The UK Commercial Court has approved an arbitrator's decision to permit the substitution of one Claimant for another to reflect what in effect was a corporate reorganization. It also permitted the Claimant to use a pending arbitration to seek an award of all balances that would come due under the treaty during the pendency of the arbitration, instead of requiring a filing of separate arbitrations for amounts that became due after the commencement of the pending arbitration. Harper Versicherungs AG v. Indemnity Marine Assurance Co.,  EWHC 1500 (QB) (June 23, 2006).
Arbitration Process Issues
A New Jersey Appellate Court has agreed with arguments made by the Reinsurance Association of America, holding that a court could not, under the authority of New Jersey's Insurer Liquidation Act, adopt a plan that forced reinsurers to pay claims based upon IBNR estimates, and could not abrogate arbitration provisions contained in reinsurance agreements to force that disputes be litigated in the liquidation court. In re Liquidation of Integrity Insurance Company, Case No., C-7022-86, 2006 WL 2795343 (N.J. Super. A.D. Oct. 2, 2006).
California has adopted amendments to its insurance code making changes regarding credit for reinsurance, insolvency of a ceding company, assets or deductions for reinsurance and foreign ceding insurers, and requirements with respect to the examination of reinsurance intermediaries. The new statute also requires that reinsurance intermediaries respond to subpoenas issued by arbitration panels. California Assembly Bill No. 2400, effective January1, 2007.
A reinsurer (Sphere Drake Insurance Limited) which successfully persuaded an arbitration panel to accord collateral estoppel effect to a decision of the London, England, Commercial Court, has convinced a , which avoided four excess of loss reinsurance slips. The London Commercial Court had determined that the four slips at issue in the arbitration had been procured through fraud by the reinsurer’s broker, and were void. The startling aspect of this decision is that the reinsured in the arbitration, Lincoln National Life Insurance Company, had not been a party to the London case. The Court found that the decision did not violate due process, since Lincoln was in “privity” with the broker party to the London case due to a similarity of interests. Sphere Drake Insurance Limited v. Lincoln National Life Insurance Co., Case no. 05-6411 (N.D. Ill. Sept. 13, 2006). Given the deference given to arbitration awards, it may be very difficult for Lincoln to obtain reversal of this decision on appeal. Further background is provided in Sphere Drake’s . The London Commercial Court decision (Sphere Drake v. EIU) was the subject of an earlier entry in this blog.
In the massive criminal tax case against seventeen former partners and employees of KPMG, KPMG declined, under severe pressure from the government, to pay the attorneys' fees of the defendants. The District Court permitted the defendants to add KPMG as a defendant, and assert a claim against it for fees. The Court recently denied KPMG's motion for summary judgment, and set the claims seeking the advancement of fees for trial on an expedited basis. , Case No. 05-crim-0888 and 06-civ-5007 (USDC S.D. N.Y. Sept. 6, 2006). The Court rejected KPMG’s contention that the fee issue was subject to arbitration under the partnership agreement, in part because not all of the defendants had been partners, but also on public policy grounds, due to the severe disruption that such a course would necessarily have had on the pending criminal case. This opinion may become of interest to reinsurers to the extent that there are criminal charges filed relating to finite reinsurance matters.