In an unreported opinion, the United States Court of Appeals for the Ninth Circuit affirmed the action of a District Court that declined to become involved in how an arbitration would be conducted, including whether consolidating multiple arbitrations was appropriate. The Court followed Supreme Court precedent in holding that the courts should only decide “gateway issues” such as whether there was a valid agreement to arbitrate, leaving issues relating to arbitration procedure to the arbitrators. Certain Underwriters at Lloyds v. Cravens Dargan & Co., 2006 WL 2337959, Case No. 05-56154 (9th Cir. Aug. 14, 2006).
Insured may not maintain action against reinsurer
A pro se plaintiff had insurance with Chubb Insurance Group, which was reinsured by GE Employers Reinsurance. After her RICO action against Chubb was dismissed, she filed a RICO action against GE. The District Court dismissed the action, based in part on the general rule that an insured can not maintain an action directly against a reinsurer. Kuhn v. Kehrwald, Case No. 05-1228 (E.D. Wis. Aug. 4, 2006). The opinion describes the Plaintiff's submissions as “incoherent and filled with invective ….” Although she alleged that her business suffered a “mysterious loss of funds,” she was convicted of stealing money from the business and its clients.
St. Paul settles broker commission issues
The St. Paul Travelers Companies Inc. has entered into a $77 million settlement with the attorneys general of New York, Connecticut and Illinois, as well as with the New York State Department of Insurance, resolving issues relating to those states' industry-wide investigations into producer compensation, bid rigging, reinsurance tying and finite reinsurance.
While not admitting any wrongdoing, the companies agreed to:
— pay $37 million into a fund for certain excess casualty policyholders and pay $40 million in fines;
— enhance the company's disclosures regarding its producer compensation practices;
— strengthen its ongoing training and education of employees;
— discontinue paying contingent commissions on excess casualty coverage in the United States through 2008; and
— discontinue paying contingent commissions on any line of business if 65 percent of the United States market for that line does not pay such commissions or has signed similar settlement agreements.
Court dismisses class action Complaint against KPMG US over reinsurer audits
A District Court has dismissed the First Amended Class Action Complaint against KPMG US relating to audit reports relating to the annual financial statements of Bermuda-based Annuity & Life Re (Holdings), Ltd. The Complaint alleged that Annuity & Life Re understated its liabilities and overstated its profits and failed to comply with Generally Accepted Accounting Principles, and that KPMG failed to follow Generally Accepted Auditing Standards in its audits of the company. The Court found that the audits were performed by KPMG Bermuda, rather than KPMG US, and that KPMG US did not control the audit process or make any independent misrepresentations. Schnall v. Annuity & Life Re (Holdings) Ltd., Case No. 02-2133 (D. CT. Aug. 10, 2006).
Arbitration award vacated due to lack of disclosure by arbitrator
In a non-reinsurance matter involving commerce in Turkey, a District Court has vacated an arbitration award due to a failure by the panel chair to disclose that an affiliate of the chair's employer had an ongoing business relationship with the prospective purchaser of a party to the arbitration. This opinion is notable due to the high standard of disclosure imposed by the Court, which was based upon language in the agreement signed by the parties, the American Arbitration Association's Code of Ethics and the International Bar Association's Guidelines on Conflicts of Interest. The panel chair had contended that the total revenue involved in the relationship was an imperceptible fraction of this employer's revenue. Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., Case No. 05-10540 (U.S.N.Y. June 28, 2006).