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Brokers / Underwriters

COURT HOLDS THAT FLORIDA LAW APPLIES TO TORT CLAIMS BROUGHT BY INSURER AGAINST FLORIDIAN AND LONDON REINSURANCE BROKERS

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We reported earlier on an action brought by Instituto Nacional de Seguros (“INS”), a Costa Rican state-owned insurer, against Florida insurance broker Hemispheric Reinsurance Group, L.L.C. and London-based Howden Insurance Brokers Limited. INS alleges breach of contract and tort claims based on Hemspheric’s and Howden’s alleged commission overcharge on $300 million in faculty reinsurance coverage INS obtained on a single property damage and business interruption policy. INS had retained Hemispheric as broker for its reinsurance program; Hemispheric, in turn, retained Howden as sub-broker to gain access to the London reinsurance market.

Howden moved for a determination that English law and practice should apply to INS’s tort claims. INS argued in opposition that the relationship between the parties began in Florida, and that Florida continued to be the center of the parties’ relationship. INS further argued that the funds for the reinsurance program, including the alleged overcharges, flowed through Florida. Howden argued that its conduct took place in England and, further, that there was no “center” of the parties’ relationship because there was no cognizable relationship between INS and Howden as the parties were not in privity. Agreeing with INS, the court held that Florida law applies to INS’s tort claims under Florida’s “most significant relationship” test. Instituto Nacional de Seguros v. Hemispheric Reinsurance Group, L.L.C., Case No. 10-33653 CA 04 (Fla. Cir. Ct. Apr. 10, 2013).

This post written by Ben Seessel.

See our disclaimer.

COURT AWARDS REINSURER REVENUE-SHARING UNDER BROKER AUTHORIZATION CONTRACT

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Reinsurer Homeowner’s Choice Property and Casualty Insurance Company entered into a one-year broker authorization contract with Aon Benenfield. The contract contained a revenue-sharing agreement (“RSA”) under which Aon was to pay Homeowners a portion of the commissions it earned from placing Homeowners’ reinsurance. Homeowners declined to renew the contract when the one-year term expired. Aon refused to pay Homeowners revenue-sharing, claiming that the RSA was contingent upon Homeowners renewing the contract. Homeowners sued, seeking payment under the RSA. An Illinois federal court granted summary judgment in Homeowners’ favor, awarding Homeowners what it was due under the RSA. After holding that the RSA should be construed against drafter AON under Illinois law, the court found that there was no clear intent by the parties to make revenue-sharing payments contingent upon Homeowner’s renewal. Homeowners Choice, Inc. v. AON Benfield, Inc., Case No. 10 C 7700 (USDC N.D. Ill. Mar. 29, 2013).

This post written by Ben Seessel.

See our disclaimer.

COURT DENIES BANK, INSURER’S, AND REINSURER’S MOTION TO DISMISS RESPA COMPLAINT

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Two borrowers filed a putative class action complaint in Pennsylvania federal court alleging that mortgage lender, First Horizon Home Loan Corporation, private mortgage insurers First Horizon had selected, and FT Reinsurance Company had engaged in a “captive reinsurance scheme” whereby illegal referral payments in the form of reinsurance premiums had been paid by the private mortgage insurers to FT Reinsurance, a wholly-owned subsidiary of First Horizon. Plaintiffs alleged that the reinsurance premiums violated the anti-kickback provisions of the Real Estate Settlement Procedures Act and that little or no risk was actually transferred from the mortgage insurers to FT Reinsurance. The court granted motions to dismiss filed by mortgage insurers Genworth Mortgage Insurance Corporation, Republic Mortgage Insurance Company, and Radian Guaranty, Inc., finding that plaintiffs did not have standing to sue because these insurers had not issued them policies. The court denied motions to dismiss filed by the other defendants, however, holding that plaintiffs had sufficiently alleged that the statute of limitations on their claims was equitably tolled and, moreover, that plaintiffs could proceed on their unjust enrichment theory because it was not clear whether plaintiffs’ mortgage contracts cover the same subject as their lawsuit. Barlee v. First Horizon National Corp., Case No. 12-3045 (USDC E.D. Pa. Feb. 27, 2013).

This post written by Ben Seessel.

See our disclaimer.

COURT DENIES MOTION TO DISMISS WHERE DEFENDANT RETROCEDED RESERVES HELD ON VEHICLE SERVICE CONTRACTS

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Operators of vehicle dealerships filed suit alleging breach of contract, conversion, breach of fiduciary duty, and money had and received against an administrator of vehicle service contracts that the plaintiff dealerships had sold to customers in connection with vehicle sales. Plaintiffs complained that defendants had improperly retroceded funds that had been reserved as reinsurance for payments to be made under the vehicle services contracts. The court denied defendant’s motion to dismiss, holding that plaintiffs had stated a plausible claim for relief that the administrator had breached reinsurance agreements that were neither attached to the complaint nor to defendant’s motion to dismiss. The court also held that the economic loss rule did not bar plaintiffs’ conversion and breach of fiduciary duty claim because there was a possibility that plaintiffs could establish with certain (undescribed) facts that a fiduciary relationship existed between the parties. Hoffpauir v. Interstate National Dealer Services, Inc., Case No. A-12-CA-263 LY (USDC W.D. Tex. Jan. 24, 2013).

This post written by Ben Seessel.

See our disclaimer.

Court Finds Reinsurance Brokerage Contract Ambiguous

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Homeowners Choice, Inc. entered into a brokerage relationship with Aon Benfield, whereby Aon agreed to place reinsurance for Homeowners, as the broker of record, and that Aon would receive a commission from premium written. The parties later amended the agreement to include a revenue sharing provision, whereby Aon agreed to perform claim services for an annual fee. Homeowners then notified Aon that it was changing its broker of record, effective approximately one year from the notice. At the end of the notice period, Homeowners then demanded from Aon approximately $660,000 in revenue sharing fees it claimed were owed under the service agreement aspect of the contract. Aon disputed the claim, and Homeowner’s brought suit. The parties filed cross-motions for summary judgment, both making claims as to the correct interpretation of the contract. The court denied both motions, finding relevant provisions of the contract to be ambiguous, and that issues of fact remained pertaining to resolution of the ambiguities. Homeowners Choice, Inc. v. Aon Benfield, Inc., No. 10 C 7700 (N.D. Ill. Sept. 10, 2012).

This post written by John Pitblado.

See our disclaimer.