Guarantee Life filed an Illinois state action seeking a declaration that an unexecuted 2006 reinsurance agreement with American Medical and Life was null and void. Despite numerous problems in its dealings with American (such as the state action), Guarantee Life entered another reinsurance agreement with American in 2008. No surprisingly, the 2008 agreement led to litigation. Guarantee Life filed a federal suit against American alleging breach of the 2008 agreement and violations of the Illinois Insurance Code. Because of the pendency of the Illinois state action, American moved to dismiss the federal complaint asking the court to abstain from hearing the case.
The United States District Court for the Northern District of Illinois denied American’s motion to dismiss finding that although the state and federal cases were parallel, abstention was not appropriate. The Court held that American failed to demonstrate the “clearest of justifications” or anything “extraordinary” that would overcome its “virtually unflagging” obligation to exercise its jurisdiction. Guarantee Trust Life Ins. Co. v. American Medical & Life Ins. Co., Case No. 01-02125 (USDC N.D. Ill. Sept. 15, 2010).