BOOZELL WINS "SUPERPRIORITY" DECISION

Chicago, IL - Illinois Director of Insurance Mark Boozell won a key ruling this week from the US Federal District Court in Chicago in the most important "superpriority" case since the Supreme Court's Fabe decision in 1993.

In a dispute against the United States involving the Reserve Insurance Company liquidation estate (Boozell v. United States), the Court agreed with Boozell that claims brought by the federal government against the Reserve estate are subject to Illinois receivership law, and are not entitled to "superpriority" ranking ahead of consumers' claims. The Court rejected an argument by the US Department of Justice that the federal government need not follow state court procedural requirements, such as claim-filing deadlines (the Court declined to follow the 1993 Garcia decision from the First Circuit). The Court also rejected an argument that the statutory role of guaranty associations invalidates state receivership laws.

Relying on the McCarran-Ferguson Act and the Fabe decision, Judge Ruben Castillo concluded, "(T)he provisions of the Illinois liquidation statute which conflict with the federal priority act relate to the business of insurance pursuant to the Supreme Court's analysis in Fabe. . . . Moreover, this Court believes . . . that the Fabe majority opinion was correct in its application of the plain wording of the McCarran-Ferguson Act."

"We believe that Judge Castillo's common-sense conclusions are tremendously helpful to insurance consumers, not only in Illinois, but across the country," Boozell observed. "Congress intended under the McCarran-Ferguson Act that state law would govern the business of insurance, from cradle to grave. The state laws on liquidation priorities, the court procedures, and the role of the guaranty associations are all part of the system of state regulation protected by McCarran. Our laws treat federal government claims no better -- and no worse -- than any other claims. We only ask that the federal government live by the same rules that apply to all other claimants, so that we can close these estates and pay the consumers. We thought that had all been settled by the Fabe decision, but if it was not, Judge Castillo's reasoning should resolve any unanswered questions."

If the federal government does not appeal the decision, Boozell is prepared to close the Reserve estate and make a final distribution of the assets he has marshalled to Reserve's creditors.

Boozell was represented by attorneys Peter Gallanis and Kevin Baldwin of the Office of the Special Deputy Receiver in Chicago, and by Carlisle Herbert of Hopkins & Sutter.