Lara v. Castlepoint National Insurance Co.Annotate this Case
In an appeal related to a California insurance insolvency proceeding, the New York Plaintiffs requested clarification from the San Francisco Superior Court as to whether its orders "prohibit or stay" their New York claims. In the insolvency case, the trial court appointed the California Insurance Commissioner (Commissioner) as conservator, and later as liquidator, of CastlePoint. The trial court, as part of the process, issued injunctions and approved releases pertaining to claims filed against or on behalf of CastlePoint or its assets.
The Court of Appeal concluded that some of the causes of action in the New York lawsuit are not barred. These causes of action relate to: (i) the alleged breach of so-called "successor obligor provisions"; and (ii) an alleged $143 million payment from ACP to shareholders of TGIL. The court explained that these causes of action are not asserted against CastlePoint or the insurance companies that were merged into it, and there is no indication the Commissioner could have asserted these causes of action on behalf of the insolvent insurance companies. Therefore, the court reasoned that permitting them to proceed in New York will not interfere in any meaningful way with the plan for CastlePoint's liquidation, especially given the New York Plaintiffs' agreement not to assert any judgment against the insolvent insurance companies' estate or assets.
However, prior to entering into releases, the Commissioner could have asserted fraudulent conveyance causes of action and a cause of action for unjust enrichment because they are based on alleged improper transfers of assets of the insolvent insurance companies. Accordingly, the court concluded that these causes of action are barred by the injunctions and releases in the liquidation proceeding. The court affirmed in part and reversed in part.