A Pennsylvania court has ruled in a dispute over the sufficiency of a letter of credit posted by a cedent and draws on that instrument. The state court's opinion is available through Mealey's. Eastern Atlantic Ins. Co. v. Swiss Reinsurance America Corp., No. 2004 cv 5514 (Pa. Comm. Pls. Dauphin Co.). There had been a parallel action in federal court, in which the Court abstained to permit the state court to adjudicate the disputes. Eastern Atlantic Ins. Co. v. Swiss Reinsurance America Corp., Case No. 04-1555 (M.D. Pa. Dec. 16, 2004).
UK court rejects claims against reinsurance broker relating to film financing and production
The UK Commercial Court has rejected a claim against a reinsurance broker which placed reinsurance for coverage of risks relating to the financing and production of motion pictures. When the reinsurers successfully contested claims, the reinsured sued the broker, alleging negligence in the placement of the reinsurance. The Court rejected the claims, holding that the reinsured had failed to prove, inter alia, that the loss for which it sought compensation had been caused by a breach of duty by the reinsurance broker. HIH Cas. and General Ins. Ltd. v. JLT Risk Solutions Ltd., [2006] EWHC 485 (Comm. Ct. Mar. 15, 2006).
SEC files civil action against RenRe executives relating to finite reinsurance transactions
The SEC has filed a civil action against three former executives of Renaissance Reinsurance Ltd., alleging that they were involved in fraudulent finite reinsurance transactions to improve the company's financial statements and earnings. The case was filed in the Southern District of New York. SEC v. Stanard, Merritt and Cash, Case No. 06-7736 (Sept. 27, 2006).
Court applies follow the fortunes doctrine and rejects late notice claim
In a summary judgment posture, a New York state court has rejected a reinsurer's late notice claim, finding that under New York law a reinsurer must prove prejudice due to late notice in order for late notice to constitute a defense to failure to pay claims. The Court found that no evidence of prejudice had been proffered. The Court then enforced a follow the fortunes clause as to the majority of the reinsurance claims at issue, finding that the reinsurer had not developed evidence in extensive discovery that the reinsured had acted fraudulently or in bad faith in paying the claims. The Court denied summary judgment as to claims relating to one underlying insured, based upon limited evidence that suggested possible bad faith in the payment of claims submitted by that party. Granite State Insur. Co. v. Ace American Reinsur. Co., Index No. 604347/04, in the Supreme Court of the State of New York, County of New York (Aug. 4, 2006).
Creative use of reinsurance not avoid rescission of life insurance policy
The Eleventh Circuit has affirmed a District Court Order granting Met Life summary judgment, rescinding a life insurance policy based upon misrepresentations in the policy application. The decision was based upon a Florida statute, which provides for rescission in either of two circumstances: (1) the insurer can show that the prospective insured made misrepresentations in the application that were material either to the acceptance of the risk or to the hazard assumed by the insurer; or (2) the insurer would not have issued the policy (or would have issued it on different terms) had it known the true facts. The insured contended that any misrepresentations could not, as a matter of law, have been material to the acceptance of the risk because Met Life had completely reinsured the liability. The Court found that it did not have to reach this contention since the evidence supported rescission under the second prong of the statutory test. Miguel v. Metropolitan Life Insur. Co., Case No. 06-11491 (11th Cir. Oct. 18, 2006). This creative argument deserves an “A” for effort.