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ARBITRATOR’S UNDISCLOSED RELATIONSHIP WITH COUNSEL RESULTS IN VACATION OF AWARD

August 23, 2011 by Carlton Fields

Recently, a Texas Court of Appeals issued a ruling on an appeal from an order confirming a $22 million arbitration award in a partnership dispute. The appellants argued on appeal that their rights were prejudiced by the evident partiality of the arbitrator because the arbitrator failed to disclose his personal and professional relationship with appellee’s counsel. The court, assessing all contacts between the individuals, found this argument persuasive, noting that the standard for disclosing such relationships reflects the determination that courts should not involve themselves in evaluations of partiality that are better left to the parties. The court found that the relationship between the arbitrator (a US Magistrate Judge) and the appellee’s counsel (a former US District Court clerk) stretched for years and that the social relationship had business overtones. Accordingly, the court concluded that the arbitrator’s duty of disclosure had been triggered and the failure to disclose the relationship constituted evident partiality. The court reversed the confirmation award and judgment, vacated the award, and remanded for further proceedings. Karlseng v. Cooke, No. 05-09-01002 (Tex. Ct. App. June 28, 2011).

This post written by John Black.

Filed Under: Confirmation / Vacation of Arbitration Awards, Week's Best Posts

UK FSA ASSESSES WILLIS LIMITED LARGEST BRIBERY FINE EVER

August 22, 2011 by Carlton Fields

The UK Financial Services Authority handed down its largest ever fine relating to bribery in late July. The FSA issued a final notice fining Willis Limited £6.895 for failures in its anti-bribery and corruption systems and controls, concluding that Willis’ systems allowed for an unacceptable level of risk that overseas third party payments could be used for corrupt purposes. Over the course of 4 years, Willis made a series of payments to overseas third parties to assist in winning business from overseas clients. The FSA, however, also concluded that the misconduct on the part of Willis was not deliberate or reckless. Willis was given 14 days from the issuance of the penalty to remit payment. FINANCIAL SERVICES AUTHORITY, FSA/PN/066/2011 (U.K. July 21, 2011).

This post written by John Black.

Filed Under: Reinsurance Regulation, Week's Best Posts

CALIFORNIA BILL REVISES PROVISIONS GOVERNING SURPLUS LINES COVERAGE TO CONFORM TO DODD-FRANK

August 18, 2011 by Carlton Fields

Approved by Governor Jerry Brown on July 13, 2011, California Assembly Bill 315 significantly changes provisions of the California Insurance Code governing surplus lines coverage to make them consistent with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Certain of the Bill’s provisions became operative on July 21, 2011. The Bill sets forth detailed legislation altering the manner in which surplus lines brokers and non-admitted insurers are governed. Among other provisions, the Bill creates rules regulating the advertising, marketing, and sales of surplus lines coverage, capital requirements for non-admitted insurers, and the taxation of surplus line insurance. The Bill also gives the Commissioner of Insurance the authority to create an advisory organization to monitor surplus lines activity. Assembly Bill No. 315, Ch. 83 (Cal. 2011).

This post written by Ben Seessel.

Filed Under: Brokers / Underwriters, Reinsurance Regulation

JULY 2011 NAIC REINSURANCE TASK FORCE MEETING UPDATE

August 17, 2011 by Carlton Fields

On July 11, 2011, the NAIC Reinsurance Task Force held an interim meeting in New York City. The meeting addressed issues raised by comments to the task force’s two exposure drafts of the Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation, which were initially posted in February 2011. The Task Force discussed whether mandatory contract clauses should be included in the models; what requirements an assuming insurer must meet in order to be approved as a certified reinsurer; what specific information certified reinsurers should be required to file; issues regarding multiple beneficiary trusts; issues relating to reporting requirements for ceding insurers; proposed changes to the ratings/collateral matrix; issues regarding the revocation of certification; issues regarding restrictions to limit so-called “concentration risk;” special issues concerning life reinsurance contracts; clarification with respect to the application process; and whether the model language should be clarified to refer to “substantially similar financial solvency regulation” as opposed to “substantially similar credit for reinsurance standards.”

The Task Force posted two revised exposure drafts on its website on July 26, 2011 (see links above), which are open for comment through the close of business on August 24, 2011.

This post written by John Pitblado.

Filed Under: Industry Background, Reinsurance Meetings, Reinsurance Regulation

U.K. COURT AFFIRMS 21-MONTH SENTENCE FOR REINSURANCE BROKER CONVICTED OF GOVERNMENT CORRUPTION

August 16, 2011 by Carlton Fields

Julian Jeffrey Messent, a reinsurance broker who was head of the Property Division (Americas) of PWS International Limited, a London-based reinsurance broker, was convicted in London in late 2010 of corruption offenses, stemming from his supervision of payments made to various Costa Rican governmental officials. The payments were found to be bribes meant to steer reinsurance placement for Costa Rican government-owned utility organizations to PWS. For his placement of the contracts, Messent received large incentive bonuses between 1999 and 2002 from PWS. After a new President of Costa Rica was elected in 2002, newly appointed Costa Rican officials discovered the improper payments, and both the Costa Rican and U.K. governments undertook criminal investigations which led to Messent’s arrest in 2007. Messent appealed his sentencing of 21 months each on two counts of corruption (to run concurrently), as well as a fine of £100,000. The convictions were affirmed on appeal, the court noting “there can be no doubt that corruption of foreign government officials . . . is at the top end of serious corporate offending both in terms of culpability and harm.” Regina v. Messent, [2011] EWCA Crim 644 (Eng. Ct. App.).

This post written by John Pitblado.

Filed Under: Brokers / Underwriters, Criminal Actions, Reinsurance Transactions, UK Court Opinions, Week's Best Posts

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