Anglo-Iberia Underwriting Management Company and Industrial Re International sued an employee of the Indonesian state-owned social security insurer, Jamsostek, who while on leave in Colorado studying for an M.B.A. perpetrated an international reinsurance fraud scam that cost the Plaintiffs an estimated $55 million. Plaintiffs also sued Jamsostek and the Republic of Indonesia, alleging that they had breached contractual obligations to Plaintiffs and negligently failed to supervise their employee. The district court had dismissed all claims against Indonesia and Jamsostek based upon the sovereign immunity conferred by the Foreign Sovereign Immunities Act. The Second Circuit addressed the issue of whether the immunity exception for commercial activities applied. The Court of Appeal found that the contract claims were properly dismissed, but that the district court had failed adequately to consider the negligent supervision claim, and remanded for further consideration with respect to that claim. In remanding, the appellate panel set out the standards for the application of the commercial activity exception. Anglo-Iberia Underwriting Management Co. v.Lodderhose, Case No. 03-9260 (2d Cir. May 25, 2007).
Jurisdiction Issues
ENGLISH HIGH COURT GRANTS ANTI-SUIT INJUNCTION
The English High Court considered an application by Noble and Shell for an anti-suit injunction to restrain Gerling from continuing proceedings in the Vermont courts against both Noble and Shell where there had been a final arbitration award rendered in a London arbitration.
In November 2006 the Vermont court held that it had no jurisdiction to vacate the arbitration award since the seat of the award was London, but accepted subject matter jurisdiction over the claims to rescind the contracts for misrepresentation. In granting the ex parte injunction, the Court held that the misrepresentation claim fell within the scope of the arbitration agreement. The Court also held that the claims raised in the Vermont proceedings could have been raised in the London arbitration and that Gerling was estopped from raising those claims in the Vermont proceedings.
On the inter partes hearing for a final injunction, the Court held that Gerling’s conduct in attempting to nullify the effect of the arbitration award by court proceedings in Vermont against both Noble and its parent Shell, based on assertions contrary to the findings in the award, was vexatious, oppressive, an abuse of process and unconscionable. This decision confirms the jurisdiction of the English court to grant an anti-suit injunction to protect an arbitration award after the arbitration proceedings have concluded, and not only exiting arbitration proceeding prior to the delivery of an award. Noble Assurance Company and Shell Petroleum Inc. v. Gerling-Konzern General Insurance Company, 2006 EWHC 253 (February 22, 2007).
Court affirms stay of state court action pending resolution of federal court action
A New York state appellate court has affirmed a stay of an action involving Lloyd's in deference to a pending federal court action concerning coverage and indemnity for asbestos-related claims. In a perfunctory opinion, the court noted that the plaintiffs in the underlying action had “remained inactive for 20 years ….” While the state court action had been filed three years before the action was filed in federal court, the appellate court based its decision on “the familiarity of the federal court with the issues, the substantial identy of the parties, and the interdependence of the issues involving primary and excess insurers ….” Certain Underwriters at Lloyd's London v. Pneumo Abex Corp., Index 602493/02 (App. Div. Jan. 9, 2007).
Fourth Circuit vacates Order dismissing policy rescission claim
The financial collapse of Reciprocal of America, an insurer and reinsurer, resulted in a number of lawsuits, including a series of lawsuits by policyholders and state Insurance Commissioners in Alabama and in other states against the company's officers and directors. When two officers pleaded guilty to criminal charges relating to the operation of the company, the company's D&O insurer filed a declaratory judgment action, seeking rescission of the policies it had issued. While the actions filed by the policyholders and Insurance Commissioners were granted MDL status, the MDL Panel declined to add the D&O insurer's action to that proceeding. The District Court dismissed the D&O insurer's action, on the basis that it would abstain from hearing the claims in deference to the parallel state court actions. The Fourth Circuit reversed, vacating the decision, finding that the requirements for abstention were not present, and that the rescission action should go forward. Great American Ins. Co. v. Gross, Case No. 05-2069 (4th Cir. Oct. 30, 2006).
District Court adopts Magistrate Judge's recommendations as to personal jurisdiction
A District Court has entered an Order adopting a Magistrate Judge's Report and Recommendation, denying a motion to dismiss, for lack of personal jurisdiction, filed by a guarantor of a quota share reinsurance agreement. Sirius America Ins. Co. v. SCPIE Indemnity Co., Case no. 05-7923 (USDC S.D.N.Y. Nov. 1, 2006). The Report & Recommendation was the subject of an October 5 posting on this blog. The Order recites that the Court had not received any objections to the Report & Recommendation.