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Arbitration / Court Decisions

IN REINSURANCE-RELATED COMMISSION DISPUTE, COURT GRANTS DEFENDANT LEAVE TO AMEND ANSWER RATHER THAN GRANT PLAINTIFF SUMMARY JUDGMENT

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A lawsuit filed in the United States Court for the District of Connecticut between Odyssey Reinsurance Company and Cal-Regent Insurance Services Corporation involves a dispute over commission payments in a reinsurance scheme with State National Insurance Company, Inc. According to Odyssey, Cal-Regent has not made the appropriate commission payments for 2003 to 2007. According to Cal-Regent, however, Odyssey failed to perform the contracts and Cal-Regent is entitled to a set-off. In its complaint, Odyssey alleged that it “has performed all of its obligations under the Reinsurance Agreement” and had performed all conditions precedent to bringing suit. Odyssey moved for summary judgment, and Cal-Regent argued that Odyssey was not entitled to summary judgment, among other reasons, because of the dispute over whether the Odyssey had first breached the reinsurance contracts. However, in its answer to Odyssey’s complaint, Cal-Regent had the burden “to deny Odyssey’s performance with particularity, which Cal-Regent failed to do.” Rather than granting summary judgment to Odyssey on this issue, the court issued a decision allowing Cal-Regent to amend its answer and affirmative defenses, including granting leave to add an affirmative defense of material breach.

In another decision issued on the same day, however, the court dismissed Cal-Regent’s counterclaim for a setoff, finding that it had been brought under Connecticut law, rather than Texas law, when the parties had agreed to Texas law in the reinsurance agreement. Odyssey Reinsurance Co. v. Cal-Regent Insurance Services Corp., No. 3:14-cv-00458-VAB (USDC D. Conn. Aug. 20, 2015).

This post written by Zach Ludens.

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INSURER AND REINSURER LOCKED IN DISCOVERY ROW

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In a row between Granite State Insurance Company (“Granite”) and R & Q Reinsurance Company (“R & Q”), a New York trial court denied R & Q’s attempt to (1) vacate a prior court order, (2) appoint a special referee, and (3) dismiss counts in the complaint.

By way of history, the court previously found that certain discovery documents were protected under attorney-client privilege. Looking for reconsideration of this order, the court construed R & Q’s motion to vacate as a motion to renew and/or reargue. The court denied R & Q’s motion to renew as it failed to present a change in law or present new facts that would necessitate an alteration of the prior discovery order. The court also denied R& Q’s motion to reargue finding the “common interest” exception to attorney-client privilege inapplicable between an insurer and reinsurer. Without a relevant exception, the court held that R & Q “failed to demonstrate that [the court] overlooked or misapprehended the relevant facts.”

The court also denied R & Q’s attempt to appoint a special referee because an appointment would only extend an already prolonged discovery process without “special circumstances.” Finally, the court noted that Granite and R & Q engaged in a considerable “meet and confer” process in an effort to narrow the scope of discovery, and thus instead of dismissing claims for which discovery had not yet been provided, the court directed R & Q to re-serve its discovery requests directed to those claims, as appropriately revised based on the parties’ “meet and confer” process.

Granite State Ins. Co. v. R & Q Reinsurance Co., No. 654494/2013 (Sup. Ct. July 22, 2015)

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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COURT MAY APPOINT ARBITRATION UMPIRE UNDER FAA

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On August 26, the Second Circuit Court of Appeals considered whether a trial court had appointment authority under the Federal Arbitration Act (“FAA”). Overturning a prior order that denied Odyssey Reinsurance Company’s (Odyssey) motion to appoint, the Second Circuit found that the trial court not only had the authority to appoint an arbitration umpire but “the obligation to appoint an umpire to correct a breakdown in the umpire selection process.”

The trial court found that it did not need to intervene in a dispute over worker’s compensation billings. The Second Circuit Court disagreed, finding the parties deadlocked as to the interpretation of various terms in the arbitration agreement concerning umpire qualifications. This “lapse” therefore necessitated the trial court to appoint an arbitration umpire.

Odyssey Reinsurance Co. v. Certain Underwriters at Lloyd’s London Syndicate 53, No. 14-2840-cv (2nd Cir. Aug. 26, 2015)

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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DISTRICT COURT WON’T ALLOW INSURER TO “REPACKAGE” ITS BREACH OF UTMOST GOOD FAITH CLAIMS

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We previously reported on Old Republic National Title Insurance Co. v. First American Title Insurance Co., in which the court partially dismissed First American’s claim for breach of good faith and fair dealing to the extent the predicate breach of reinsurance contract claim alleged by First American failed to state a claim. The court has now denied First American’s motion to amend its answer. In the motion, First American attempted to demonstrate the predicate breach of reinsurance contract by contending that Old Republic failed to make payment under the contract based on false accusations and improper document requests. But the court agreed with Old Republic that the claims as pled did not support First American’s new allegations, and could not serve as a basis for a claim for the breach of the utmost duty of good faith. Old Republic Nat. Title Ins. Co. v. First American Title Ins. Co., No. 8:15-cv-126-T-30EAJ (USDC M.D. Fla. July 17, 2015).

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

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COURT RULES PANEL MUST DETERMINE WHETHER ARBITRATORS OR ACTUARIES DETERMINE AMOUNT OF DISPUTED REINSURANCE PAYMENT

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In a dispute involving an earlier arbitration ordering American United Life Insurance Company (“AUL”) to make a commutation payment to The Travelers Indemnity, the parties filed cross petitions for arbitration pursuant to different clauses of a reinsurance contract. AUL argued arbitration should proceed pursuant to the Article 16 in the contract requiring all disputes between the company and the reinsurer be submitted to arbitration. It further argued that Travelers had forfeited its right to name umpire candidates, and that the court should appoint an umpire from the names submitted by AUL. Travelers, for its part, argued that the matter should proceed pursuant to Article 6 of the contract that required actuaries to make the determination concerning the amount of the loss.

The Court sided with AUL stating that an arbitration panel needed to decide the threshold issue of whether the matter should proceed pursuant to Article 16 or Article 6. The court reasoned that in order to determine whether to proceed by a panel of actuaries, the reinsurance contract had to be interpreted and that Article 16 was clear that “any dispute between the Company and the Reinsurer arising out of, or relating to the formation, interpretation, performance or breach of this Contract, whether such dispute arises before or after termination of this Contract, shall be submitted to arbitration.” Regarding AUL’s request that the court appoint an umpire from its list of candidates, the court noted that the parties were engaged in settlement discussions and Travelers had offered to name umpire candidates but AUL never responded. Based on this, the court held that Travelers never knowingly waived its right to name umpire candidates, and ordered Travelers to comply with Article 16. American United Life Insurance Co. v. Travelers Indemnity Co., et al., Case No. 3:14-cv-1339 (USDC D. Conn. Aug. 18, 2015).

This post written by Barry Weissman.

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