The United States District Court for the Northern District of Florida granted the receiver for The Aries Insurance Company (“Aries Insurance”) its motion to remand the case. The court remanded the receiver’s action to the state court in accordance with the requirements of the McCarran-Ferguson Act’s reverse preemption doctrine. A copy of the court’s decision can be found here.
In 2002, Aries Insurance was placed into receivership with plaintiff Florida Department of Financial Services (DFS) as its receiver. Defendant, General Reinsurance Corp., provided reinsurance to Aries’ parent corporation, Onyx Insurance Group (“Onyx”), shortly before the receivership. DFS instituted a Florida Insurers Rehabilitation and Liquidation Act (the “Liquidation Act”) proceeding in state court against General Reinsurance. In its complaint, DFS alleges that Onyx caused $4.6 million of Aries’ assets to be transferred to General Reinsurance in the six months prior to Aries’ rehabilitation date without fair consideration.
General Reinsurance removed the case to the U.S. District Court for the Northern District of Florida, and DFS moved to remand the action. DFS argued that McCarran-Ferguson, which places insurance regulation with the states, supported remand of the action.
McCarran-Ferguson provides that “ [n]o Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . unless such Act specifically relates to the business of insurance.” 15 U.S.C. § 1012(b). Thus, the court noted that McCarran-Ferguson reverses the normal preemption of federal laws over state laws where (1) the state law was enacted for the “purpose of regulating the business of insurance;” (2) the federal statute does not specifically relate “to the business of insurance;” and (3) the federal statute operates to “invalidate, impair, or supersede” the state law. General Reinsurance, in turn, argued that McCarran-Ferguson does not apply because “[h]ere, there is no conflict between federal and state law.”
In its analysis, the court first noted that the federal law at issue was the removal statute, which does not specifically relate to the business of insurance. Second, the court found that the removal statute, when used to remove a Liquidation Act proceeding to recover preferential transfers, clearly “invalidates, impairs, or supersedes” the Liquidation Act’s provisions vesting exclusive jurisdiction in the state court with respect to the assets or property of any insurer subject to Liquidation Act proceedings. Third, the Liquidation Act – in particular, the Act’s exclusive jurisdiction provision – was enacted for the “purpose of regulating the business of insurance.” Accordingly, the court held that the Liquidation Act preempted the federal removal statute and, since the court lacked jurisdiction over the action, granted the motion to remand.
