New reinsurance-related and arbitration developments from Carlton Fields
How important is it to specify the rate at which unpaid amounts will accrue interest under a reinsurance agreement? In a Treaty Tip, Tony Cicchetti provides two examples from recent court opinions that illustrate the importance of covering this topic in a reinsurance contract.
This post written by Tony Cicchetti.
Swiss Re, invoking a Indemnity Agreement SuperValu had entered into with the now defunct Amwest Surety, sought to recover attorneys fees and expenses from SuperValu based upon a reinsurance agreement it had entered into, as reinsurer, to guaranty the performance under an appeal bond. Because SuperValu refused to remit payment pursuant to the Indemnity Agreement (which Swiss Re acquired from Amwest by assignment), the District Court found that SuperValu’s refusal constituted a breach and that Swiss Re was entitled to recover damages incurred as a result. However, the District Court concluded that Swiss Re was not entitled to recover attorneys’ fees and costs incurred in defending, settling, and administering payment of the claim relative to the Bond underlying the action because the Indemnity Agreement did not contain any language supporting the recovery of fees and costs. Thus, the parties’ cross-motions for summary judgment were both granted in part and denied in part. Swiss Reinsurance Am. Co. v. SuperValu, Inc., Case No. 09-3083 (USDC D. Minn. Oct. 15, 2010).
This post written by John Black.
In May of 2010, insurer Mutual Marine Office Inc. commenced an action against one of its excess-of-loss reinsurers, British Law Insurance Co. (now known as Sun Alliance Insurance UK Ltd.), in New York County Supreme Court. Mutual Marine and British Law have now agreed to dismiss the case and go to arbitration. The dispute pertains to the application of a settlement into which Mutual Marine and British Law’s parent company had previously entered. The settlement permitted Mutual Marine to submit aggregated claims to British Law, which would be payable on a discounted basis, despite the fact that the governing reinsurance treaties did not contain an express aggregate extension clause. Mutual Marine Office, Inc. v. British Law Ins. Co., Case No. 10-cv-4306 (USDC SDNY, Sept. 15, 2010)
This post written by Michael Wolgin.
The plaintiff made a claim under a disability policy issued to him in conjunction with his opening a deposit account with a bank. When the claim was denied, plaintiff brought suit against both the bank and the insurance company, alleging several causes of action, including breach of trust, fraud, misrepresentation, breach of contract and bad faith. Both the bank and insurer moved to compel arbitration based on the arbitration provision contained in the deposit account agreement. The district court denied the motions on the basis that arbitrability had been raised, and was an issue for the court to decide. The Fifth Circuit reversed, noting some limited circumstances in which arbitrability can be addressed by the court, but finding that the arbitration provision in question unambiguously provided that issues of arbitrability should be decided by the arbitrator and not the court, and that the language controlled. Allen v. Regions Bank, No. 09-60705 (5th Cir. August 11, 2010)
This post written by John Pitblado.
In a dispute between providers of payroll services (“payroll providers”) and the reinsurers of a movie, the Ninth Circuit, which previously held that the reinsurers were liable for the obligations of the movie’s producers, affirmed an award of attorney’s fees that were incurred in an arbitration between the payroll providers and the movie producers, and in the payroll providers’ related efforts to confirm and collect the arbitration award. The Ninth Circuit held that the underlying arbitration provision in the contracts between the payroll providers and the movie producers provided that the prevailing party would be entitled to attorney’s fees. Under California law, an arbitration provision that permits the recovery of fees includes fees that were incurred in related judicial proceedings. However, the Ninth Circuit reversed the fees award for the payroll providers’ litigation with the reinsurers, reasoning that the arbitration clause and other provisions in the contracts did not entitle a party to attorney’s fees incurred in litigation between the parties. The Ninth Circuit also affirmed the district court’s decision to award prejudgment interest, but held that it should run from the time that the amount of damages became certain – not the time that liability to pay was established. Scie LLC v. XL Reinsurance America, Inc., Case No. 08-56502 (9th Cir. Sept. 27, 2010).
This post written by Michael Wolgin.