Brokers / Underwriters

COURT DISMISSES ALL CLAIMS BROUGHT BY INSURED AGAINST REINSURANCE INTERMEDIARY AND AGENT IN CONNECTION WITH FRAUDULENT SCHEME AND ILLUSORY AGREEMENT

November 11, 2014 by Carlton Fields

A federal district court has dismissed all claims brought against American Special Risk (ASR), a reinsurance intermediary and agent for insurer Signet, by insured Car Sense. Car Sense sued Signet and ASR in connection with a Buy Back Guarantee program that Signet offered as a way to increase customer participation in certain incentive programs offered by Car Sense. Signet represented that the BBG program was 100% secured via a reinsurance agreement with Hannover Re. ASR acted as Signet’s reinsurance intermediary and agent in negotiating and procuring the reinsurance agreement. As alleged, though Signet represented that the BBG was a legitimate insurance product, the BBG was in fact a fraudulent scheme engineered to generate one-time fees. Moreover, the reinsurance agreement did not provide for 100% security of the BBG as Signet represented but was, in fact, illusory. Car Sense sued Signet and ASR for various claims ranging from breach of contract to fraud.

The court dismissed all claims against ASR finding, in large part, that ASR did not owe any duty, and had not made any misrepresentations, to Car Sense. The court also gave notice of its intention to dismiss all claims against Signet for Car Sense’s failure to serve Signet within the time required by the Federal Rules of Civil Procedure. Car Sense, Inc. v. American Special Risk, LLC, No. 13-CV-5661 (USDC E.D. Pa. Oct. 24, 2014).

This post written by Renee Schimkat.

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NEW YORK APPELLATE COURT DISMISSES CLAIMS AGAINST REINSURER AND ITS CLAIMS ADMINISTRATOR

November 10, 2014 by Carlton Fields

In what began as a dispute between OneBeacon America Insurance Company and its insured, Colgate, over OneBeacon’s asserted right to control the defense of claims against Colgate in connection with numerous personal injury suits, Colgate sued OneBeacon’s reinsurer, National Indemnity Company (“NICO), and its affiliated claims adjuster, Resolute Management. Colgate alleged that OneBeacon’s contractual relationship with NICO and Resolute created a conflict of interest because they served a dual role as both OneBeacon’s reinsurer and the claims adjuster under those policies. Colgate wanted to defend the actions against it, while NICO and Resolute wanted to settle the cases to minimize the legal expenses.

Colgate sued NICO and Resolute under several theories, including declaratory relief, breach of contract, tortious interference, breach of the implied covenant of fair dealing, and a statutory claim under Massachusetts law for unfair deceptive conduct. After the lower court only partially dismissed these claims, NICO and Resolute appealed. The appellate court dismissed all claims against NICO and Resolute. Central to the court’s ruling was the absence of a contract between Colgate and NICO or between Colgate and Resolute. Moreover, the agreement between NICO and Resolute provided that the agreement could not be assigned and that it did not confer any rights on third parties. Absent contractual privity or an assigment, Colgate could not assert any claims against NICO or Resolute despite their dual roles as OneBeacon’s reinsurer and Colgate’s claims administrator. OneBeacon America Insurance Co. v. Colgate-Palmolive, Index No. 651193/11 (N.Y. App. Div. Oct. 28, 2014).

This post written by Leonor Lagomasino.

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SPECIAL FOCUS: IS IT STILL PRIVILEGED?

October 21, 2014 by Carlton Fields

We previously reported on the decision in Progressive Casualty Ins. Co. v. FDIC, where the federal district court rejected claims of privilege, work product, and the common interest doctrine to certain information disclosed by an insurer to its reinsurers and broker. In a Special Focus article titled “IS IT STILL PRIVILEGED? AN INSURER’S DISCLOSURE OF INFORMATION TO ITS REINSURERS AND BROKERS WAIVES PRIVILEGE … SOMETIMES,” Renee Schimkat discusses Progressive Casualty (including another more recent order in that case) and other decisions where courts have considered whether the disclosure of information between these three parties waives applicable privileges.

This post written by Renee Schimkat.
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REINSURANCE BROKER AND CEDENT SETTLE COMPENSATION DISPUTE

September 5, 2014 by Carlton Fields

On March 26, 2014, we reported on a dispute surrounding whether a cedent was responsible to compensate a reinsurance broker under a particular broker authorization agreement. The court had denied summary judgment, finding that the agreement was ambiguous in that one provision required the reinsurer to pay the broker, while a separate provision implied that it was the cedent’s responsibility to do so. On June 27, 2014, the court entered an order dismissing the case based on an unopposed motion informing the court of the parties’ settlement. Global Risk Intermediary, LLC v. Aetna Global Benefits Ltd., Case No. 4:13-CV-0133 (USDC W.D. Ark. June 27, 2014).

This post written by Michael Wolgin.

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SUMMARY JUDGMENT IN FAVOR OF BROKER IN MALPRACTICE CASE REVERSED, WHERE SPECIAL RELATIONSHIP WITH INSURED MAY HAVE EXISTED

April 2, 2014 by Carlton Fields

In a case involving alleged broker malpractice with respect to certain underinsured business interruption losses under a commercial property insurance policy, the New York high court reversed a lower appellate court’s affirmance of summary judgment in favor of the insurance broker. The court found that the evidence suggested that “there was some interaction regarding a question of business interruption coverage, with the insured relying on the expertise of the agent,” where the insured testified that (1) she and the broker discussed the coverage, (2) the broker requested sales figures and other data, (3) the broker assured the insured that the coverage was adequate, and (4) the broker repeatedly pledged to review coverage annually and recommend adjustments as the insured’s businesses grew. The court also reversed the intermediate court’s majority view that the insured’s knowledge of the coverage limits warranted dismissal. The court explained that, where a special relationship existed, “it is wholly irrelevant whether [the insured was] aware of the limits that were actually procured.” Voss v. Netherlands Insurance Co., Case No. 11 (N.Y. Ct. App. Feb. 25, 2014).

This post written by Michael Wolgin.

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