Carlton Fields

UTAH ISSUES BULLETIN REGULATING SURPLUS LINES INSURERS AND PRODUCERS

June 10, 2014 by Carlton Fields

On May 15, 2014, the Utah Insurance Department and Surplus Line Association of Utah issued Bulletin 2014-5 to all surplus lines insurers and surplus lines producers/brokers informing them of the following changes by the Utah legislature for policies issued or renewed in Utah after May 13, 2014:

Insurers who wish to audit a surplus lines policy must initiate the audit within six months after the expiration of the term for which the premium is paid and must complete the audit within three years after the surplus lines insurance transaction expires. The failure to meet either of these requirements will preclude the insurer from charging premiums in excess of the terms of the original policy.
A surplus lines insurer may not count as earned premium an amount in excess of 50% of the initial premium until the earlier of (1) the completion of the audit; or (2) the term for which the auditable policy was written has expired and the time to conduct an audit has passed.
If an audit is conducted, the insured is entitled to a refund if the actual exposure is less than the estimated exposure. The insured may request such an audit and the insurer will be bound by the insured’s statement of exposure, requiring refund of the excess portion of the premium, if the insurer does not conduct the audit as required by this law.
Alternatively, if the risk is determined to be greater than the initial estimate upon a timely audit, the insurer is entitled to additional premium.

These new laws apply to the extent they are not pre-empted by federal law.

This post written by Leonor Lagomasino.

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COURT AWARDS $5.6 MILLION IN DAMAGES FOR COVERED CLAIMS UNDER RETROCESSION AGREEMENTS

June 9, 2014 by Carlton Fields

A federal district court has awarded Munich Re $5.6 million in damages in its breach of contract action against American National Insurance Company for ANICO’s nonpayment of certain claims the court previously determined were covered by the parties’ retrocession agreements. In previous opinions, reported here on March 10 and May 29, 2014, the court concluded that ANICO breached its payment obligations to Munich Re for claims properly and timely ceded to ANICO under those agreements. In awarding damages, the court determined that Munich Re was entitled to a sum certain based on all claims previously identified and billed by Munich Re at the time of trial, along with the appropriate amount of prejudgment interest. The court also determined that ANICO was entitled to (1) offset some damages claimed by Munich Re by the amount of outstanding premium ANICO was owed and (2) “particulars and estimates” under the reporting obligations of the retrocession agreements which obligate Munich Re, when reporting claims, to provide information sufficient for ANICO to determine that the claims fall within the scope of its obligations. The court denied ANICO’s request that the court to take judicial notice of certain alleged admissions Munich Re made in prior litigation. Munich Reinsurance America, Inc. v. American National Insurance Co., Case No. 09-6435 (USDC D.N.J. May 27, 2014).

This post written by Renee Schimkat.

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JURY AWARDS STONEBRIDGE CASUALTY $5.8 MILLION ON REINSURANCE CLAIM

June 5, 2014 by Carlton Fields

A final judgment was recently entered on a jury verdict awarding $5.8 million to Stonebridge Casualty Insurance Company. The case involved a reinsurer’s failure to pay reinsurance claims arising out of an automobile tire loyalty rewards program insured by Stonebridge. The reinsurer was a motor club that had entered into a contractual arrangement with certain Lloyd’s syndicates under which the motor club agreed to be financially responsible for reinsurance claims.

Under the insured program, automobile dealerships offered their customers a reward certificate entitling the customer to two free sets of tires if they returned to the dealership for all of the manufacturer’s recommended service. Stonebridge insured the program and obtained reinsurance coverage in the event that claims exceeded $46 per certificate. After the reinsurance threshold was exceeded and Stonebridge filed reinsurance claims, the motor club and Lloyd’s contended that the tire claims were invalid and sued Stonebridge for a declaration that they were not liable. Stonebridge counterclaimed, and after seven days of trial, the jury returned a verdict in favor of Stonebridge, awarding the full amount of damages sought in the amount of $5.8 million. Stonebridge has also filed a motion seeking additional prejudgment interest of $813,226. Stonebridge Casualty Ins. Co. v. Nation Motor Club, Inc., Case No. 9:10 cv 81157 KLR (USDC S.D. Fla. Mar. 24, 2014).

This post written by Michael Wolgin.

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VERMONT AMENDS ITS CAPTIVE INSURER LAW

June 4, 2014 by Carlton Fields

Vermont has amended its captive insurer statute (H. 563) to permit a company to elect a “dormant captive insurance company” status for a period of five years (renewable) if it meets certain criteria: (1) unimpaired, paid-in capital and surplus of not less than $25,000; (2) submission of a prescribed annual report; and (3) payment of a license renewal fee. Dormant companies are those which: (1) do not insure controlled unaffiliated business; (2) have ceased transacting the business of insurance (including the issuance of insurance policies); and (3) have no remaining liabilities associated with insurance business transactions or outstanding insurance policies. Dormant companies are not liable for certain premium taxes.

This post written by Rollie Goss.

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DISPUTE PENDING IN COURT MAY NOT BE MADE SUBJECT TO ARBITRATION

June 3, 2014 by Carlton Fields

An individual had a dispute over work-related issues while working at a Citicorp call center. His employment agreement required arbitration of individual disputes but did not require the arbitration of class claims. The employee filed a class action lawsuit, and left Citicorp’s employ. In what the Sixth Circuit called “a confluence of improbable circumstances,” the former employee was rehired by Citicorp while the class action lawsuit was still pending, but this time signed an employment agreement which required the arbitration of both individual and class claims. The issue was whether he could be compelled to arbitrate the pending class claims. The Court interpreted the second arbitration provision to be prospective only, designed to head off new lawsuits rather than cut off existing lawsuits. This was a question of the interpretation of the arbitration agreement, and despite the general interpretation rule favoring arbitration, the Court found that there was “no doubt” as to the scope of the arbitration provision in the new employment agreement. Therefore, the employee was not required to arbitrate the pending class claims. The Court noted that there was an ethical issue of Citicorp dealing with an employee who was represented by counsel in a pending lawsuit concerning the subject matter of the lawsuit, but found it unlikely that Citicorp’s lawyers intended the provision to be provided to parties to pending litigation. Russell v. Citigroup, Inc., No. 13-5994 (6th Cir. April 4, 2014).

This post written by Rollie Goss.

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