LAW ENFORCEMENT INS. CO., LTD. v. Corcoran, 86 Civ. 1200 (PNL).

• Decision Date: 17 July 1986
• Docket Number: No. 86 Civ. 1200 (PNL).,86 Civ. 1200 (PNL).
• Parties: LAW ENFORCEMENT INSURANCE COMPANY, LTD., A Bermuda Corporation, Plaintiff, v. James P. CORCORAN, Superintendent of Insurance of the State of New York as Liquidator of Ideal Mutual Insurance Company in Liquidation, Defendant.
• Court: U.S. District Court — Southern District of New York

640 F. Supp. 271

LAW ENFORCEMENT INSURANCE COMPANY, LTD., A Bermuda Corporation, Plaintiff, v. James P. CORCORAN, Superintendent of Insurance of the State of New York as Liquidator of Ideal Mutual Insurance Company in Liquidation, Defendant.

No. 86 Civ. 1200 (PNL).

United States District Court, S.D. New York.

July 17, 1986.

Grand & Ostrow, New York City, for plaintiff; Michael D. Rips, of counsel.

Cahill, Gordon & Reindel, New York City, for defendant James P. Corcoran; Marc J. Korpus, Thomas M. Campbell, of counsel.

LEVAL, District Judge.

Defendant, the New York State Superintendent of Insurance, liquidator of Ideal Mutual Insurance Company, moves to dismiss. Plaintiff, Law Enforcement Insurance Corporation ("LEICL") brought the action under 28 U.S.C. § 2201 seeking a declaratory judgment that, under its contract with Ideal, Ideal is legally obligated as direct insurer on claims arising out of policies issued by plaintiff to members of the National Sheriff's Association during the period October 1977 through September 1978. Ideal is in liquidation in the New York State courts under the supervision of the Superintendent of Insurance. On February 7, 1985, the New York Supreme Court entered an order of liquidation which included a stay enjoining all claimants from prosecuting their claims against Ideal otherwise than in the liquidation proceeding. On February 10, 1986, plaintiff brought this action alleging diversity of citizenship and seeking declaratory judgment as to its contract rights with Ideal.

The Superintendent contends that the action must be dismissed under two different federal court abstention doctrines. First, he contends that the abstention doctrine of Burford v. Sun Oil Company, 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), requires the federal court to abstain because the regulation of insurance is a specialized, on-going scheme committed by law primarily to state authorities. In support of this argument, the Superintendent cites the McCarran-Ferguson Act, 15 U.S.C. §§ 1011 et seq. (1982). See also Levy v. Lewis, 635 F.2d 960 (2d Cir.1980).

As a second basis for abstention, the Superintendent cites Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), which held that in exceptional circumstances, considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation, permit a federal court to decline to exercise its jurisdiction in favor of concurrent state proceedings.

The Superintendent points out, furthermore, that declaratory judgment jurisdiction is discretionary, giving this court a further basis for declining to exercise diversity jurisdiction.

Plaintiff argues that abstention would be inappropriate. It argues that there is no conflict between the adjudications sought in federal and state court, since plaintiff is not seeking a money judgment here but only a declaration of contract rights; any money judgment would be sought in the state liquidation proceeding. Plaintiff argues, therefore, that the proceedings can exist alongside one another without conflict.

In my view, the Superintendent has adequately justified his claim of entitlement to abstention under the Colorado River doctrine. A liquidation of an insurance...