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FOR IMMEDIATE NEWS RELEASE NEWS RELEASE # 27 FROM: CLERK OF SUPREME COURT OF LOUISIANA

The Opinions handed down on the 12th day of April, 2005 , are as follows:

BY CALOGERO, C.J. :

2004-C- 1544

ALL STAR ADVERTISING AGENCY, INC. D/B/A ALL STAR AUTOMOTIVE GROUP v. RELIANCE INSURANCE COMPANY, IN LIQUIDATION (Parish of E. Baton Rouge) Accordingly, the court of appeal's judgment is reversed, and the matter is remanded to the court of appeal for consideration of the plaintiff's unaddressed contention that the Pennsylvania Commonwealth Court in the order of liquidation did not assert exclusive jurisdiction over a lawsuit such as the plaintiff brings here, that is, one for injunctive relief in which is sought the production of documents supporting the defendant's demand for premiums due and an injunction preventing the defendant from drawing down on a letter of credit. REVERSED AND REMANDED TO THE COURT OF APPEAL

04/12/2005 SUPREME COURT OF LOUISIANA No. 2004-C-1544 ALL STAR ADVERTISING AGENCY, INC. d/b/a ALL STAR AUTOMOTIVE GROUP VERSUS RELIANCE INSURANCE COMPANY, In Liquidation ON WRIT OF CERTIORARI TO THE COURT OF APPEAL FIRST CIRCUIT, PARISH OF EAST BATON ROUGE CALOGERO, Chief Justice Uniformity and predictability in interstate relations regarding insurer delinquency and liquidation proceedings has been the objective of two model laws on the topic: the Uniform Insurers Liquidation Act (UILA) proposed in 1939 by the National Conference of Commissioners on Uniform State Laws, and the superseding Insurers Rehabilitation and Liquidation Model Act proposed in 1978, and since amended, by the National Association of Insurance Commissioners. The issue of subject matter jurisdiction in this case turns on the reciprocity between a state, Louisiana, that has adopted the UILA, and a state, Pennsylvania, that has adopted a version of, or laws related to, the Model Act. After consulting a table of UILAadopting jurisdictions provided as an annotation to West's LSA - Revised Statutes, the court of appeal below ruled that Pennsylvania, the domiciliary state of the delinquent insurer, was not a reciprocal state vis-a-vis Louisiana under Louisiana's Uniform Insurers Liquidation Law, La. Rev. Stat. 22:757 through 22:763, this state's version of the UILA. We granted the writ application of the Insurance Commissioner of the Commonwealth of Pennsylvania, as Liquidator for Reliance Insurance Company, to

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determine the correctness of that ruling. Upon review, we set forth the manner in which reciprocity should be determined under Louisiana law and, having done so, we hold that Pennsylvania is a "reciprocal state" under the definition set forth in La. Rev. Stat. 22:757(7). Accordingly, for the reasons provided below, the decision of the court of appeal is reversed and the matter is remanded to that court for consideration of the plaintiff's unaddressed assignment of error asserted in the court of appeal. FACTS According to its Petition for a Temporary Restraining Order and for a Rule for Preliminary Injunction, Plaintiff, All Star Advertising Agency, Inc., d/b/a All Star Automotive Group, in December 1996 purchased policies of automobile liability coverage and workers' compensation coverage from Defendant, Reliance Insurance Company, through its wholly-owned subsidiary, United Pacific Insurance Company. The policies were in effect through December 15, 1999. In connection with the policies acquired in December 1996, the parties entered into a Retrospective Premium Endorsement plan whereby All Star would pay Reliance an estimated standard premium that would be adjusted through periodic audits to determine the actual standard premium. The premium could be further adjusted as the result of losses up to 140% of the audited standard premium. As part of the agreement, and to secure its obligation, All Star established a letter of credit with Bank One, a Louisiana bank, effective February 21, 2000, in the amount of $225,000.00.1 In October 2001, Reliance Insurance Company was declared insolvent and placed in liquidation through an order issued by the Commonwealth Court of Pennsylvania in Philadelphia. The Commonwealth Court appointed Pennsylvania
There is a factual dispute as to the purpose of the letter of credit. According to All Star's petition, the letter of credit was issued for the purpose of securing the retroactive premium obligation under the 1996 through 1999 policies. Reliance contends it had required All Star to obtain the letter of credit as security for All Star's contractual obligation to pay deductibles on claims owed under other policies issued after 1999. 2
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Insurance Commissioner M. Diane Koken as the Liquidator and vested her with "title to all property, assets, contracts and rights of action (`assets') of Reliance, of whatever name and wherever located, whether held directly or indirectly, as of the date of the filing of the Petition for Liquidation." Paragraph 5 of the liquidation order continues: All assets of Reliance are hereby found to be in custodia legis of this Court; and this Court specifically asserts, to the fullest extent of its authority, (a), in rem jurisdiction over all assets of the Company wherever they may be located and regardless of whether they are held in the name of the Company or any other name; (b) exclusive jurisdiction over all determinations of the validity and amount of claims against Reliance; and (c) exclusive jurisdiction over the determination of the distribution priority of all claims against Reliance." The liquidation order was supplemented in February 2002 and in September 2002. In May 2002, Reliance presented a premium adjustment to All Star and demanded an additional premium of $415,428.00.2 In November 2002, All Star filed a petition in the 19th Judicial District Court in East Baton Rouge Parish attempting to obtain a temporary restraining order and in injunction. All Star sought to enjoin Reliance from drawing on the letter of credit. The district court in November 2002 denied the petition for a temporary restraining order, stating that there was no irreparable harm that could not be compensated in monetary damages. Before the hearing on All Star's petition for a preliminary injunction was conducted, Reliance filed an exception of lack of subject matter jurisdiction citing the Pennsylvania order of liquidation and the Uniform Insurers Liquidation Act (UILA) of 1939, adopted in Louisiana in 1948 as the Uniform Insurers Liquidation Law (UILL) at La. Rev. Stat. 22:757 through 22:763, governing interstate insolvencies. Reliance asserted that Pennsylvania is a reciprocal state under the UILL and that the

All Star asserts that Reliance was obligated to calculate the retrospective premium after eighteen months from the commencement of the three-year period in December 1996, and annually thereafter, but that Reliance presented its first retrospective calculation in May 2002. 3

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order of liquidation was therefore entitled to full faith and credit in Louisiana under the United States Constitution. Citing La. Rev. Stat. 22:760, Reliance further argued that, because no ancillary receivership proceedings had been initiated in Louisiana, residents of Louisiana must assert their claims at law or equity against Reliance in the proceedings of the domiciliary state of the foreign insurer, Pennsylvania. The Louisiana district court in this case sustained Reliance's exception, finding that it did not have subject matter jurisdiction in light of the Pennsylvania Commonwealth Court's order of liquidation. Though it apparently gave no reasons for its ruling, the Louisiana district court necessarily, if implicitly, found that Pennsylvania was a reciprocal state under Louisiana law and that the Pennsylvania Commonwealth Court's order of liquidation operated to divest it of subject matter jurisdiction over the litigation instituted by All Star. The court of appeal reversed and remanded. All Star Advertising Agency, Inc. d/b/a All Star Automotive Group v. Reliance Insurance Co., in Liquidation, 03-0891 (La. App. 1 Cir. 2/23/04), 871 So.2d 371. The appellate court found the district court had erred in sustaining the exception of lack of subject matter jurisdiction, but not for the reasons asserted by All Star on appeal.3 The court of appeal found that Pennsylvania had not adopted the UILA, citing an annotation entitled "Table of Jurisdictions Wherein Act Has Been Adopted" that formerly followed La Rev. Stat.
All Star, as it does in this court, contended in the appellate court that it was not asserting any claim for monetary damages against Reliance or any relief that would affect the legitimate corpus of Reliance's assets and, therefore, the order of liquidation did not grant to the Pennsylvania court exclusive jurisdiction over the case. All Star has argued that it is only requesting supporting documentation from Reliance for the calculation of the Standard Premium and the additional premium, if any, as alleged in its Petition in Paragraphs 10 and 11. In its Petition, however, All Star further asserts that Reliance is in possession of some $316,000 in Open Reserves previously paid to Reliance to pay claims from claim years 1996 through 1999, that Reliance is no longer paying or satisfying All Star's claims, that Reliance will likely not return to All Star any excess premiums paid, and that Reliance must be permanently enjoined from drawing down on the letter of credit to prevent irreparable harm to All Star "until such time as [Reliance] provides All Star with the necessary documentation to evaluate Reliance's claims and a reasonable time to review said documentation." See Petition, Paras. 12 - 17. In addition to injunctive relief, All Star seeks "all general and equitable relief." Petition, Prayer Art. III. 4
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22:757 in West's LSA-Revised Statutes, and concluded that Pennsylvania was therefore not a reciprocal state. Thus, the appellate court reasoned, the provisions of the Louisiana's UILL are not applicable and cannot operate to confer exclusive jurisdiction over All Star's claims against Reliance in the Pennsylvania court. The court of appeal further found that full faith and credit and the doctrine of comity do not require recognition of the order of liquidation, relying on Bonura v. United Bankers Life Ins. Co., 552 So.2d 1248 (La. App. 1st Cir. 1989), writ denied, 558 So.2d 1125 (La. 1990), for the proposition that full faith and credit and the doctrine of comity do not require recognition of the foreign order if to do so will violate the positive law or public policy of Louisiana. We granted the writ application filed by the Pennsylvania Insurance Commissioner as Reliance's Liquidator. 04-1544 (La. 11/15/04), 887 So.2d 462. DISCUSSION La. Rev. Stat. 22:757(7) defines a "reciprocal state" as any state other than this state in which in substance and effect the provisions of this law are in force, including the provisions requiring that the insurance commissioner or equivalent insurance supervisory official be the receiver of a delinquent insurer.

Following this provision in West's LSA-Revised Statutes, Volume 15B (West Publishing Co. 1995), now superseded, there was a table entitled "Table of Jurisdictions Wherein Act Has Been Adopted." Some twenty-seven states and territories are listed in this table. As might be expected, the table is not found in any legislation enacting the Louisiana Uniform Insurers Liquidation Law. Furthermore, this table has been omitted from West's LSA-Revised Statutes, Volume 15A (West 2004), which is West's most recent publication of La. Rev. Stat. 22:757. Instead, the current West annotation, entitled "Historical and Statutory Notes," lists twenty-five

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states under the sub-heading "Comparative Laws." Clearly, the table, and the current list of "Comparative Laws," are simply annotation or reference materials provided by West, and are not intended to be a conclusive listing of the states that are to be considered reciprocal states under the definition of such set forth in La. Rev. Stat. 22:757(7). Nor was the court of appeal's reliance on the West annotation table mandated by this court's jurisprudence. In Martin v. General American Casualty Co., 226 La. 481, 76 So.2d 537 (1954), the court was confronted with the question whether La. Rev. Stat. 22:762 of the UILL is applicable without regard to whether the domiciliary state is a reciprocal state under the UILL. The court held that this section of the UILL applies only when the domiciliary state and the ancillary state are reciprocal states as defined in La. Rev. Stat. 22:757. The court, however, was not called upon to determine whether the domiciliary state, Texas, was a reciprocal state with the ancillary state, Louisiana, because the Louisiana Secretary of State, who had brought the suit, had admitted that Texas was not a reciprocal state. 76 So.2d at 539. Accordingly, the court stated, "Since Texas is admittedly not a reciprocal state, the provisions of the insurance code dealing with the Uniform Insurance [sic] Liquidation Law, LSA-R.S. 22:757-763, cannot be applicable." 76 So.2d at 542 (emphasis removed). The Martin court made no reference to the table in the West annotation cited by the court of appeal below. In Bonura, which the court of appeal cited, the First Circuit held, inter alia, that the Louisiana court did have subject matter jurisdiction over a suit by Louisiana residents against an insolvent Texas insurer, even though no ancillary receivership proceeding had been initiated in Louisiana, because Texas was not a reciprocal state within the meaning of the Louisiana UILL. As to whether Texas was a reciprocal

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state under the Louisiana UILL, the court stated: As shown by the Table of Jurisdictions immediately following Section 757 in which the Act has been adopted, Texas is not a reciprocal state. Therefore, the provisions of the Uniform Insurers Liquidation Law, and specifically Section 760, cannot be applicable in this instance. See Martin v. General American Casualty Co., 226 La. 481, 76 So.2d 537 (La. 1954). Bonura, 509 So.2d at 10. The Bonura court, however, cited no authority for merely consulting the West annotation table to determine whether Texas was a reciprocal state pursuant to La. Rev. Stat. 22:757. Moreover, the Bonura court made no analytical examination of the laws of Texas, so as to determine whether Texas was in fact a "state in which in substance and effect the provisions of [La. Rev. Stat. 22:757-763] are in force, including the provisions requiring that the insurance commissioner or equivalent insurance supervisory official be the receiver of a delinquent insurer." La. Rev. Stat. 22:757(7). Presumably relying on Bonura, as did the court of appeal below, the Third Circuit in Krueger v. Tabor, 546 So.2d 1317 (La. App. 3rd Cir. 1989), also found Texas not to be a reciprocal state under the Louisiana UILL. The Krueger court stated, without even a reference to the West table: "At the outset, it is important to note that the State of Texas has not adopted the Uniform Insurers Liquidation Act (La. Rev. Stat. 22:757-22:763)." 546 So.2d at 1320. Clearly, La. Rev. Stat. 22:757(7) does not direct a court to refer to the West annotation table to determine whether a particular state is a reciprocal state. Indeed, the courts that have considered the issue appropriately examine the laws of the other state to determine whether they are "in substance and effect" the provisions of the UILA. See, e.g., Public Service Truck Rending, Inc. v. Ambassador Ins. Co., 175 A.D.2d 632, 572 N.Y.S. 2d 559 (1991); Allied Fidelity Ins. Co. v. Ruth, 57 Wash. App. 783, 790 P.2d 206 (1990); Herstram v. Bd. of Directors, Silvercreek Water and
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Sanitation Dist., 895 P.2d 1131 (Colo. App. 1995). See also Jay M. Zitter, Annotation, Validity, Construction, and Application of the Uniform Insurers Liquidation Act, 44 A.L.R.5th 683 (1996-2004). Furthermore, mechanical reliance on the West annotation table of adopting jurisdictions of the UILA could possibly lead a court into error given that the UILA, promulgated in 1939 by the National Conference of Commissioners on Uniform State Laws, has itself been superseded. In 1978, the National Association of Insurance Commissioners (NAIC) adopted a more comprehensive model law for insurer insolvency proceedings, entitled "Insurers Rehabilitation and Liquidation Model Act." The NAIC encouraged the states to adopt the Model Act, which has been enacted all or in part by over thirty states and territories, including some that had formerly adopted the UILA. See N.A.I.C. 555-63. Pertinent to our reasoning today, the UILA, which addresses only interstate relations, was incorporated into the Model Act, according to NAIC historical notes accompanying the Model Act. The NAIC in 1968 began the process of creating a more comprehensive uniform law having to do with insurer insolvency, rehabilitation, and liquidation, and a drafting committee of the NAIC selected Wisconsin law as a starting point. Wisconsin, notably, had adopted the UILA in 1965. Consequently, the NAIC expressly based Article III of the new Model Act governing "Interstate Relations" on the former UILA. Given the existence of the Model Act, in 1981 the National Conference of Commissioners on Uniform State Laws not surprisingly withdrew the UILA as the model law which the National Conference was thereafter recommending for enaction. Therefore, reliance by a court today on the former West annotation table with regard to the UILA might result in the court's overlooking the actual reciprocity of a state that has adopted either the Model Act or laws similar to

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the UILA "in substance and effect." Accordingly, we find that the Bonura court erred when it found that Texas is not a reciprocal state without first having conducted an independent comparison of the Texas law to the Louisiana law to determine whether the Texas law contains provisions that are "in substance and effect" the provisions of Louisiana's UILL, La. Rev. Stat. 22:757 through 22:763. To that extent, we disapprove of Bonura and its mechanical reliance on the West annotation table. For these same reasons, we find that the court of appeal below should have conducted an independent examination of the laws of Pennsylvania to determine whether they are in substance and effect equivalent to the provisions of La. Rev. Stats. 22:757 through 22:763.4 We turn next to the question of whether Pennsylvania is a reciprocal state with Louisiana pursuant to La. Rev. Stat. 22:757(7). Notably, Plaintiff All Star has not asserted in this court that Pennsylvania is not a reciprocal state, nor has All Star pointed to any provision in Pennsylvania insurance liquidation law governing interstate relations that is not "in substance and effect" the Louisiana UILL. Nonetheless, we will compare Pennsylvania and Louisiana law in that regard. For Pennsylvania to be a reciprocal state with Louisiana, the statutes of the two states need not be identical; however they must be equivalent "in substance and effect." The purpose of the UILA when it was enacted in 1939 was to break down some of the differences between states that had previously interfered with the

As further support for its holding that the district court did have subject matter jurisdiction over the plaintiff's suit for injunctive relief against Reliance, the appellate court cited Bonura for the proposition that La. Rev. Stat. 22:629 directs that no insurance contract delivered or issued for delivery in this state which covers Louisiana residents may contain any provision that deprives the courts of this state of jurisdiction over action against the insurer. 03-0891, p. 6, 871 So.2d at 375. However, there has been no allegation that the policies issued to All Star contain such a clause. Moreover, La. Rev. Stat. 22:629 would not appear to be relevant when insolvency proceedings involving an insurer domiciled in a reciprocal state have commenced in the reciprocal state, because such proceedings are instead controlled by Louisiana's Uniform Insurers Liquidation Law at La. Rev. Stat. 22:757 through 22:763. Thus, the court of appeal's reliance on La. Rev. Stat. 22:629 was misplaced. 9

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extension of comity to foreign insurer delinquency proceedings. Twin City Bank v. Mutual Fire Marine & Inland Ins. Co., 646 F.Supp. 1139, 1140 (S.D.N.Y. 1986), aff'd, 812 F.2d 713 (2nd Cir. 1987); Kelly v. Overseas Investors, Inc., 24 A.D.2d 157, 264 N.Y.S.2d 586 (1st Dept. 1965), rev'd on other grounds, 18 N.Y.2d 622, 272 N.Y.S.2d 773, 219 N.E.2d 288 (1966). The Prefatory Note to the UILA identifies six specific features of insurer delinquency proceedings that were then causing the "greatest embarrassment." Prefatory Note, Uniform Insurers Liquidation Act, 13 U.L.A. 322 (1986) (superseded). If each state enacted the uniform law, the National Conference of Commissioners on Uniform State Laws reasoned, these past embarrassments could be remedied by the following: (1) provision that the insurance commissioner or an equivalent official shall serve as receiver; (2) authority for domiciliary receivers to proceed in non-domiciliary states so as to prevent dissipation of assets therein; (3) vesting of title to assets in the domiciliary receiver; (4) provision for non-domiciliary creditors to have the option to proceed with claims before local ancillary receivers; (5) uniform application of the laws of the domiciliary state to the allowance of preferences among claims; and (6) prevention of preferences for diligent non-domiciliary creditors with advance information. Id. Accordingly, these

provisions provide a supplementary basis for comparing Louisiana's Uniform Insurers Liquidation Law to the statutes of the other state. An examination of the Pennsylvania and Louisiana statutes reveals that each state's laws regarding interstate relations in insurer liquidation proceedings are the same "in substance and effect." La. Rev. Stat. 22:757, entitled "Uniform Insurers Liquidation Law," corresponds to Section 1 of the UILA and sets forth definitions of insurer, delinquency proceeding, state, foreign country, domiciliary state, ancillary state, reciprocal state, general assets, preferred claim, special deposit claim, secured

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claim, and receiver. Pennsylvania statute 40 P. S.

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