Reinsurance Focus

Thursday, July 02. 2009

ADR UMPIRE HAS AUTHORITY TO DETERMINE ENFORCEABILITY OF SETTLEMENT AGREEMENT

Constructamax, Inc. (“CMAX”), joined by Arch Insurance Company and Arch Reinsurance Company, filed a motion in federal district court to enforce a purported settlement agreement reached with Whitlock Mills LP (“Whitlock”) prior to the commencement of an Alternative Dispute Resolution (“ADR”) proceeding . Whitlock acknowledged the settlement discussion, but denied the existence of an enforceable settlement agreement. The district court ultimately denied CMAX’s motion, ruling that pursuant to the plain language of The New Jersey Alternative Procedure for Dispute Resolution Act, the ADR umpire had full jurisdiction to decide the enforceability of the purported settlement agreement. Deluxe Building Sys., Inc. v. Constructamax, Inc., Case No. 06-2996 (USDC D.N.J. June 2, 2009).

This post written by Dan Crisp.

Posted by Rollie Goss in - Arbitration process issues at 06:00

Wednesday, July 01. 2009

SUMMARY JUDGMENT GRANTED FOR VIOLATION OF CONSENT TO SETTLE PROVISION

Ace American Insurance Company (“Ace”) made claim for coverage from its reinsurer, Continental Casualty Company (“Continental”), for an $11.68 million settlement it entered into with its underlying insured in a first party coverage case which included bad faith claims against Ace. Continental declined coverage and instituted a declaratory action seeking a determination that it owed no coverage because (1) Ace settled the case without Continental’s approval as required under the consent to settle provision, and (2) given Ace’s $10m deductible, uninsured losses would have reduced the claim to less than the deductible.

The Court agreed with Continental, finding that an oral agreement to settle in principal, even though not consummated, was entered into by Ace prior to any attempt to obtain Continental’s consent thereto. The Court found this breach of the consent-to-settle provision dispositive, but also noted its agreement with Continental’s other claim that certain of the losses pertained to Ace’s exposure to non-covered punitive damages, which losses would have reduced the claim to less than the amount of Ace’s deductible. Continental Cas. Co. v. Ace American Ins. Co., Case No. 07-958 (USDC S.D.N.Y. May 31, 2009)

This post written by John Pitblado.

Posted by Rollie Goss in - Reinsurance claims at 06:00

Tuesday, June 30. 2009

JUDICIAL REVIEW OF ARBITRATION ISSUE DENIED AGAIN ON RIPENESS GROUNDS

On December 1, 2008, we reported on a Sixth Circuit remand with instructions to dismiss for lack of jurisdiction on ripeness grounds, which the district court subsequently dismissed the action. Though in the underlying arbitration, the arbitration panel issued a “Partial Final Class Determination Award” denying the defendants’ motion for class certification. Then, after granting plaintiff’s motion to reopen the case, the plaintiff filed a motion to confirm the award, and defendants filed a motion to dismiss for lack of subject matter jurisdiction. Applying the Sixth Circuit’s analysis from the earlier action, the district court granted the motion to dismiss as the matter was not ripe for judicial review, determining that the plaintiff could not establish a suffering of harm or hardship and quoting the circuit court stating that courts “should remain reluctant to invite a judicial proceeding every time the arbitrator sneezes.” Dealer Computer Servs., Inc. v. Dub Herring Ford Lincoln Mercury, Inc., Case No. 017-10263 (USDC D.N.J. May 29, 2009).

This post written by Dan Crisp.

Posted by Rollie Goss in - Arbitration process issues, WEEK'S BEST POSTS at 06:00

Monday, June 29. 2009

SPECIAL FOCUS: NAIC'S REINSURANCE REGULATORY MODERNIZATION ACT

The NAIC's Reinsurance Regulatory Modernization Act was supposed to be the solution for the problems surrounding the regulation of reinsurance and the role of collateral in reinsurance transactions. SPECIAL FOCUS Editor John Pitblado describes the critical comments received to the exposure draft of the proposed federal legislation, the consitutional issues involved and the current status of this initiative, in Constitutional Concerns with the Reinsurance Regulatory Modernization Act.

This post written by John Pitblado.

Posted by Rollie Goss in REINSURANCE REGULATION, SPECIAL FOCUS, WEEK'S BEST POSTS at 06:00

Thursday, June 25. 2009

REINSURERS WILL NOT FEEL BROTHERLY LOVE; MOTION TO TRANSFER VENUE DENIED

Two Philadelphia-based reinsurance companies’ motion to transfer venue from New York to Philadelphia has been denied. Describing the proximity of the two cities as a “95-mile jaunt” and citing the availability of “rapid, efficient transit,” the court was not persuaded by the defendants’ argument that Philadelphia would be a more convenient forum for defense and a majority of non-party witnesses. Despite the reinsurers’ contention that the reinsurance claims and billings at issue were handled in Philadelphia, making it the locus of operative facts, the court found that because the contracts were made in New York, the defendants “should expect to be sued here.” This blog previously reported on this matter after TIG successfully moved the court to amend its complaint. See May 19, 2009 posting. TIG Ins. Co. v. Century Indemnity Co., Case No. 08-7322 (USDC S.D.N.Y. June 4, 2009).

This post written by Brian Perryman.

Posted by Lynn Hawkins in - Reinsurance claims, ARBITRATION/COURT DECISIONS at 06:00

Wednesday, June 24. 2009

FIFTH CIRCUIT CONFIRMS INTERNATIONAL ARBITRATION AWARD FROM NETHERLANDS

On June 9, 2009, the U.S. Court of Appeals for the Fifth Circuit affirmed an arbitration award against Saipem America, which arose out of an international commercial insurance dispute. The Fifth Circuit reviewed the arbitration award handed down by a tribunal in The Hague, Netherlands for $1 million in damages and $400,000 in attorneys' fees. In addressing the parties' dispute over whether the U.S. Supreme Court's decision in Hall Street Associates prevented review of the award on nonstatutory grounds, the Fifth Circuit concluded that it may vacate the award only if a statutory ground supported the vacatur. With respect to the negligence claim, the Court ruled that the tribunal was within its authority to rule on the issue of negligence because the parties had submitted the issue in the "Terms of Reference" to the arbitration tribunal. Further, the Court ruled that the award of attorneys' fees was statutorily proper under Texas Code Section 172.145. Finally, the Court found no basis to overturn the tribunal's ruling as to indemnity. Saipem Am. v. Wellington Underwriters Agencies Ltd., No. 08-20247 (5th Cir. Jun. 9, 2009).

This post written by John Black.

Posted by Lynn Hawkins in - Arbitration process issues, ARBITRATION/COURT DECISIONS at 06:00

Tuesday, June 23. 2009

THE IMPLICATIONS OF FEDERAL REGULATORY CHANGES FOR THE REINSURANCE INDUSTRY

On June 17,2009, the Administration published its proposals for the regulation of the financial services industry. Reinsurance Focus presents its analysis of these proposals as they may affect the reinsurance industry. The prior day, the U.S. House Subcommittee on Capital Markets, Insurance and Government Enterprises held a hearing on the regulation of systemic risk in the economy, which is one of the principal focuses of the Administration's proposals. Franklin Nutter, President of the Reinsurance Association of America, testified at that hearing, and a written copy of his testimony is provided here to add background to the potential reinsurance implications of the regulation of systemic risk. Other written testimonies from the hearing are available on the Subcommittee's web site. There is also a link on that page to a video webcast version of the hearing.

This post written by Rollie Goss.

Posted by Rollie Goss in REINSURANCE REGULATION, WEEK'S BEST POSTS at 06:00

Monday, June 22. 2009

NAIC SUMMER MEETINGS RESULT IN MINIMAL PROGRESS ON REINSURANCE ISSUES

The NAIC held its Summer 2009 meetings in Minneapolis last week, and there was only very modest progress on reinsurance-related issues. The Reinsurance Task Force meeting summary relates the following items:

Guidance Memorandum regarding reinsurance collateral: The exposure draft of this Guidance Memorandum (see our April 13, 2009 post) was adopted, for distribution to all state insurance commissioners.

Reinsurance Regulatory Modernization Framework: There was further discussion of the implementation of this initiative. The exposed draft Congressional bill is on hold pending the receipt of a legal opinion from Sidley Austin, LLP on constitutional issues that have been raised about this initiative.

Nonadmitted and Reinsurance Reform Act: An update was received on the status of this Congressional session’s version of this bill (HR 2571) (see our June 9, 2009 legislative update post). This bill was referred to committee upon its filing, without any progress since that time.

Credit for Reinsurance Model Act: Comments were received on a proposed amendment to this Act, which would provide a commissioner the authority to lower the minimum trusted surplus requirement applicable to a multiple-beneficiary trust maintained by an assuming insurer in run-off. Staff was directed to initiate the process for consideration of this amendment, and an additional amendment related to the implementation of the Reinsurance Regulatory Modernization Framework.

International Association of Insurance Supervisors’ Reinsurance Subcommittee and Reinsurance Transparency Subgroup: An update on recent activity of this group was received.

This post written by Rollie Goss.

Posted by Rollie Goss in - Reserves, REINSURANCE REGULATION, WEEK'S BEST POSTS at 06:00

Thursday, June 18. 2009

RECENT ARBITRABILITY DECISIONS: THE GOOD, THE BAD, AND THE VOID

There have been a number of decisions recently on the issue of arbitability:

Denial of motion to compel affirmed: Arbitration provision void due to agreement’s non-compliance with California workers compensation insurance laws. Ceradyne, Inc. v. Argonaut Ins. Co., G039873 (Cal. Ct. App. June 2, 2009)

Motion to compel individual arbitration denied: Class arbitration waiver void as unconscionable under Washington state law. Coneff v. AT&T Corp., No. C06-944 (W.D. Wa. May 22, 2009)

Denial of motion to compel affirmed: Arbitration provision void under California arbitration statute for possibility of conflicting rulings. Schwartz v. Vista Pointe Salton Sea, LLC, D052988 (Cal. Ct. App. June 2, 2009)

Motion to compel granted, no procedural or substantive unconscionability: Nayal v. Hip Network Services IPA, Inc., 08-10170 (S.D.N.Y. May 28, 2009)

Motion to vacate order compelling arbitration granted for defendant’s waiver: Apple & Eve, LLC v. Yantai North Andre Juice Co., Ltd., 07-745 (E.D.N.Y. April 27, 2009)

This post written by John Pitblado.

Posted by Rollie Goss in - Arbitration process issues at 06:09

Wednesday, June 17. 2009

VARIOUS RULINGS WITH RESPECT TO ARBITRATION AWARDS

Manifest Disregard of Law: Macromex Srl v. Globex Int’l Inc., No. 08-2255 (2d Cir. May 26, 2009) (affirming district court’s confirmation of award, finding no manifest disregard of law); Brezden v. Associated Sec. Corp., Case No. 09-2771 (USDC C.D. Cal. June 1, 2009) (denying petition to vacate, finding no manifest disregard of law) (respondents have since filed a Notice of Appeal); Holland v. Wachovia Sec., LLC, Case No. 08-1772 (USDC S.D. Cal. May 15, 2009) (dismissing petition to vacate; manifest disregard of law allegation did not necessarily depend on resolution of a substantial question of federal law). None of these opinions discuss the continued viability of this doctrine after the Supreme Court’s Hall Street Associates opinion.

Petitions to Vacate: United Gov’t. Sec. Officers of Am., Int’l Union v. Pinkerton Gov’t Servs., Inc., Case No. 08-285 (USDC E.D. Tenn. June 03, 2009) (denying defendant’s motion to dismiss an action to vacate and modify an award, finding the court was not deprived of its concurrent jurisdiction); Steward v. H & R Block Fin. Advisors, Inc., Case No. 08-5994 (USDC D. Minn. May 28, 2009) (dismissing petition to vacate, rejecting petitioner’s numerous claims).

Public Policy: Columbia Gas of Ohio, Inc. v. Util. Workers Union of Am., Local 349, No. 08-3616 (6th Cir. May 15, 2009) (affirming the district court’s confirmation of award, enforcement of the contract agreement not contrary to public policy).

Miscellaneous: Parham v. Am. Bankers Ins. Co. of Fla., Case No. 07-706 (Ala. May 29, 2009) (finding no indication that the clerk entered the arbitrator’s order as the judgment of that court as required, ruling that the trial court’s order is void and vacated, dismissing the appeal for lack of subject matter jurisdiction as no final judgment exists); Med. Shoppe Int’l., Inc. v. Turner Invs., Inc., Case No. 09-00102 (USDC E.D. Mo. May 7, 2009) (granting application to confirm award as the allegations of bias failed and the court lacked jurisdiction to review allegations of factual errors); Dzanoucakis v. The Chase Manhattan Bank, USA, Case No. 06-5673 (USDC E.D.N.Y. Mar. 31, 2009) (granting motion to confirm award, finding sufficient evidentiary basis to establish the existence of an arbitration agreement and no evidence of impartiality).

This post written by Dan Crisp.

Posted by Rollie Goss in - Confirmation/vacation of arbitration awards at 06:08

Tuesday, June 16. 2009

REINSURANCE INFORMATION NOT DISCOVERABLE

The Flintkote Company (“Flintkote”), an insolvent asbestos manufacturer, brought this action against its insurers for failure to defend or indemnify for claims allegedly covered under a policy in force between 1958 and 1961 and requested discovery of its insurer’s reserves and reinsurance information. In allowing discovery of reserves information, the district court found this information relevant to the plaintiff’s claims of bad faith in that the information could be relevant to show the difference between what the insurers expected to pay for claims and communication with the plaintiff regarding the scope of loss. The court then denied plaintiff’s request to discover reinsurance documents, determining that the reinsurance agreements were not directly at issue or relevant to the litigation. The Flintkote Co. v. Gen. Accident Assurance Co., Case No. 04-01827 (USDC N.D. Cal. May 26, 2009).

This post written by Dan Crisp.

Posted by Rollie Goss in - Discovery, WEEK'S BEST POSTS at 06:16

Monday, June 15. 2009

REINSURER’S CLAIM FOR SETOFF IN LIQUIDATION PROCEEDING FOR PAYMENT OF LIQUIDATED COMPANY’S OBLIGATION DENIED

Century Indemnity Company (“CIC”) reinsured The Home Insurance Company (“Home”). Due to Home’s liquidation proceedings, which began in 2003, CIC became fully liable for a $13 million settlement of certain environmental claims for which CIC and Home were both primarily liable under the parties’ respective insurance contracts. CIC, a debtor in the Home proceedings, sought a setoff of $8 million against other obligations owed to Home, for Home’s share of the settlement that CIC paid in full. The New Hampshire Supreme Court reversed the trial court’s order permitting the setoff. Finding that the trial court’s reading of the statute governing setoff was too narrow, the Court cited the remedial nature of the statute, and the legislative purpose of obtaining “full payment from reinsurers despite an insurer’s insolvency.” In Re Liquidation of The Home Ins. Co., No. 2008-407 (N.H. May 27, 2009).

This post written by John Pitblado.

Posted by Rollie Goss in - Reorganization and liquidation, WEEK'S BEST POSTS at 06:20

Sunday, June 14. 2009

NEW SIDEBAR AREA REGARDING REINSURANCE MARKET

Observant readers will have noticed a new addition to the right sidebar of Reinsurance Focus titled Reinsurance Market. In discussions with our clients, many have mentioned the higher reinsurance rates this season, and the particular difficulty in obtaining acceptably priced reinsurance for cat risks. Although the cat bond market basically dried up during the second half of 2008, early 2009 has seen a number of cat bonds successfully issued and sold, using a somewhat different model and cost structure than before. Since our tracking of how many readers view each of our posts reveals that a large number of our readers are interested in such topics, we have added this new area to provide links to publicly available studies and analysis of the reinsurance market and cat risk bond market. It is not our intention to provide "newsy" items in this area, but rather to bring to the attention of our readers particularly thoughtful reports and studies which might provide a basis for creative thinking to help get your company or clients through difficult times. Let us know what additional types of information might be useful to you.

This post written by Rollie Goss.

Posted by Rollie Goss in - Alternative Risk Transfers, INDUSTRY BACKGROUND at 18:28

Thursday, June 11. 2009

ENGLISH COURT CIRCUMVENTS ARBITRATION CLAUSE AND RETAINS JURISDICTION OVER DISPUTE BETWEEN FRENCH AND ENGLISH CO-INSURERS

A UK appellate court recently dismissed a French insurer’s jurisdictional challenge to a lawsuit initiated against it by an English insurer. After settling a personal injury claim, the French insurer sought to recover $2.45 million from the English insurer as its proportionate share of the settlement. The English insurer, however, denied coverage for the claim, and commenced proceedings in England for a declaration of non-liability. In response, the French insurer argued that the English court lacked jurisdiction because of an arbitration clause in the insurance policy that required all disputes to be arbitrated in Paris. It further noted that European Union Regulation 44/2001 has an arbitration exclusion that precluded English jurisdiction. The lower court rejected this argument, and the French insurer appealed.

The appellate court rejected the French insurers’ jurisdictional argument, holding that—under the EU Regulation—both the subject matter of the claim and the preliminary issue of the enforceability of the arbitration clause were within the English court’s jurisdiction. The court reasoned that “the mere fact that a claim is the subject of an arbitration agreement does not deprive a court of its jurisdiction to determine the dispute.” Rather, a court has to look at the subject matter of the proceeding to decide whether it is within the scope of the arbitration agreement or the EU Regulation. Applying this standard, the court found that the English insurer’s claim did not arise from the insurance policy’s arbitration agreement; instead, it arose out of a separate liability agreement between the co-insurers. Youell v. La Reunion Aerienne [2009] EWCA Civ 175.

This post written by John Black.

Posted by Lynn Hawkins in - UK Court opinions, ARBITRATION/COURT DECISIONS at 06:00

Wednesday, June 10. 2009

ARBITRATION AWARD SUMMARILY CONFIRMED WHERE NO DISPUTE ABOUT THE AWARD EXISTED

A petition to confirm a $187,000 reinsurance arbitration award was granted where there was no dispute that the court had jurisdiction over the parties and subject matter of the action, or that the claims at issue were properly submitted to the arbitration panel for resolution. In fact, the amount of the award had already been paid. The petitioner apparently wished the award confirmed simply to avoid any doubt in future litigation. That request was granted. Global Reinsurance Corp. v. Argonaut Ins. Co., Case No. 08-8482 (USDC S.D.N.Y. May 22, 2009).

This post written by Brian Perryman.

Posted by Lynn Hawkins in - Confirmation/vacation of arbitration awards, ARBITRATION/COURT DECISIONS at 06:00

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Reinsurance Focus covers reinsurance and arbitration legal issues, and is presented by the law firm of Jorden Burt LLP, a national law firm with a unique focus on financial services and a national reputation in high stakes litigation, financial regulation and products. View our firm's electronic newsletter, Expect Focus.

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Reinsurance Market

Last updated 6/22/2009

Links to recent items of particular interest about the reinsurance market and cat risks ...

Global Terrorism Insurance Report(Guy Carpenter)

US Administration White Paper for the "modernization" of the regulation of the financial services industry

NAIC 2008 Annual Reports permitted and prescribed practices

Guy Carpenter extended blog post titled Florida Renewal Up 15%, Follows the Global Trend

Reinsurance Market Report 2008 (and data Appendix) (International Association of Insurance Supervisors) (includes data on premiums, losses, investments and profitability)

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Coming Events

Last updated 6/19/2009

ReContracts - The Art of Designing Reinsurance Contracts and Programs (RAA) - July 14-17, 2009 (New York)

Reinsurance Claims & Dispute Resolution (HB Lit. Conferences) - September 10, 2009 (New York, New York) (also available by live webcast)

3rd Annual Reinsurance Strategies (Marcus Evans) - September 14-15, 2009 (Philadelphia, Pa.)

ReClaims - Reinsurance Claims Management by Claims Professionals (RAA) - September 24-25, 2009 (New York, New York)

ReFinance - The ABCs of Financial Reporting and Analysis (RAA) - October 7-8, 2009 (New York, New York)

ARIAS-US Fall Conference and Annual Meeting - November 12-13, 2009 (New York, New York)

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Recent Law Review Articles

Last updated 5/30/2009

William O'Neill, Nilam Sharma, Michael Carolan & Zainab Charchafchi, Coping with the CDS Crisis: Lessons Learned from the LMX Spiral, vol. 16 no. 2 Journal of Reinsurance (IRU) 1 (Spring 2009)

Tracey Laws, Reinsurance Regulation in the U.S.: An Opportunity to Move into the 21st Century, vol. 16 no. 2 Journal of Reinsurance (IRU) 35 (Spring 2009)

Peter Chaffetz and Cecilia Moss, Follow the Fortunes and Allocation: An Update, vol. 16 no. 2 Journal of Reinsurance (IRU) 55 (Spring 2009)

Ann Ketchen, Reserve and Reinsurance Information: Is It Discoverable?, vol. 38 no. 3 The Brief (ABA) 40 (Spring 2009)

Nonsignatories to Contract May Invoke Arbitration Clause, vol. 21 no. 1 Journal of Civil Litigation 75 (Spring 2009)

Matthew Melamed, Timelines and the Non-Existence of Arbitration Agreements - Three Analogies, vol. 12 no. 2 Journal of Consumer & Commercial Law 78 (Spring 2009)

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For more information on the firm and our reinsurance practice, visit Jorden Burt's Reinsurance Practice webpage.

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Blogmaster and author: Rollie Goss (E-mail Rollie a comment - DC office)

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Special Focus Editor and author: John Pitblado (E-mail John a comment - Simsbury office)

Author: Brian Perryman (E-mail Brian a comment - DC office)

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