (West

RE SS ee

Wis. Stat. Ann. § 645.01 (4)(f) (West 1999). 000000000...

Wis. Stat. Ann. § 645.01, comment on sub. (4) (West

ee cintieernitiliestiieit ilies dale a na ta

Wis. Stat. Ann. § 645.41 (7), comment on sub. 7 (West

Wis. Stat. Ann. § 645.49, comment on sub. (1) (West

ITT secnsditcatesiriiendthatmnietiaedameiih a Nl thd aa aan

Laws of 1851, ch. 95, § 6, Denio & Tracy's Revised

Statutes of the State of New York 1:1288, § 30

ee ees a a ee

Other:

P. Dassenko, Obligations and Duties of the Liquidators

to Reinsurers: A Liquidator’s Perspective, in “Law

and Practice of Insurance Company Insolvency

Revisited” (American Bar Ass'n 1989) 00000...

S. Kimball, History and Development of the Law of State

Insurer Insolvency Proceedings: An Overview, in

“Law and Practice of Insurance Company Insol-

vency” (American Bar Ass'n 1986). 0000000000000...

National Association of Insurance Commissioners, Mode!

Supervision, Rehabilitation and Liquidation Act §

BUT emnsnsiediinitadiaeainataniiiacen st ee eT

17,19

10,19

— Vvil—

National Association of Insurance Commissioners, “Re-

ceivers Handbook for Insurance Company

Insolvencies” (NAIC 1992). 000000 occccceceeeeeen.

F. Semaya, Insurance Insolvency - Where We Are To-

day, in “Law and Practice of Insurance Company

Insolvency Revisited” (American Bar Ass'n

SUITE cieiaticttcinaliipdeeiieterieeinhinaiaticait ate

D. Spector, Rights and Obligations of Reinsurers of an

Insolvent Ceding Company - A Consideration of

Selected Issues, in “Law and Practice of Insurance

Company Insolvency Revisited” (American Bar

| SRR LCR at oR ec OER OR

16,19

No. 95-244

In THe

Supreme Court of the Hnited States

Octoser Term, 1995

Cuuck Quackensusn, Insurance Commissioner of the State of

California, in his capacity as Liquidator and Trustee of the Mission

Insurance Company Trust, Mission National Insurance Company

Trust, Enterprise Insurance Company Trust, Holland-America

Insurance Company Trust and Mission Reinsurance Corporation Trust,

Petitioner.

VS.

ALLSTATE INSURANCE COMPANY,

Respondent.

Petition for Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

BRIEF OF THE COMMONWEALTH OF

MASSACHUSETTS AND THE DIRECTOR OF

INSURANCE OF THE STATE OF MISSOURI AS

AMICI CURIAE IN SUPPORT OF PETITIONER,

CHUCK QUACKENBUSH,

INSURANCE COMMISSIONER

OF THE STATE OF CALIFORNIA

INTEREST OF AMICI CURIAE

Both the Commonwealth of Massachusetts and the State of

Missouri, through the respective chief officials of their insurance

departments, have in force comprehensive statutory provisions

for the regulation of insurance within their jurisdictions. As part

of this comprehensive system, the two also provide for regulat-

ing the insurance companies subject to their jurisdiction when

those companies become financially impaired.

The Commonwealth of Massachusetts extensively regulates

the business of insurance. Linda Ruthardt is the Commissioner

of Insurance of the Commonwealth of Massachusetts (“Com-

missioner”). The Massachusetts Legislature has given the

Commissioner “very broad supervisory powers over insurance

companies.” Commissioner of Insurance v. Century Fire &

Marine Insurance Co., 373 Mass. 473, 476-77, 367 N.E.2d 842

(1977). In particular, she “has long been charged by statute with

the responsibility to oversee the financial stability of insurance

companies.” Maryland Casualty Co. v. Commissioner of Insur-

ance, 372 Mass. 554, 562, 363 N.E.2d 1087 (1977). The

Legislature has enacted a comprehensive statutory scheme to

provide for the supervision, rehabilitation and liquidation of

troubled companies doing business in the Commonwealth. See

Mass. G.L. c. 175J (supervision); Mass. G.L. c. 175, § 6 (receiv-

ership); Mass. G.L. c. 175, §§ 180A-180L (rehabilitation and

liquidation).

The Massachusetts Legislature has placed the process of

conserving, rehabilitating or liquidating insurers under the direct

supervision of the Supreme Judicial Court. See Mass. G.L. c.

175, §§ 6, 180B, 180C. These statutes require the Commissioner

to apply to the single justice session of the Supreme Judicial

Court for appointment as a receiver. Over recent years, the

Commissioner has been appointed domiciliary or ancillary re-

ceiver for the purposes of rehabilitating or liquidating several

insurance companies. She is presently receiver of three Massa-

chusetts insurers, subject to the continuing oversight of the

Supreme Judicial Court. '

Jay Angoff is the duly appointed Director of the Department

of Insurance of the State of Missouri. In that capacity, he acts as

statutory supervisor, rehabilitator and liquidator of troubled and

insolvent insurance companies in both domiciliary and ancillary

proceedings relating to the management of those types of enti-

ties. §§ 375.954, 375.958, 375.1174, 375.1160, 375.1166 and

375.1176, RSMo 1994. In serving in these capacities, the

Director operates under a comprehensive system for the exercise

of the state’s police power in protecting the public and specific

policyholders from the financial difficulties of affected insur-

ance companies. Klaber v. O'Malley, 90 S.W.2d 396 (Mo.

1936); Lucas v. Manufacturing Lumbermen's Underwriters,

163 S.W.2d 750 (Mo. 1942); Medallion Insurance Co. v.

Whartenbee , 568 S.W.2d 599,601 (Mo. App. 1978). Further, by

statute, the Director acts under the direct oversight of the Circuit

Court of Cole County in carrying out these functions. Mo. Rev.

Stat. §375.1182.5 (1994).

The Commonwealth of Massachusetts and the State of Mis-

souri have an interest in this case for a variety of reasons. First,

and foremost, the core issue of the interjection of federal courts

into a comprehensive state regulatory scheme involving the

financial condition of insurance companies will substantially

affect the ability of the two State insurance regulators to carry out

the state statutory mechanisms for dealing with financially

impaired companies, whether those companies be in liquidation,

rehabilitation or supervision.

‘ Commissioner of Insurance v. American Mutual Liability Insurance Co.,

et al., No. 89-23 (Supreme Judicial Court for Suffolk County (liquidation);

Commissioner of Insurance v. Monarch Life Insurance Co., No. 94-268

(Supreme Judicial Court for Suffolk County (rehabilitation); Commissioner

of Insurance v. Abington Mutual Insurance Co., No. 95-278 (Supreme

Judicial Court for Suffolk County (rehabilitation).

— i

Second, the Commonwealth and the State are mlsoueted

because the federal courts in both States have taken a position on

the issue before the Court which is diametrically opposed to the

position of the Ninth Circuit. In Wolfson v. Mutual Benefit Life

Ins. Co., 51 F.3d 141 (8th Cir. 1995), the Eighth Circuit (the

Circuit within which the State of Missouri is located) held that

Burford abstention is not dependent on the existence of equitable

remedies in the case. In Doughty v. Underwriters at Lloyds,

London, 6 F.3d 856 (1st Cir. 1993), the First Circuit (the Circuit

within which the Commonwealth of Massachusetts is located)

held that a district trial court did not abuse its discretion when it

abstained from exercising jurisdiction under such circumstances.

The amici assert that the Ninth Circuit approach in Garamendi

v. Allstate Insurance Co., 47 F.3d 350 (9th Cir. 1995), incor-

rectly states the law with respect to abstention, particularly in the

area of the regulation of financially impaired insurers. The

adoption of the Ninth Circuit approach will substantially impede

their State insurance regulators in their ability to effectively

regulate the financial impairment of insurance companies within

their jurisdictions.

Both amici have a substantial interest in seeing that a finan-

cially troubled insurer is supervised, rehabilitated or liquidated

in a manner which best protects the policyholders of the com-

pany, its creditors and the general public. This interest includes,

and is best furthered by, a system of regulation comprised of a

single regulator subject to the control of a single judicial forum

in the delinquency proceeding. This issue is not one limited to

the State of California. It will affect the capacity of each of the

State insurance regulators to alleviate the threat to public welfare

posed by financially impaired insurance companies. This brief

is intended to provide the Court with a perspective national in

scope of how the abstention issue affects the state regulator in his

or her regulation of financially troubled insurers, particularly

those in liquidation proceedings facing reinsurance issues.

— wn

SUMMARY OF ARGUMENT

Every state has established a comprehensive system of regu-

lation of insurers in the area of supervision, rehabilitation and

liquidation of financially impaired insurers. Abstention by

federal courts in cases before them is particularly apt to these

type of proceedings under Burford v. Sun Oil Co., 319 U.S. 315

(1943). Litigation in the federal courts in this area can only lead

to a disruption of state efforts to establish a coherent policy with

respect to administration of the affairs of financially impaired

insurers. The Ninth Circuit's decision in Garamendi v. Allstate

Insurance Co., 47 F.3d 350 (9th Cir. 1995), incorrectly decided

that a federal district court could not abstain from exercising

jurisdiction in actions at law in cases closely related to the

collection and distribution of assets of the insolvent company’s

estate.

The Ninth Circuit's conclusion that the decision to abstain is

to be based on archaic classifications rather than contemporary

policy considerations must necessarily result in decisions which

thoughtful reflection would regret. Considerations of comity

and respect for the federal nature of our political system present

a more rational basis to resolve the abstention issue. The Ninth

Circuit approach would establish a restricted gateway through

which a party bringing the abstention issue to the court must first

pass in order to have the issue considered. Under this view, only

those carrying the equity “password” would be allowed to enter

accompanied by the issue of abstention. Those who carry the law

“password” must leave the issue at the gateway upon entry.

The abstention issue was not intended to be so limited. A

decision based on the allocation of power between an equity

chancellor and a judge at law is not adequate to resolution of an

issue seeking to balance the substantial interests of the States in

an unfettered comprehensive scheme of regulation and the

‘cmaeds

Federal interest in providing a federal forum for disputes. As the

district court recognized, abstention is necessary in order to

leave to the state courts the determination of the legal issues so

inextricably intertwined with the state’s substantial interest in

controlling and supervising the processes of rehabilitation and

liquidation. Abstention is proper in this case. The decision of the

Court of Appeals should be reversed.

_ va

ARGUMENT

ABSTENTION IS A BALANCING PROCESS CALL-

ING FOR A WEIGHING OF STATE AND FEDERAL

INTERESTS, NOT A MECHANICAL TEST BASED

ON THE FORM OF ACTION.

Abstention’ is a doctrine of the federal courts rooted in policy

not forms of actions. While there are policy reasons justifying

independent analysis of cases arising under the different types of

abstention, New Orleans Public Service, Inc. v. Council of New

Orleans, 491 U.S. 350, 359-60, 109 S.Ct. 2506, 2513-14, 105

L.Ed.2d 298 (1989), abstention doctrines reflect the federal

nature of our political system (“Our Federalism”) and the need

for comity between the States and National government. Ab-

stention is appropriate to “a proper respect for state functions, a

recognition of the fact that the entire country is made up of a

Union of separate state governments, and a continuance of the

belief that the National Government will fare best if the States

and their institutions are left free to perform their separate

functions in their separate ways.” Younger v. Harris, 401 U.S.

37, 44-45, 91 S.Ct. 746, 750-51, 27 L.Ed.2d 669 (1971). Implicit

in the abstention doctrine is a balancing, a “sensitivity to the

legitimate interests of both State and National Governments, and

> The terms “abstention” and “abstain” are used in this brief in their generic

sense to refer to the doctrines by which a federal court determines to not

exercise jurisdiction over a case in deference to a State proceeding involving

the same parties and issues. While the Court has noted that there are actually

two remedies which must follow from the application of the “abstention”

policy (deferral and dismissal), Growe v. Emison, __ U.S. ___, 113 S.Ct.

1075, 1080 & n. 1 (1993), the issue addressed by the amici here is whether the

principle which calls for deferral and abstention should be applied to actions

at law.

in which the National Government, anxious though it may be to

vindicate and protect federal rights and federal interests, always

endeavors to do so in ways that will not unduly interfere with the

legitimate activities of the States.” Jd. Thus, the consideration

of the abstention issue, in any context, should focus on the

relative interests of the Federal and State Governments involved

and not on the form of action or relief to be afforded.

THE STATE INTEREST IN A COMPREHENSIVE

RECEIVERSHIP PROCEEDING OUTWEIGHS THE

FEDERAL INTEREST IN PROVIDING A FEDERAL

FORUM.

This action grew out of the financial impairment of the

Mission Insurance Companies. Initially, those companies were

placed in conservatorship by the courts of California on October

31 and November 26, 1985.* Subsequently, on March 5, 1987,

the companies were placed in liquidation. The Commissioner of

Insurance of the State of California was appointed as receiver for

the companies in liquidation.

The dispute between the Receiver and Allstate Insurance

Company stemmed from reinsurance contracts between the

insolvent companies and Allstate which involved both compa-

nies reinsuring the primary insurance obligations of the other.

Allstate filed several claims in the liquidation proceedings, as

did other reinsurers of the insolvent companies. [Petition for

Writ of Certiorari at 7 & n. 13.] The claims raised the same issues

which were presented to the district court. [/d.] In June of 1990,

the Receiver brought suit against Allstate and other reinsurers to

recover money due the estate under the reinsurance contracts.

‘Unless specifically noted otherwise, the discussion of the facts specific

to this case are taken from the decision of the Court of Appeals.

—

The causes of action in that suit consisted of declaratory relief,

breach of contract, and various civil conspiracy theories.‘

Allstate removed the action to the United States District Court

for the Central District of California on the basis of diversity

jurisdiction. Diversity was obtained because all non-diverse

parties were settled out of the case. [Order of District Court,

Appendix B to Petition for Writ of Certiorari at | Sa-!6a. |

These case-specific facts serve as a back-drop ‘or a consider-

ation of the two interests to be balanced in the consideration of

the abstention issue. There are two factors of note concerning

these facts. First, as to the interests of the State, the action arose

within the confines of a liquidation proceeding of an insolvent

insurance company. Thus, the weight to be afforded the State is

to be determined on the basis of the importance of these proceed-

ings to the State. Second, as to the Federal interest involved,

federal jurisdiction was premised on diversity jurisdiction. There

was no federal question arising out of a federal statute or

constitutional provision which would control the substantive

rights of the parties.

1. The Strong State Interest in Consolidated Regula-

tion of Troubled Insurers Has Long Been Recog-

nized.

State regulation of insolvent insurance companies dates back

to at least 1851 when New York passed a statute permitting the

state comptroller to apply to a state court for the dissolution and

liquidation of a life insurance company on a showing that its

* This was the second suit brought by the Receiver against a group of

remsurers of the insolvent companies. The first case involved approximately

300 reinsurers of the companies. That action was consolidated with the

liquidation proceedings.

== {9 —

assets were insufficient to meet its obligations. Laws of 1851.

ch. 95, § 6, Denio & Tracy's Revised Statutes of the State of New

York 1:1288, § 30 (1852). Subsequently, state regulation of

insurance company insolvency has become increasingly more

complex with the result that current statutes provide for a unitary,

integrated process of regulation of companies which are finan-

cially impaired. See, generally, S. Kimball, History and Devel-

opment of the Law of State Insurer Insolvency Proceedings: An

Overview, in “Law and Practice of Insurance Company Insol-

vency,” (American Bar Ass'n 1986)(hereafter Kimball). The

modern statutes, with rare exception, are premised on either the

National Conference of Commissioners on Uniform State Laws’

Uniform Insurer's Liquidation Act (hereafter the Uniform

Insurer’ s Liquidation Act) or the National Association of Insur-

ance Commissioners’ Model Supervision, Rehabilitation, and

Liquidation Act (hereafter the NAIC Model Act). /d. at 37. Tne

Uniform Insurer's Liquidation Act was adopted by the National

Conference of Commissioners on Uniform State Laws in 1939.

Id. at 21. The NAIC Model Act was adopted in 1977 by the

National Association of Insurance Commissioners, but was

largely based on the Wisconsin Liquidation Act, Wis. Stat. Ann.

§§ 645.01 -.90 (West 1995), which had been passed in 1967.

Kimball at 39.

An overriding purpose of both the Uniform Insurer’ s Liquida-

tion Act and the NAIC Model Act was to provide for a compre-

hensive regulation of the insolvency process. This is made clear

* Amici’s focus on regulation of insolvency as the State interest most

directly presented by this case is not intended to exclude other interests. The

States have strong interests in the comprehensive regulation of the condition

of troubled insurers through all manner of delinquency proceedings, includ-

ing administrative supervision, conservatorship and rehabilitation proceed-

ings. The States’ interests encompass receiverships of insurers to reduce the

(Footnote 5 continued on next page)

in the comments to the Wisconsin statute on which the NAIC

relied in drafting their Mode! Act:

Par. (f) has a precise purpose. It is intended to make it clear

beyond doubt that this chapter is perceived by the legisla-

ture as, and in fact is, part of the regulatory structure. It is

a part of the regulatory system because this chapter will

have considerable effect on the way the insurance business

is conducted by reinsurers, agents, premium financiers, and

Wis. Stat. Ann. § 645.01, comment on sub. (4) (West 1995).

Thus, under paragraph (f) of that section, the means by which the

interests of insureds, creditors and the general public are to be

protected is to extend regulation of the insurance industry to

delinquency proceedings. /d. § 645.01 (4) (f). The NAIC Model

Act incorporated this same concept in its statement of purpose:

“Providing for a comprehensive scheme for the rehabilitation

and liquidation of insurance companies and those subject to this

Act as part of the regulation of the business of insurance,

insurance industry and insurers in this state. Proceedings in

cases of insurer insolvency and delinquency are deemed an

integral aspect of the business of insurance and are of vital public

interest and concern.” NAIC Model Act, § 1.D (7). See,

(Footnote 5 continued)

risk of loss due to mismanagement. and not just after-the-fact liquidations to

minimize unavoidable loss. See Kuecklehan v. Federal Old Line Insurance

Co., 69 Wash.2d 392, 418 P.2d 443, 461 (1966); Attorney General v. North

American Life Insurance Co., 82 N.Y. 172, 184-85 (1880). As illustrated by

the Wisconsin statute, one of the primary purposes of the modern statutes 1s

“Early detection of any potentially dangerous condition in an insurer, and

prompt application of appropriate corrective measures, neither unduly harsh

nor subyect to the kind of publicity that would needlessly damage or destroy

the insurer... .” Wis. Stat. Ann. § 645.01(4)(a) (West 1995). This concept

of early detection and intervention and measures short of liquidation 1s said

to pervade the entire statutory chapter on troubled insurers. /d., comment to

sub. (4a).

—=— =

Appendix, § IV at A-11 to A-12.. The Court has also recognized

that the insolvency process involves the regulation of insurance.

United States Department of the Treasury v. Fabe,___ U.S. __.,

113 S.Ct. 2202, 2210, 124 L.Ed.2d 449 (1993).

A survey of the statutes of the States on the liquidation

process, see Appendix, evidences a consensus on the two over-

riding principles which will lead to a liquidation which best

protects the policyholders, creditors and the general public.

These are (1) that consolidation of the proceedings to the greatest

extent possible benefits all concerned: and (2) regulatory

decisionmaking within the context of liquidtion best is done by

the person with the greatest knowledge of the complexities of the

insurance industry. This person is the State's insurance regula-

tor. This second principle recognizes that this person, under the

oversight of a state court, should make the primary decisions

concerning the liquidation process. The statutory provisions

touching on the abstention issue implement one or both of these

overriding principles.

The roles of the parties to the iiquidation proceeding and their

interests are also important. In the overwhelming number of

insurance company receiverships, an insurer is put into liquida-

tion because it is financially troubled and that financial condition

poses a threat to the interests of the policyholders, creditors and

the general public. See Appendix § [IX at A-18 to A-23. The State

insurance regulator as liquidator is solely concerned with what

is best and fairest for all concerned — how are a limited, usually

insufficient, amount of assets to be distributed among competing

claims?

There are two factors which will largely influence the success

of the liquidator in his or her efforts. These are the marshalling

of assets and the resolution of claims. Experience has shown that

there may be a dispute as to an entitlement to or the amount of

either. In determining the interest of the State, then, in the

abstention equation (and, for that matter, the Federal interest) it

—

should be borne in mind that the holder of the disputed asset or

claim enters any action on that dispute with a goal of maximizing

its benefit at the expense of those interested in the liquidation

estate. It should also be borne in mind that the liquidation

statutes have provided for the fair and efficient resolution of

these adversarial disputes within the liquidation court through

procedures to be conducted before a neutral, competent tribunal.

Consolidation of control over the proceedings by which the

insolvency is regulated is the first of the two common and

overriding principles embodied in th comprehensive state statu-

tory schemes. See Garamendi v. Executive Life Ins. Co., 2\ Cal.

Rptr. 2d 578, 585 (Cal. App. 1993), review denied 1993 Cal.

LEXIS 5639 (1993); In re Rehabilitation of Mutual Benefit Life

Insurance Co., 609 A.2d 768, 774 (N.J. App. Div. 1992). The

Wisconsin statute was modeled after the federal bankruptcy act

then in existence in part to provide for the singular control over

the process afforded by that act. See Wis. Stat. Ann. ch. 645

Preliminary Comment, Liquidation (West 1995). Proceedings

in accordance with the state’s chapter on liquidation of insurers

is the sole and exclusive means of liquidating, rehabilitating,

reorganizing or conserving an insurer. See Appendix, § VII at A-

16to A-17. On issuance of an order of insolvency, no action may

be taken or continued against an insurer or the liquidator outside

of the ins lvency proceedings. See Appendix, § XVI at A-33 to

A-34. The ability to put an insurer into receivership is premised

on various standards, including that the company has been the

subject of successful or attempted liquidation proceedings other

than a proceeding under the state's insurer delinquency chapter.”

See Appendix, § IX at A-18 to A-23.

* The intent of this type of provision is to prevent insurers from placing

themselves voluntarily into liquidation proceedings, as such proceedings

would not necessarily “follow an approved pattern for liquidation,” and,

thereby not provide the regulatory protection provided by the insurance

insolvency statutes over the liquidation of the assets. Wis. Stat. Ann. § 645.41

(7), comment on sub. 7 (West 1995).

= =

This concept of consolidation is also carried out in the provi-

sions dealing with the claims process. With respect to claims

against the estate, the insolvency proceedings are the exclusive

forum for the filing and resolution of claims. Any judgment

against the insolvent insurer entered in a proceeding outside the

insolvency proceeding and after the entry of the order of insol-

vency does not have to be considered as proof of the insolvent

insurer’s liability or the amount of damages. See Appendix, §

XX at A-40 to A-41. In other words, such a judgment entered

outside of the receivership proceedings may be treated as advi-

sory only within the proceedings themselves.

Equally emphasized in the statutes is the second principle that

control over the proceedings must be vested in the State insur-

ance regulator. The state insurance regulator is normally the

only one who can seek a court order for liquidation of a com-

pany.’ See Appendix, § V at A-12 to A-14. With only one

exception, the state insurance regulator is required to be ap-

pointed as receiver in the proceedings. See Appendix, § X at A-

23 to A-25.

In the capacity of receiver, the state insurance regulator

succeeds to the title of the assets of the insolvent insurer and is

directed to take possession of those assets. See Appendix, § XI

at A-25 to A-27. To accomplish this, the state insurance

regulator has the power to take the actions necessary to collect

those assets, including intervention in proceedings outside the

state in order to protect the assets and prevent outside forums

from exercising control over them. See Appendix, §§ XII at A-

28 to 29; XIV at A-30 to A-31; XV at A-32 to A-33; XVII at A-

34 to A-35. As receiver, the state insurance regulator is given

substantial discretion as to the forum in which he may proceed

’ There is an exception in those states adopting the NAIC Model Act which

allows for three creditors of the company to seek a liquidation order, but only

after allowing the state insurance regulator the opportunity to review the

complaint and take action. See Appendix § VI at A-14 to A-15.

to collect the assets of the estate or otherwise carry out the duties

of his office. See Id. As outlined in the comments to the

Wisconsin statute, this discretion is a necessary component of

the regulatory process:

The entire subject of the effect of liquidation upon actions

brought elsewhere is very complex. What the statute does

is to give the liquidator all possible tools and leave it to him

to decide, in a concrete context, which ones to use and how

to use them. This is the reason for empowering the

commissioner to intervene in foreign lawsuits, and to

petition for immediate dissolution, among other powers.

Wis. Stat. Ann. § 645.49, comment on sub. (1) (West 1995).

The foregoing survey of the statutory framework for insur-

ance insolvency proceedings illustrates the substantial interest

of the States in maintaining control over the insolvency process

as an integral part of their regulation of insurance. Except in rare

circumstances, the State’s regulatory interest will dictate that all

matters related to the insolvency be consolidated in a single legal

forum. In those rare circumstances when resort to another forum

may be undertaken, it is the result of an informed determination

by those responsible for the regulation of the insolvency process

that the best interests of the State are carried out by allowing a

separate forum to consider a question or questions related to the

liquidation of the company. This interest was recognized by the

federal courts even before the adoption of the more comprehen-

sive insurance insolvency codes:

Experience has demonstrated that, in order to secure an

economical, efficient, and orderly liquidation and distribu-

tion of the assets of an insolvent corporation for the benefit

of all creditors and stockholders, it is essential that the title,

custody, and control of the assets be intrusted to a single

management under the supervision of one court. Hence,

other courts, except when called upon by the court of

ins Cen

primary jurisdiction for assistance, are excluded from par-

ticipation. This should be particularly true as to proceed-

ings for the liquidation of insolvent insurance companies

for the reasons adverted to by Mr. Justice Cardozo in Clark

v. Willard, 292 U.S. 112, 123 [(1934)].

Motlow v. Southern Holding & Securities Corp., 95 F.2d 721,

725-26 (8th Cir.), cert. denied, 305 U.S. 609 (1938).

2. AsAnImportant Asset of An Insurer, Reinsurance

Is Necessarily an Integral Part of Insurance Re-

ceivership Proceedings.

Within the general framework of state regulation of insurance

insolvency, there is the more specific consideration of the role of

reinsurance within that regulatory process. First, it should be

noted that reinsurance is at the core of a company’s financial

status. Reinsurance recoverables are treated as assets of the

ceding company. See Appendix, § I at A-1 to A-2. More

importantly, the mere existence of reinsurance will determine

the amount of surplus and reserves required to be maintained by

acompany, reinsurance being allowed as acredit to the company's

assets or a deduction from its liabilities, thereby reducing the

amount of liquid assets which a company must maintain. See

Appendix, §§ II at A-2 to A-10; III at A-10 to A-11. The

reinsurance relationship is going to have a significant role in

determining whether a company is financially impaired and

subject to regulation as an insolvent insurer.

In fact, reinsurance practices resulting in reinsurance pro-

ceeds becoming uncollectible are seen as one of the contributing

factors to many insurance company insolvencies. F. Semaya,

Insurance Insolvency - Where We Are Today in “Law and

Practice of Insurance Company Insolvency Revisited” |, at 10-

11 (American Bar Ass’n 1989) (hereafter Semaya). It is also

specifically recognized by the Hawaii statute on supervision,

rehabilitation and liquidation, that the troubled financial condi-

tion of a ceding company’s reinsurer may be grounds for

—_

instituting delinquency proceedings against the ceding com-

pany.* Haw. Rev. Stat. §431:15-103.5 (5) (1993).

| Reinsurance is also integral to the insurer insolvency proceed-

ings. “Just as reinsurance is important to the operations of an

insurer, it is equally important to a receiver. Reinsurance

receivables often represent the estate’s largest asset.” National

Association of Insurance Commissioners, “Receivers Hand-

book for Insurance Company Insolvencies at 7-1 (NAIC 1992).°

In the receivership proceeding underlying this case, it was

estimated that there was over $400,000,000.00 in reinsurance

receivables due the estate. (Complaint, { 9, Roxani Gillespie v.

Allstate Insurance Co. et al., Case No. 6751868 (Superior Court

. The Statute provides that among the factors which will support a

determination that continued operation of a company would be hazardous to

policyholders, creditors and the general public is “[t)he ability of an assuming

reinsurer to perform and whether the insurer's reinsurance program provides

sufficient protection for the company’s remaining surplus after taking into

account the insurer's cash flow and the classes of business written as well as

the financial condition of the assuming reinsurer. .. .” Haw. Rev. Stat. §

431:15-103.5 (5S) (1993). See also, Md. Ins. Code Ann. § 1318(5) (Supp.

1995); R.I. Gen. Laws § 27-14.2-2 (1994).

* See, also, D. Spector, Rights and Obligations of Reinsurers of an

Insolvent Ceding Company — A Consideration of Selected Issues, in “Law

and Practice of Insurance Company Insolvency Revisited” 685, at 685

(American Bar Ass'n 1989) (“The breath, body, and blood of the relationship

between a reinsurer and the receiver of its insolvent reinsured is the reinsurance

proceeds. For many, perhaps most, insolvent insurance company estates,

reimsurance is the principle mechanism for financing payment of policyholder

and guaranty fund claims. Reinsurance collectibles are often the largest

single item on the insolvent insurer's balance sheet”); P. Dassenko, Obliga-

tions and Duties of the Liquidator to Reinsurers: A Liquidator’s Perspective

in “Law and Practice of Insurance Company Insolvency Revisited” 661, at

662 (American Bar Ass'n 1989) (hereafter Dassenko) (“One of the major

assets of an insolvent insurance company’s estate is the right to receive

reinsurance proceeds. Therefore, much if not most of the liquidator’s time

will be spent managing relationships with reinsurers towards the collection of

all reinsurance proceeds due the estate”).

—=

for the County of Los Angeles).] The suit by the Receiver in

Doughty sought to recover $15,000,000.00 in overdue reinsurance

indemnities. 6 F.3d at 859. As an asset, reinsurance recoverables

would be available for distribution to those with claims against

the estate, when collected, but may also be used by the receiver

as security for loans made to the estate. See Appendix, § XIII at

A-29 to A-30.

In some states, in recognition of the status of reinsurance

recoverables as an asset of the estate, the chapter on delinquency

proceedings state that the amount of a reinsurer’s liability will

not be reduced by the fact that the ceding insurer is in receiver-

ship. See Appendix, § XIX at A-39 to A-40. In other states, the

very nature of the reinsurance relationship is transformed through

what are known as statutory insolvency clauses. These clauses,

required to be included in contracts of reinsurance if a company

wants to use the reinsurance in determining its financial condi-

tion, obligate the reinsurer to pay claims based on the liability of

the ceding company even though it has not paid on a claim, as

opposed to payment on an indemnity basis. Spector, at 697-700.

Both of these types of clauses account for the fact that, typically,

most reinsurance contracts are contracts of indemnity requiring

the reinsurer to pay only if the ceding company has paid a loss.

The effect of these clauses is to increase the assets potentially

available to the estate and to make the reinsurance recoverables

generally available for distribution. In another statutory provi-

sion directed at reinsurers and designed to assist in the marshal-

ling of the estate’s assets, those entering into reinsurance con-

tracts with an insurer in rehabilitation or liquidation are subject

to the personal jurisdiction of the receivership court. See

Appendix § VIII at A-17 to A-18.

From the standpoint of reinsurance as an asset of the insolvent

company, one of the most significant provisions is the set-off

provision. See Appendix § XVIII at A-35 to A-39. As explained

by the NAIC:

—

Setoff is a device which permits two contracting parties to

net reciprocal debt obligations and pay only the remaining

balance. It is therefore an important element of any receiv-

ership. ...

In recent years, there has been a significant increase in

the number and severity of U.S. insurer insolvencies. As a

consequence, there has been a commensurate increase in

the value of setoff rights and the economic protection they

provide for creditors. However, receivers have a fiduciary

duty to assure that all of the insolvent insurer’s assets be

marshalled for distribution in accordance with creditor

priorities established by statute. Amounts allowed to be set

off will not be available for ultimate distribution to policy-

holders and other claimants, since such amounts are not

assets of the insurer.

Development of an effective approach to setoff must

begin with a careful analysis of both the applicable provi-

sions of the domiciliary state’s statute and relevant case

law. Setoff is an area of considerable controversy. Setoff

rights may vary depending upon whether the insurer is

subject to either a rehabilitation or a liquidation proceeding.

National Association of Insurance Commissioners, “Receivers

Handbook for Insurance Company Insolvencies” at 7-27 (NAIC

1992). As recognized by the Ninth Circuit in the decision here

under review, the effect of the set-off provision is to grant the

reinsurer a first priority among claims for the amounts subject to

set-off. Garamendi, 47 F.3d at 352 n. 5. Whether reinsurers

should be given such an advantage was a matter of considerable

concern and debate when the Wisconsin statute was drafted and

the NAIC Model Act was adopted. Kimball at 35-36, 39-42. It

is still a question of considerable controversy, both as to whether

it should exist and, if existent, the extent of what is to be set off.

Semaya, at 19-20; Dassenko at 663-672.

= =

What is illustrated here is that both reinsurance and set-off are

a key part of the State insurance insolvency regulatory process.

Within this regulatory process, neither the issues surrounding

reinsurance as an asset nor those concerning the availability or

breadth of the right of set-off can be carved out of this system of

regulation for separate treatment. The State has as substantial an

interest in controlling the handling of this issue in the insolvency

process as it does any other issue, such as the resolution of claims

not subject to set-off. In terms of the federal abstention issue and

the balance to be reached between the State and Federal interests

in the application of the doctrine, the interest of the State is the

need for the concentration of the reinsurance and set-off issues

in a singular regulatory forum that minimizes interference from

outside sources. Without this concentration, the complete and

adequate regulation of the insolvency process becomes im-

paired.

3. The Federal Interest In Providing A Federal Fo-

rum Is a Minimal One In the Context of This Case.

On the Federal side of the equation, the abstention doctrine

potentially implicates two Federal interests. First, there may be

a federal substantive right based on the Constitution or federal

statute which the National government would have an interest in

seeing upheld or vindicated. Moses H. Cone Memorial Hospital

v. Mercury Construction Corp., 460 U.S. 1, 26-26, 103 S.Ct.

927, 941-41, 74 L.Ed.2d 765 (1983). When such an issue is

present in a case, it “must always be a major consideration

weighing against surrender” of jurisdiction. /d.

Second, and common to all abstention cases, is the Federal

interest in access to its courts. This interest has been expressed

by the Court in the following language: “*When a Federal court

is properly appealed to in a case over which it has by law

jurisdiction, it is its duty to take such jurisdiction. . . . The right

of a party plaintiff to choose a Federal court where there is a

choice cannot be properly denied.’” NOPS/,491 U.S. at 358-59,

109 S.Ct. at 2513, quoting Willcox v. Consolidated Gas Co.,2\2

U.S. 19, 40, 29 S.Ct. 192, 195, 53 L.Ed. 382 (1909).

: In a case such as this one, based on federal diversity jurisdic-

tion, the only Federal interest in the abstention equation which is

implicated is the procedural interest of preserving access to and

obtaining an adjudication from the Federal courts. There is no

Federal substantive issue to be given weight in the balancing

process.

THE EQUITY/LAW DISTINCTION SHOULD HAVE

NO ROLE IN THE DISTRICT COURT’S DECISION

WHETHER TO ABSTAIN.

The Federal interest is not immutable. “‘The doctrine of

abstention, under which a District Court may decline to exercise

or postpone the exercise of its jurisdiction, is an extraordinary

and narrow exception to the duty of a District Court to adjudicate

a controversy properly before it. Abdication of the obligation to

decide cases can be justified only in the exceptional circum-

stances where the order to the parties to repair to the state court

would clearly serve an important countervailing interest.’”

Colorado River Water Conservation District v. United States,

424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976),

quoting County of Allegheny v. Frank Mashuda Co., 360 U.S.

185, 188-89, 79 S.Ct. 1060, 1063, 3 L.Ed.2d 1163 (1959). When

a declaratory judgment is sought, the standard is less strenuous.

Wilton v. Seven Falls Co., __ U.S. ___, 115 S.Ct. 2137, 2143

(1995).

The underlying interests of the State in insurance insolvency

proceedings do present the exceptional circumstances calling for

abstention. See Penn Central Casualty Co. v. Commonwealth of

Pennsylvania, 294 U.S. 189 (1935). The case is clearly within

the factors favoring abstention as set out in Burford v. Sun Oil

Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed.2d 1424 (1943), and

Colorado River, supra. The insolvency process involved is a

well-organized system of regulation and judicial review further-

ing substantial State concerns to which the federal courts could

make small contribution through their determination of ques-

tions of State law. Burford, 319 U.S. at 327, 63 S.Ct. at 1104.

Similarly, as recognized by Fabe, supra, the insurance insol-

vency process is within the pronounced federal policy to avoid

federal interference with the State regulation of insurance.

Where such a policy exists and federal court action would

interfere with a comprehensive state system for adjudicating

rights among highly interdependent relationships, abstention ts

appropriate. Colorado River, 424 U.S. at 819, 96 S.Ct. at 1247.

see, also, Arizona v. San Carlos Apache Tribe of Arizona, 463

U.S. 545, 103 S.Ct. 3200, 77 L.Ed.2d 837 (1983). Indeed, to the

extent that the federal proceedings interfere with the regulation

of the insolvency process, abstention should be required under

application of the McCarran Ferguson Act on the basis that the

more general statute on federal jurisdiction must yield to the

more specific statute restricting Federal regulation of the busi-

ness of insurance. See 15 U.S.C. §§ 1011-15; Fabe, 113 S.Ct. at

2212. ;

There are other factors identified by the Court in its abstention

cases favoring abstention in the circumstance of insurance

insolvency proceedings. As noted in Harrison County Commis-

sioners Court v. Moore, 420 U.S. 77, 84, 95 S.Ct. 870, 875, 43

L.Ed.2d 32 (1975) (Pullman abstention), “when the state law

questions have concerned matters peculiarly within the provinee

of the local courts, we have inclined towards abstention.” Simi-

larly, there are certain matters over which the State has primacy

and the federal courts must neither affirmatively obstruct such

matters nor allow themselves to be used to impede the State in

those matters. Growe v. Emison, ___ U.S. ___, 113 S.Ct. 1075,

1081 (1993)(Pullman abstention). When the federal action ts

ancillary to, and in furtherance of a broader State policy of

— =

substantial interest, abstention is justified. Trainor v. Hernandez,

43) U.S. 434, 444, 97 S.Ct. 1911, 1918, 52 L.Ed.2d 486

(1977) Younger abstention). The federal courts should also

abstain when the matter under consideration goes to the core of

the administration of a State's established system of adjudication

or regulation. Juidice v. Vail, 430 U.S. 327, 335, 97 S.Ct. 1211,

1217, 51 L.Bd.2d 376 (1977) Younger abstention). The State's

interest in its regulation of a profession or industry for the

protection of the public, prevention of are-occurrence of wrongs,

and assurance and maintenance of high standards of conduct

outweigh the Federal interests considered in the abstention issue.

Middlesex County Ethics Committee v. Garden State Bar Ass'n.

457 U.S. 423,435, 102 S.Ct. 2515, 2523, 73 L.Ed.2d 1 16( 1982).

From a policy standpoint, the support for abstention in this

case is overwhelming. It has been denied by the Ninth Circuit not

because the Federal interests outweigh considerations of feder-

alism or comity, but because of a mechanical distinction between

actions at law and actions in equity. The Ninth Circuit approach,

as set out in Garamendi vy. Allstate Insurance Co., 47 F.3d 350

(9th Cir. 1995), unduly restricts the balancing called for in the

abstention doctrine to cases in equity. Its approach seeks to set

up a gateway to consideration of the issue. The abstention issue

may only enter into a case through this gateway. If the case

involves a traditional equitable relief, the issue is allowed to pass

through the gateway and comes before the district court for its

consideration. If it involves a traditional relief at law, the issue

is denied entry to the case and consideration by the court

altogether.

Within the context of the abstention issue, the distinction

drawn by the Ninth Circuit between an action in equity and an

action at law is an artificial one. The balance between the Federal

and State interests in the case will be the same whether the case

is One at law or equity. The problem with the rule announced by

the Ninth Circuit is that a focus on the equity/law distinction is

antitiun

a focus on the remedy to be afforded and not on the jurisdictional

question of whether the State interests involved outweigh the

Federal interest in vindicating and protecting the right of a party

to have its case considered by the Federal court. The Court has

already noted that the abstention issue is not remedy focused.

Zuickler v. Koota, 389 U.S. 241, 254, 88 S.Ct. 391, 399 (1967).

citing Dombrowski v. Pfister, 380 U.S. 479, 85 S.Ct. 1116, 14

L.Ed.2d 22 (1965); Lake Carriers’ Ass'n v. MacMullan, 406

U.S. 498, 509 n. 13, 92 S.Ct. 1749, 1756 n. 13, 32 L.Ed.2d 257

(1972)\(“The question of abstention, of course, is entirely sepa-

rate from the question of granting declaratory or injunctive

relief”); Steffel v. Thompson, 415 U.S. 1209, 474 n. 21,94S.Ct.

1209, 1223 n. 21, 39 L.Ed.2d 505 (1974).

Other Circuit Courts considering abstention in light of the

equity/law distinction have rejected the idea that the distinction

is one which should control the balancing of the Federal and

State interests undertaken by the abstention issue. Wolfson v.

Mutual Benefit Life Ins. Co., 51 F.3d 141 (8th Cir. 1995);

General Glass Industries Corp. v. Monsour Medical Founda-

tion, 973 F.2d 197 (3rd Cir. 1992). More important, there is

nothing in the Court's treatment of the issue which calls for such

a distinction. The Court has previously upheld or required

abstention where the issues before the district court were actions

at law rather than in equity. Tafflin v. Levitt, 493 U.S. 455, 110

S.Ct. 792, 107 L.Ed.2d 887 (1990)(RICO damages); Fair As-

sessment in Real Estate Association v. McNary, 454 U.S. 100

(1981) (damages under 42 U.S.C. § 1983); Fornaris v. Ridge

Tool Co., 400 U.S. 41 (1970); United Gas Pipe Line Co. v. Ideal

Cement Co., 369 U.S. 134 (1962); Clay v. Sun Insurance Office

Lid., 363 U.S. 207, 80 S.Ct. 1222 (1960)\(claim for recovery of

proceeds due under insurance contract); Louisiana Power &

Light Co. v. City of Thibodaux, 360 U.S. 25, 79 S.Ct. 1070

(1959)(condemnation action).

—=— =

The Ninth Circuit dismissed the Fair Assessment in Real

Estate and Louisiana Power & Light cases on the basis that these

constituted “‘special’ classes of damage actions.” This charac-

terization highlights that the Ninth Circuit improperly focuses on

remedy in setting up its gateway to the abstention issue. This

Court's discussion of the special nature of the state system for

taxation in Fair Assessment and of the power of eminent domain

in Louisiana Power & Light was not intended as a justification

for exercising the abstention doctrine in actions at law. It was an

explanation of the substantial nature of the State interest in-

volved in the proceedings."® Abstention in cases at law is not

foreclosed.

That the equity/law distinction should not control the issue is

best illustrated by Gulfstream Aerospace Corp. v. Mayacamas

Corp., 485 U.S. 271, 99 L.Ed.2d 296, 108 S.Ct. 1133 (1988).

There the Court held that in an age where law and equity have

been merged in the federal legal system, where “[{sJuits that

involve diverse claims and request diverse forms of relief are not

easily categorized as equitable or legal,” and where the contin-

ued promulgation of nights and procedures have little reference

to these outmoded jurisdictional and remedial distinctions, those

distinctions should no longer be controlling. 485 U.S. at 283-85.

What the Court said concerning the exercise of appellate juris-

diction has equal application to the abstention issue:

More important, the Enelow-Ettelson doctrine is “divorced

from any rational or coherent appeals policy.” Under the

rule, appellate jurisdiction of orders granting or « nying

Even if the discussion was a justification for the exercise of abstention,

this case would come within the same justification. If the two cases recognize

the existence of special cases at law which share the characteristics of equity

proceedings, the insurance liquidation proceeding certainly comes within the

ambit of that “special” type of proceeding. See. ¢.¢.. Commonwealth of

Pennsylvania v. Williams, 294 U.S. 176 (1935)(an action in receivership

involves the exercise of equitable powers).

~~ =

stays depends upon a set of considerations that in no way

reflects or relates to the need for interlocutory review.

There is no reason to think that appeal of a stay order is more

suitable in cases in which the underlying action is at law and

the stay is based on equitable grounds than in cases in which

one of these conditions is not satisfied. The rule’s focus on

historical distinctions thus produces arbitrary and anoma-

lous results. Two orders may involve similar issues and

produce similar consequences, and yet one will be appeal-

able whereas the other will not.

485 U.S. at 285-86. Adherence to a mechanical equity/law

distinction as a precondition to consideration of the abstention

issue can only ultimately result in arbitrary and anomalous

results in which cases involving similar issues of State concern

and having similar consequences on those interests will produce

different results — one in which the federal court refrains from

interposing itself in the State interest and one in which the federal

court does make such an interference.

A decision based on the allocation of power between an equity

chancellor and a judge in a court of law is not adequate to

resolution of an issue seeking to balance the substantial interests

of the States in an unfettered comprehensive scheme of regula-

tion and the National interest in providing a federal forum for

disputes. The Ninth Circuit's conclusion that the decision to

abstain is to be based on archaic classifications rather than

contemporary policy considerations must necessarily result in

decisions which thoughtful reflection would regret . Consider-

ations of comity and respect for the federal nature of our political

system present a more rational basis to resolve the abstention

issue.

When the principle underlying the abstention doctrine 1s

applied to the facts of this case, and the issue before the Court,

it becomes apparent that abstention 1s appropriate.

— =

CONCLUSION

The doctrine of Burford abstention is not limited to actions

involving equitable remedies. The Ninth Circuit too narrowly

limits this doctrine in its Garamendi decision. The Court should

overturn the decision of the Circuit Court and order it to affirm

the action of the district court in abstaining in this action.

\s\ Thomas W. Rynard

JOHN C. CRAFT SCOTT HARSHBARGER

RICHARD D. RHYNE ATTORNEY GENERAL

THOMAS W. RYNARD* COMMONWEALTH OF

MASSACHUSETTS

CRAFT FRIDKIN & RHYNE

310 MONROE MARK W. STAHLHUTH

JEFFERSON CITY, MO 65101 GENERAL COUNSEL

(314) 636-8578 MISSOURI DEPART-

(314) 636-8615 (telecopier) MENT OF INSURANCE

* Counsel of Record

APPENDIX

SURVEY OF INSURANCE INSOLVENCY LAW

I. Reinsurance recoverables are an asset of the company.

Wyo. Stat. Ann. § 26-6-101.

(a) In any determination of an insurer’ s financial condition,

only the following insurer owned assets shall be allowed:

(viii) The full amount of reinsurance recoverable by a

ceding insurer from a solvent reinsurer and which reinsurance is

authorized under W.S. 26-5-111{.]

Similar provisions:

Ala. Code § 27-37-1(8)( 1986).

Alaska Stat. § 21.18.010 (9) 1993).

Ariz. Rev. Stat. Ann. § 20-501 (9) (1990).

Ark. Code Ann. § 23-63-601 (9) (1987).

Colo. Rev. Stat. § 10-1-102 (1.5)(h) (1994).

Conn. Gen. Stat. Ann. § 38a-71 (a)(F) (West Supp. 1995).

Del. Code Ann. tit. 18, § 1101 (8) (1989).

Fla. Stat. Ann. § 625.012 (8) (West Supp. 1995).

Ga. Code Ann. § 33-10-1 (9) (Supp. 1995).

Haw. Rev. Stat. § 431:5-201 (8) (1993).

Idaho Code § 41-601 (8) (1991).

Ky Rev. Stat. Ann. § 304.6-010 (1)(h) (Baldwin 1988).

Me. Rev. Stat. Ann. tit. 24-A, § 901.8 (West 1990).

Md. Ins. Code Ann. § 75 (8) (1994).

Mont. Code Ann. § 33-2-501 (8) (1995).

Nev. Rev. Stat. § 681B.010 (8) (1991).

N.M. Stat. Ann. § 59A-8-1 (H) (1991).

N.Y. Ins. Law § 1301 (14) (McKinney 1985).

Okla. Stat. Ann. tit. 36, § 1501.8 (West 1990).

Or. Rev. Stat. § 733.010 (5) (1993).

— o en

S.C. Code Ann. § 38-1 1-40(c) (Law. Co-op. Supp. 1995).

S.D. Codified Laws Ann. § 58-26-1(9) (1990).

Tenn. Code Ann. § 56-2-207(a)(2) (1994).

Utah Code Ann. § 31A-17-201(2)(f) (1994).

W. Va. Code § 33-7-1(h) (1992).

Wyo. Stat. § 26-6-101(a) (1993).

Il. Reinsurance as a credit or deduction from liabilities of

company.

Mass. Gen. L. ch. 174, § 20A (Supp. 1995).

(1) Credit for reinsurance shall be allowed a domestic

ceding insurer as either an asset or a deduction from liability on

account of reinsurance ceded only when the reinsurer meets the

requirements of paragraph (A), (B), (C) or (D) or paragraph (E)

of subsection 2.If meeting the requirements of paragraph (C) or

(D), the requirements of paragraph (F) shall also be met.

(A) Credit shall be allowed when the reinsurance is ceded

to an assuming insurer which is licensed: (i) to issue policies in

the commonwealth covering risks of the same kinds as those

reinsured, or (ii) to reinsure in the commonwealth risks of the

same kinds as those reinsured.

(B) Credit shall be allowed when the reinsurance is ceded

to an assuming insurer which is accredited as a reinsurer in this

commonwealth.An accredited reinsurer is one which:

(i) files with the commissioner evidence of its submis-

sion to this commonwealth’s jurisdiction;

(ii) submits to the commonwealth’s authority to

examine its books and records;

(iii) is licensed to transact insurance or reinsurance In

at least one state, or in the case of a United States branch of an

alien assuming insurer is entered through and licensed to transact

insurance or reinsurance in at least one state;

(iv) files annually with the commissioner a copy of its

annual statement with the insurance department of its state of

domicile and a copy of its most recent audited financial state-

ment; and either

(a) maintains a surplus as regards policyhold-

ers in an amount which is not less than twenty millica

dollars and whose accreditation has not been denied

by the commissioner within ninety days of its submis-

sion; or

(b) maintains a surplus as regards policyhold-

ers in an amount not less than twenty million dollars

and whose accreditation has been approved by the

commissioner.

No credit shall be allowed a domestic ceding insurer, if the

assuming insurers’ accreditation has been revoked by the com-

missioner after notice and a hearing.

to an assuming insurer which is domiciled and licensed in, or in

the case of a United States branch of an alien assuming insurer

is entered through, a state which employs standards regarding

credit for reinsurance substantially similar to those applicable

under this section and the assuming insurer or United States

branch of an alien assuming insurer:

(i) maintains a surplus as regards policyholders in an

amount not less than twenty million dollars; and (ii) submits to

the authority of the commonwealth to examine its books and

records; provided, however, that the requirement of clause (i) of

paragraph (C) does not apply to reinsurance ceded and assumed

pursuant to pooling arrangements among insurers in the same

holding company system.

(D) (i) Credit shall be allowed when the reinsurance is

ceded to an assuming insurer which maintains a trust fund in a

—

— ~~

qualified United States financial institution, as defined in para-

graph (3), for the payment of the valid claims of its United States

policyholders and ceding insurers, their assigns and successors

in interest.The assuming insurer shall report annually to the

commissioner information substantially the same as that re-

quired to be reported on the National Association of Insurance

Commissioners Annual Statement form by licensed insurers to

enable the commissioner to determine the sufficiency of the trust

fund.In the case of a single assuming insurer, the trust shall

consist of a trusteed account representing the assuming insurer's

liabilities attributable to business written in the United States

and, in addition, the assuming insurer shall maintain a trusteed

surplus of not less than fifty million dollars. In the case of a group

of individual unincorporated underwriters, the trust shall consist

of a trusteed account representing the group’s liabilities attribut-

able to business written in the United States and, in addition, the

group shall maintain a trusteed surplus of which one hundred

million dollars shall be held jointly for the benefit of United

States ceding insurers of any member of the group; and the group

shall make available to the commissioner an annual certification

of the solvency of each underwriter by the group’s domiciliary

regulator and its independent public accountants.

(ii) In the case of a group of incorporated insurers

under common administration which complies with the filing

requirements contained in the previous subparagraph, and which

has continuously transacted an insurance business outside the

United States for at least three years immediately prior to making

application for accreditation; and submits to the commonwealth’ s

authority to examine its books and records and bears the expense

of the examination, and which has aggregate policyholders’

surplus of ten billion dollars; the trust shall be in an amount equal

to the group’s several liabilities attributable to business ceded by

United States ceding insurers to any member of the group

pursuant to reinsurance contracts issued in the name of such

group; plus the group shall maintain joint trusteed surplus of

— *

which one hundred million dollars shall be held jointly for the

benefit of United States ceding insurers of any member of the

group as additional security for any such liabilities, and each

member of the group shall make available to the commissioner

an annual certification of the member’s solvency by the member’ s

domiciliary regulator and its independent public accountant.

(iii) Such trust shail be established in a form approved

by the commissioner.The trust instrument shall provide that

contested claims shall be valid and enforceable upon the final

order of any court of competent jurisdiction in the United

States. The trust shall vest legal title to its assets in the trustees of

the trust for its United States policyholders and ceding insurers,

their assigns and successors in interest.The trust and the assum-

ing insurer shall be subject to examination as determined by the

commissioner. The trust described herein must remain in effect

for as long as the assuming insurer shall have outstanding

obligations due under the reinsurance agreements subject to the

trust.

(iv) No later than February twenty-eight of each year

the trustees of the trust shall report to the commissioner in

writing setting forth the balance of the trust and listing the trust’s

investments at the preceding year end and shall certify the date

of termination of the trust, if so planned, or certify that the trust

shall not expire prior to the next following December thirty-first.

(E) Credit shall be allowed when the reinsurance is

ceded to an assuming insurer not meeting the requirements

of paragraph (A), (B), (C), or (D) but only with respect to

the insurance of risks located in jurisdictions where such

reinsurance is required by applicable law or regulation of

that jurisdiction.

(F) If the assuming insurer is not licensed or

accredited to transact insurance or reinsurance in the com-

monwealth, the credit permitted by paragraphs (C) and (D)

aa Ahan

shall not be allowed unless the assuming insurer agrees in

the reinsurance agreements:

(i) That in the event of the failure of the

assuming insurer to perform its obligations under the

terms of the reinsurance agreement, the assuming

insurer, at the request of the ceding insurer, shall

submit to the jurisdiction of an alternative dispute

resolution panel or any court of competent jurisdiction

in any state of the United States, will comply with all

requirements necessary to give such panel or court

jurisdiction, and will abide by the final decision of

such panel or court or of any appellate court in the

event of an appeal of a decision by such panel or court;

and (11) To designate the commissioner or a designated

attorney as its true and lawful attorney upon whom

may be served any lawful process in any action, suit or

proceeding instituted by or on behalf of the ceding

company. |

This provision is not intended to conflict with or

override the obligation of the parties to a reinsurance

agreement to arbitrate their disputes, if such an obligation

is created in the agreement.

(2) A reduction from liability for the reinsurance ceded by

a domestic insurer to an assuming insurer not meeting the

requirements of subsection (1) shall be allowed in an amount not

exceeding the related liabilities carried by the ceding insurer and

such reduction shall be in the amount of funds held by or on

behalf of the ceding insurer, including funds held in trust for the

ceding insurer, under a reinsurance contract with such assuming

insurer as security for the payment of obligations thereunder, if

such security is held in the United States subject to withdrawal

solely by, and under the exclusive control of, the ceding insurer

or in the case of trust, held in a qualified United States financial

— * =

institution as defined in paragraph (B) of subsection (3).This

security may be in the form of:

(A) Cash.

(B) Securities listed by the Securities Valuation

Office of the National Association of Insurance Commis-

sioners and qualifying as admitted assets.

issued or confirmed by a qualified United States institution,

as defined in paragraph (A) of subsection (3), no later than

December thirty-first in respect of the year of which filing

is being made, and in the possession of the ceding company

on or before the filing date of its annual statement.

Letters of credit meeting applicable standards of 1s-

suer acceptability as for the dates of their issuance or

confirmation shall, notwithstanding the issuing or confirm-

ing institution's subsequent failure to meet applicable stan-

dards of issuer acceptability, continue to be acceptable as

security until their expiration, extension, renewal, modifi-

cation or amendment, whichever first occurs.

(D) Any other form of security acceptable to the

(3) (A) For purpesss of paragraph (C) of subsection (2), a

qualified United States financial institution means an institution

is Organized or, in the case of a United States

office of a foreign banking organization, licensed

under the laws of the United States or any state

thereof:(ii) is regulated, supervised and examined by

United States federal or state authorities having regu-

latory authority over banks and trust companies, and

(iti) has been determined by either the commissioner

or the Securities Valuation Office of the National

—Y

Association of Insurance Commissioners to meet such

standards of financial condition and standing as are

considered necessary and appropriate to regulate the

quality of financial institutions whose letters of credit

will be acceptable to the commis sioner.

(B) A qualified United States financial institution

means, for purposes of those provisions of this section

specifying those institutions that are eligible to act as a

fiduciary of a trust, an institution that:

(1) is organized, or, in the case of a United States

branch or agency office of a foreign banking organiza-

tion, heensed, under the laws of the United States or

any state thereof and has been granted authority to

operate with fiduciary powers; and (ii) is regulated,

supervised and examined by federal or state authori-

ties having regulatory authority over banks and trust

companies.

(4) No credit shall be allowed to any ceding insurer for

reinsurance unless, by the terms of a written reinsurance agree-

ment, the reinsurance is payable by the assuming insurer on the

basis of the liability of the ceding insurer under any policy or

contract reinsured without diminution because of the insolvency

of the ceding insurer.Any reinsurance agreement may provide

that the liquidator or receiver or statutory successor of an

insolvent ceding insurer shall give written notice of the pen-

dency of a claim against the insolvent ceding insurer on the

policy or contract reinsured within a reasonable time after such

claim is filed in the insolvency proceeding and during the

pendency of such claim the assuming insurer may investigate

such claim and interpose, at its own expense, in the proceedings

where such claim ts to be adjudicated any defense or defenses

which it may deem available to the ceding company or its

liquidator or receiver or statutory successor.Subject to court

approval, the expense thus incurred by the assuming insurer shall

whBun

be chargeable, against the insolvent ceding insurer as part of the

expense of liquidation, to the extent of a proportionate share of

the benefit which may accrue to the ceding insurer solely as a

result of the defense undertaken by the assuming insurer.

(5S) The commissioner may in accordance with the provi-

sions of chapter thirty A, after notice and hearing, promulgate

reasonable rules and regulations necessary to effectuate the

provisions of this section, but such regulations shal! not enlarge

upon or extend the provisions of this section.

Similar authority:

Ark. Code Ann. § 23-62-204 & 23-62-303 (1987).

Colo. Rev. Stat. § 10-3-118 (1994 & Supp. 1995).

Conn. Gen. Stat. Ann. § 38a-85 & -86 (West 1992 & Supp. 1995).

Del. Code Ann. tit. 18, §§ 911 & 1105 (1989 & Supp. 1995)

Fla. Stat. Ann. § 624.610 (2) (West Supp. 1995).

Ga. Code Ann. § 33-7-14 (Supp. 1995).

Haw. Rev. Stat. §§ 431:4A-101 & -102 (1993 & Supp. 1995).

Idaho Code §§ 41-514 & -604 (1991 & Supp. 1995).

Il. Stat. Ann. ch. 215, §§ 5/173.1 & .2 (1993 & supp. 1995).

Kan. Stat. Ann. § 40-212 (1993).

Ky. Rev. Stat. Ann. § 304.5-140 (Baldwin Supp. 1995).

La. Rev. Stat. Ann. §§ 941 - 941.3 (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, §§ 731, 731-B & 922 (West 1990 &

Supp. 1995).

Md. Ins. Code Ann. § 74 (2) (1994).

Mich. Stat. Ann. § 24.1725 (Callaghan Supp. 1995).

Minn. Stat. Ann. § 604.092 & 604.093 (West Supp. 1995).

Mich. Stat. Ann. § 24.1725 (Callaghan Supp. 1995).

Mont. Code Ann. §§ 33-2-1216 & 1217 (1995).

Neb. Rev. Stat. § 44-416.01 (Supp. 1995).

Nev. Rev. Stat. § 681A.1 10.2 (1991).

N.M. Stat. Ann. §§ 59A-7-11(B) & S9A-8-3 (1991).

N.Y. Ins. Law § 1308 (McKinney 1985 & Supp. 1995).

N.C. Gen. Stat. §§ 58-7-21 & 58-7-26 (1994).

— A-10 —

N.D. Cent. Code §§ 26.1-31.2-.01 & 26.1-31.2-.02 (1995).

Okla. Stat. Ann. tit. 36, § 711 (West Supp. 1995).

Or. Rev. Stat. §§ 731.508 - 510, 733.040 & 733.140 (1993).

R.1. Gen. Laws § 27-1. 1-1 & 27-1.1-2 (1994).

S.C. Code Ann. §§ 38-9-200 & -210 (Law. Co-op. Supp. 1995).

S.D. Codified Laws Ann. §§ 58-14-4, & 56-14-14 to -16 (1990).

Tenn. Code Ann. § 56-2-208 (1994).

Utah Code Ann. § 31A-17-404 (1994).

Vt. Stat. Ann. tit. 8, § 3634a(b) (Supp. 1995).

Va. Code Ann. § 38.2-1316.2-.4 (1994 & Supp. 1995).

W. Va. Code § 33-4-15a (Supp. 1995).

Wash. Rev. Stat. Ann. § 48.12.160 (West Supp. 1995).

Ill. Reinsurance affects the amount of reserves or surplus

required.

Wyo. Stat. Ann. § 26-6-104 (1993).

(a) As to property, casualty and surety insurance the insurer

shall maintain an unearned premium reserve on all policies in

force.

(b) [T]he unearned premium reserve shall not be less than

that computed, after deduction of applicable reinsurance in

solvent insurers, as fifty percent (50%) of the gross premium for

the current policy year plus one hundred percent ( 100%) of gross

premiums paid in advance as to subsequent policy years.

Similar authority:

Ala. Code § 27-36-3 (b) (1986).

Alaska Stat. § 21.18.060(b) (Supp. 1995).

Anz. Rev. Stat. Ann. § 20-506(B) 1990).

Ark. Code Ann. § 23-62-605(b) 1) (1987).

Del. Code Ann. tit. 18, § 1106(b) (1989).

Fla. Stat. Ann. § 625.051(2) (West 1984).

Ga. Code An. § 33-10-6(b) (Michie 1992).

Haw. Rev. Stat. § 431:5-301(b) (1993).

— A-Il —

Idaho Code § 41-606(2) (1991).

lowa Code Ann. § 515.47 (West 1988).

Ky. Rev. Stat. Ann. § 304.6-050(2) (Baldwin 1988).

La. Rev. Stat. Ann. § 891 (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 923.2 (West 1990).

Md. Ins. Code Ann. § 78 (2) (1994).

Mont. Code Ann. § 33-2-512 (1995).

Nev. Rev. Stat. § 681B.060 (2) (1991).

N.Y. Ins. Law § 1305 (b) (McKinney 1985).

N.C. Gen. Stat. § 58-3-71 (b)-(d) & 58-3-81 (a) (1994).

Okla. Stat. Ann. tit. 36, § 1505.B (West 1990).

S.C. Code Ann. § 38-9-190 (Law. Co-op. Supp. 1995).

S.D. Codified Laws Ann. § 58-26-37 (1990).

Va. Code Ann. § 38.2-1316.6 (1994).

W. Va. Code § 33-7-6(b) (1992).

Wyo. Stat. § 26-6-105(b) (1993).

IV. Legislative finding re: regulation of insolvency process

Tenn. Code Ann. § 56-9-101(d)(6) & (7) (1994).

(d) The purpose of this chapter is the protection of the

interests of insureds, claimants, creditors and the public gener-

ally, with minimum interference with the normal prerogatives of

owners and managers of insurers, through:

(6) Regulation of the insurance business by the impact of

the law relating to delinquency procedures and substantive rules

on the entire insurance business; and

(7) Providing for a comprehensive scheme for the rehabili-

tation and liquidation of insurance companies and those subject

to this chapter as part of the regulation of the business of

insurance, insurance industry and insurers in this

state.Proceedings in cases of insurer insolvency and delin-

— A-12 —

quency are deemed an integral aspect of the business of insur-

ance and are of vital public interest and concern.

Mo. Rev. Stat. § 375.1176.1 (1994).

.. The liquidation of any insurer shall be considered to be

the business of insurance for the purposes of application of any

law of this state.

Similar authority:

Colo. Rev. Stat. § 10-3-S01(3(f&(g) & 501(4) (1994).

Conn. Gen. Stat. Ann. § 38a-903(6)&(7) (West 1992 & Supp. 1995).

Ga. Code Ann. § 33-37-1(6)&(7) (Supp. 1995).

Haw. Rev. Stat. § 431:15-101(6) (1993).

Idaho Code § 41-3301(4\(f) (1991).

lowa Code Ann. § 507c.1(4\(f)& (g) (West 1988 & Supp. 1995).

Ky. Rev. Stat. Ann. § 304.33-010(4)(f)& (g) (Baldwin Supp. 1995)

Mich. Stat. Ann. § 24.18101 (3\(f) 1994).

Minn. Stat. Ann. § 60B.01 (4\(f) (West 1986).

Miss. Code Ann. § 83-24-3 (f) & (g) (1991).

Mont. Code Ann. § 33-2-1302 (3\(f) (1995).

Neb. Rev. Stat. § 44-4801 (6)&(7) (1993). __

N.H. Rev. Stat. Ann. § 402-C:1 (IV\(f) (1983).

N.C. Gen. Stat. § 58-30-1 (c 6) (1994).

N.D. Cent. Code § 26.1-06.1-01.3 (f)&&(g) (1995).

Ohio Rev. Code Ann. § 3903.02 (D\(6) (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.1 (cvi) (1992).

Wis. Stat. Ann. § 645.01(4)(f) (West 1995).

Vv. Action for appointment of receiver to be initiated by

commissioner.

Mo. Rev. Stat. § 375.1154.1 (1994).

No delinquency proceeding shall be commenced after

August 28, 1991, by anyone other than the director [of the

Department of Insurance] and no court shall have jurisdiction to

— A-13 —

entertain, hear or determine any proceedings commenced by any

other person.

Mass. Gen. L. ch. 175, § 180C (Supp. 1995).

If the commissioner deems that a domestic company which

is the subject of a rehabilitation proceeding under section one

hundred and eighty B, or which may properly be the subject of

such a proceeding for any cause referred to in said section,

hereinafter referred to as the company, is insolvent and that it

should be liquidated, he shall make application to the court for

a decree authorizing him to liquidate the company.

Similar authority:

Ala. Code § 27-32-4 (1986).

Alaska Stat. § 21.78.020(a) (1993).

Ariz. Rev, Stat. Ann. § 20-613(A) (Supp. 1995).

Ark. Code Ann. § 23-68-104 (1987).

Colo. Rev. Stat. § 10-3-504(1) (1994).

Conn. Gen. Stat. Ann. § 38a-906(a) (West 1992).

Dela. Code Ann. tit. 18, § 5903 (1989).

Fla. Stat. Ann. § 631.031 (West Supp. 1995).

Ga. Code Ann. § 33-37-4(a) (Michie Supp. 1995).

Idaho Code § 41-3304(1) (1991).

Ind. Code Ann. §§ 27-2-4-1 & 27-9-1-3(a) (Burns 1994).

lowa Code Ann. § 507C.4(1) (West 1988).

Kan. Stat. Ann. § 40-3608(a) (1993).

La. Rev. Stat. Ann. § 742 (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4354.1 & 4360 (West Supp. 1995).

Md. Ann. Code art. 48A, § 134 (1994).

Mich. Stat. Ann. § 24-18104 (1) (Callaghan 1994).

Miss. Code Ann. § 83-24-9 (1) (1991).

Mont. Code Ann. § 33-2-1305 (1) (1995).

Neb. Rev. Stat. § 44-4804 (1) (1993).

NJ. Stat. Ann. § 17:30C-4 (a) (West 1994).

N.M. Stat. Ann. § S9A-41-34 (A) (1991).

—_ <<)

N.Y. Ins. Law § 7417 (McKinney 1985).

N.C. Gen. Stat. § 58-30-15 (a) (1994).

N.M. Cent. Code § 26.1-06.1-04.1 (1995).

Ohio Rev. Code Ann. § 3903.04 (A) (Anderson 1989).

Okla. Stat. Ann. tit. 36, § 1903 (West 1990).

Or. Rev. Stat. § 734.130 (1) (1993).

40 Pa. Cons. Stat. Ann. § 221.20 (a) (1993).

R.L Gen. Laws § 27-14.3-4 (a) (1994).

S.D. Codified Laws Ann. § 58-29B-4 (1990).

Tenn. Code Ann. § 56-9-104(a) (1994).

Wash. Rev. Stat. Ann. § 48.31.190{2) (West Supp. 1995).

Wis. Stat. Ann. § 645.04(1) (West 1995).

Wyo. Stat. § 26-28-1093 (1993),

VI. Commissioner and limited number of creditors can

petition for liquidation.

Utah Code Ann. § 31A-27-103

(1) Except as provided in Subsection (2), no delinquency

proceeding may be commenced under this chapter by anyone

other than the Utah commissioner.

(2) (a) Three or more judgment creditors holding unrelated

judgments against an insurer, which judgments aggregate more

than $5,000 in excess of any security held by those creditors may

commence proceedings against the insurer under the conditions

and in the manner prescribed in this subsection, by serving notice

upon the commissioner and the insurer of an intention to file a

petition for liquidation under Section 31 A-27-307 or 31A-27-

402.Each of the judgments:

(i) shall have been rendered against the insurer by a

Utah court having jurisdiction over the subject matter and

the insurer;

(ii) shall have been entered more than 60 days before

the service of notice under Subsection (2);

— A-15 —

(iii) may not have been satisfied in full,

(iv) may not be the subject of a valid contract between

the insurer and any judgment creditor for payment of this

judgment, unless that contract has been breached by the

insurer;

(v) may not be a judgment assigned in order to

institute proceedings under this subsection; and

(vi) may not be a judgment on which an appeal or

review is pending or may yet be brought.

(b) If any one of the judgments in favor of a petitioning

creditor remains unpaid for 30 days after service of the notice

under Subsection (2), and the commissioner has 1. then filed a

petition for liquidation, the creditor may file a verified petition

for liquidation of the insurer in the manner prescribed by Section

31A-27-307 or 31A-27-402, alleging the conditions stated in

this subsection. The commissioner shall be served and joined in

the action.

Similar authority:

Haw. Rev. Stat. § 431:15-104(a)&(b) (1993).

Ill. Rev. Stat. ch. 215, para. 5 § 201 (1993).

Ky. Rev. Stat. Ann. § 304.33-040(1)&(2) Baldwin Supp. 1995).

Minn. Stat. Ann. § 60B.04 (1 )& (2) (West 1986).

Nev. Rev. Stat. §§ 696B.250 & 696B.350 (1991).

N.H. Rev. Stat. Ann. § 402-C:4 (D&(IT) (1983).

S.C. Code Ann. § 38-27-60(a) (Law. Co-op. Supp. 1995).

Utah Code Ann. § 31A-27-103(1) & (2) (1994).

Va. Code Ann. § 38.2-1504 (1994).

—_ =

VII. Liquidation under chapter the sole and exclusive

remedy.

Mo. Rev. Stat. § 375.1154.2 (1994).

No court of this state shall have jurisdiction to entertain,

hear or determine any complaint praying for the dissolution,

liquidation, rehabilitation, sequestration, supervision, conserva-

tion or receivership of any insurer; or praying for an injunction

or restraining order or other relief preliminary to, incidental to or

relating to such proceedings other than in accordance with

sections 375.1150 to 375.1246 [Insurers Supervision, Rehabili-

tation and Liquidation Act.]}

Similar authority:

Ala. Code § 27-32-3 (1986).

Alaska stat. § 21.78.010(b) (1993).

Ariz. Rev. Stat. Ann. § 20-612(c) (Supp. 1995).

Ark. Code Ann. § 23-68-103(c) (1987).

Conn. Gen. Stat. Ann. § 38a-906(b) (West 1992).

Dela. Code Ann. tit. 18, § 5902(d) (1989).

Fla Stat. Ann. § 631.021(3) (West Supp. 1995).

Ga. Code Ann. § 33-374 (Michie Supp. 1995).

Haw. Rev. Stat. 431:15-104(c) (1993).

Idaho Code § 41-3304(2) (1991).

Ind. Code Ann. § 27-9-1-3(b) (1994).

lowa Code Ann. § 507C.4(2) (West 1994).

Kan. Stat. Ann. § 40-3608(6) (1993).

Ky. Rev. Stat. § 304.33-040(3) (Baldwin Supp. 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4354.4 (West 1990).

Md. Ann. Code art. 48A, § 133 (c) (1994).

Mich. Stat. Ann. § 24-18104 (2) (Callaghan 1994).

Minn. Stat. Ann. § 60B.04 (3) (West 1986).

Miss. Code Ann. § 83-24-9 (2) (1991).

Mont. Code Ann. § 33-2-1305 (2) (1995).

Neb. Rev. Stat. § 44-4804 (2) (1993).

an fi 89 an

Nev. Rev. Stat. § 696B.190 (4) (1991).

N.H. Rev. Stat. Ann. § 402-C:4 (III) (1983).

N.J. Stat. Ann. § 17:30C-3 (West 1994).

N.C. Gen. Stat. § 58-30-15 (b) (1994).

N.D. Cent. Code § 26.1-06.1-04.2 (1995).

Ohio Rev. Code Ann.§ 3903.04 (B) (Anderson 1989).

Okla. Stat. Ann. tit. 36, § 1902.C (West 1990).

Or. Rev. Stat. § 734.120 (1) (1993).

40 Pa. Cons. Stat. Ann. § 221.4 (a) (1993).

R.1. Gen. Laws § 27-14.3-4 (a)&(b) (1994).

S.C. Code Ann. § 38-27-60(b) (Law. Co-op. Supp. 1995).

S.D. Codified Laws Ann. § 58-29B-4 (1990).

Tenn. Code Ann. § 56-9-104(b) (1994).

Utah Code Ann. § 31A-27-103(3) (1994).

Vt. Stat. Ann. § 7032 (1993).

W. Va. Code § 33-10-2 (1992).

Wis. Stat. Ann. § 645.04(3) (West 1995).

Wyo. Stat. § 26-28-102(d) (1993).

VIII. Personal jurisdiction over reinsurer.

Mo. Rev. Stat. § 375.1154 (1994).

4. In addition to other grounds for jurisdiction provided by

the law of this state, a court having jurisdiction of the subject

matter has jurisdiction over a person served pursuant to appli-

cable laws or supreme court rule in an action brought by the

receiver of adomestic insurer or an alien insurer domiciled in this

State:

(b) I f the person is a reinsurer who has at any time entered

into a contract of reinsurance with an insurer against which a

delinquency proceeding has been instituted, or is an agent or

broker of or for the reinsurer, in any action on or incident to the

reinsurance contract[.]

— A-18 —

Similar authority:

Alaska Stat. § 21.78.020(d)\(2) (1993).

Colo. Rev. Stat. Ann. § 10-3-504(3)(b) (1994).

Conn. Gen. Stat. Ann. § 38a-906(c)(2) (1992).

Ga. Code Ann. § 33-37-4(c)(2) Michie Supp. 1995).

Haw. Rev. Stat. § 431:15-104(e)(2) (1993).

Idaho Code § 41-3304(3)\(b) (1991).

Ind. Stat. Ann. § 27-9-1-3(c)(2) (Burs 1994).

lowa Code Ann. § 507C.4(3)(b) (West Supp. 1995).

Kan. Stat. Ann. § 40-3608(c)(2) (1993).

Ky. Rev. Stat. § 304.33-040(5)(b) (Baldwin Supp. 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4355.1.B (West Supp. 1995).

Md. Ann. Code art. 48A, § 133 (e(2) (1994).

Mich. Stat. Ann. § 24.18104 (3)(b) (Callaghan 1994).

Minn. Stat. Ann. § 60B.04 (5)(b) (West 1986).

Miss. Code Ann. § 83-24-9 (3)(b) (1991).

Mont. Code Ann. § 33-2-1306 (2) (1995).

Neb. Rev. Stat. § 44-4804 (3)(b) (1993).

Nev. Rev. Stat. § 696B.200 (1)(b) (1991).

N.H. Rev. Stat. Ann. § 402-C:4 (V)(b) (Supp. 1994).

N.C. Gen. Stat. § 58-30-15 (c(2) (1994).

N.D. Cent. Code § 26.1-06.1-04.3 (b) (1995).

Ohio Rev. Code Ann. § 3903.04 (C)\(2) (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.4 (b\(ii) (1993).

R.L. Gen. Laws § 27-14.3-4 (c\(2) (1994).

S.C. Code Ann. § 38-27-60(d)(2) (Law. Co-op. Supp. 1995).

S.D. Codified Laws Ann. § 58-29B-6(2) (Supp. 1995).

Tenn. Code Ann. § 56-9-104(c) (1994).

Utah Code Ann. § 31 A-27-103(5)(b) (1994).

IX. Grounds for liquidation.

Mass. Gen. L. ch. 175, § 6 (1987).

If [the commissioner of insurance] is satisfied that any

domestic company is insolvent or in an unsound financial

— A-19 —

condition, or that its business policies or methods are unsound or

improper, or that its condition or management is such as to rencer

its further transaction of business hazardous to the public or to its

policyholders or creditors, or that it is transacting business

fraudulently or that its officers or agents have refused to submit

to an examination under section four or seventy-three, or that it

has attempted or is attempting to compromise with its creditors

on the ground that it is unable to pay its claims in full, or that,

when its assets are less than its liabilities, inclusive of unearned

premium but exclusive of capital, if any, it has attempted or is

attempting to the disadvantage of policyholders who have suf-

fered losses to prefer, or has preferred, by reinsurance, policy-

holders who have sustained no losses, he shall, except as pro-

vided in section one hundred and eighty B or one hundred and

eighty C, or, if he is satisfied that any domestic insurer has

exceeded its powers or has violated any provision of law, or that

the amount of its funds, insurance in force or premiums or

number of risks is deficient or that its guarantee capital under

section ninety B or ninety-three or its guarantee fund under

section ninety C is impaired, as set forth in sections twenty-three,

seventy-four, ninety-three D and one hundred and sixteen, he

may, apply to the supreme judicial court for an injunction

restraining it in whole or in part from further proceeding with its

business and for the appointment of a receiver.

Mo. Rev. Stat. § 375.1175 (1994).

The director may petition the court for an order directing

him to liquidate a domestic insurer or an alien insurer domiciled

in this state on the basis:

(1) Of any ground for an order of rehabilitation as specified

in section 375.1165, whether or not there has been a prior order

directing the rehabilitation of the insurer;

(2) That the insurer is insolvent;

— A-20 —

(3) That the insurer is in such condition that the further

transaction of business would be hazardous, financially or oth-

erwise, to its policyholders, its creditors or the public;

(4) That the insurer is found to be in such condition after

examination that it could not meet the requirements for i

ration and authorization specified in the law under which it was

incorporated or is doing business; or

| (S) That the insurer has ceased to transact the business of

insurance for a period of one year.

Mo. Rev. Stat. § 375.1165 (1994).

The director may apply by petition to the court for an order

authorizing him to rehabilitate a domestic insurer or an alien

insurer domiciled in this state on any one or more of the

following grounds:

(1) The insurer is in such condition that the further trans-

action of business would be hazardous financially to its policy-

holders, creditors or the public;

(2) There is reasonable cause to believe that there has been

embezzlement from the insurer, wrongful sequestration or diver-

sion of the insurer’ s assets, forgery or fraud affecting the insurer,

or other illegal conduct in, by, or with respect to the insurer that

if established would endanger assets in an amount threatening

the solvency of the insurer;

(3) The insurer has failed to remove any person who in fact

has executive authority in the insurer, whether an officer, man-

ager, general agent, employee, or other person, if the person has

been found after notice and hearing by the director to be dishon-

est or untrustworthy in a way affecting the insurer's business:

(4) Control of the insurer, whether by stock ownership or

otherwise, and whether direct or indirect, is in a person or

persons found after notice and a hearing to be untrustworthy;

— A-21 —

(5) Any person who in fact has executive authority in the

insurer, whether an officer, manager, general agent, employee,

or other person, has refused to be examined under oath by the

director concerning its affairs, whether in this state or elsewhere,

and after reasonable notice of this fact, the insurer has failed

promptly and effectively to terminate the employment and status

of the person and all his influence on management,

(6) After request by the director pursuant to section

374.190, RSMce, or pursuant to the provisions of sections 375.1 150

to 375.1246, the insurer has failed to promptly make available

for examination any of its own property, books, accounts,

documents or other records, or those of any subsidiary or related

company within the control of the insurer, or those of any person

having executive authority in the insurer so far as they pertain to

the insurer,

(7) Without first obtaining the written consent of the

director, the insurer has transferred, or attempted to transfer in a

manner contrary to section 375.241 or sections 382.040 to

382.060, RSMo, substantially its entire property or business, or

has entered into any transaction the effect of which 1s to merge,

consolidate or reinsure substantially its entire property or busi-

ness in or with the property or business of another;

(8) The insurer or its property has been or is the subject of

an application for the appointment of a receiver, trustee, Custo-

dian, conservator or sequestrator or similar fiduciary of the

insurer or its property otherwise than as provided under the

insurance laws of this state, or such appointment has been made

or is imminent,

(9) Within the three previous years the insurer has willfully

violated its charter or articles of incorporation, its bylaws, any

insurance law of this state, or any valid order of the director under

section 375.1160 or 375.1162;

— A-22 —

(10) The insurer has failed to pay within sixty days after due

date any obligation to any state or subdivision thereof of any

judgment entered in any state, if the court in which such judg-

ment was entered had jurisdiction over such subject matter

except that such nonpayment shall not be a ground until sixty

days after any good faith effort by the insurer to contest the

obligation has been terminated, whether it is before the director

or in the courts, or the insurer has systematically attempted to

compromise or renegotiate previously agreed settlements with

its creditors on the ground that it is financially unable to pay its

obligation in full;

(11) The insurer has failed to file its annual report or other

financial report required by law within the time allowed by law:

(12) The board of directors or the holders of a majority of

the shares entitled to vote, or a majority of those individuals

entitled to the control of the insurer request or consent to

rehabilitation under sections 375.1150 to 375.1246.

Similar authority:

Ala. Code § 27-32-7 (1986).

Alaska Stat. § 21.78.050 (1993).

Ariz. Rev. Stat. Ann. § 20-616 (1990).

Ark. Code Ann. § 23-68-107 (1987).

Colo. Rev. Stat. Ann. §§ 10-3-516 & 10-3-511 (Michie 1994).

Conn. Gen. Stat. Ann. §§ 38a-919 (West 1992).

Del. Code Ann. tit. 18, § 5906 (1989).

Fla. Stat. Ann. § 631.061 (West Supp. 1995).

Ga. Code Ann. §§ 33-37-16 & 33-37-11 (Supp. 1995).

Haw. Rev. Stat. §$ 431:15-306 & 431:15-301 (1993).

Idaho Code §§ 41-3317 & 41-3312 (1991).

Ill. Rev. Stat. ch. 215, para. 5, § 188 (Supp. 1995).

Ind. Stat. Ann. $§ 27-9-3-6 & 27-9-3-1 (Burns 1994).

lowa Code Ann. §§ 507C.17 & 507C.12 (West 1988).

Kan. Stat. Ann. § 40-3621 & 40-3616 (1993).

—_

Ky. Rev. Stat. § 304.33-190 (Baldwin Supp. 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4357.2 (West 1990).

Md. Ann. Code art. 48A, §§ 137 & 136 (1994)

Mich. Stat. Ann. §§ 24.18117 & 24.18112 (Callaghan 1994).

Minn. Stat. Ann §§ 60B.20 & 60B.15 (West Supp. 1995).

Miss. Code Ann. §§ 83-24-33 & 83-24-23 (1991).

Mont. Code Ann. §§ 33-2-1341 & 33-2-1331 (1995).

Neb. Rev. Stat. §§ 44-4817 & 44-4812 (1993).

Nev. Rev. Stat. § 696B.220 (1991).

N.H. Rev. Stat. Ann. §§ 402-C:20 & 402-C:15 (1983).

NJ. Stat. Ann. § 17:30C-8 (West 1994).

N.M. Stat. Ann. § 59A-41-28 (1991).

N.Y. Ins. Law § 7404 & 7402 (McKinney 1985 & Supp. 1995).

N.C. Gen. Stat. §§ 58-30-100 & 58-30-75 (1994).

N.D. Cent. Code § 26. 1-06. 1-16 & 26.1-06.1-11 (1995).

Ohio Rev. Code Ann. §§ 3903.17 & 3903.12 (Anderson 1989).

Okla. Stat. Ann. tit. 36, §§ 1906 & 1905 (West 1990).

Or. Rev. Stat. §§ 734.170 & 734.150 (1993).

40 Pa. Cons. Stat. Ann. § 221.19 & 221.14 (1993).

R.L. Gen. Laws §§ 27-14.3-21 & 27-14.3-16 (1994).

Utah Code Ann. § 31 A-27-307 (1994).

Va. Code § 38.2-1503 (1994).

W. Va. Code § 33-10-6 (1992).

Wis. Stat. Ann. § 645.41 (West 1995).

Wyo. Stat. § 26-28-105 & 26-28-106 (1993).

X. Commissioner shall be appointed receiver/liquidator.

Mass. Gen. L. ch. 175, § 180C (Supp. 1995).

If the commissioner deems that a domestic company which

is the subject of a rehabilitation proceeding under section one

hundred and eighty B, or which may properly be the subject of

such a proceeding for any cause referred to in said section,

hereinafter referred to as the company, is insolvent and that it

should be liquidated, he shall make applicatioa to the court for

a decree authorizing him to liquidate the company. The court,

= At

alter notice to all known creditors and stockholders of the

company anda full hearing, may order its liquidation and appoint

the commissioner permanent receiver thereof.

Mo. Rev. Stat. § 375.1176 (1994).

.1. An order to liquidate the business of a domestic insurer

shall appoint the director and his successors as liquidator and

shall direct the liquidator forthwith to take immediate possession

of the assets of the insurer and to administer them subject to the

supervision of the court until the liquidator is discharged by the

court.

Similar authority:

Ala. Code § 27-32-15(a) (1986).

Alaska Stat. § 21.78.130(a) (Supp. 1995).

Ariz. Rev. Stat. Ann. § 20-624 (1990).

Ark. Code Ann. § 23-68-113(d) (1987).

Colo. Rev. Stat. Ann. § 10-3-517(1) (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-920(a) (West 1992).

Del. Code Ann. tit. 18, § 5913 (1989).

Fla. Stat. Ann. § 631.141 (West 1989).

Ga. Code Ann. § 33-37-17(a) (Supp. 1995). ~

Haw. Rev. Stat. § 431:15-307(a) (1993).

Idaho Code §§ 41-3317 & 41-3318(1) (1991).

Ill. Rev. Stat. ch. 215, para. 5, § 190(5) (Supp. 1995).

Ind. Stat. Ann. § 27-9-3-7(a\(1) (Burns 1994).

lowa Code Ann. § 507C.18(1) (West Supp. 1995).

Kan. Stat. Ann. § 40-3622 (1993).

Ky. Rev. Stat. § 304.33-200(1) (Baldwin Supp. 1995).

La. Rev. Stat. Ann. § 735.A (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4364.1 (West 1990).

Md. Ann. Code Art. 48A, § 141 (a)(1) (1994).

Mich. Stat. Ann. § 24.18118 (1) (Callaghan Supp. 1995).

Minn. Stat. Ann. § 60B.21 (1) (West 1986).

Miss. Code Ann. § 83-24-35 (1) (1991).

— A-25 —

Mont. Code Ann. § 33-2-1342 (1) (1995).

Neb. Rev. Stat. § 44-4814 (1) (1993).

Nev. Rev. Stat. § 696B.290 (1) (1991).

Nev. Rev. Stat. § 696B.300 (1) (1991).

N.H. Rev. Stat. Ann. § 402-C:21 (1) (1983).

N.J. Stat. Ann. § 17:30C-15(a) (West 1994).

N.M. Stat. Ann. §§ 59A-41-18 (A) & 59A-41-30 (A) (1991).

N.Y. Ins. Law §§ 7405 & 7409 (b) (McKinney 1985).

N.C. Gen. Stat. § 58-30-105 (a) (1994).

N.D. Cent. Code § 26.1.06.1-17.1 (1995).

Ohio Rev. Code Ann. § 3903.18 (A) (Anderson 1989).

Okla. Stat. Ann. tit. 36, § 1914.A (West 1990).

Or. Rev. Stat. § 734.210 (1) (1993).

40 Pa. Cons. Stat. Ann. § 221.20(c) (1993).

R.L. Gen. Laws § 27-14.3-22 (a) (1994).

S.C. Code Ann. § 38-27-370(A) (Law. Co-op. Supp. 1995).

Tenn. Code Ann. § 56-9-307(a) (1994).

Tex. Ins. Code § 21.28(2)(a) (West Supp. 1995).

Utah Code Ann. § 31A-27-307 (1994).

Vt. Stat. Ann. tit. 8, § 7057 (1994).

Wash. Rev. Code Ann. § 48.99.020(1) (West Supp. 1995).

W. Va. Code § 33-10-14 (1992).

Wis. Stat. Ann. § 645.42 (1) (West 1995).

Wyo. Stat. § 26-28-112(a) (1993).

Contra Va. Code Ann. § 38.2-1508 (1994)(when Insurance

Commission is appointed receiver it acts without supervision of

court; if someone other than Commission is appointed it acts

pursuant to a court ordered plan.)

XI. Liquidator to take control of property of insurer and

begin to collect the assets

Mo. Rev. Stat. § 375.1146 (1994)

.1. An order to liquidate the business of a domestic insurer

shall appoint the director and his successors as liquidator and

— A-26 —

shall direct the liquidator forthwith to take immediate possession

of the assets of the insurer and to administer them subject to the

supervision of the court until the liquidator is discharged by the

court. . .. The liquidator shall be vested by operation of law with

the title to all of the property, contracts and rights of action, and

all of the books and records of the insurer ordered liquidated, as

of the entry of the order of liquidation.

Mo. Rev. Stat. § 375.1182 (1994)

.1. The liquidator shall have the power:

(6) To collect all debts and moneys due and claims

belonging to the insurer, wherever located{.]

Mass. Gen. L. ch. 175, § 180C (1987).

Upon the entry of a decree ordering liquidation of a com-

pany the receiver shall proceed forthwith to liquidate the busi-

ness thereof]. ]

Ala. Code §§ 27-32-12(a) & 14(b) (1986).

Alaska Stat. §§ 21.78.100(a) & 130(b)(1993 & Supp. 1995).

Ariz. Rev. Stat. Ann. §§ 20-621(a) & -624(B) (1990).

Ark. Code Ann. §§ 23-68-11 1(a)(1) & -113(2) (1987).

Colo. Rev. Stat. Ann. § 10-3-517(1) (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-920(a) (West 1992).

Del. Code Ann. tit. 18, §§ 591 1(a) & 5913(b) (1989).

Fla. Stat. Ann. §§ 631.111, .141(2) & .152(2) West 1984 & Supp.

1995).

Ga. Code Ann. § 33-37-20(8) (Supp. 1995).

Haw. Rev. Stat. § 431:15-307(a) & -310(a)(6) (1993).

Idaho Code §§ 41-3318(1) & -3319(1)(f) (1991).

Ill. Rev. Stat. ch. 215, para. 5, § 190(5) & 191 (1993 & Supp. 1995).

Ind. Stat. Ann. § 27-9-4-7(b) & -9(b)(6) (Burns 1994),

—_—~

lowa Code Ann. § 507C.18(1) & .21(f) (West 1988).

Kan. Stat. Ann. § 40-3622(a) & .3625(a)(8) (1993).

Ky. Rev. Stat. § 304.33-200 & 240(6) (Baldwin Supp. 1995).

La. Rev. Stat. Ann. § 737.A (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4364.2 (West 1990).

Md. Code Ann. art. 48A, §§ 141 (a)(2) & (b) & 142 (1994).

Mich. Stat. Ann. § 24.18118 (1) & .18121 (f) (Callaghan Supp.

1995).

Minn. Stat. Ann. § 60B.21 (1) & .25(6) (West 1986 & Supp. 1995).

Miss. Code Ann. § 83-24-35 (1) & -41(h) (1991).

Mont. Code Ann. § 33-2-1342 (1) & -1345(1)(f) (1995).

Neb. Rev. Stat. § 44-4818 (1) & -4821(1)(h) (1993).

Nev. Rev. Stat. § 696B.290 (2)&(5) & .300(2) (1991).

N.H. Rev. Stat. Ann. § 402-C:21(1) & -C:25(V1) (1983).

N.J. Stat. Ann. § 17:30C-15(a)&(b) (West 1994).

N.M. Stat. Ann. § 59A-41-18(B)&(C) & -30(A)&(B) (1991).

N.Y. Ins. Law § 7405(a)&&(b) & 7409(a)&(b) (McKinney 1985).

N.C. Gen. Siat. § 58-30-105(a) & -120(6) (1994).

N.D. Cent. Code § 26.1-06.1-17.1 & -20.1(h) (1995).

Ohio Rev. Code Ann. § 3903.18(A) & 3903.21(A)(6) (Anderson

1989).

Okla. Stat. Ann. tit. 36, § 1911.A & 1914.A, .B & .E (West 1990).

Or. Rev. Stat. § 734.180(1), .210(1) & .220 (1993).

40 Pa. Cons. Stat. Ann. § 221.20(c) & .23(6) (1993).

R.I. Gen. Laws § 27.14.3-22(a) & -25(8) (1994).

S.C. Code Ann. §§ 38-27-370(A) & -400(6) (Law. Co-op. Supp.

1995).

S.D. Codified Laws Ann. § 58-29B-49(6) (Supp. 1995).

Tenn. Code Ann. §§ 56-9-307(a) & -310(8) (1994).

Utah Code Ann. §§ 31 A-27-310 & -314(6) (1994).

Vt. Stat. Ann. tit. 8, § 7060 (9).

Wash. Rev. Code Ann. § 48.99.020(1) (West Supp. 1995).

W. Va. Code § 33-10-11 (1992).

Wis. Stat. Ann. §§ 645.42(1) & 645.46(6) (West 1995).

Wyo. Stat. §§ 26-28-110 & -112(a)&(b) (1993).

— A-28 —

XII. Liquidator may bring actions in other jurisdictions to

forestall garnishment or attachment.

Mo. Rev. Stat. § 375.1182 (1994)

.1. The liquidator shall have the power:

(6) To collect all debts and moneys due and claims

belonging to the insurer, wherever located, and for this purpose:

(a) to institute timely actions in other jurisdictions to

forestall garnishment and attachment proceedings against such

debt[.]

Similar authority:

Colo. Rev. Stat. Ann. § 10-3-520 (1)(h\(II) (Michie 1994).

Ga. Code Ann. § 33-37-20(8)(A) (Supp. 1995).

Haw. Rev. Stat. § 431:15-310(6)(A) (1993).

Idaho Code §§ 41-3321(1)\(f)1 (1991).

Ind. Stat. Ann. § 27-9-3-9(b)(6)(A) (Burns 1994).

lowa Code Ann. § 507C.21(f 1) (West 1988).

Kan. Stat. Ann. § 40-3625(a)(8\ 1) (1993).

Ky. Rev. Stat. § 304.33-240(6)) (Baldwin Supp. 1995).

Mich. Stat. Ann. § 24.18121 (f(1) (Callaghan Supp. 1995).

Minn. Stat. Ann. § 60B.25(6) (West Supp. 1995).

Miss. Code Ann. § 83-24-41 (h)(1) (1991).

Mont. Code Ann. § 33-2-1345 (1 (fi) (1995).

Neb. Rev. Stat. § 44-4821 (1)(h)(i) (1993).

N.H. rev. Stat. Ann. § 402-C:25 (VI) (1983).

N.C. Gen. Stat. § 58-30-120 (6) 1) (1994).

N.D. Cent. Code § 26. 1-06. 1-20.1 (hy 1) (1995).

Ohio Rev. Code Ann. § 3903.21 (A\(6)(a) (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.23 (6) (1993).

R.L. Gen. Laws § 27-14.3-25 (8)(i) (1994).

S.C. Code Ann. § 38-27-400(6)(a) (Law. Co-op. Supp. 1995).

oan in

S.D. Codified Laws Ann. § 58-29B-4%6) (Supp. 1995).

Tenn. Code Ann. § 56-9-310(8) (1994).

Utah Code Ann. § 31A-27-314 (6)(a) (1994).

Vt. Stat. Ann. tit. 8, § 7060(9) (1993). ,

Wis. Stat. Ann. § 645.46(6) (West 1995).

XIII. Money can be borrowed by liquidator on pledge of

assets of the estate.

Mo. Rev. Stat. § 375.1182 (1994)

.1. The liquidator shall have the power:

(10) To borrow money on the security of the insurer's

assets or without security and to execute and deliver all docu-

ments necessary to that transaction for the purpose of facilitating

the liquidation.Any such funds borrowed may be repaid as an

administrative expense and have priority over any other claims

in class | under the priority of distribution{.]

Similar authority:

Ala. Code § 27-32-25 (1986).

Alaska Stat. § 21.78.230(a) (1993).

Ariz. Rev. Stat. Ann. § 20-634 (1990).

Ark. Code Ann. § 23-68-123(a) (1987).

Colo. Rev. Stat. Ann. § 10-3-520(1) (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-923( 10) (West Supp. 1995).

Del. Code Ann. tit. 18, § 5923 (1989).

Ga. Code Ann. § 33-37-20(a)( 12) (Supp. 1995).

Haw. Rev. Stat. § 431:15-310(a)( 10) (1993).

Idaho Code § 41-3321(1)\j) (1991).

lll. Rev. Stat. ch. 215, para. 5, § 195 (1993).

Ind. Stat. Ann. § 27-9-3-9(b)( 10) (Burns 1994).

lowa Code Ann. § 507C.21(1)(j) (West Supp. 1995).

Kan. Stat. Ann. § 40-3625(a)( 12) (1993).

Ky. Rev. Stat. § 304.33-240(11) (Baldwin Supp. 1995).

—+ wn

Me. Rev. Stat. Ann. tit. 24-A, § 4373 (West 1990).

Md. Ann. Code art. 48A, § 155 (1994).

Mich. Stat. Ann. § 24.18121 (j) (Callaghan Supp. 1995).

Minn. Stat. Ann. § 60B.25(10) (West Supp. 1995).

Miss. Code Ann. § 83-24-41 (1) (1991).

Mont. Code Ann. § 33-2-1345 (j) (1995).

Neb. Rev. Stat. § 44-4821 (1)(1) (1993).

Nev. Rev. Stat. § 696B.380 (1991).

N.H. Rev. Stat. Ann. § 402-C:25 (X) (1983).

N.J. Stat. Ann. § 17:30C-24 (West 1994).

N.M. Stat. Ann. § S9A-41-39 (1991).

N.Y. Ins. Law § 7429 (McKinney 1985).

N.C. Gen. Stat. § 58-30-120 (10) (1994).

N.D. Cent. Code § 26.1-06.1-20.1 (1) (1995).

Ohio Rev. Code Ann. § 3903.21 (A)(10) (Anderson 1989).

Okla. Stat. Ann. tit. 36, § 1924 (West 1990).

40 Pa. Cons. Stat. Ann. § 221.23 (10) (1993).

R.I. Gen. Laws § 27-14.3-25 (12) (1994).

S.C. Code Ann. § 38-27-400( 10) (Law. Co-op. Supp. 1995).

S.D. Codified Laws Ann. § 58-29B-49( 10) (Supp. 1995).

Tenn. Code Ann. § 56-9-310(12) (1994).

Utah Code Ann. § 31A-27-314 (10 (1994).

Vt. Stat. Ann. tit. 8, § 7060(11) (1993).

Va. Code Ann. § 38.2-1511 (1994).

W. Va. Code § 33-10-24 (1992).

Wis. Stat. Ann. § 645.46(10) (West 1995).

Wyo. Stat. § 26-28-122 (1993).

XIV. Liquidator can continue to prosecute or initiate any

action by or against the insurer.

Mo. Rev. Stat. § 375.1182 (1994)

.1. The liquidator shall have the power:

— A-31 —

(12) To continue to prosecute and to institute in the name

of the insurer or in his own name any and all suits and other lega!

proceedings, in this state or elsewhere, and, with the approval of

the supervising court, to abandon the prosecution of claims that

he deems unprofitable to pursue further{.]

Similar authority:

Colo. Rev. Stat. Ann. § 10-3-520(n) (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-923( 12) (West Supp. 1995).

Ga. Code Ann. § 33-37-20(a)( 14) (Supp. 1995).

Haw. Rev. Stat. § 431:15-310(a)( 12) (1993).

Idaho Code § 41-3321(1\(1) (1991).

Ind. Stat. Ann. § 27-9-3-9(b)( 12) (Burns 1994).

lowa Code Ann. § 507C.21(1) (West 1988).

Kan. Stat. Ann. § 40-3625(14) (1993).

Ky. Rev. Stat. § 304.33-240( 13) (Baldwin Supp. 1995).

Mich. Stat. Ann. § 24.18121 (1) (Callaghan Supp. 1995).

Minn. Stat. Ann. § 60B.25(12) West Supp. 1995).

Miss. Code § 83-24-41 (n) (1991).

Mont. Code Ann. § 33-2-1345 (1) (1995).

Neb. Rev. Stat. § 44-4821 (1)(n) (1993).

N.H. Rev. Stat. Ann. § 402-C:25 (XID) (1983).

N.C. Gen. Stat. § 58-30-120 (12) (1994).

N.D. Cent. Code § 26.1-06.1-20.1 (n) (1995).

Ohio Rev. Code Ann. § 3903.21 (A)(12) (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.23 (12) (1993).

R.I. Gen. Laws § 27-14.3-25 (14) (1994).

S.C. Code Ann. § 38-27-400(12) (Law. Co-op. Supp. 1995).

S.D. Codified Laws Ann. § 58-29B-49% 12) (Supp. 1995).

Tenn. Code Ann. § 56-9-310( 14) (1994).

Utah Code Ann. § 31 A-27-314 (12) (1994).

Vt. Stat. Ann. tit. 8, § 7060(13) (1993).

Wis. Stat. Ann. § 645.46(12) (West 1995).

— A-32 —

XV. Liquidator can intervene in any suit which might lead

to the appointment of a receiver or trustee.

Mo. Rev. Stat. § 375.1182 (1994)

.1. The liquidator shall have the power:

(20) To intervene in any proceeding wherever instituted

that might lead to the appointment of a receiver or trustee, and to

act as receiver or trustee whenever the appointment is offered[.]

Similar authority:

Alaska Stat. § 21.78.130(j)(3) (1993).

Colo. Rev. Stat. Ann. § 10-3-520(v) (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-923(20) (West Supp. 1995).

Ga. Code Ann. § 33-37-20(a)(22) (Supp. 1995).

Haw. Rev. Stat. § 431:15-310(a)(20) (1993).

Idaho Code § 41-3321(1\(t) (1991).

Ind. Stat. Ann. § 27-9-3-9(b)(20) (Burns 1994).

lowa Code Ann. § 507C.21(1)(t) (West Supp. 1995).

Kan. Stat. Ann. § 40-3625(a)(22) (1993).

Ky. Rev. Stat. § 304.33-240(20) (Baldwin Supp. 1995).

Mich. Stat. Ann. § 24.18121 (t) (Callaghan Supp. 1995).

Minn. Stat. Ann. § 60B.25(20)\(West Supp. 1995).

Miss. Code Ann. § 83-24-41 (v) (1991).

Mont. Code Ann. § 33-2-1345 (t) (1995).

Neb. Rev. Stat. § 44-4821 (1)(v) (1993).

N.H. Rev. Stat. Ann. § 402-C:25 (XIX) (1983).

N.C. Gen. Stat. § 58-30-120 (20) (1994).

N.D. Cent. Code § 26.1-06.1-20.1 (v) (1995).

Ohio Rev. Code Ann. § 3903.21 (A)(20) (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.23 (20) (1993).

R.L. Gen. Laws § 27-14.3-25 (22) (1994).

S.C. Code Ann. § 38-27-400(20) (Law. Co-op. Supp. 1995).

— A-33 —

S.D. Codified Laws Ann. § 58-29B-4%(20) (Supp. 1995).

Tenn. Code Ann. § 56-9-310(22) (1994).

Utah Code Ann. § 31A-27-314 (20) (1994).

Vt. Stat. Ann. tit. 8, § 7060(21) (1993).

Wis. Stat. Ann. § 645.46(20) (West 1995).

XVI. No further actions can be commenced or continued

against insurer or liquidator following entry of order of

liquidation.

Mo. Rev. Stat. § 375.1188 (1994).

.1. Upon issuance of an order appointing a liquidator of a

domestic insurer or of an alien insurer domiciled in this state, no

action at law or equity or in arbitration shall be brought against

the insurer or liquidator, whether in this state or elsewhere, nor

shall any such existing actions be maintained or further pre-

sented after issuance of such order.The courts of this state shall

give full faith and credit to injunctions against the liquidator or

the company or the continuation of existing actions against the

liquidator or company, when such injunctions are included in an

order to liquidate an insurer issued pursuant to corresponding

provisions in other states.

Similar authority:

Ala. Code § 27-32-21 (1986).

Alaska Stat. § 21.78. 100(h) (1993).

Colo. Rev. Stat. Ann. § 10-3-523(1) (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-926 (West 1992).

Fla. Stat. Ann. § 631.041(1) (West Supp. 1995).

Ga. Code Ann. § 33-37-23(a) (Supp. 1995).

Haw. Rev. Stat. § 431:15-313(a) (1993).

Idaho Code §§ 41-3324 (1991).

Ind. Stat. Ann. § 27-9-3-12(a) (Burns 1994),

lowa Code Ann. § 507C.24(1) (West Supp. 1995).

Kan. Stat. Ann. § 40-3627(a) (1993).

Ky. Rev. Stat. § 304.33-270(1) (Baldwin Supp. 1995).

—_

Mich. Stat. Ann. § 24.18124 (1) (Callaghan 1994),

Minn. Stat. Ann. § 60B.28 (1) (West 1986).

Miss. Code Ann. § 83-24-47 (1) (1991).

Mont. Code Ann. § 33-2-1348 (1) (1995).

Neb. Rev. Stat. § 44-4824 (1) (1993).

N.H. Rev. Stat. Ann. § 402-C:28 (1) (1983).

N.C. Gen. Stat. § 58-30-130 (a) (1994).

N.D. Cent. Code § 26.1-06.1-23.1 (1995).

Ohio Rev. Code Ann. § 3903.24 (A) (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.26 (a) (1993).

R.I. Gen. Laws § 27-14.3-28 (a) (1994),

S.C. Code Ann. § 38-27-430(a) (Law. Co-op. 1985).

S.D. Codified Laws Ann. § 58-29B-55(1) (1990).

Tenn. Code Ann. § 56-9-313(a)( 1) (1994).

Utah Code Ann. § 31 A-27-317(1) (1994).

Wash. Rev. Code Ann. § 48.99.131(1) (West Supp. 1995).

Wis. Stat. Ann. § 645.49(1) (West 1995).

XVII. The liquidator can intervene in any pending suit

outside of the state when liquidator determines it is in

best interest of the estate to do so.

Mo. Rev. Stat. § 375.1188 (1994),

.1.... Whenever, in the liquidator’s judgment, protection

of the estate of the insurer necessitates intervention in an action

against the insurer that is pending outside this state, he may

intervene in the action. The liquidator may defend any action in

which he intervenes pursuant to this section at the expense of the

estate of the insurer.

Similar authority:

Ala. Code § 27-32-21 (1986).

Alaska Stat. § 21.78. 100(h) (1993).

Colo. Rev. Stat. Ann. § 10-3-523(1) (Michie 1994).

Conn. Gen. Stat. Ann. § 384-926 (West 1992).

Fla. Stat. Ann. § 631.041(1) (West Supp. 1995).

— A-35 —

Ga. Code Ann. § 33-37-23(a) (Supp. 1995).

Haw. Rev. Stat. § 431:15-3ly3(a) (1993).

Idaho Code §§ 41-3324 (1991).

Ind. Stat. Ann. § 27-9-3-12(a) (Burns 1994).

lowa Code Ann. § 507C.24(1) (West Supp. 1995).

Kan. Stat. Ann. § 40-3627(a) (1993).

Ky. Rev. Stat. § 304,33-270(1) (Baldwin Supp. 1995).

Mich. Stat. Ann. § 24.18124 (1) (Callaghan 1994).

Minn. Stat. Ann. § 60B.28 (1) (West 1986).

Miss. Code Ann. § 83-24-47 (1) (1991).

Mont. Code Ann. § 33-2-1348 (1) (1995).

Neb. Rev. Stat. § 44-4824 (1) (1993).

N.H. Rev. Stat. Ann. § 402-C:28 (I) (1983).

N.C. Gen. Stat. § 58-30-130 (a) (1994).

N.D. Cent. Code § 26. 1-06. 1-23.1 (1995).

Ohio Rev. Code Ann. § 3903.24 (A) (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.26 (a) (1993).

R.1. Gen. Laws § 27-14.3-28 (a) (1994).

S.C. Code Ann. § 38-27-430(a) (Law. Co-op. 1985).

S.D. Codified Laws Ann. § 58-29B-55(1) (1990).

Tenn. Code Ann. § 56-9-313(a)( 1) (1994).

Utah Code Ann. § 31 A-27-317(1) (1994).

Wash. Rev. Code Ann. § 48.99.131(1) (West Supp. 1995).

Wis. Stat. Ann. § 645.49(1) (West 1995).

XVIII. Setoff of mutual debts

Mo. Rev. Stat. § 375.1198.

1. Mutual debts or mutual credits, whether arising out of

one or more contracts, between the insurer and another person in

connection with any action or proceeding under sections 375.1150

to 375.1246, sections 374.216 and 374.217, RSMo, and section

382.302, RSMo, shall be set off and the balance only shall be

allowed or paid, except as provided in subsections 2, 3, 4, 5 and

6 of this section and section 375.1204.

— A-36 —

.2. No setoff shall be allowed in favor of any person where:

(1) The obligation of the insurer to the person would

not as of the date of the filing of a petition for liquidation entitle

the person to share as a Claimant in the assets of the insurer;

(2) The obligation of the insurer to the person was

purchased by or transferred to the person with a view to its being

used as a setoff; or

(3) The obligation of the person is to pay an assess-

ment levied against the members or subscribers of the insurer, or

is to pay a balance upon a subscription to the capital stock of the

insurer, Or is in any other way in the nature of a capital contribu-

tion; or

(4) The obligation of the insurer is owed to an affiliate

of such person or to any entity or association, rather than the

person; or

(5) The obligation of the person is owed to an affiliate

of the insurer or to any other entity or association, rather than the

insurer; or

(6) The obligations between the person and the insurer

arise from reinsurance relationships resulting in business which

is both ceded to and assumed from the insurer.

3. As soon as practicable, the receiver shall provide persons

who assumed business from the insurer as reinsurers with

Statements of account identifying debts which are currently due

and payable to the insurer.Such persons may set off against such

debts only mutual credits which are currently due and payable by

the insurer to such persons for the period covered by the account-

ing statements.

4. A person who ceded business to the insurer may set off

debts due the insurer against only those mutual credits which the

—s =

person has paid or which have been allowed in a delinquency

proceeding.

5. Notwithstanding the foregoing, a setoff of sums due on

obligations in the nature of those prescribed in subdivision (6) of

subsection 2 of this section shall be allowed for those debts

accruing from business written under reinsurance contracts

which were entered into, renewed or extended with the express

written approval of the director where Missouri is the state of

domicile of the insolvent insurer and when in the judgment of the

director such action is deemed necessary or advisable in order to

prevent or mitigate a threatened impairment or insolvency of a

domiciliary insurer, in connection with supervision or conserva-

tion proceedings pursuant to this act or otherwise in connection

with the exercise of the director's regulatory responsibilities

concerning a threatened impairment or insolvency without the

institution of any delinquency proceedings.

6. The provisions of this section shall apply to all obliga-

tions incurred under contracts entered into, renewed, or extended

on or after July 1, 1992, and to any existing contract with a

termination date longer than one year from January |, 1993, and

shall supersede any contractual provisions which might be

construed to enlarge the setoff rights of any person under any

contract with the insurer; provided that the provisions of subdi-

vision (6) of subsection 2 and subsections 3, 4 and 5 of this

section shall not apply to insurers or reinsurers until such time

that the director determines that substantially similar provisions

are effective in a sufficient number of states so as not to place

domestic insurers or reinsurers at acompetitive disadvantage. The

director shall promulgate a rule announcing any determination

as is necessitated by this subsection.

Similar authority:

Ala. Code § 27-32-29 (1986).

Alaska Stat. § 21.78.270 (1993).

— A-38 —

Ariz. Rev. Stat. Ann. § 20-638 (1990).

Ark. Code Ann. § 23-68-127 (1987).

Colo. Rev. Stat. Ann. § 10-3-529 (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-932 (West 1992 & Supp. 1995).

Del. Code Ann. tit. 18, § 5927 (1989).

Fla. Stat. Ann. § 631.281 (West 1984).

Ga. Code Ann. § 33-37-29 (Supp. 1995).

Haw. Rev. Stat. § 431:15-319 (1993).

Idaho Code §§ 41-3330 (1991).

Ill. Rev. Stat. ch. 215, para. 5, § 206 (Supp. 1995).

Ind. Stat. Ann. § 27-9-3-28 (Burns Supp. 1995).

lowa Code Ann. § 507C.30 (West 1988 & Supp. 1995).

Kan. Stat. Ann. § 40-3633 (1993).

Ky. Rev. Stat. § 304.33-330 (Baldwin 1988).

La. Rev. Stat. Ann. § 747 (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4381 (West 1991).

Md. ann. Code art. 48A, § 159 (1994).

Mich. Stat. Ann. § 24.18130 (Callaghan Supp. 1995).

Minn. Stat. Ann. § 60B.34 (West 1986).

Miss. Code Ann. § 83-24-59 (1991).

Mont. Code Ann. § 33-2-1359 (1995).

Neb. Rev. Stat. § 44-4830 (1993).

Nev. Rev. Stat. § 696B.440 (1991).

N.H. Rev. Stat. Ann. § 402-C:34 (1983).

NJ. Stat. Ann. § 17:30C-27 (West 1994).

N.M. Stat. Ann. § 59A-41-45 (1991).

N.Y. Ins. Law § 7427 (Mckinney 1985).

N.C. Gen. Stat. § 58-30-160 (1994).

N.D. Cent. Code § 26.1-06.1-29 (1995).

Ohio Rev. Code Ann. § 3903.30 (Anderson 1989).

Okla. Stat. Ann. tit. 36, § 1928 (West 1990).

Or. Rev. Stat. § 734.370 (1993).

40 Pa. Cons. Stat. Ann. § 221.32 (1993).

R.1. Gen. Laws § 27-14.3-34 (1994).

S.C. Code Ann. § 38-27-490 (Law. Co-op. 1985).

— A-39 —

S.D. Codified Laws Ann. §§ 58-29B-86 & -87 (1990 & Supp. 1995).

Tenn. Code Ann. § 56-9-319 (1994).

Utah Code Ann. § 31A-27-323 (1994).

Vt. Stat. Ann. tit. 8, § 7069 (1993).

Va. Code § 38.2-1515 (1994).

Wash. Rev. Code Ann. § 48.31.135 (West Supp. 1995).

W. Va. Code § 33-10-28 (1992).

Wis. Stat. Ann. § 645.56 (West 1995).

Wyo. Stat. § 26-28-126 (1993).

XIX. Reinsurers liability not reduced because of delin-

quency proceedings.

Mo. Rev. Stat. § 375.1202 (1994).

The amount recoverable by the liquidator from reinsurers

shall not be reduced as a result of the delinquency proceedings,

regardless of any provision in the reinsurance contract or other

agreement.Payment made directly to an insured or other creditor

shall not diminish the reinsurer’s obligation to the insurer's

estate.

Similar authority:

Alaska Stat. § 21.78.272 (1993).

Colo. Rev. Stat. Ann. § 10-3-531 (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-934 (West 1992).

Ga. Code Ann. § 33-37-31 (Supp. 1995).

Haw. Rev. Stat. § 431:15-321 (1993).

Idaho Code §§ 41-3332 (1991).

Ind. Stat. Ann. § 27-9-3-30 (Bums 1994).

lowa Code Ann. § 507C.32 (West 1988).

Kan. Stat. Ann. § 40-3634 (1993).

Ky. Rev. Stat. § 304.33-350 (Baldwin 1988).

Mich. Stat. Ann. § 24.18132 (Callaghan 1994).

Minn. Stat. Ann. § 60B.36 (West 1986).

Miss. Code Ann. § 83-24-63 (1991).

Mont. Code Ann. § 33-2-1361 (1995).

— A-40 —

Neb. Rev. Stat. § 44-4832 (1993).

N.H. Rev. Stat. Ann. § 402-C:36 (1983).

N.C, Gen. stat. § 58-30-170 (1994).

N.D. Cent. Code § 26.1-06.1-31 (1995).

Ohio Rev. Code Ann. § 3903.32 (Anderson 1989).

40 Pa. Cons. Stat. Ann. § 221.34 (1993).

R.I. Gen. Laws § 27-14.3-36 (1994).

S.D. Codified Laws Ann. § 58-29B-94 (1990).

Utah Code Ann. § 31A-27-326 (1994).

Vt. Stat. Ann. tit. 8, § 7071 (1993).

Wis. Stat. Ann. § 645.58 (West 1995).2

XX. Judgment entered after commencement of liquidation

proceeding not to be considered as evidence of insurer’s

liability or the amount of damages.

Mo. Rev. Stat. § 375.1208 (1994),

.4. No judgment or order against an insured or the insurer

entered after the date of filing of a successful petition for

liquidation, anc no judgment or order against an insured or the

insurer entered at any time by default or by collusion need be

considered as evidence of liability or of the amount of damages.

Similar authority:

Ala. Code § 27-32-30(c) (1986).

Alaska Stat. § 21.78.170(g) (1993).

Ariz. Rev. Stat. Ann. § 20-639(C) (1990).

Ark. Code Ann. § 23-68-128(c) (1987).

Colo. Rev. Stat. Ann. § 10-3-535(4) (Michie 1994).

Conn. Gen. Stat. Ann. § 38a-938(d) (West Supp. 1995).

Del. Code Ann. tit. 18, § 5928(c) (1989).

Fla. Stat. Ann. § 631.181(2)(d) (West Supp. 1995).

Ga. Code Ann. § 33-37-35(d) (Supp. 1995).

Haw. Rev. Stat. § 431:15-326(d) (1993).

Idaho Code §§ 41-3336(4) (1991).

— A-41 —

Ill. Rev. Stat. ch. 215, para. 5, § 206 (Supp. 1995).

Ind. Stat. Ann. § 27-9-3-34(d) (Burns 1994).

Iowa Code Ann. § 507C.36(4) (West 1988).

Kan. Stat. Ann. § 40-3637(d) (1993).

Ky. Rev. Stat. § 304.33-370(3) (Baldwin 1988).

La. Rev. Stat. Ann. § 749.D(4) (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4378.3 (West 1990).

Md. Ann. Code art. 48A, § 160 (c) (1994).

Mich. Stat. Ann. § 24.18136 (4) (Callaghan 1994).

Minn. Stat. Ann. § 60B.38 (3) (West 1986).

Miss. Code Ann. § 83-24-71 (4) (1991).

Mont. Code Ann. § 33-2-1365 (4) (1995).

Neb. Rev. Stat. § 44-4836 (4) (1993).

N.H. Rev. Stat. Ann. § 402-C:38 (III) (1983).

N.J. Stat. Ann. § 17:30C-28 (c) (West 1994).

N.C. Gen. Stat. § 58-30-190 (d) (1994).

N.D. Cent. Code § 26.1-06.1-35.4 (1995).

Ohio Rev. Code Ann. § 3903.36 (D) (Anderson 1989).

Or. Rev. Stat. § 734.380(4) (1993).

40 Pa. Cons. Stat. Ann. § 221.38 (c) (1993).

R.I. Gen. Laws § 27-14.3-40 (d) (1994).

S.C. Code Ann. § 38-27-550(d) (Law. Co-op. 1985).

S.D. Codified Laws Ann. § 58-29B-1 10 (1990).

Tenn. Code Ann. § 56-9-324(d) (1994).

Utah Code Ann. § 31A-27-329 (1994).

Vt. Stat. Ann. tit. 8, § 7075 (1994).

W. Va. Code § 33-10-29 (1992).

Wyo. Stat. § 26-28-127 (1993).

XXI. Attachment and garnishment of assets of estate not

allowed.

Mo. Rev. Stat. § 375.1244 (1994).

During the pendency in this or any other state of a liquida-

tion proceeding, whether called by that name or not, no action or

proceeding in the nature of an attachment, garnishment or levy

—_e

of execution shall be commenced or maintained in this state

against the delinquent insurer or its assets.

Similar authority:

Ala. Code § 27-32-21 (1986).

Alaska Stat. § 21.78.190 (1993).

Ariz. Rev. Stat. Ann. § 20-630 (1990).

Ark. Code Ann. § 23-68-120 (1987).

Colo. Rev. Stat. Ann. § 10-3-556 (Michie 1994).

Del. Code Ann. tit. 18, § 5919 (1989).

Ga. Code Ann. § 33-37-56 (Supp. 1995).

Haw. Rev. Stat. § 431:15-408 (1993).

Idaho Code §§ 41-3357 (1991).

Ill. Rev. Stat. ch. 215, para. 5, § 221.9 (1993).

Ind. Stat. Ann. § 27-9-4-8 (Burns 1994),

lowa Code Ann. § 507C.57 (West 1988).

Kan. Stat. Ann. § 40-3655 (1993).

Ky. Rev. Stat. § 304.33-580 (Baldwin 1988).

La. Rev. Stat. Ann. § 762 (West 1995).

Me. Rev. Stat. Ann. tit. 24-A, § 4369 (West 1990).

Md. Ann. Code art. 48A, § 151 (1994).

Mich. Stat. Ann. § 24.18157 (Callaghan 1994).

Minn. Stat. Ann. § 60B.59 (West 1986).

Miss. Code Ann. § 83-24-113 (1991).

Mont. Code Ann. § 33-2-1386 (1995).

Neb. Rev. Stat. § 44-4857 (1993).

Nev. Rev. Stat. § 696B.340 (1991).

N.H. Rev. Stat. Ann. § 402-C:59 (1983).

N.J. Stat. Ann. § 17:30C-22 (West 1994).

N.Y. Ins. Law § 7414 (McKinney 1985).

N.C. Gen. Stat. § 58-30-295 (1994).

N.D. Cent. Code § 26.1-06. 1-56 (1995).

Ohio Rev. Code Ann. § 3903.57 (Anderson 1989).

Okla. Stat. Ann. tit. 36, § 1920 (West 1990).

Or. Rev. Stat. § 734.320 (1993).

— A-43 —

40 Pa. Cons. Stat. Ann. § 2221.60 (1993).

R.L. Gen. Laws § 27-14.3-61 (1994).

S.D. Codified Laws § 58-29B-157 (1990).

S.C. Code Ann. § 38-27-980 (1985).

Tenn. Code Ann. § 56-9-408 (1994).

Vt. Stat. Ann. tit. 8, § 7098 (1993).

Wash. Rev. Code Ann. § 48.99.070 (West Supp. 1995).

W. Va. Code § 33-10-20 (1992).

Wis. Stat. Ann. § 645.88 (West 1995).

Wyo. Stat. § 26-28-118 (1993).

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.