Contract Formation

NO COSTS AWARDED TO AIG AFTER APPELLATE VICTORY OVERTURNING $35 MILLION JURY VERDICT

May 4, 2011 by Carlton Fields

In a suit between AXA and AIG in which AIG prevailed over AXA’s claim that AIG fraudulently induced it to enter into two reinsurance facilities, a court has set aside AIG’s award of over $200,000 in litigation costs. AIG had prevailed in the case after the Second Circuit Court of Appeals reversed a $35 million jury verdict in favor of AXA, which awarded compensatory and punitive damages, on the grounds that the case was barred by the statute of limitations. The court reasoned that it would be “inequitable to award costs to AIG,” especially in light of the fact that “after a two-week trial, a jury of twelve citizens unanimously found that AIG had defrauded AXA to such a deplorable extent that the conduct merited an award of punitive damages.” AXA Versicherung AG v. New Hampshire Insurance Co., Case No. 05-10180 (USDC S.D.N.Y. March 9, 2011).

This post written by Michael Wolgin.

TREATY TIP: AVOIDING GAPS IN REINSURANCE COVER

March 22, 2011 by Carlton Fields

Changing an underlying insurance policy can create a reinsurance coverage gap; a “follow the fortunes” provision in the reinsurance agreement will not always close the gap. In a Treaty Tip, Tony Cicchetti describes a recent example of this.

This post written by Tony Cicchetti.

BANKRUPTCY COURT AWARDS PRE- AND POST-JUDGMENT INTEREST ON REINSURER’S CLAIM FOR UNPAID PREMIUM

January 31, 2011 by Carlton Fields

Granite Reinsurance Company won an award for unpaid premiums from Acceptance Insurance Company (in rehabilitation) in a bankruptcy adversary proceeding. The unpaid premiums amounted to $9 million on a $15 million dollar policy that was purchased to cover Acceptance for five years. The parties had agreed to a $3 million per year premium payment schedule, due at the beginning of each of the five years covered under the reinsurance agreement. However, a dispute arose as to the calculation of pre-judgment interest on the award. The bankruptcy court awarded Granite Re pre-judgment interest calculated from the date each $3 million dollar premium payment became due (a different date for each of the three unpaid premium payments), and also awarded post-judgment interest from the date of judgment. In Re Acceptance Ins. Cos., Inc. No. BK-of-80059 (USDC Bankr. D. Neb. Jan. 19, 2011).

This post written by John Pitblado.

SPECIAL FOCUS: THE DOCTRINE OF UBERRIMAE FIDEI

November 15, 2010 by Carlton Fields

The doctrine of uberrimae fidei, or utmost good faith, has been invoked in reinsurance disputes for many years. In a Special Focus feature, John Pitblado explores the origins of this doctrine and its current status in the reinsurance field.

This post written by John Pitblado.

TREATY TIP: THE IMPORTANCE OF SPECIFYING A NON-PAYMENT INTEREST RATE

November 2, 2010 by Carlton Fields

How important is it to specify the rate at which unpaid amounts will accrue interest under a reinsurance agreement? In a Treaty Tip, Tony Cicchetti provides two examples from recent court opinions that illustrate the importance of covering this topic in a reinsurance contract.

This post written by Tony Cicchetti.