New reinsurance-related and arbitration developments from Carlton Fields
There is considerable uncertainty as to how President-elect Trump may proceed with respect to the regulation of the financial services sector of the U.S. economy. We present one possible approach, based on a pending bill, in a Special Focus article, What Might Be the Future of the Dodd-Frank Act’s Insurance and Reinsurance-Related Provisions in a Trump Administration.
This post written by Rollie Goss.
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On August 24, 2016, the Oklahoma Insurance Commissioner issued an order requiring all accredited reinsurers in the state to file all annual statements, audited financial statements, forms, documents and accompanying fees, fines, and payments, by electronic means. The new requirements are effective on or before March 1, 2017. The Commissioner acted pursuant to a statute in effect as of November, 2014, which granted authority to require certain forms and associated payments to be filed electronically, “notwithstanding” other provisions of law requiring particular forms and payments be filed in paper form or mailed or hand-delivered to the Insurance Department.
In re: Electronic Filings of Accredited Reinsurers in the State of Oklahoma, Case No. 16-0633 (Aug. 24, 2016)
This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .
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In a special focus article in May, we wrote about the future of multi-state allocation of nonadmitted premium tax revenue following the dissolution of the Non-Admitted Insurance Multistate Agreement (NIMA). We followed up on this issue in July, with an article regarding Florida’s bulletin on the topic. On September 6, 2016, the Tennessee Department of Commerce and Insurance issued its own bulletin with the following guidance, effective October 1, 2016. The bulletin begins by noting that Tennessee has reached agreement with the Florida Surplus Lines Service Office for continued use of the Surplus Lines Information Portal (SLIP). The bulletin then provides that all policies effective on or after October 1, 2016, for which Tennessee is designated as the Home State, will be reported as single state policies with 100 percent of the premium being reported to and taxed by Tennessee through SLIP. These policies will, however, be subject to a 0.175 percent gross premium SLIP transaction fee, in addition to the 5 percent surplus lines premium tax, though these costs may be passed along to the insured. For all policies with effective dates of October 1, 2014 through September 30, 2016, no SLIP transaction fee will be charged.
This post written by Zach Ludens.
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The Eleventh Circuit affirmed a district court’s denial of a motion to compel arbitration on the grounds that the designated forum in the arbitration agreement was both unavailable and integral to the agreement. Appellee Jessica Parm acquired a loan from Western Sky Financial, owned by a Cheyenne River Sioux Tribe (“the Tribe”) member. The loan agreement included a binding arbitration clause, specifying the Tribe would conduct the arbitration according to tribal governing rules, but allowed Parm a right to choose amongst certain arbitral organizations to administer the arbitration. At the time of both the agreement and the lawsuit, no tribal arbitral forum nor governing rules existed.
Parm sued the National Bank of California (“Bank”) for illegally permitting Western Sky to initiate electronic fund transfers from her account under the loan agreement. Bank moved to compel arbitration under the provision referenced above. In denying the motion, the court first applied traditional rules of contract construction to reject the Bank’s arguments, interpreting the choice of arbitrator provision as subject to the tribal arbitration provision to give meaning to both. It read an exception clause as applying to its nearest-reasonable referent, the “Dispute[s]” excepted from arbitration, rather than as an exception to the tribal exclusivity provision. It then stated that even if the Bank’s arguments were persuasive, the contract would be ambiguous, and thus construed against the Bank as the draftor. Finally, the court held the arbitration clause unenforceable, rather than substituting an available forum, based on how integral the tribal forum provisions were to the agreement. The mandatory language of and pervasive references to the Tribe and its rules indicated the use of that forum was not merely an ancillary concern. Because the agreement required arbitration in an unavailable forum that was integral to the agreement itself, the arbitration clause was deemed unenforceable. Parm v. Nat’l Bank of Cal., N.A., No. 15-12509 (11th Cir. Aug. 29, 2016).
This post written by Thaddeus Ewald, a law clerk at Carlton Fields in Washington, DC .
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On July 13, 2016, a U.S. Court of Appeals for the Third Circuit panel held that an arbitration clause is not waived simply because a party failed to raise a futile argument. The case arose out of a putative class action alleging over $50 million in untrebled damages relating to purported overcharges of fees stemming from the recording of deeds and mortgage instruments. The case was pending in the District of New Jersey, where strong precedent suggested that a motion to compel bipolar arbitration—that is individual, rather than class-wide—would have been futile. Following the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), where the Court found that the Federal Arbitration Act preempted state laws that had previously prohibited a party from compelling bipolar arbitrations, the defendants notified the plaintiffs that they would be seeking to compel arbitration of this kind. The U.S. District Court for the District of New Jersey granted the motion.
On appeal, the Third Circuit found that “futility can excuse the delayed invocation of the defense of arbitration.” Examining what other federal courts had held previously, the Third Circuit panel, over a strong dissent, held that “[w]hy would we require a party to make a futile gesture to prevent waiver when we do not require such gestures in other scenarios?” The panel went on to state that the correct test is whether it was almost certain that a motion to compel arbitration would have been denied. Finding that test satisfied in these circumstances, the panel found that because defendants demanded bipolar arbitration less than a month after Concepcion, the plaintiffs were not prejudiced and affirmed the district court’s order compelling the case to individual arbitration.
Chassen v. Fidelity National Financial, Inc., Case No. 15-3789 (3d Cir. July 13, 2016).
This post written by Zach Ludens.
See our disclaimer.