Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Carlton Fields

Carlton Fields

OHIO JUDGE STAYS BAD FAITH ACTION PENDING ARBITRATION IN HEALTH CARE PAYMENT ROW

by

A district court in Ohio granted defendant Pan-American Life Insurance Company’s (“Pan-American”) motion to stay pending arbitration finding a valid and enforceable arbitration provision within the pertinent group health policy. Plaintiffs Joan and Thomas Kirkland filed an action for breach of contract and bad faith arising from Pan-American’s denial of medical benefit payments. Plaintiffs alleged that defendant failed to uphold representations it made to pay for certain health procedures and office visits. Defendant sought arbitration of bad faith pursuant to the group health policy’s arbitration provision (the parties previously settled the breach of contract claim). The court found that the enforceable arbitration provision allowed for the arbitration of bad faith for a number of reasons. Plaintiffs had a duty to read the group health policy and further had an option to cancel within the prescribed time limit. The court also found that the policy did not lack mutuality. The court noted that the arbitration provision is applicable to both parties for “all claims or controversies” under the policy, including claims for bad faith. Kirkland v. Pan-Am. Life Ins. Co., No. 2:14-cv-2536 (S.D. Ohio Sep. 3, 2015)

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

See our disclaimer.

COURT DENIES MOTION FOR INTERLOCUTORY APPEAL IN ALLEGED INSURANCE KICKBACK SCHEME

by

We have previously reported on a case styled Munoz v. PHH Corp., one of similar suits alleging putative class actions under the Real Estate Settlement Procedures Act arising from purported “sham” reinsurance transfers covering private mortgage insurance. Here, the California district court had granted PHH’s partial motion to dismiss and certified the remainder of the class. Plaintiffs subsequently filed for interlocutory appeal concerning whether a prior decision in the Ninth Circuit concerning equitable tolling and equitable estoppel disturbed the holdings in other California district court opinions. The court found that plaintiffs failed to satisfy the second of three prongs for certification—that there is substantial ground for difference of opinion among the courts. A “party’s strong disagreement with the court’s ruling is not sufficient for there to be a substantial ground for difference.” The court found that the appellate and district court opinions were not inconsistent, instead, “all assume that there are situations in which equitable tolling or equitable estoppel can apply to RESPA violations.” Even divergent application of settled law is not sufficient to show substantial ground for difference. Munoz v. PHH Corp., No 1:08-cv-00759-AWI-BAM (E.D. Cal. Oct. 1, 2015)

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

See our disclaimer.

FIO ISSUES 2015 ANNUAL REPORT

by

Last month, the Federal Insurance Office (“FIO”) issued its Annual Report for 2015. The Report discusses many financial consumer protection and regulatory issues, both domestic and international, relating to the business of insurance. The Report has relatively little discussion of reinsurance, largely tracking the topics discussed in the FIO’s December 2014 report on the global reinsurance market. The 2015 Annual Report discusses three topics of interest to the reinsurance sector:

  • Regulation of captives: Regulation of captives is discussed mainly in terms of the NAIC’s work on a captive framework and the adoption of principal-based reserves. The Report is critical of the limitation of the captive framework to cessions of reserves for term life insurance and universal life insurance with secondary guarantees, and the “uncertain timeframe for its implementation ….” See Report at 59. The FIO previously identified the regulation of captives as a topic in which it is interested and may take action, although it has not exposed any proposal relating to captives.
  • Credit for reinsurance: The Report is critical of the slow progress on credit for reinsurance reform and notes that the United States and the European Union are in the preliminary stages of discussions of what the Dodd-Frank Act referred to as a covered agreement on that topic. The Report states that “[b]y statute [the Dodd-Frank Act], USTR [United States Trade Representative] and FIO must give notice to Congress of the intent to commence negotiations. That notice is expected in the coming weeks.” See Report at 81 and Recommendation at Appendix, page vii.
  • Alternative risk transfers: The Report contains a brief discussion of the abundance of capital in the reinsurance sector and the rapid growth of alternative risk transfers such as insurance-linked securities (including cat bonds), industry-loss warranties, collateralized reinsurance and sidecars. The Report does not contain any opinions or recommendations with respect to this topic. See Report at page 42.

This post written by Rollie Goss.
See our disclaimer.

COMPLAINT FAILS TO OVERCOME HEIGHTENED PLEADING STANDARD FOR FRAUD RELATING TO REPORTING OF REINSURER’S LOSSES

by

The Southern District of New York granted Amtrust Financial Services’ motion to dismiss after finding that the plaintiff failed to specifically allege misstatements or omissions necessary to prove scienter in claims related to purported misrepresentations of defendant’s consolidated financial statements. Plaintiff claimed that Amtrust’s financial statements fraudulently misrepresented losses associated with insurance policies, the premiums for which had been ceded to a foreign subsidiary. Amtrust’s foreign subsidiary, located in Luxemburg, operated using an equalization reserve, allowing the reinsurer to offset losses by drawing on the fund. Such reserves are not a feature of U.S. reinsurance companies, and the generally accepted accounting principles (“GAAP”) does not address how such withdrawals should be accounted. The court held that the alleged misstatements failed to specifically allege any facts relating to fraud or scienter. The complaint did not contain sufficient facts to support a material violation of the GAAP or the required intent to defraud. The court reiterated the notion that GAAP principles are subject to the discretion of management. Absent specific facts relating to an intent to conceal or defraud, the determination relating to accounting principles alone was held to not be sufficient to maintain an action alleging securities fraud. Harris v. Amtrust Financial Services Inc., Case No. 14-CV-736 (USDC S.D.N.Y. Sept. 29, 2015).

This post written by Joshua S. Wirth, a law clerk at Carlton Fields in Washington, DC.

See our disclaimer.

FEDERAL COURT ALLOWS SEALING OF A PETITION SEEKING CONFIRMATION OF ARBITRAL AWARD

by

On August 14, 2015, a federal district court in New York entered an order allowing a petition to confirm an arbitration award to be filed in redacted form with the arbitration award to be filed under seal. The case is pending between the Century Indemnity Company and the Global Reinsurance Corporation, U.S. Branch. The underlying arbitral award deals with a reinsurance dispute relating to underlying policies issued by Century to Caterpillar Tractor Company during the late 1960s and early 1970s and claims under the policies for asbestos products personal injury lawsuits. According to Century’s Petition, Century and Global had an agreement that certain arbitration information be kept confidential. The most recent arbitration award confirmation is part of ongoing claims between Century and Global on reinsurance policies to underlying policies to manufacturers such as Caterpillar for ongoing underlying claims, such as the asbestos claims here. We most recently reported on these cases on July 21, 2015. Century Indemnity Co. v. Global Reinsurance Corp. of America, Case No. 15-cv-6426 (USDC S.D.N.Y. Aug. 14, 2015).

This post written by Zach Ludens.

See our disclaimer.