Contract Interpretation

CONTINENTAL CASUALTY AND SCOR AGREE TO DISMISS REINSURANCE CASE WITH PREJUDICE

December 15, 2009 by Carlton Fields

On October 14, the US District Court for the Northern District of Illinois entered an Agreed Order of Dismissal of a reinsurance dispute as to whether the commutation and release agreement between Continental Casualty and SCOR also covered reinsurance contracts purchased from non party insurers Unity Fire and General Ins. Co. and Allstate Ins. Co. Following an April 2009 Order denying SCOR’s motion for a stay pending arbitration, this matter came before the Court by agreement of the parties and the action was dismissed with prejudice. Continental Cas. Co. v. Commercial Risk Re-Insurance Co., Case No. 07-6912 (N.D. Ill. Oct. 14, 2009).

This post written by John Black.

REINSURER’S ROLE IN INSURANCE POLICY FOUND TO BE AMBIGUOUS, SUPPORTING A DIRECT ACTION AGAINST IT BY THE INSURED

December 10, 2009 by Carlton Fields

Felman Production, Inc. brought suit against Industrial Risk Insurers (“IRI”), an unincorporated association, after one year of inconclusive coverage discussions. The suit also named two of IRI’s member companies as defendants, one of which was Swiss Reinsurance America Corporation (“Swiss Re”). Swiss Re moved to dismiss, arguing that Swiss Re is merely the reinsurer of the policy, not the original insurer. The court disagreed, finding that Swiss Re’s role was ambiguous pursuant to certain policy language. The court thus denied Swiss Re’s motion to dismiss. Felman Prod., Inc. v. Industrial Risk Insurers, Case No. 09-0481 (USDC S.D. W.Va. Oct. 19, 2009).

This post written by Dan Crisp.

NEW YORK APPELLATE COURT ADDRESSES NUMEROUS CONTRACT INTERPRETATION ISSUES IN REINSURANCE DISPUTE

November 25, 2009 by Carlton Fields

Gulf Insurance Company sued Gerling Global Reinsurance Corporation of America (“Gerling”) and others who participated in reinsurance treaties covering a portfolio of Gulf’s automobile residual value insurance. Gerling denied Gulf’s claims for its portion of payments Gulf made in connection with underlying coverage litigation which settled for $266 million. Gulf sued Gerling, and Gerling countersued, seeking rescission of the treaties on the basis of nondisclosures and misrepresentations made by or on behalf of Gulf. The issues turned in part on the interpretation under the treaties of the percentage of the reinsurers’ participation. That interpretation was impacted by a further determination as to the amount of premium paid, but Gerling argued, and the trial court agreed, that the amount of premium was miscalculated by its bookkeeping department, and that Gulf improperly based its premium payment on those miscalculations. The premium payments were also not made until after formation of the treaties, and thus, the trial court found, did not affect interpretation of the treaties. After addressing a number of other contract interpretation issues, the Appellate Court essentially affirmed, with partial modification, the trial court’s decisions granting partial summary judgment to Gerling, and denying partial summary judgment to Gulf. Gulf Insurance Company v. Transatlantic Reinsurance Company, Nos. 6016023/03 and 601077/04 (N.Y. App. Div., Oct. 1, 2009)

This post written by John Pitblado.

DISTRICT COURT FINDS FRAUDULENT ASSET TRANSFERS, PIERCES CORPORATE VEIL

November 19, 2009 by Carlton Fields

In the latest development in the action arising out of a Strategic Alliance Agreement between Continental Casualty Company and IFG Insurance Company relating to a federal crop reinsurance program, the US District Court for the Southern District of Indiana held that CCC (along with 1911 Corp) demonstrated that the counterdefendants (the IFG parties along with IGF Holdings, SIG, Goran Capital, Granite Re, Pafco Gen. Ins. Co., Superior Ins. Co., Gordon Symons, Alan Symons, and Douglas Symons) fraudulently transferred assets in violation of the Indiana Fraudulent Transfer Act, and that the counterdefendants were alter egos of one another. Accordingly, the court pierced the corporate veil as to those parties. However, the court ruled that 1911 Corp failed to introduce evidence supporting its breach of contract claim against IGF Holdings, therefore ruling in favor of IGFH as to that claim. A separate judgment is forthcoming in the case. IGF Ins. Co. v. Continental Casualty Co., Case No. 01-cv-799 (USDC S.D. Ind. Oct. 19, 2009).

This post written by John Black.

ENGLISH COURT HAS JURISDICTION OVER REINSURANCE CLAIM BY A BERMUDA INSURER AGAINST A SWISS REINSURER

November 12, 2009 by Carlton Fields

The underlying dispute involves claims made by Gard Marine & Energy, Ltd. (“Gard”), a Bermudan company, against its reinsurers in an English court. One reinsurer, Glacier Reinsurance AG (“Glacier”), domiciled in Switzerland, objected to the court’s jurisdiction. Glacier had originally paid Gard the sum Glacier considered due, but later sued Gard in a Swiss court seeking repayment of the sum paid. The present action was stayed until the Swiss Federal Court declined jurisdiction. The English court then addressed the issues of governing law and jurisdiction.

The English court first addressed whether Swiss or English law applied. Following the principles of the Rome Convention, the court found that Gard established a good, arguable case that English law applied for four reasons, which were: (1) the circumstances of the placement; (2) the use of a Lloyd’s slip and policy; (3) a number of London market wordings incorporated in the slip; and (4) the wording included provisions relevant to English law. The court next addressed jurisdiction. Applying the Lugano Convention (the “Convention”), the court found that it had jurisdiction. The Convention permits Gard to sue Glacier in Glacier’s country of domicile; however, certain provisions in the Convention allow for an exception. Pursuant to Article 6(1) of the Convention, since the English court had jurisdiction over the other defendants, the court had jurisdiction over Glacier because litigation in English and Swiss courts would result in irreconcilable judgments. Gard Marine & Energy Ltd. v. Tuncliffe, [2009] EWHC 2388 (Comm. Oct. 9, 2009).

This post written by Dan Crisp.