April 25, 2019

Colorado Court of Appeals: Colorado Court Must Recognize and Give Effect to South Carolina Liquidation Order

The Colorado Court of Appeals issued its opinion in Garrou v. Shovelton on Thursday, January 24, 2019.

Interlocutory Appeal—Uniform Insurers Liquidation Act—Federal Liability Risk Retention Act—Enforcement of South Carolina Order.

The Garrous sued Shovelton, among others, for medical malpractice. Shovelton’s malpractice insurer is Oceanus, a South Carolina industrial insured captive corporation formed as a risk retention group. In 2017, a South Carolina court issued an order commencing liquidation proceedings against Oceanus that, among other things, imposed an injunction and an automatic stay of proceedings against the insurer, its assets, and its policyholders. Shovelton moved to stay the proceedings based on the South Carolina order. The district court denied the motion, and Shovelton moved for C.A.R. 4.2 certification of the court’s order denying the stay.

On appeal, Shovelton contended that the district court erroneously denied his motion for stay because Colorado and South Carolina are reciprocal states under the Uniform Insurers Liquidation Act (UILA), so Colorado must give full faith and credit to any injunction order in a liquidation proceeding. Because Colorado and South Carolina are reciprocal states under the UILA, Colorado must recognize South Carolina’s order. In addition, the Federal Liability Risk Retention Act of 1986 governs risk retention groups and requires Colorado to honor the South Carolina order. South Carolina has jurisdiction over Oceanus and its policyholders, including Shovelton. The district court erred in denying the motion for stay as to Shovelton.

The order was reversed and the case was remanded with directions to stay the proceedings as to Shovelton and to enter any further orders deemed necessary and appropriate as to the remaining parties.

Summary provided courtesy of Colorado Lawyer.