Interim or Preliminary Relief

COURT DENIES RECONSIDERATION OF RULING THAT REINSURER MUST POST PRE-PLEADING SECURITY

May 24, 2016 by Carlton Fields

On April 13, 2016, we reported on Select Insurance Company’s successful motion for pre-pleading security against Excalibur Reinsurance Corp., pursuant to Connecticut law. Excalibur filed a motion for reconsideration, which the Magistrate has now denied. The court rejected on procedural grounds Excalibur’s new argument that, because Connecticut law did not deem Select Insurance Co. a Connecticut citizen, Select should not be permitted to invoke the Connecticut pre-pleading statute. The court also rejected Excalibur’s citation to certain Connecticut case decisions as dicta. The court concluded: “In the March 2016 Ruling, this Court held that the language of the Connecticut Security Statute does not address the citizenship of the moving party, nor is there Connecticut case law to the contrary; the Court relied on controlling law in this district in interpreting Connecticut’s Security Statute … and the wording of the Security Statute itself. There is no basis for reconsideration of the March 2016 Ruling on these issues.” Select Insurance Co. v. Excalibur Reinsurance Corp., Case No. 3:15-cv-00715 (D. Conn. May 10, 2016).

This post written by Joshua S. Wirth.
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COURT LOOKS TO PRIOR RELATED REINSURANCE LITIGATION IN RULING THAT REINSURER MUST POST PRE-PLEADING SECURITY

April 13, 2016 by Carlton Fields

We previously reported on reinsurance litigation in Connecticut federal court between Travelers Indemnity Co. and Excalibur Reinsurance Corp, which the parties settled in May 2014. See prior post dated July 31, 2014. A year later, in May 2015, another reinsurance dispute in Connecticut federal court was filed by Travelers’s subsidiary, Select Insurance Co., against Excalibur. Initially, Excalibur sought to enjoin the Connecticut litigation, arguing that without the injunction, Excalibur would need to post security, which would deplete its corporate assets and seriously affect its liquidity. The injunction was denied, however, because Excalibur would not be “irreparably harmed” by posting security. See prior post dated July 8, 2015.

Just as Excalibur feared, the Connecticut court has now granted Select Insurance Co.’s motion for pre-pleading security pursuant to Conn. Gen. Stat. section 38a-27(a). The court looked to virtually identical rulings previously made in the prior cases involving Travelers, and rejected Excalibur’s opposition to posting a security. The court held that: (1) the statute requires that unauthorized insurers post security; (2) the statute applies, notwithstanding that Select Insurance Co. was not a citizen of Connecticut; (3) the statute applies, notwithstanding that the reinsurance agreements selected New York law, because the statute is procedural in nature; (4) an order of supervision by the Pennsylvania Insurance Commissioner purporting to prohibit Excalibur’s posting of security did not preempt the Connecticut law; and (5) security was necessary because Excalibur was unauthorized at the time of the litigation, notwithstanding that Excalibur was previously, for a limited period of time, authorized in Connecticut. Accordingly, the court ruled that Excalibur was required to post security in an amount to be determined following a hearing. Select Insurance Co. v. Excalibur Reinsurance Corp., Case No. 3:15-cv-00715 (USDC D. Conn. Mar. 24, 2016).

This post written by Michael Wolgin.
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DISTRICT COURT DENIES PRELIMINARY RELIEF IN REINSURANCE DISPUTE OVER RELATED LITIGATION

July 8, 2015 by John Pitblado

Plaintiff Excalibur Reinsurance Corporation (“Excalibur”) sought a preliminary injunction in the Eastern District of Pennsylvania to enjoin Defendants Select Insurance Company and the Travelers Indemnity Company from proceeding with litigation on the same issues in the District of Connecticut. Excalibur argued that without the injunction, it would need to post security in the Connecticut action, an action that would deplete its corporate assets and seriously affect its liquidity. The district court, however, denied Excalibur’s preliminary injunction because it found that Excalibur would not be “irreparably harmed” if the request were denied. The court found that Excalibur would recover posted funds in Connecticut if it prevailed. It also noted that a sworn statement by its Assistant Vice President was insufficient evidence to demonstrate the potential injury the company faced from posting security in two different matters.

Excalibur Reinsurance Corp. v. Select Ins. Comp., No. 15-2522 (USDC E.D. PA. June 2, 2015)

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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CLAUSE WHERE PARTY DEMANDING ARBITRATION IS NOT A PARTY TO ALLEGEDLY TERMINATED REINSURANCE AGREEMENT

May 27, 2014 by Carlton Fields

A federal district court has taken under advisement plaintiff’s motion for injunction and defendant’s cross-motion to compel arbitration after conducting a hearing on the matter. The issue to be decided is whether CX can compel Trenwick to participate in an arbitration based upon a reinsurance agreement as to which CX was not a party and which, according to Trenwick, was terminated. At the core of this dispute is a reinsurance agreement under which Trenwick reinsured Commercial Casualty Insurance Company. CX argued the reinsurance agreement included a “cut-through” provision which gave CX the right to collect directly against Trenwick even though CX was not a party to the reinsurance agreement. Trenwick denied liability under this cut-through provision and further denied that the cut-through provision gave its beneficiaries, including CX, any rights under the agreement’s arbitration clause. Additionally, Trenwick argued that the reinsurance agreement was terminated further to a commutation agreement between Trenwick and CCIC’s Liquidator and, as a result, terminated any rights CX may have had under the cut-through provision and any requirement to arbitrate CX’s claims. CX responded that it was not a party to the commutation agreement, which could therefore not extinguish CX’s right to arbitrate. CX also argued that Trenwick’s termination defense must be arbitrated. Trenwick America Reinsurance Corp. v. CX Reinurance Company Limited, Case No. 3:13-cv-01264 (JBA) (USDC D. Conn. Apr. 28, 2014).

This post written by Leonor Lagomasino.

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SIXTH CIRCUIT REFUSES TO PERMIT JUDICIAL REVIEW PRIOR TO CONCLUSION OF REINSURANCE ARBITRATION PROCEEDING

April 21, 2014 by Carlton Fields

The Sixth Circuit recently reversed a district court’s decision to stay arbitration proceedings in a dispute concerning allegations of overbilling on a reinsurance program. The arbitration clause from the treaty established a tripartite method of arbitration – one arbitrator selected by each side and one neutral umpire. During the course of the arbitration (and before rendition of a final award), one of the parties contended that its selected arbitrator had been disenfranchised by the other two arbitrators and that inappropriate ex parte communications had occurred. A lawsuit was filed in Michigan state court, seeking to vacate an interim award on the grounds that the two arbitrators had exceeded their authority under the treaty and that the umpire had displayed evident partiality. The case was removed to federal court, where the district court recast the challenge as a breach of contract dispute regarding the rules under which the arbitration was to proceed, and it granted an injunction to stay the arbitration. On appeal, the Sixth Circuit reversed, concluding that the district court erred by prematurely interjecting itself into the private dispute, noting that parties to an arbitration generally may not challenge the fairness of the proceedings or the partiality of the arbitrators until the conclusion of the arbitration and the rendition of a final award. The Sixth Circuit made a point to disagree with the district court’s application of 9 U.S.C. § 2, noting that “[n]othing in the text or history of the FAA suggests that § 2 was intended to displace § 10’s limitation on judicial review of non-final awards.” Savers Property & Casualty Insurance Co. v. National Union Fire Insurance Co. of Pittsburgh, PA, Nos. 13-2288/2289 (6th Cir. Apr. 9, 2014).

This post written by Catherine Acree.

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