Insurance Corporation of New York v. H&H Plastering Inc. et al

Filing 98

ORDER GRANTING EXTENSION OF STAY. Signed by Judge Alsup on April 1, 2010. (whalc2, COURT STAFF) (Filed on 4/2/2010)

1 2 3 4 5 6 7 8 9 10 INSURANCE CORPORATION OF NEW YORK, Plaintiff, v. H&H PLASTERING INC., CONCRETE SHELL STRUCTURES, INC., and DOES 1 through 10, inclusive, Defendants. / ORDER GRANTING EXTENSION OF STAY No. C 07-5214 WHA IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court

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For the Northern District of California

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In June 2009, plaintiff Insurance Corporation of New York in this long-running insurance-contract action was placed in rehabilitation proceedings in New York (where it is domiciled) due to its insolvency. On February 4, 2010, this action was stayed for 60 days pursuant to California Insurance Code § 1063.6. California Insurance Code § 1063.6 states that California courts must automatically stay any legal action in which an insolvent insurer is a party for 60 days after an order of receivership with a finding of insolvency. This stay may be extended "to permit proper defense or conduct" of the pending action. See Superior Dispatch, Inc. v. Insurance Corp. of New York, 2010 WL 187957 (Cal. App. 2 Dist., Jan. 21, 2010). It is undisputed that California state law applies -- including California Insurance Code § 1063.6 -- because this is an action in diversity. Plaintiff's previous motion for an indefinite stay was denied. Plaintiff seeks reformation of its insurance policies with claimants, and a declaration that it not be held responsible for their

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legal defense in an underlying arbitration. The claimants (via the arbitration) have been trying to collect on the insurance policy since 2004 and plaintiff, through the rehabilitator, is using the New York proceeding as a vehicle to deny that claim. Plaintiff now moves to extend the stay for an additional 60 days. For the following reasons, the extension is GRANTED. On March 4, 2010, an order of liquidation was entered against plaintiff in New York Supreme Court. The order appoints the Superintendent of Insurance of the State of New York as liquidator (Fama Decl. Exh. A at 2). California Insurance Code § 1063.6 provides for an additional stay upon the entry of an order of liquidation. It provides in pertinent part: "All proceedings in which the insolvent insurer is a party . . . shall . . . be stayed for 60 days from the date that an order of liquidation . . . has been entered . . . by a court in the state of domicile of the insurer." Because a stay of 60 days after an order of liquidation is mandatory under California law, plaintiff's motion is GRANTED. The final pretrial conference scheduled for April 19, 2010, is continued to JUNE 21, 2010, AT 2:00 P.M. The trial scheduled for May 3, 2010, is continued to JULY 26, 2010, AT 7:30 A.M. If plaintiff or its liquidator believe that pursuit of this action would violate New York state's rehabilitation scheme, it is free to dismiss its complaint. If plaintiff is going to abandon this action then it must so elect in writing by JUNE 7, 2010.

United States District Court

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For the Northern District of California

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IT IS SO ORDERED.

Dated: April 1, 2010.

WILLIAM ALSUP UNITED STATES DISTRICT JUDGE

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