July 2, 2002
MARK S. ROSE AND FREDRIC G. ROSE, PLAINTIFFS,
MUTUAL LIFE INSURANCE COMPANY AND AMSOUTH BANK OF FLORIDA,
The opinion of the court was delivered by: Spatt, District
MEMORANDUM OF DECISION AND ORDER
The plaintiffs Mark S. Rose and Fredric G. Rose (collectively, the
"plaintiffs") allege that the defendants The Fidelity Mutual Life
Insurance Company ("FMLIC") and the AmSouth Bank of Florida ("AmSouth")
failed to pay them proceeds under a life insurance policy. The plaintiffs
originally commenced this action in the Supreme Court of the State of New
York, Suffolk County. FMLIC and AmSouth removed the action on the basis of
diversity jurisdiction pursuant to 28 U.S.C. ss 1332 and 1441(a).
Presently before the Court is a motion by FMLIC to dismiss the complaint
pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil
Procedure. Also, the plaintiffs move to sever the action so as to proceed
only against the defendant AmSouth pursuant to Rule 42(b) of the Federal
Rules of Civil Procedure.
The following facts are taken from the complaint unless indicated
otherwise. In July of 1986, FMLIC issued a life insurance policy (the
"Policy") on the life of one Michael Montana in the face amount of
$2,000,000. See Affidavit of William S. Taylor, the Deputy Insurance
Commissioner of the Commonwealth of Pennsylvania executed on September 20,
2001 submitted in support of FMLIC's motion to dismiss ("Taylor
Affidavit") p 6. Sometime thereafter, the plaintiffs entered into a "split
dollar agreement" with Montana. As part of the "split dollar agreement",
Montana assigned the Policy to the plaintiffs.
On November 6, 1992, the Commonwealth Court of Pennsylvania (the
"Commonwealth Court") placed FMLIC into rehabilitation in accordance with
the Insurance Department Act of 1921. Maleski v. Fid. Mut. Life Ins. Co.,
No. 92-389, slip op. (Pa.Commw.Ct. Nov. 6, 1992). In addition, the
Commonwealth Court appointed the Pennsylvania Insurance Commissioner as
Rehabilitator of FMLIC and directed her to "take possession of [FMLIC's]
property, business and affairs ... and to take such action as the nature
of this case and the interests of the policyholders, creditors, or the
public may require." Id. at 2. Furthermore, the Commonwealth Court
All persons, in the Commonwealth or elsewhere, are enjoined
and restrained from: (a) instituting or further prosecuting any action
in law or equity against [FMLIC] or the Rehabilitator; (b) obtaining
preferences, judgments, attachments, garnishments or liens against
[FMLIC], the Rehabilitator, or [FMLIC's] assets and property; (c)
levying any execution process against [FMLIC], the Rehabilitator or
[FMLIC's] assets and property in the Commonwealth of Pennsylvania or
elsewhere; and (d) making any assessments or indirectly collecting such
assessments by setting them off against amounts otherwise payable to
Id. at 6.
On February 11, 1998, the Commonwealth Court established a process for
the adjudication of claims made against FMLIC. Koken v. Fid. Mut. Life
Ins. Co., No. 92-389, slip op. (Pa.Commw.Ct. Feb. 11, 1998). The
Commonwealth Court required that all claims against FMLIC be presented and
pursued in the context of the rehabilitation proceeding in Pennsylvania.
Id. pp 1-6. Finally, the Commonwealth Court emphasized that it
"maintain[s] sole and exclusive jurisdiction, to the exclusion of all
other courts or tribunals, over and all assets of [FMLIC] of whatsoever
kind or nature and wherever or however owned or held, whether directly or
indirectly." Id. p 7.
On March 21, 1999, Montana died. Thereafter, the plaintiffs provided
the assignment of the Policy to FMLIC and demanded $351,574 from the
proceeds of the Policy. AmSouth also demanded that FMLIC pay it the
proceeds from the Policy pursuant to an assignment made by Montana to
AmSouth in January of 1997. See Taylor Affidavit p 7. Based upon the
assignment to AmSouth, FMLIC paid it the entire proceeds of the Policy.
The plaintiffs then demanded that AmSouth pay them $351,574. This request
On June 25, 2001, the plaintiffs filed a complaint against
the defendants in the Supreme Court of the State of New York, Suffolk
County. The complaint seeks to recover the sum of $351,574 under
theories of common law conversion, negligence and breach of contract. On
August 24, 2001, the defendants removed the action to this Court on the
basis of diversity jurisdiction pursuant to 28 U.S.C. ss 1332 and
1441(a). FMLIC now moves to dismiss the complaint pursuant to Rules
12(b)(1) and 12(b)(6) on the ground that any claim against it must be
adjudicated in the ongoing rehabilitation proceeding in Pennsylvania.
The plaintiffs move to sever the action pursuant to Rule 42(b), so as to
proceed separately against the defendant
A. The Standard of Review
With regard to a motion under Rule 12(b)(1), the Court may consider
affidavits and other material beyond the pleadings to resolve the
jurisdictional question. Robinson v. Gov't of Malaysia, 269 F.3d 133, 141
n. 6 (2d Cir.2001); Antares Aircraft, L.P. v. Fed. Republic of Nigeria,
948 F.2d 90, 96 (2d Cir.1991), vacated on other grounds, 505 U.S. 1215,
112 S.Ct. 3020, 120 L.Ed.2d 892 (1992); Exch. Nat'l Bank of Chicago v.
Touche Ross & Co., 544 F.2d 1126, 1130 (2d Cir.1976). Under the
provision of Rule 12(b)(1), the Court must accept as true all material
factual allegations in the complaint, but will not draw inferences
favorable to the party asserting jurisdiction. Shipping Fin. Servs. Corp.
v. Drakos, 140 F.3d 129, 131 (2d Cir.1998); Atl. Mut. Ins. Co. v. Balfour
Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir.1992). Hearsay statements
contained in affidavits may not be considered. Kamen v. Am. Tel. &
Tel. Co., 791 F.2d 1006, 1011 (2d Cir.1986). FMLIC submitted affidavits
and other material in support of its motion to dismiss. The Court will
consider such material to the extent they are relevant to the issue of
1. The Uniform Insurers Liquidation Act
New York has adopted the Uniform Insurers Liquidation Act (the
"UILA"). G.C. Murphy Co. v. Reserve Ins. Co., 54 N.Y.2d 69, 77, 444
N.Y.S.2d 592, 429 N.E.2d 111 (N.Y.1981). The UILA "was adopted with the
main purpose in mind of providing a uniform system for the orderly and
equitable administration of the assets and liabilities of defunct
multistate insurers". Id.
New York Insurance Law s 7412(a) provides: "[i]n a delinquency
proceeding in a reciprocal state against an insurer domiciled in that
state, claimants residing in this state may file claims either with the
ancillary receiver, if any, appointed in this state, or with the
domiciliary receiver." N.Y. Ins. Law s 7412(a) (McKinney 2000). A
rehabilitation proceeding falls within the definition of a "delinquency
proceeding." N.Y. Ins. Law s 7408(b)(2) (McKinney 2000). As such, when an
insurer is undergoing rehabilitation in a "reciprocal state" and no
ancillary receiver has been appointed in New York, a New York court cannot
adjudicate an action brought against the insurer. The only option for the
would-be plaintiff is to file a claim in the out-of-state rehabilitation
proceeding. See Maleski v. Landberg, No. 93-5318, 1995 WL 10838, *1, 1995
U.S. Dist. LEXIS 154, at *2 (S.D.N.Y. Jan. 12, 1995).
Pennsylvania is a "reciprocal state" to which New York's version of
the UILA applies. Twin City Bank v. Mut. Fire Marine & Inland Ins.
Co., 646 F.Supp. 1139, 1141-42 (S.D.N.Y.1986), aff'd without opinion, 812
F.2d 713 (2d Cir.1987). In addition, there has been no ancillary receiver
appointed for FMLIC in New York. See Taylor Affidavit p 3. Thus, the
plaintiffs who are New York residents must pursue their claims against
FMLIC in Pennsylvania. See G.C. Murphy Co., 54 N.Y.2d at 80, 444 N.Y.S.2d
at 592, 429 N.E.2d 111 ("[W]hatever the nature of the claim asserted,
absent the appointment of an ancillary receiver, the Uniform Insurers
Liquidation Act requires that the claimant prove his claim in the
domiciliary liquidation proceedings.").
Accordingly, the motion to dismiss the complaint against FMLIC is
granted without prejudice. As such, the plaintiffs' motion to sever is
denied as moot.
Based upon the foregoing, it is hereby
ORDERED, that the motion to dismiss the complaint against FMLIC is
GRANTED; and it is further
ORDERED, that the motion to sever is DENIED; and it is
ORDERED, that the plaintiffs and AmSouth are directed to appear
forthwith before United States Magistrate Judge William D. Wall for the
completion of discovery.
© 1992-2004 VersusLaw Inc.