The UK Commercial Court has decided that a reinsurance company is entitled to damage for the cost of investigating a conspiracy between one of its employees and its broker/intermediary. R+V Versicherung AG v. Risk Insurance and Reinsurance Solutions, SA, [2006] EWHC 1705 (Commercial Court July 10, 2006). The Court had previously ruled on other damages requests. The fraudulent activity included a hidden compensation agreement that gave the broker additional commissions in exchange for an equity interest in a London operation that was of minimal if any value.
Brokers / Underwriters
US allowed to interevene in broker liability case to contest disclosure of audit report
A US Magistrate Judge has granted the United States permission to intervene in an MDL broker liability case to contest the disclosure of a report which it contends contains statements of potential Government witnesses in a pending criminal case, where the statements would not be subject to disclosure in the criminal action. In re Insurance Brokerage Antitrust Litigation, MDL No. 1663 (D.N.J. July 12, 2006). The Government sought a stay of the disclosure until the conclusion of the criminal matter, which had been brought by indictment. The Court required in camera submissions prior to making a decision on the request for a stay of discovery of the report.
UK – Reinsurance broker not entitled to double brokerage
The UK Court of Appeal has held that a reinsurance broker was not entitled to receive brokerage on both a deposit premium and on the total adjusted premium (without deduction of the deposit premium). This was a question of the interpretation of four excess of loss reinsurance contracts and seven burning cost contracts. Absalom v. TCRU Ltd., [2005] EWCA Civ 1586 (December 19, 2005).
New Jersey court rejects creative malpractice claim against reinsurance broker
In litigation over asbestos-related coverage that has been onging for 20 years, a New Jersey trial court has rejected claims for reinsurance broker malpractice or breach of contract, independent of whether the broker in fact procured coverage, when an insurer was able to raise colorable defenses to coverage such that summary judgment on the coverage issue was not possible. The Court found that such a cause of action would “stretch the limits of malpractice claims beyond any reasonable boundry by giving rise to myriad ill-defined and amorphous issues as to the contours of such a cause of action which would result in insurance claim litigation being more never ending than it already is.” The Court required that the claimant prove that coverage had not been obtained in order to establish liability. Owens Insurance, Ltd. v. Reiss Holdings, Ltd., Docket No. L-9575-02, in the Superior Court of New Jersey, Law Division, Middlesex County (June 14, 2006). In earlier proceedings, the reinsured had taken the position that even if coverage had been obtained, if the coverage did not encompass all of the risks that the broker had been instructed to reinsure, the reinsured would seek to hold the broker liable for any unreinsured losses. This might be a particularly interesting claim here, since the broker, and its affiliates, had set up a captive insurance company that was the reinsured under the treaties at issue, and hence were driving forces in the structuring of the risks and the various layers of insurance and reinsurance. It is not clear whether the reinsured will pursue that theory.
UK – broker may assert lien for unpaid reinsurance premium
Under UK law, a reinsurance broker may assert a lien over claim proceeds for premiums for reinsurance coverage paid by the party's broker, but not reimbursed by the reinsured. Heath Lambert Ltd. v. Sociedad de Corretaje de Seguros, [2006] EWHC 1345 (June 9, 2006).