Section 2.15 Circuit Court Interpretations of Fabe Reverse-Preemption Test

• Library: Insurance Practice 2015

In Murff v. Professional Medical Insurance Co., 97 F.3d 289, 291 (8^th Cir. 1996), the Eighth Circuit interpreted the third part of the United States Department of Treasury v. Fabe, 508 U.S. 491 (1993), test in the context of insurance insolvency. The court noted that “[a] state statute regulates the business of insurance if it ‘affects the relation of insured to insurer and the spreading of risk.’ [F]ederal law must yield to the extent the [state] statute furthers the interests of policyholders.” Murff, 97 F.3d at 291 (citation omitted). Interpreting the third prong of the test, the court found “impairment” of the state statute when the federal statute “expressly prohibit[s] acts permitted by state law, or vice versa.” Id. at 292 (quoting Merchants Home Delivery Serv., Inc. v. Frank B. Hall & Co., 50 F.3d 1486, 1492 (9^th Cir. 1995)). But the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621, et seq., did not impair the state insolvency statute governing stays of proceedings involving the insolvent insurer. The state statute could not preclude the age discrimination claim in federal court. See alsoWagner v. J.A. Jones Constr. Co. (In re Amwest Sur. Ins. Co.), 245 F. Supp. 2d 1038 (D. Neb. 2002) (federal court invoked reverse-preemption test of Fabe, finding that the Nebraska receivership court had exclusive jurisdiction to resolve whether a payment had been a preferential transfer of an insolvent’s assets); Koken v. P.LD. Denis Esq. & Others, Lloyd’s Syndicate No. 1121, No. 1:03-CV-2154, 2004 U.S. Dist. LEXIS 6506 *9 (M.D. Pa. Feb. 6, 2004) (dispute involving the payment by Reliance Insurance Company to a cedent after the Director had placed the company in...