Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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SUPREME COURT REQUIRES APPLICATION OF FAA IN STATE COURTS

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The U.S. Supreme Court has issued a per curiam decision holding that the Federal Arbitration Act must be enforced in both state and federal courts. In this case, a Florida state court of appeal upheld a trial court’s refusal to compel arbitration after determining that two of the four claims in a complaint were nonarbitrable. The Supreme Court cited prior precedent requiring that courts send arbitrable claims to arbitration even if it will lead to piecemeal litigation. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 (1985). The Court vacated the judgment and remanded the case so that the lower court could determine if any of the claims were arbitrable. KPMG, LLP v. Cocchi, No. 10-1521, 565 U.S. – (U.S. Nov. 7, 2011).

This post written by John Black.

CONFIRMATION OF ARBITRATION AWARD OF ATTORNEYS FEES AND COSTS AFFIRMED ON APPEAL

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White Springs Agricultural Chemicals, Inc. and Glawson Investments Corp. had a history of property dispute litigation arising from their respective uses of neighboring properties in Florida. They stipulated to a settlement, agreeing that future disputes would be arbitrated. A dispute again arose, and Glawson demanded arbitration in accordance with the agreement. The parties arbitrated, and the panel found in Glawson’s favor, awarding attorneys fees and costs. White Springs sought to vacate the award in federal court, arguing the fee award was improper and beyond the scope of the submission. The court disagreed, confirming the award. White Springs appealed. The Eleventh Circuit affirmed, citing the agreement for the panel’s authority to award attorneys fees, and noting that, while Glawson had not initially sought fees, it was apparent the parties had submitted that issue to the arbitration panel, inasmuch as both parties briefed the issue, and the panel heard argument on the issue before issuing the award. White Springs Agricultural Chemicals, Inc. v. Glawson Investments Corp., No. 10-14532 (11th Cir. Oct. 17, 2011).

This post written by John Pitblado.

INSURERS IN COVERAGE SUIT COMPELLED TO PRODUCE DISCOVERY ON REINSURANCE

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Olin Corporation sought a declaratory judgment that it was covered for damages to its industrial plant under a policy issued by a consortium of property insurers. Olin sought to discover information on the property insurers’ reinsurance coverage. The property insurers moved for a protective order and Olin moved to compel. The magistrate judge held that, pursuant to Federal Rule 26(a)(1)(A)(iv), the insurers must produce any reinsurance agreement that might be used to satisfy a judgment or indemnify or reimburse the insurers for payments made to satisfy a judgment. The court further held that communications with the reinsurers were also discoverable because they might contain information relevant to the property insurers’ affirmative defenses relating to their analysis of the sufficiency of Olin’s proof of loss and satisfaction of contractual prerequisites. Olin Corp. v. Continental Casualty Co., Case No. 10-CV-623 (USDC D. Nev. Aug. 30, 2011).

This post written by Ben Seessel.

NAIC ADOPTS REINSURANCE COLLATERAL REDUCTION AMENDMENTS TO CREDIT FOR REINSURANCE MODEL LAW AND MODEL REGULATION

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On November 6, 2011, the NAIC Executive Committee-Plenary adopted revisions to the NAIC’s Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786). The revisions, as finally adopted, are substantially in the form covered in our Special Focus analysis of the revisions adopted in September by the Financial Condition (E) Committee, with one notable addition. The Model Law, in new Section 2(J), now imposes certain notification requirements on a ceding company when its reinsurance recoverables from a single reinsurer (or group of assuming companies) exceed specified levels of the ceding company’s surplus or gross written premium. Note: The redlining in these documents is from the NAIC, and apparently shows the differences between the just adopted versions and the previously existing text of the model law and model regulation.

This post written by Anthony Cicchetti.

REINSURER LIMITED TO COMPLAINT’S REQUEST FOR APPOINTMENT OF NEUTRAL UMPIRE

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A dispute arose between Century Indemnity Company and Everest Reinsurance Company over reinsurance coverage for certain asbestos claims. The parties each selected an arbitrator pursuant to the procedure set forth in their reinsurance treaty. Unable to reach agreement on the selection of a neutral umpire, Everest filed an action seeking appointment of an umpire or, in the alternative, to compel Century to participate in an ARIAS neutral umpire selection process. After Everest filed its complaint, however, Century agreed to the ARIAS process as part of a global agreement involving the arbitration (the “Formosa Arbitration”), and two other pending arbitrations (the “Congoleum Arbitration” and the “Flintkote Arbitration”), mooting the issue. Everest thereafter moved to enforce the global agreement, complaining that Century had sought to consolidate the Congoleum Arbitration with another arbitration that was not part of the agreement, and in which a panel of arbitrators had already been selected, circumventing the agreed-upon panel selection process. The court denied Everest’s motion on the basis that it was outside the complaint’s scope, which merely sought appointment of a neutral umpire in the Formosa Arbitration. To obtain relief regarding the Congoleum Arbitration, Everest could file a motion with the Congoleum Arbitration panel or in the court where other motions relating to that proceeding were pending. Everest Reinsurance Co. v. Century Indemnity Co., Case No. 11-2789 (USDC D.N.J. Oct. 31, 2011).

This post written by Ben Seessel.