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THIRD CIRCUIT AFFIRMS ORDER FINDING CONFIDENTIALITY OF DELAWARE CHANCERY COURT’S ARBITRATION PROCEEDINGS UNCONSTITUTIONAL

November 26, 2013 by Carlton Fields

On September 25, 2012, we reported on an order finding unconstitutional the confidentiality provision of Delaware’s novel business arbitration procedures, in which a sitting judge of the Court of Chancery presides in court as arbitrator. The federal district court held that since the arbitration process essentially functions like a civil trial, the confidentiality provision violated the qualified right of access to criminal and civil trials protected by the First Amendment. On appeal, the Third Circuit affirmed (with one dissenting judge), but not before conducting the First Amendment “experience and logic test,” which the lower court had failed to do. As to “experience” the court explored the history of both civil trials and arbitrations and concluded that “both the place and process of Delaware’s proceeding have historically been open to the press and general public.” Regarding the “logic” of public access to the arbitration proceedings, the court held that the “benefits of openness weigh strongly in favor of granting access to Delaware’s arbitration proceedings” and in “comparison, the drawbacks of openness” are relatively slight. The court did not give much weight to the Delaware chancellor and judges’ arguments that: (1) privacy is necessary to protect closely held information, (2) privacy is necessary to prevent the “loss of prestige and goodwill” of the disputants, (3) privacy encourages a “less hostile, more conciliatory approach,” and (4) that public access would “effectively end Delaware’s arbitration program.” The court concluded, “the interests of the state and the public in openness must be given weight, not just the interests of rich businesspersons in confidentiality.” Delaware Coalition for Open Government, Inc. v. Strine, Case No. 12-3859 (3d Cir. Oct. 23, 2013).

This post written by Michael Wolgin.

See our disclaimer.

Filed Under: Arbitration Process Issues, Week's Best Posts

FIO REPORT FINDS DODD-FRANK ACT NOT ADVERSELY AFFECTING INFORMATION EXCHANGE AMONG REGULATORS

November 25, 2013 by Carlton Fields

The Federal Insurance Office recently issued a report required by the Dodd-Frank Act concerning the access of regulators to information concerning reinsurance. In a Special Focus article, Rollie Goss discusses this Report.

This post written by Rollie Goss.

See our disclaimer.

Filed Under: Reinsurance Regulation, Week's Best Posts

COURT COMPELS PRODUCTION OF LOSS RESERVE INFORMATION REPORTED TO REINSURER

November 21, 2013 by Carlton Fields

The case involved an insurer’s denial of coverage for damage to a fishing vessel. The discovery dispute related to an insurer’s production of its reinsurance contract and reinsurance reporting, but with all information related to loss reserves redacted as confidential. The court compelled the insurer to produce the reserve information, citing cases holding that such information is relevant to whether the insurer acted in bad faith in denying coverage. The court was not persuaded by the insurer’s attempt to distinguish this reinsurance case from typical first party insurance disputes, finding that the plaintiff had shown that “the purported re-insurer in this case, is actually the front-line insurer.” McAdam v. State National Insurance Co., Case No. 12cv1333 (USDC S.D. Cal. Nov. 1, 2013).

This post written by Michael Wolgin.

See our disclaimer.

Filed Under: Discovery

PLAINTIFFS JUMP MOTION TO DISMISS HURDLE IN A PMI CAPTIVE REINSURANCE DISPUTE

November 20, 2013 by Carlton Fields

A federal district court in Pennsylvania sided with plaintiffs on motions to dismiss filed by the lender, private insurers, and captive reinsurance company in a dispute over premiums charged for private mortgage insurance. Although plaintiffs’ claims were outside the statute of limitations window, the court concluded that equitable tolling applies to RESPA claims, denying defendants’ motions on that issue and allowing plaintiffs to conduct limited discovery on statute of limitations and equitable tolling issues. The court also denied defendants’ motions on the merits of the RESPA and unjust enrichment claims, finding plaintiffs’ argument that the reinsurance relationships are “shams” to be persuasive. Defendants did secure the dismissal of N.Y. Gen. Bus. Law § 349 claims brought by non-New York plaintiffs, however. Cunningham v. M&T Bank Corp., No. 12-1238 (USDC M.D. Pa. Oct. 30, 2013).

This post written by Abigail Kortz.

See our disclaimer.

Filed Under: Contract Interpretation

COURT AFFIRMS ORDER APPROVING UP-FRONT DEDUCTION OF BROKER FEES IN DISPUTE OVER ALLOCATION OF REINSURANCE PREMIUM

November 19, 2013 by Carlton Fields

The plaintiff insurance company wanted to underwrite a commercial automobile insurance program, but lacked the ability to provide direct insurance. It obtained the services of a reinsurance broker, which set up a complicated transaction involving a fronting insurer, ceding 100% of risk to a reinsurer, which in turn retroceded a portion of the risk to the plaintiff. The dispute surrounded whether the reinsurer satisfied its obligation of paying commissions to the plaintiff by paying to the broker and fronting company the brokerage amounts owed by plaintiff. The reinsurer prevailed on summary judgment, and the plaintiff appealed, contending that the reinsurer was not authorized to offset its commission obligations with the cost of broker fees and expenses. On appeal, the court affirmed summary judgment and rejected the plaintiff’s argument, finding that each separate agreement underlying the various relationships amongst the program participants were inextricably intertwined such that the reinsurer acted properly in accounting for amounts owed by the plaintiff company to the broker and fronting company. The court further relied on industry custom and the course of dealings between the parties, including monthly bordereaux sent to the plaintiff (without protest) that disclosed all premium, commission, and expense allocations under the program. Eastern Atlantic Insurance Co. v. Swiss Reinsurance America Corp., Case No. 179 MDA 2013 (Pa. Sup. Ct. Nov. 1, 2013).

This post written by Michael Wolgin.

See our disclaimer.

Filed Under: Brokers / Underwriters, Week's Best Posts

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