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New reinsurance-related and arbitration developments from Carlton Fields

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COURT DENIES IN PART, GRANTS IN PART CROSS-MOTIONS TO COMPEL DISCOVERY IN ASBESTOS REINSURANCE DISPUTE

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A federal court recently ruled on cross-motions to compel in the ongoing litigation between Travelers Casualty and Century Indemnity. The dispute arose from Century’s denial of certain payment claims (regarding asbestos losses) under a series of reinsurance contracts covering underwriting years 1969-1974. The court denied Century’s motion to compel coverage dispute documents, finding them irrelevant because the underlying coverage was undisputed. Travelers, however, must provide all non-privileged documentation concerning the evaluation of the reinsurance claims. The court also denied Century’s motion regarding Traveler’s communications with other insurers, finding these irrelevant. The court also ordered the parties to meet and confer in an attempt to reach an agreement regarding the discovery of information related to Century’s reinsurance of other companies that insured the underlying insureds for asbestos liability. Finally, Century was compelled to answer an interrogatory related to its allocation of asbestos losses under the reinsurance treaties. Travelers Casualty & Surety Co. v. Century Indemnity Co., No. 3:10-cv-00400 (USDC D. Conn. Nov. 16, 2011).

This post written by John Black.

HYPERLINKS AND BOILERPLATE LANGUAGE IN EMAILS HELD INSUFFICIENT TO CONFER NOTICE OF CONTRACT TERMS

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A court recently found in a pair of cases that an insurance agent’s receipt of emails containing hyperlinks and boilerplate footers referencing contractual terms, including a forum selection clause, did not provide adequate notice to qualify as a binding agreement. The underlying dispute was filed in federal court between two Lloyd’s syndicates and their insurance agent, Walnut Advisory Corporation, which, in turn, sought indemnification from Miller Insurance Services Limited, the insurance intermediary between Walnut and the syndicates. Miller responded by seeking dismissal on the basis that the business relationship between Walnut and Miller was governed solely by separate agreements providing for jurisdiction in English courts. The court denied Miller’s motions, finding an implied-in-fact contract governed the parties’ relationship and that the terms of the Miller agreements were not part of that contract. The court refused to apply the Miller agreements because (1) there was no evidence Walnut received mailed copies of the agreements; and (2) hyperlinks and email footer references to the agreements in electronic correspondence with Walnut were not “immediately visible” and therefore did not qualify as adequate notice to Walnut to constitute binding terms. The court also found that Miller’s client website, which referenced the Miller agreements in a manner that could qualify as “immediately visible,” was still insufficient notice because Walnut had access to the website only after the business relationship between it and Miller had been established. Liberty Syndicates at Lloyd’s v. Walnut Advisory Corp., Case No. 3:09-cv-01343 (USDC D.N.J. Nov. 16, 2011); Syndicate 1245 at Lloyd’s v. Walnut Advisory Corp., Case No. 3:09-cv-01697 (USDC D.N.J. Nov. 16, 2011).

This post written by Michael Wolgin.

IAIS PUBLISHES PAPER ANALYZING, IN PART, REINSURANCE INDUSTRY

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The International Association of Insurance Supervisors recently published its
2011 report on Insurance and Financial Stability. The paper presented a supervisory perspective on the insurance and reinsurance industry focusing on financial stability issues. Concerning reinsurance, the paper analyzed the nature of the industry itself, its connection to the insurance industry more generally, and the level of inter- and intra-connectedness among companies. Notably, the IAIS concludes that (1) evidence for global systemic risk to arise from reinsurance failures is small to non-existent; (2) the record and stress scenarios tested correspond to the results of a study commissioned by the Group of Thirty; and (3) reinsurers have reduced their exposure to non-insurance credit default swaps. The IAIS stated it will continue to monitor the industry in the future.

This post written by John Black.

NO APPELLATE JURISDICTION TO REVIEW DECISION VACATING ARBITRATION AWARD FOR EVIDENT PARTIALITY

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William Smythe invested funds with Morgan Keegan & Co, Inc. He brought a FINRA arbitration against Morgan Keegan alleging improper investments. Pursuant to FINRA rules, the parties named potential arbitrators, and Morgan Keegan objected to certain of them, two of whom were appointed to the panel over its objections. The panel found in favor of Smythe, and Morgan Keegan brought an action in Tennessee state court seeking to vacate the award based on the alleged “evident partiality” of two of the arbitrators. The trial court agreed with Morgan Keegan and vacated the award and remanded for a new FINRA arbitration. Smythe appealed. The appellate court lacked jurisdiction to hear the appeal, noting that while the Federal Arbitration Act specifically grants the right to appeal vacatur of an arbitration award, the comparable Tennessee arbitration statute allows for appellate review of vacatur only if unaccompanied by an order to remand for a new arbitration. Morgan Keegan & Co. v. Smythe, No. CH092353 (Tenn. Ct. App. Nov. 14, 2011)

This post written by John Pitblado.

CLIENT NOT PERMITTED TO SUBMIT COUNSEL’S DECLARATION IN SUPPORT OF MOTION FOR RECONSIDERATION OF DISQUALIFICATION ORDER

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As we reported on November 1, 2011, a federal district court disqualified counsel for Insco, Ltd. because counsel had improperly procured and reviewed emails between members of an arbitration panel touching on deliberations in the ongoing arbitration. Insco moved for reconsideration of this decision and sought leave to file a declaration of one of its attorneys in support of its motion. The court denied Insco’s request, finding that nothing in the declaration raised new arguments or facts that had not been pursued in Insco’s opposition to Northwestern National’s motion to disqualify. The court will limit its decision on the motion for reconsideration to the record before it on Northwestern National’s original motion. Northwestern National Insurance Co. v. Insco, Ltd., Case No. 11-1124 (USDC S.D.N.Y. Nov. 10, 2011).

This post written by Ben Seessel.