Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Carlton Fields

COMMONWEALTH COURT OF PENNSYLVANIA APPROVES REINSURANCE COMMUTATION AGREEMENT

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On September 4, 2014, the receivership court for the Reliance Insurance Company (“Reliance’) estate (the “Reliance Estate”) approved a settlement agreement allowing the Liquidator to terminate and commute the obligations between Odyssey and Reliance under the reinsurance agreements. The receivership court accepted the liquidator’s representations that the settlement agreement is a fair and reasonable settlement of Odyssey’s obligations to the Reliance estate under the reinsurance agreements and that the payment contemplated under the settlement constituted fair and reasonable value to the Reliance Estate. The Reliance estate will receive an economic benefit amounting to $6,450,000. In re Liquidation of Reliance Insurance Company, Docket No. 1 REL 2011 (Pa. Comm. Ct. Oct. 8, 2014)

This post written by Kelly A. Cruz-Brown.

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FEDERAL COURT REFUSES TO ENFORCE ARBITRATOR’S SUBPOENA DUCES TECUM TO NON-PARTY

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A United States district court in Louisiana recently dismissed a suit brought under the Federal Arbitration Act to enforce a subpoena duces tecum issued in an arbitration proceeding. The district court granted the defendant’s motion to dismiss on two grounds. First, the court held that the amount in controversy requirement for diversity jurisdiction was lacking because the plaintiffs were asserting no claim against the defendant in the federal court action; the plaintiffs sought only the production of discovery documents. Second, the court ruled that Section 7 of the FAA provides for the enforcement of a subpoena duces tecum against a non-party only if the non-party is compelled to testify as a witness before the arbitrator. Because the defendant was not summoned to testify in the arbitration proceeding, the subpoena duces tecum was unenforceable. Chicago Bridge & Iron Co. N.V., et al. v. TRC Acquisition, LLC, No. 14-1191, 2014 WL 3796395 (E.D. La. July 29, 2014).

This post written by Catherine Acree.

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COURT CONFIRMS ARBITRATION PANEL’S INTERIM AWARD REQUIRING REINSURER TO POST SECURITY FOR CEDENT’S CLAIMED LOSSES

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A federal district court has confirmed an arbitration panel’s interim award requiring Allied Provident, as reinsurer, to post security for unreimbursed losses and expenses that its cedent claims are due under the parties’ reinsurance agreement. The court first considered whether it even had the power to confirm the panel’s interim award because generally a court does not have the authority to review an interlocutory ruling by an arbitration panel. The court found, however, that an exception to that rule exists when a panel has granted an award of temporary equitable relief, such as a security award, separable from the merits of the arbitration. The court therefore found that it had the power to confirm the interim award and rejected all of Allied Provident’s arguments to vacate it.

The court also denied Allied Provident’s request to stay the interim award and to disqualify the entire arbitration panel. The court directed Allied Provident to appoint a new party arbitrator, as its arbitrator had resigned due to health reasons, so the proceedings could continue. Companion Property and Casualty Insurance Co. v. Allied Provident Insurance Inc., Case No. 13-CV-7865 (USDC S.D.N.Y. Sept. 26, 2014).

This post written by Renee Schimkat.

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OHIO DEPARTMENT OF INSURANCE IDENTIFIES REQUIREMENTS FOR DOMESTIC INSURERS TO TAKE CREDIT FOR CEDED INSURANCE ON FINANCIAL STATEMENTS

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The Ohio Department of Insurance requires that Ohio domestic insurance companies taking credit for ceded insurance on their financial statements to comply with certain statutory conditions, including requiring that the assuming reinsurer must be authorized in Ohio as of the date of the financial statement. Additionally, domestic insurers may take credit for reinsurance ceded to certain unauthorized reinsurers that meet the US reinsurance trust requirements under certain Ohio statutory requirements.

This post written by Leonor Lagomasino.

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SPECIAL FOCUS: IS IT STILL PRIVILEGED?

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We previously reported on the decision in Progressive Casualty Ins. Co. v. FDIC, where the federal district court rejected claims of privilege, work product, and the common interest doctrine to certain information disclosed by an insurer to its reinsurers and broker. In a Special Focus article titled “IS IT STILL PRIVILEGED? AN INSURER’S DISCLOSURE OF INFORMATION TO ITS REINSURERS AND BROKERS WAIVES PRIVILEGE … SOMETIMES,” Renee Schimkat discusses Progressive Casualty (including another more recent order in that case) and other decisions where courts have considered whether the disclosure of information between these three parties waives applicable privileges.

This post written by Renee Schimkat.
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