A Connecticut court has ruled in favor of reinsurance brokers Carvill America in their dispute with XL Specialty Insurance Company. In 1999, Carvill was appointed reinsurance broker for XL Specialty Insurance Company. This appointment was subsequently terminated. In 2004, XL sued Carvill alleging misconduct and Carvill counter-claimed alleging it was entitled to brokerage on all of the reinsurance contracts it had placed prior to XL terminating its role. The court determined that XL tortiously interfered with Carvill’s business relationships with the reinsurers when it instructed its new broker (Benfield) to withhold the amount of Carvill’s brokerage from premium payments to the reinsurers. The court concluded that termination of a reinsurance broker’s position as broker of record for an insurer does not terminate the reinsurers’ contractual obligation to pay the placing broker the brokerage as required by the slips. XL Specialty Ins. Co. v. Carvill America, Inc., No. X04cv044000148S, 2007 WL 1748157 (May 31, 2007), denying XL’s motion to amend, 2007 WL 2200560 (Super. Ct. Conn. July 9, 2007) (not available on court’s web site).
APPELLATE COURT AFFIRMS SUMMARY JUDGMENT BARRING SUIT ON CLAIM ALREADY ARBITRATED
Lewis arbitrated a claim for retaliatory discharge against his employer, Circuit City, and after losing the arbitration on the merits sued Circuit City on the same claim. The same attorney represented Lewis in both proceedings. Circuit City filed a motion to dismiss, which the District Court converted into a motion for summary judgment. The District Court granted the motion, finding that Lewis had not alleged any of the bases for vacating an arbitration award under the Federal Arbitration Act, and that his lawsuit improperly sought to relitigate a claim after a final judgment, contrary to the doctrine of claim preclusion. The Tenth Circuit affirmed, denying sanctions in a case that may have merited sanctions. Lewis v. Circuit City Stores, Inc., No. 05-3383 (10th Cir. Aug. 31, 2007).
COURT APPROVES SETTLEMENT OF BROKERAGE CLAIMS AGAINST ARTHUR GALLAGHER
The court handling the insurance brokerage antitrust litigation (see prior blog posts dated April 27, 2007 and September 14, 2006) has approved a proposed settlement with Arthur J. Gallagher & Co. and related entities. The settlement relief includes: (1) a $28 million fund to be paid to class members; (2) reform of certain alleged business practices, including prohibitions on accepting contingent compensation, “pay to play” arrangements, “bid rigging” arrangements, reinsurance leveraging, and inappropriate use of wholesale insurance brokers; (3) requirements for certain disclosures to customers; (4) implementation of specified training for Gallagher employees; and (5) payment of attorneys’ fees and costs not to exceed $8.885 million. Two objections were received to the proposed settlement, only one of which challenged the proposed settlement relief. In re Antitrust Brokerage Antitrust Litigation, Case No. 04-5184 (USDC D.N.J. Sept. 4, 2007).
CASE UPDATE: INSURERS ENTITLED TO HEARING ON AMOUNT OF PRE-PLEADING SECURITY
In a prior posting (dated 7/24/2006) this blog reported on a Connecticut Supreme Court decision reversing the dismissal of an appeal by the Court of Appeals, holding that the denial of pre-pleading security was an appealable final judgment, and remanding the case to the Court of Appeals for consideration of the merits of the appeal. The trial court had determined that the relevant statutory text required service to be made on the insurance commissioner or the secretary of the state and precluded service made on the unauthorized insurers’ contractually designated agents for service of process. On remand, the court of appeals disagreed with the trial court’s judgment in favor of the defendant insurers. However, the court was persuaded that on remand, for constitutional reasons, the defendant insurers are entitled to a hearing regarding the amount of pre-pleading security that they must provide. Hartford Accident and Indemnity Co. v. Ace American Reinsurance Co., AC 25661 (Ct. Ct. App. Aug. 14, 2007).
HOUSE PASSES TRIA RENEWAL
On September 19, 2007, in a 312-110 vote, the House passed H.R. 2761, the “Terrorism Risk Insurance Revision and Renewal Act of 1007.” The act extends TRIA for 15 years and includes group life insurance as a covered line of insurance. View H.R. 2761 (as amended) and the Committee Report.