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140 Ariz. 426, *; 682
P.2d 431, **; 1984 Ariz. App. LEXIS 531, ***
STATE
of Arizona, ex rel. J.
Michael LOW,
Director of Insurance,
Plaintiff-Appellant, David G. Yates, Conservator of William D. Yates, a minor;
Lois J. Agnew; Bret A. Batchelor, Conservator of Lisa Renee Batchelor, a minor;
Richard H. and Sharon Hardman; Nancy G. Corey, individually, and as guardian of
Karen M. Corey; Rosalie and Victor Yurk; David H. and Susan Smith; Lloyd and
Ruth Bingham; and Henry O. and Nellie T. Sanchez; John and Virginia Musa; Glenda
Worsham, individually and on behalf of Chanita Lynn Engleke and Choya Lin
Worsham, her minor daughter and son; Richard Todd, a minor, by and through his
mother, Kathy A. Todd Hansen; Darrell and Geanna Smith, surviving parents of
Kent E. Smith, Claimants-Appellants, v. IMPERIAL
INSURANCE COMPANY, a California corporation, By and Through the INSURANCE
COMMISSIONER OF the STATE OF CALIFORNIA, as Domiciliary Liquidator of Imperial
Insurance Company, Defendant-Appellee Nos.
1 CA-CIV 5829, 1 CA-CIV 5909 Court
of Appeals of Arizona,
Division One, Department A 140
Ariz. 426; 682 P.2d 431;
1984 Ariz. App. LEXIS 531 January
26, 1984 SUBSEQUENT HISTORY: [***1]
Review
Denied May 3, 1984. CORE TERMS: reinsurance,
domiciliary, receiver, liquidator, ancillary, ancillary receiver,
appellant-claimants, insured, claimant, insurer, liquidation, guaranty,
insolvent, residents, insolvency, policyholder, insolvent insurer, receivership,
reinsurer, liquidate, entitlement, vested, deposit, procedural question,
insurance commissioner, notice, insurance law, Uniform Insurers Liquidation Act,
home state, nonreciprocal COUNSEL: McGowan & Johnson by
Rodney G. Johnson, Phoenix, for plaintiff-appellant State of Arizona
ex rel. Low. Hofmann,
Salcito, Stevens & Myers, P.A. by Leroy W. Hofmann, Phoenix, for
claimants-appellants. G. David
Gage Ltd., P.C. by G. David Gage, Phoenix, for claimants-appellants and
claimants-appellants Yurk. Robbins
& Green, P.A. by Phillip A. Robbins, Phoenix, for claimants-appellants
Corey. Nicholas C.
Guttilla, P.C. by Nicholas C. Guttilla, Phoenix, for defendant-appellee. Lewis &
Roca by Paul G. Ulrich, Merton Marks, Phoenix, and Charles W. Havens, III,
Richard J. Brooks, Franklin W. Nutter, Washington, D.C., for amicus curiae
Reinsurance Ass'n of America. JUDGES: Contreras, Judge. Kleinschmit,
P.J., and Froeb, J., concur. OPINIONBY: CONTRERAS OPINION: [*427]
[**432]
OPINION This case
presents questions of first impression in Arizona with respect to the administration of
reinsurance proceeds. Specifically, we are called upon to determine whether (1)
reinsurance proceeds payable to an insolvent California insurer by reason of
claims arising in Arizona
are general assets vested solely in the domiciliary receiver in California and
(2) whether [***2]
Arizona claimants who have
filed their claims with the California domiciliary receiver are bound by the
actions taken by such domiciliary receiver and the California courts. We answer
both questions in the affirmative. I.
REINSURANCE AND STATE REGULATION. In order to
better understand our determination we set forth a brief discussion of
reinsurance and its interrelation to statutory regulation by the state. Simply
stated, reinsurance is the insurance
of insurance companies. n1 A succinct definitive discussion of
"reinsurance" was set forth by [*428]
[**433]
Judge Choy in Excess
& Cas. Reinsurance Ass'n v. Insurance
Comm'r, 656 F.2d 491 (9th Cir.1981). We quote: Reinsurance
is a special form of insurance
obtained by insurance
companies to help spread the burden of indemnification. A reinsurance company
typically contracts with an insurance
company to cover a specific portion of the insurance
company's obligation to indemnify a policyholder in the event of a valid claim.
This excess insurance, as
it is called, enables the insurance
companies to write more policies than their reserves would otherwise sustain
since its [sic] guarantees the ability to pay a [***3]
part of all claims. The reinsurance contract is not with the
insured/policyholder. When a valid claim is made, the insurance
company pays the first level insured, and the reinsurance company pays the insurance
company. The reinsurance company's obligation is to the insurance
company, and the insurance
company vis-a-vis the reinsurer is thus the insured, or more appropriately the
"reinsured." - - - - - -
- - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n1 We refer
the reader desiring more familiarity with reinsurance concepts to Thompson, Critical
Issues of the Eighties: How Trends in Reinsurance Will Affect Legal,
Legislative, and Regulatory Actions, 16 Forum 1038 (1981); Sheffey, Reinsurance
Intermediaries: Their Relationship to Reinsured and Reinsurer, 16 Forum 922
(1981); 13A J. Appleman, Insurance
Law and Practice, §§ 7681-7707 (1976); J. Olson, Reinsurers' Liability to
the Insolvent Reinsured, 41 Notre Dame Law 13 (1965). - - - - - -
- - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - Insurance guaranty
associations operated in the various states provide insolvency insurance
for insurance [***4]
companies. The function of the guaranty association is to protect policy
insureds in the extraordinary event of insurance
company insolvency. Generally, the rules of the various associations are
authorized by state statute and the associations are funded by the insurance
companies doing business in that state. The guaranty associations assume the
obligations of an insolvent insurance
company, generally providing indemnification of a limited amount to the policy
holders. See A.R.S. §§ 20-661 to -680. In Arizona
and pursuant to A.R.S. § 20-667(B) the liability ceiling for a covered claim is
$ 100,000.00. The insurance
industry is a multi-billion dollar industry and is regulated in the various
states by a state insurance
commissioner (director) within the department of insurance.
n2 See A.R.S. §§ 20-101 thru -2120. As explained in Excess and
Cas. Reinsurance Ass'n: [i]f an insurance
company becomes insolvent, the state insurance
commissioner is typically designated by statute as receiver or trustee to
distribute the remaining funds of the company according to statutory priority.
Thus while a guaranty association guarantees payment only to policyholders,
[***5] the
insurance commissioner
liquidates the assets of the insolvent insurance
company and distributes funds to all creditors, in order of priority. - - - - - -
- - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n2 Under the
U.S. Constitution the federal government has the power to regulate insurance
as part of interstate commerce. See United
States v. South-Eastern Underwriters, Ass'n., 322 U.S. 533, 64 S.Ct. 1162,
88 L.Ed. 1440 (1944). However, it has expressly declined to exercise that
power and has left such regulation to the states. See McCarran-Ferguson
Insurance Regulation Act, 15
U.S.C.A. §§ 1011 to 1015 (1976). In addition, and although the U.S.
Constitution would support insurer-insolvency proceedings under art. 1, § 8 cl.
4 of the U.S. Constitution, Congress has declined to exercise its power to do
so. See Bankruptcy Act, 11
U.S.C.A. § 109 (West 1979). - - - - - -
- - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - The Uniform
Insurers Liquidation Act provides a comprehensive scheme for liquidating,
rehabilitating, reorganizing or conserving an insolvent insurer. In addition to Arizona,
[***6] 31
states have adopted this Act. California, however, has not. Under the Uniform
Act, where a foreign insurer's home state has adopted the Act, reciprocity
exists so that Arizona
citizens are entitled to the same rights and preferences as citizens of the
foreign insurer's home state. In such cases, the Arizona
ancillary receiver is basically a conduit for the administration of all the
assets by the domiciliary receiver. With these general concepts in mind, we now
consider the factual setting of the present appeals. II. FACTS. Imperial Insurance
Company (Imperial) was an
insurance company incorporated and domiciled in the state of California. Imperial
wrote medical malpractice insurance
in California, Arizona,
Florida, New [*429]
[**434]
York, Nevada, Utah, and Alabama. Imperial at one time wrote a considerable amount of
medical malpractice coverage for Arizona physicians. Imperial
subsequently entered into reinsurance contracts with a number of reinsurance
carriers, identified of record in the Reinsurance Memorandum filed with the
trial court on August 20, 1980. On January
10, 1978, the Superior Court of the County of Los Angeles, California, placed Imperial
in receivership [***7]
for liquidation and appointed appellee, insurance
commissioner for the state of California, as domiciliary liquidator. In its
order of liquidation, the California court issued restraining orders restraining
all persons from interfering with the conduct of the liquidation in the winding
up of the business of Imperial
and further restraining all persons from instituting or prosecuting any action
or proceedings against Imperial
or its domiciliary receiver without the prior consent of the California court. The
domiciliary receiver, in furtherance of his duties as liquidator of Imperial,
set July 21, 1978, as the last date for all claims to be filed against Imperial.
As a result of this notice, appellant-claimants Yates, Agnew, Batchelor,
Hardman, Corey, Yurk, [David and Susan] Smith and Bingham filed timely claims
with the domiciliary receiver in California. n3 - - - - - -
- - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n3 Although
Sanchez failed to file a claim with the domiciliary receiver, Dr. Mills, Imperial's
insured against whom Sanchez had a claim, preserved the Sanchez claim by filing
with the domiciliary receiver in California. From the record before this court
it cannot be determined whether appellant-claimants Musa, Worsham, Todd and
[Darrell and Geanna] Smith had filed claims with the California domiciliary
receiver at the time the appeal was filed in the case before us. We note from
the record that at the time the trial court entered its ruling by minute entry
in this case (December 23, 1980), these appellant-claimants were not before the
trial court as claimants in the Arizona
ancillary proceedings. These listed claimants did, in January of 1981, file
claims with the ancillary receiver. The formal order of the trial court,
pursuant to its previous minute entry ruling, was filed on February 12, 1981,
and contained appropriate Rule 54(b) language. We express no opinion with regard
to these latter claimants other than to observe that by reason of our
disposition in this case their claims would be subject to administration by the
domiciliary receiver in accordance with California law. - - - - - -
- - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - [***8]
Between
October 1978 and September 1980, appellant-claimants Yates, Agnew, Batchelor,
Hardman, Corey, Yurk, [David and Susan] Smith, Bingham and Sanchez obtained Arizona
judgments against the physicians insured by Imperial. Of those nine judgments, seven were
preceded by covenants not to execute against the physicians who were insureds of
Imperial. Thereafter, each
of those nine claimants filed a claim with the Arizona
Guaranty Fund (Fund) and obtained payment of at least $ 99,900 against their
respective judgments. On February
1, 1980, J. Michael Low,
Director of Insurance for
the State of Arizona,
petitioned the Maricopa County Superior Court, pursuant to A.R.S. § 20-625, for
appointment as ancillary receiver of Imperial. This petition acknowledged that Imperial
was in receivership in California, its domiciliary state, and was based upon the
petition of ten or more Arizona
residents (appellant-claimants) having claims against Imperial.
On March 24, 1980, J. Michael Low
was appointed ancillary receiver by the Arizona
court. By August
25, 1980, appellant-claimants Yates, Agnew Hardman, Corey, Yurk, [David and
Susan] Smith, Bingham and Sanchez filed their claims with the [***9]
ancillary receiver. n4 On September 16, 1980, the Arizona
ancillary receiver filed his first report of claim (covering the judgment claims
which had been filed on August 25, 1980) recommending approval of the claims in
full, and sent out notice regarding the scheduled final hearing. Upon receipt of
the notice of hearing, the California domiciliary receiver entered an appearance
and [*430]
[**435]
filed objections to the Maricopa County Superior Court's jurisdiction in the
ancillary proceedings and objections to the ancillary receiver's recommendation
regarding those claims. - - - - - -
- - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n4 The
Batchelor claim was filed on October 27, 1980. As previously noted,
appellant-claimants Musa, Worsham, Todd and [Darrell and Geanna] Smith filed
their claims with the ancillary receiver in January, 1981. They were added as
parties to this appeal in the second notice of appeals, as amended, filed with
this court on March 13, 1981. - - - - - -
- - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - On November
21, 1980, appellant-claimants Yates, Agnew, Batchelor, Hardman, Corey, Yurk,
[David [***10]
and Susan] Smith and Bingham filed a petition for an order to show cause in the
Los Angeles Superior Court challenging the domiciliary receiver's recommendation
regarding their claims filed in the California receivership proceeding. On
January 9, 1981, the California court issued an injunction enjoining all persons
from interfering with the domiciliary receiver's exclusive right to funds
recovered under any agreement or treaty of reinsurance. On December
23, 1980, the Arizona
superior court entered its minute entry order which provided: (1) that the
appellant-claimants, with the exception of Sanchez, voluntarily submitted
themselves to the jurisdiction of the California court, and are thus bound by
actions taken by the domiciliary liquidator, and the California court; (2) that
the reinsurance proceeds are not assets within the jurisdiction of the Arizona
ancillary proceedings; and (3) that further ancillary proceedings are stayed in Arizona
pending discovery of assets of the insolvent insurer in Arizona.
The Arizona court entered its formal order on February 12, 1981. Both
appellant-claimants and the Arizona
ancillary receiver filed appeals which were subsequently consolidated. [***11]
III. ISSUES.
The
following issues are presented on appeal: A.
Entitlement to the Reinsurance Proceeds. Whether the
trial court was correct in its determination that the Imperial
reinsurance proceeds are not assets which are subject to the Arizona ancillary receivership. As a corollary,
whether the reinsurance proceeds payable to an insolvent California insurer by
reason of claims arising in Arizona
are general assets vested solely in the domiciliary receiver in California. B.
Procedural Question. Whether the
claimants are bound to an election of remedy in the California court. IV.
DISCUSSION. A.
Entitlement to the Reinsurance Proceeds. In the trial
court, appellants contended, as they do here, that the reinsurance proceeds
payable on Arizona losses
are Arizona assets subject
to administration in the Arizona
ancillary receivership. In support of this contention they argue that Imperial
obligated itself to be bound by Arizona's
insurance law as a condition for its authorization by the Arizona
Insurance Department to write medical malpractice coverage for the
protection of Arizona
patients injured by Arizona
physicians. They further argue that Arizona's
insurance code requires [***12]
reinsurance proceeds generated by Arizona
claims to be collected and administered in Arizona,
as an Arizona asset by the Arizona
ancillary receiver for the benefit of Arizona
insureds and Arizona
victims when the insolvent carrier's home state (California) is not one of the
32 states (including Arizona)
which has adopted the Uniform Insurer's Liquidation Act. Appellee on the other
hand contends that the reinsurance proceeds are general assets and the sole
property of the domiciliary receiver. The Arizona
trial court agreed with the appellee. After studying the applicable case law and
Arizona statutes we
conclude that the trial court was correct. The issue of
the entitlement of a domiciliary receiver in a nonreciprocal state to
reinsurance proceeds traceable to claims of residents in a reciprocal state
presents a question of first impression in Arizona. However, the domiciliary receiver's
entitlement to reinsurance proceeds has been challenged by state guaranty funds
and ancillary receivers in other states governed by the Uniform Insurers
Liquidation Act. These challenges have been uniformly rejected [*431]
[**436] by
the courts on the grounds that (1) the reinsurance [***13]
was treated by the domiciliary state as a general financial asset for all
creditors and policyholders, not attributable to either a particular state or
potential nondomiciliary claimant, and (2) the smooth functioning of interstate
liquidation necessitated that all such assets be distributed through the
domiciliary receiver. In America
Re-Insurance
Co. v. Insurance
Comm'r of California, 527 F.Supp. 444 (C.D.Cal.1981), reinsurers of Imperial
Insurance Company (the same Imperial
with which we are here concerned) brought an action for declaratory relief
against appellant Arizona
ancillary receiver and others. The U.S. District Court in California noted that:
Numerous
states can claim a relationship to the agreements in the present case:
California, as the state of Signal/Imperial's
domiciliary liquidator, and place of partial performance of the agreements; New
York, as American's principal place of business, and the place of partial
performance; Florida, Alabama, and Arizona, as states that have appointed ancillary
liquidators or receivers for Signal and/or Imperial;
California, Arizona, and
Florida, as states that have insurance
guaranty associations that have made claims for [***14]
the direct payment of the subject reinsurance proceeds and are parties to this
action; and any state where claimants or creditors of Signal/Imperial
reside. An
examination of the laws of California and the other affected states reveals no
apparent conflict of law. However, even assuming that such a conflict were to
exist, no state has a more significant relationship to the agreements and
transactions in this case than California, or has an interest in applying its
laws that is superior to that of California, the state of the domiciliary
liquidator. Id.
at 451, 452. The court acknowledged the propriety of jurisdiction of
ancillary receivers, but rejected the Arizona ancillary receiver's claim that reinsurance
proceeds were due by reason of claims of Arizona
residents against Imperial.
The court stated: The
reinsurance proceeds, under the express terms of the subject reinsurance
agreements and under general insurance
law, are not directly payable to Signal/Imperial's
insureds and, therefore, they are not directly payable to an entity standing in
the stead of those insureds. The right to recover reinsurance proceeds is a
chose in action owned solely by a ceding company [***15]
such as Signal/Imperial.
Reinsurance proceeds are not local assets over which ancillary receivers can
exercise control (emphasis added). In Excess
& Casualty Reinsurance Ass'n, supra, (again dealing with the same Imperial)
an ancillary receiver in the reciprocal state of Florida and the liquidator of
the insolvent insurer in the nonreciprocal state of California demanded payment
of reinsurance proceeds. Excess, the reinsurer in the nonreciprocal state,
brought an interpleader action to relieve it of its obligations under the
reinsurance contract. The U.S. District Court in California awarded the
reinsurance proceeds to the California statutory liquidator of the insolvent
insurer, Imperial. On
appeal, the Ninth Circuit affirmed the lower court and, in denying the claim of
the Florida Guaranty Association, stated: We look
first, as did the district court, to the contract. While FIGA's [Florida Insurance
Guaranty Association] actions triggered Excess' obligations, the reinsurance
proceeds arise from the reinsurance contract. The terms of the contract cannot
be ignored in determining the proper recipient of the proceeds. Contracts
are interpreted [***16]
in accordance with the intent of the parties (citations omitted). The plain
language of the contract indicates the intent of the parties that the
reinsurance proceeds go to the receiver in the event of insolvency. In
California, the California Insurance
Commissioner is that receiver. We agree
with both the holdings and rationale of federal courts as expressed [*432]
[**437] in
American Reinsurance Co., and Excess & Casualty Reinsurance
Ass'n and similarly conclude that the reinsurance proceeds which resulted
from Imperial's contracts
with reinsurers and Imperial's
subsequent insolvency are general assets vested solely in the California
domiciliary liquidator. See also Skandia
America Reinsurance Corp. v. Barnes, 458 F.Supp. 13 (D.Colo.1978); Skandia
America Reinsurance Corp. v. Schenck, 441 F.Supp. 715 (S.D.N.Y.1977); General
Reinsurance Corp. v. Missouri General Ins. Co., 458 F.Supp. 1
(W.D.Mo.1977), aff'd 596
F.2d 330 (8th Cir.1979); State
of Florida ex rel. O'Malley v. Department of Ins., 291 N.E.2d 907, 155
Ind.App. 168 (1973). The Arizona
statutes also compel a finding that in this case the reinsurance proceeds [***17]
are the sole property of the California liquidator. A.R.S. § 20-623(B) provides
for the ancillary liquidation of a foreign insurer where assets of the foreign
insurer are located in this state. The statute provides, in pertinent part: An order to
liquidate the assets in this state of a foreign insurer shall require the
director forthwith to take possession of the property of the insurer within this
state and to liquidate it subject to the orders of the court and with due regard
to the rights and powers of the domiciliary receiver, as provided in this
article. In the
present case, appellants' argument that pursuant to A.R.S. § 20-501(8), the
"assets" are the reinsurance proceeds which the Arizona
residents are claiming, is without merit. A.R.S. § 20-501, which lists
reinsurance proceeds as an asset, sheds no light on the question of entitlement
to those assets upon the insurer's insolvency. Rather, that statute lists the
assets which the director of insurance
is to consider in assessing the financial condition of an insurer. Since we have
previously concluded that the reinsurance proceeds in question were vested
solely in the California domiciliary liquidator, there [***18]
were no assets in this state of which the Arizona
Director of Insurance
could take possession. We also
reject any suggestion that an equitable lien should be judicially imposed on the
reinsurance proceeds to the extent of the claims of Arizona
residents. Again, we find the rationale in Excess instructive. In Excess,
the guaranty association argued that the claims of its residents created an
interest in the property and, therefore, it was unconscionable not to impose an
equitable lien on the reinsurance proceeds for the benefit of its residents. In
rejecting that claim the court stated that the guaranty association
"overstates its case when it claims that it brought the fund into existence
[because it] did not pay premiums . . . or otherwise contribute to the disputed
fund." 656
F.2d at 496. The court further noted that: The guaranty
associations have no greater hardship claim than any other creditor . . . .
Granting a super priority to the guaranty association would be unfair to other
creditors, including, conceivably, individual policyholders. Id.
We conclude
that the trial court properly ruled that the reinsurance proceeds payable to the
insolvent [***19]
insurer by reason of claims arising in Arizona
are general assets vested solely in the domiciliary liquidator in California. B.
Procedural Question. On appeal we
are faced with the procedural question of whether the appellant-claimants are
bound to an election of remedy in the California court. The trial court ruled
that when the claimants filed their claims in the California proceedings, they
"voluntarily submitted themselves to the jurisdiction of the California
court" and were thereby bound by the actions taken by the domiciliary
liquidator and the California courts. We affirm the trial court's ruling on this
procedural question. Appellants
argue that pursuant to A.R.S. § 20-627(B) they have a statutory right to
liquidate their claims in Arizona.
For the following reasons, we disagree. [*433]
[**438]
A.R.S. § 20-627(B) provides, in pertinent part: Controverted
claims belonging to claimants residing in this state may either be proved in the
domiciliary state as provided by the law of that state, or if ancillary
proceedings have been commenced in this state, be proved in those proceedings.
In the event that any such claimant elects to prove his claim in this [***20]
state, he shall file his claim with the ancillary receiver and shall give notice
in writing to the receiver in the domiciliary state, either by registered mail
or by personal service at least forty days prior to the date set for hearing. However,
A.R.S. § 20-627(B) does not control the claims procedure in this case because,
as specified in A.R.S. § 20-631, this section is part of the Uniform Insurers
Liquidation Act, and California is a non-reciprocal state. As discussed
above, no assets of the insolvent insurer are located in Arizona
and therefore there is no basis for appointing an ancillary receiver to
liquidate the claims of Arizona
residents. Therefore, the liquidation of the insolvent insurance
company is controlled by the laws of the state of California. When the
appellant-claimants filed their claims in the California domiciliary proceedings
prior to the deadline date, they were proceeding in the proper forum. In fact,
that is the only forum in which the individual claims could be filed and fully
administered. This includes the Sanchez claim which was filed on Sanchez' behalf
by his Arizona insured
physician. Sanchez' claim was thereby preserved. n5 - - - - - -
- - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n5 See
note 3, supra. - - - - - -
- - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - - [***21]
C. Full
Faith and Credit. We are also
of the opinion that full faith and credit must be given to the California
court's rulings as they relate to proceedings involving the liquidation of Imperial.
In Moody
v. State ex rel. Payne, 295 Ala. 299, 329 So.2d 73 (1976), the Alabama
Supreme Court discussed this issue. The court stated: This same
question was raised in Allmon v. Bookout, Middle District of Alabama,
No. 74-377-N . . . and we quote [Judge Varner's] statements with approval: "It
appears to be the settled rule with respect to suits in equity for the control
by receivership of the assets of an insolvent corporation that the Court first
assuming jurisdiction may maintain and continue to exercise that jurisdiction to
the exclusion of any other court." 329
So.2d at 80. See also Holley
v. General American Life Ins. Co., 101 F.2d 172 (8th Cir.1939), where
the Ninth Circuit Court of Appeals stated: It is the
established rule that the liquidation of a domestic insurance
company under the laws of the state of its domicile, where such laws furnish a
comprehensive method for the winding up of its affairs by an officer of the
state under the [***22]
jurisdiction of a state, cannot be interfered with by a federal court. We also find the United States Supreme Court
decision in Underwriters
Nat'l Assur. Co. v. North Carolina Life and Accident and Health Ins. Guar. Ass'n.,
455 U.S. 691, 102 S.Ct. 1357, 71 L.Ed.2d 558 (1982) to be pursuasive, if not
dispositive of the case at hand. In Underwriters Nat'l Assur., an insurance
corporation, incorporated in Indiana (a non-reciprocal state) and doing business
in North Carolina (a reciprocal state), was required to post a $ 100,000 deposit
for the sole benefit of North Carolina policyholders. Subsequently, the Indiana
Department of Insurance
commenced rehabilitation proceedings against the insurance
company and the court appointed the Indiana Commissioner of Insurance
as rehabilitator to take possession of the business and assets of the insurance
company. The Indiana Court subsequently entered an order approving a
rehabilitation plan which among other things determined that Indiana had the
right to the $ 100,000 deposited in North Carolina. In a subsequent declaratory
[*434]
[**439]
judgment action instituted in North Carolina, the North Carolina [***23]
courts held that its statutes, which were the bases for requiring the posting of
the deposit by the Indiana insurer, deprived the Indiana court of subject matter
jurisdiction to determine rights in the $ 100,000 deposit. The United States
Supreme Court, in reversing, found that North Carolina was obligated to give
full faith and credit to the judgment of the Indiana court which had determined
the rights to the $ 100,000 deposit. A similar situation obtains here. In the present case, the California court on
January 10, 1978, was the court to first assume jurisdiction in dealing with the
insolvency of Imperial and
was the court that determined Imperial's actual insolvency. In addition,
California has a comprehensive statutory method for winding up an insolvent insurance
company's affairs. There is no question that California properly assumed and
exercised jurisdiction over Imperial.
Also, on January 10, 1978, the Superior Court of California issued a restraining
order which specified that all persons were enjoined and restrained from
interfering with the possession, title and rights of the domiciliary receiver
and from interference with the conduct of the liquidation, and all persons
[***24]
were enjoined from instituting or prosecuting any action or proceedings against Imperial
without the consent of the California court. This order of the California court
must be given full faith and credit by the Arizona
courts. Underwriters Nat'l. Assur. v. North Carolina Life. V. CONCLUSION. The trial court properly determined that the
reinsurance proceeds were general assets and the sole property of the
domiciliary receiver in California and that the appellant-claimants are bound by
the actions taken by the California courts and the domiciliary liquidator in the
processing and administration of their claims. Accordingly, we affirm.
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