The Ninth Circuit has allowed an insurance policy coverage question action to proceed against the insolvent Reliance Insurance in Liquidation, although brought in California, outside of the company's domiciliary jurisdiction, where Reliance's liquidation is pending. Issues of McCarran-Ferguson, Burford abstention, full faith and credit and construction of the Uniform Insurers Liquidation Act (UILA) were resolved by the Court of Appeals.
Lawyers for Reliance unsuccessfully argued that the liquidation court's pending stay of legal action against Reliance applied to bar the Hawthorne action. Although the plaintiff was allowed to reduce his claim to judgment, execution thereon will continue to be channelled to the liquidation court in Pennsylvania, according to Marc' brief.
Mark Mayerson at Insurance Scrawl provides a background brief on the decision in Hawthorne Savings FSB v. Reliance Ins. Co., (9th Cir. Aug. 24, 2005) Insurance Scrawl: Stay What? Coverage Claims May Proceed Against Insolvent Insurers
For more background links about Reliance, see: Unintended Consequences: Reliance: $85 MM Settlement with Directors
Posted by dougsimpson at September 23, 2005 06:01 AM