Arbitration / Court Decisions

DAMAGES AGAINST REINSURANCE AGENT AFFIRMED FOR FAILURE TO ADJUST COMMISSIONS BASED ON “INCURRED” RUN-OFF PAYMENTS

April 25, 2012 by Carlton Fields

On December 18, 2007, we reported on Gamma Group, Inc. v. Transatlantic Reinsurance Co., in which a reinsurer and its cedent prevailed in a case involving their agent’s failure to deduct run-off payments from its commissions. In that decision, the appellate court reversed a damages award in favor of the reinsurer and cedent because the award was incorrectly based on “reasonable” run-off payments, as opposed to actual “incurred” payments. After the trial court re-determined damages on remand, the agent appealed, arguing that the trial court (1) went “outside the mandate” by considering various types of evidence, including evidence of run-off payments made subsequent to the first trial, (2) improperly considered untimely evidence, and (3) erroneously calculated post-judgment interest from the date of the original judgment in 2005, rather than the date of the second judgment in 2010. The appellate court rejected these arguments, holding that the trial court properly considered all evidence of incurred run-off payments, acted in its discretion in considering untimely (but cumulative) evidence, and appropriately calculated post-judgment interest from the date of the original judgment, which was “still in full force and effect as to liability issues.” Gamma Group, Inc. v. Transatlantic Reinsurance Co., Case No. 05-10-00705 (Tex. Ct. App. March 28, 2012).

This post written by Michael Wolgin.

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NEW YORK HIGH COURT DISMISSES DONNELLY ACT CLAIMS AGAINST EQUITAS

April 24, 2012 by Carlton Fields

New York’s Court of Appeals reversed the Appellate Division of the Supreme Court and upheld the trial court’s dismissal of plaintiff’s claim against Equitas under the Donnelly Act, New York’s antitrust law. The plaintiff, a cedent under certain retrocessional agreements with various Lloyd’s syndicates covering non-life exposures, alleged that Equitas engaged in antitrust violations because it controlled the market for retrocessional and reinsurance claims adjustment for these types of so-called “long tail” claims, such as asbestos-related injury claims. Equitas was formed and approved by European governmental authorities, as a claims adjustment facility for the Lloyd’s syndicates, in order to manage exposures which threatened the financial stability of syndicates, and the market itself. The high court held that even if there were a “market” for the claims handling function performed by Equitas (which it found dubious), it held that any such market would not have a sufficient nexus with New York State to warrant extra-territorial application of its antitrust law. Global Reinsurance Corp. v. Equitas, Ltd., No. 2012-53 (N.Y. March 27, 2012).

This post written by John Pitblado.

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TRAVELERS AND R&Q RE SETTLE REINSURANCE ACTION RELATED TO ASBESTOS CLAIMS

April 19, 2012 by Carlton Fields

Travelers and R&Q Reinsurance recently settled and agreed to voluntarily dismiss their ongoing dispute in the US District Court for the District of Connecticut. The action arose out of a series of reinsurance contracts between Travelers and R&Q Reinsurance (successor in interest to INA Re). The reinsurance contracts were part of Traveler’s Blanket Excess of Loss program, incepted in 1962, and covered a period between April 1, 1976 through April 1, 1979. The contracts covered asbestos related claims which were indemnified by Travelers. In this action, Travelers filed a Complaint alleging breach of contract, contending that it had properly indemnified an asbestos producer but that INA Re wrongfully had refused to pay in violation of the reinsurance agreements between the parties. Travelers Casualty and Surety, Co. v. R&Q Reinsurance Co., Case No. 10-01946 (USDC D. Conn. Jan. 31, 2012).

This post written by John Black.

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CIVIL SUBPOENAS ISSUED BY ARBITRATOR AGAINST OUT-OF-STATE NONPARTIES HELD UNENFORCEABLE

April 18, 2012 by Carlton Fields

The Colorado Supreme Court vacated a district court’s order enforcing subpoenas issued by an arbitrator against out-of-state nonparties. The court held that a district court has the same authority to enforce subpoenas in civil actions regardless of whether arbitration is involved or not, and that Colorado courts have no authority to enforce civil subpoenas against out-of-state nonparties. The court rejected the argument that Colorado’s long-arm statute gives a Colorado court the authority to enforce such subpoenas. It further stated that, under the Uniform Interstate Depositions and Discovery Act (“UIDDA”), which Colorado and other states had recently adopted, a subpoena issued for discovery in the “trial state” must be submitted to the clerk of court in the “discovery state” at which time the clerk in the discovery state re-issues the subpoena. Colorado Mills, LLC v. SunOpta Grains & Foods, Inc., No. 11SA82 (Colo. Feb. 6, 2012).

This post written by Ben Seessel.

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COURT REJECTS REPETITIVE CHALLENGE TO CLASS ARBITRATION UNDER STOLT-NIELSEN

April 17, 2012 by Carlton Fields

After losing on essentially the same issue in an appeal to the Fourth Circuit Court of Appeals, the defendants in an ongoing class arbitration Amerix Corporation and Genus Credit Management initiated an action on the eve of termination of the class arbitration attacking the propriety of class arbitration, alleging that the arbitrator was exceeding the scope of his authority as defined in Stolt-Nielsen and Concepcion. They also filed a motion under Fed. R. Civ. P. 60(b) seeking review of the court’s decision declining to vacate the arbitrator’s initial Clause Construction Award. The class claimants moved to dismiss this new action, filed an opposition to the Rule 60(b) motion, and moved for attorneys fees.

The District Court concluded that res judicata could apply to bar reconsideration of the clause construction, which the court declined to vacate. Further, the court explained that Stolt-Nielsen did not present a sufficient change to revisit prior issues, and thus, the law of the case doctrine precluded relitigating the construction of the arbitration clause. Finally, the court held that Stolt-Nielsen itself provided another ground for dismissing the new action. Specifically, the court ruled that the arbitrator’s decision was based on applicable law and contract principles, so his determination to allow class arbitration did not run afoul of Stolt-Nielsen. Unlike Stolt-Nielsen, the agreement was not silent as to the parties intent, which the arbitrator was able to determine in the instant case. Thus, the new action was dismissed. Additionally, the court denied further review under Rule 60(b) and denied the motion for attorneys fees. Amerix Corp. v. Jones, Case No. 11-02844 (USDC D. Md. Jan. 17, 2012).

This post written by John Black.

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