Carlton Fields

EXCESS WORKERS’ COMPENSATION AND EMPLOYERS’ LIABILITY POLICY HELD NOT TO BE REINSURANCE

December 16, 2015 by Carlton Fields

The United States District Court for the Middle District of Louisiana recently granted an insurer’s motion for summary judgment, finding that an excess workers’ compensation and employers’ liability policy was not reinsurance and that the limit of liability of an underlying insurance policy was not relevant to the amount owed. Louisiana Commerce and Trade Association Self Insurers Fund sued National Union Fire Insurance Company of Louisiana for breach of contract. The district court to which the case was removed described the case as “a dispute between two insurance companies over the limits of liability resulting from the settlement of an intentional tort case.” LCTA provided indemnity for workers’ compensation benefits and employers liability and issued coverage to Gee Cee Group Inc. and Gee Cee Enterprises. An employee of Gee Cee was injured and filed a workers’ compensation claim and claim for intentional tort damages against Gee Cee. Gee Cee settled the intentional tort action and LCTA filed a proof of claim with National Union for $1 million, the policy limits of the National Union/LCTA policy. Of that amount, National Union paid $800,000 and then asserted that it had overpaid by $300,000 because the policy limit was actually only $500,000. Both parties moved for summary judgment. LCTA asserted that it was entitled to judgment in its favor for $200,000, and National Union asserted that it is a reinsurer that has no greater liability to LCTA than LCTA has to Gee Cee, which is $500,000. Finding the terms of the National Union/LCTA policy to be clear and unambiguous, and not reinsurance, the district court held for LCTA. Louisiana Commerce and Trade Association Self Insurers Fund v. Nat’l Union Fire Insurance Co. of Pittsburgh, No. 13-773-JJB-RLB (USDC M.D. La. Nov. 3, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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NEW YORK APPELLATE COURT AFFIRMS DENIAL OF COMPETING SUMMARY JUDGMENT MOTIONS IN REINSURANCE DISPUTE

December 15, 2015 by Carlton Fields

In a short, unanimous opinion, the New York Appellate Division, First Department, affirmed a trial court’s ruling that genuine issues of fact precluded it from granting summary judgment to a reinsurer or the plaintiff-cedents in a long-running dispute between them. The case involves Everest Reinsurance Company’s obligation to reimburse various cedents for a settlement entered into under certain facultatively reinsured policies. Everest Re asserted various defenses, including whether the loss is covered by the certificate at issue and whether the settlement entered into was reasonable and made in good faith. The cedents argued that Everest Re is bound to honor the billings under the follow the settlements doctrine. The Appellate Division held that the record before it presented “numerous issues of fact” regarding the settlement entered into by the cedents, and, specifically, the issue of good faith, “none of which are susceptible to resolution on summary judgment.” National Union of Fire Insurance Co. of Pittsburgh v. Everest Reinsurance Co., Index No. 602485/06 (N.Y. App Div., 1st Dep’t, Nov. 5, 2015).

This post written by Rob DiUbaldo.

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SPECIAL FOCUS: COVERED AGREEMENT PROCESS UNDERWAY

December 14, 2015 by Carlton Fields

The U.S. Treasury Department and the U.S. Trade Representative have given notice to Congress of the initiation of discussions with the European Union to enter into a Covered Agreement essentially addressing two major issues: (1) the equivalence of the U.S. insurance and reinsurance regulatory regime in the context of the EU’s Solvency II initiative; and (2) credit for reinsurance collateral requirements. Covered Agreements were introduced by the Dodd-Frank Act as a vehicle for limited federal intrusion into the regulation of the business of insurance and reinsurance by the states. Rollie Goss describes the Covered Agreement process and this initial utilization of that process in a Special Focus article.

This post written by Rollie Goss.
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ARBITRATION AWARD THAT ATTEMPTED TO INDIRECTLY ADJUDICATE NON-PARTY VACATED AS EXCEEDING ARBITRATOR’S AUTHORITY

December 10, 2015 by Carlton Fields

The dispute involved whether a defense contractor, its owners, and its captive insurance companies (collectively, “OSI”) were entitled to a return of their premiums from a non-party insurer (“PoolRe”) that serviced a risk pool in which OSI had decided not to participate. This unsuccessful risk pool arrangement had been arranged by a law firm and related companies (collectively, “Capstone Companies”) that were responsible for forming and administering the captives. Following a contested arbitration in Texas, which culminated in an award that was vacated, and a concurrent Delaware litigation that culminated in a dismissal in favor of a second arbitration in Delaware, a Delaware arbitrator awarded OSI reimbursement of the premiums it had paid to non-party PoolRe. However, since PoolRe was not a party to the agreement between OSI and Capstone Companies, the arbitrator exercised its equitable powers and ordered the Capstone Companies “to arrange for the payment” from PoolRe to OSI.

Capstone Companies moved to vacate the award, and the Delaware district court granted the motion, ruling that the arbitrator exceeded his authority by awarding relief against non-party PoolRe. While the award did not technically require any action on the part of PoolRe because all the obligations were imposed upon the Capstone Companies to arrange for payment, the court found that the award effectively imposed an obligation upon a non-party. The court was also persuaded by the fact that a separate arbitration proceeding was pending between OSI and PoolRe before the International Chamber of Commerce, and the Delaware award’s attempt to adjudicate PoolRe through Captstone could result in a conflicting award. Hendricks, et al. v. Feldman Law Firm LLP, et al., Case No. 1:14-cv-00826 (USDC D. Del. Sept. 25, 2015).

This post written by Barry Weissman.

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COURT GRANTS MOTION TO DISMISS IN ROW BETWEEN INSURED, INSURER, AND THIRD-PARTY CLAIM ADMINISTRATORS

December 9, 2015 by Carlton Fields

A district court in Ohio granted defendants National Indemnity Company (“National”) and Resolute Management, Inc.’s (“Resolute”) motion to dismiss in an asbestos coverage dispute. Plaintiff, industrial manufacturer the William Powell Company (“Powell”), bought 60 million dollars in primary and excess product and liability coverage, eventually assumed by OneBeacon Insurance Company (OneBeacon), with additional coverage for claim defense. OneBeacon procured reinsurance protection through National. National subsequently delegated its claim responsibilities to various companies including Resolute. In 2001, Powell became embroiled in asbestos injury claims to which it sought defense. Powell alleged that National and Resolute “combined to form a racketeering enterprise for the purpose of depriving Powell of its insurance coverage and to profit at Powell’s expense” by rejecting claims and improperly intervening in the defense of those claims. National, OneBeacon, and Resolute sought dismissal of Powell’s various federal and state law claims. The court first rejected plaintiff’s federal RICO claim as it would impede Ohio insurance law to contravene McCarran-Ferguson. In particular, the court noted that an insured my not sue a third-party claims administrator for bad faith nor unfair claims handling. Additionally, a RICO claim “would upset and impair [Ohio’s] regulatory scheme and impede its ability to detect insurance fraud.” Considering next state specific claims, the court found that, without privity, Ohio does not recognize a bad faith claim for the handling of insurance claims. For these and other reasons the court granted defendants’ motion to dismiss. The William Powell Co. v. National Indemnity Co., Case No. 1:14-cv-807 (USDC S.D. Ohio Sept. 30, 2015).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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