Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Brokers / Underwriters

DISTINCT CLAIMS AGAINST REINSURANCE BROKERS WERE NOT IMPERMISSIBLY COMMINGLED

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In September, 2010, Instituto Nacional de Seguros filed an amended complaint against two reinsurance brokers (Hemispheric Reinsurance and Howden Insurance) alleging breach of contract, negligence, and breach of fiduciary duty, alleging that the two brokers failed to provide reinsurance slips and other requested information, and when finally forced to do so, the documents revealed significant brokerage overcharges. Howden subsequently filed a motion to dismiss. A Florida state court General Magistrate has recommended the denial of the motion, finding that INS did not impermissibly commingle separate and distinct claims in a single count. Instituto Nacional De Seguros v. Hemispheric Reinsurance Group, LLC, Case No. 10-33653 (Fla. Cir. Ct. Dec. 13, 2010).

This post written by John Black.

UK COURT REJECTS CLAIMS BASED UPON DEFECTION OF LLOYD’S BROKERS TO A COMPETITOR FIRM

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The defection of three brokers from Global Risks, a Lloyd’s insurance and reinsurance broker, to competitor Tyser & Co., gave rise to claims of breach of contract, violation of employment and fiduciary duties and conspiracy, due to the alleged solicitation by the defectors of clients and employees of Global Risks. The court rejected the claims for different reasons for each claim, including lack of duty, failure of proof and lack of damage. If you are interested in a description of how a Lloyd’s broker works, this would be an interesting opinion to read. Lonmar Global Risks Limited v. West, [2010] EWHC 2878 (Queen’s Bench Nov. 11, 2010).

This post written by Rollie Goss.

REINSURANCE BROKER’S SALES COMMISSIONS ARE AN “IDENTIFIABLE CHATTEL” AND SUPPORT A CONVERSION CLAIM

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In a dispute between reinsurance brokers, Guy Carpenter sued its competitor, Lockton, arising from broker fees alleged owed to Guy Carpenter as a result of its placement of reinsurance on behalf of two reinsurers, whose business went (after placement) to Lockton when one of Carpenter’s brokers switched his employment to Lockton. Carpenter asserted that the broker fees, which were established and became payable upon placement of the reinsurance at issue, were improperly withheld by Lockton after they were received from the reinsurers. Lockton moved to dismiss all three claims asserted by Carpenter, including conversion, tortious interference with contract, and unjust enrichment. The court denied the motion (save for its dismissal of the unjust enrichment claim), notably holding that the monies owed to Carpenter constitute an “identifiable chattel” and thus supported the conversion claim. The court also held that Lockton’s alleged withholding of money owed pursuant to the broker agreement between the reinsurers and Carpenter adequately stated a tortious interference with contract claim. Guy Carpenter & Co., LLC v. Lockton Re, LP, No. 10-Civ-4932 (USDC S.D.N.Y. Nov. 4, 2010)

This post written by John Pitblado.

GEN RE DISMISSED FROM AIG CONSOLIDATED SECURITIES LITIGATION

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A New York federal court granted judgment on the pleadings to the Gen Re defendants in the consolidated AIG securities litigation (about which we have previously posted on July 17, 2008 and November 17, 2009). The partial judgment under Rule 54 does not affect the other defendants. In 2008, Gen Re and certain of its individual officers moved for judgment on the pleadings, arguing that they were not liable to AIG as a matter of law for alleged “fraud on the market” in connection with alleged statements made pertaining to AIG, as a result of the U.S. Supreme Court’s decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008). In its recent ruling, the court agreed, holding that AIG’s pleading failed to allege the elements of “material misrepresentation or omission,” and “reliance upon that misrepresentation” under the standards set in Stoneridge, and therefore granted judgment on the pleadings to the Gen Re defendants. In re American International Group, Inc. Securities Litigation, No. 04-cv-8141 (USDC S.D.N.Y. Sept. 10, 2010)

This post written by John Pitblado.

THIRD CIRCUIT VACATES SEVERAL SHERMAN ACT AND RICO CLAIMS IN INSURANCE BROKERAGE MDL

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We have reported several times on the ongoing developments in the Insurance Brokerage Antitrust Litigation MDL proceeding. In the most recent development, following a third District Court dismissal of the RICO and Sherman Act claims, the Third Circuit Court of Appeals issued a 200 page opinion affirming in part, vacating in part, and remanding for further proceedings. The Court of Appeals vacated the District Court’s dismissal of the Sherman Act claims with respect to defendants alleged to have engaged in bid rigging in the Marsh-centered commercial conspiracy, the dismissal of the RICO claims based on the same issue, and the dismissal of the alleged CIAB enterprise with respect to defendant brokers. The Court also vacated the dismissal of the state law claims. The District Court’s judgment was affirmed in all other respects. The Third Circuit remanded for further proceedings consistent with the opinion. In re: Insurance Brokerage Antitrust Litig., MDL No. 1663 (3d Cir. Aug. 16, 2010).

This post written by John Black.