Arbitration / Court Decisions

COURT ORDERS STIPULATED DISMISSAL IN REINSURANCE DISPUTE

June 23, 2010 by Carlton Fields

National Union Fire Insurance Company of Pittsburgh, Pa. sued Scottsdale Insurance Company in October 2009, alleging that Scottsdale breached the parties’ reinsurance agreement by failing to reimburse National Union for certain costs and expenses in connection with an underlying settlement National Union entered into with its insured, arising from damage to two gas turbines. National Union and Scottsdale have now pulled the matter out of court by joint stipulation of dismissal, which was recently entered and ordered by the court. National Union Fire Ins. Co. of Pittsburgh, Pa. v. Scottsdale Ins. Co., No. 09-8635 (USDC S.D.N.Y. May 17, 2010).

This post written by John Pitblado.

“PER CLAIM” HELD AMBIGUOUS IN COMMERCIAL LIABILITY POLICY

June 22, 2010 by Carlton Fields

A California appellate court reversed a grant of summary judgment for defendant on a claim for equitable contribution for sums expended in defending a construction defect action. Defendant North American contended that its duty to defend never arose because the underlying insured never paid the $25,000 “per claim” self-insured retention for each of the eight covered homes at issue. The plaintiff, Clarendon America, countered that “per claim” required only one $25,000 payment for the entire action. In an unpublished opinion, the appellate court held that the phrase “per claim” was ambiguous, and that North American failed to show that the developer did not have an “objectively reasonable expectation” that the $25,000 payment would apply only once to the construction defect action as a whole, rather than to each of the eight covered homes. Clarendon Am. Ins. Co. v. North Am. Capacity Ins. Co., No. CIVRS701868 (Cal. App. Ct. June 15, 2010).

This post written by Michael Wolgin.

COURT DECLINES TO RECONSIDER RULING FOR REINSURER IN LIABILITY LIMIT DISPUTE

June 21, 2010 by Carlton Fields

Pacific Employers Insurance Company moved for reconsideration of a recent court ruling that Global Reinsurance Corporation of America was not required to reimburse Pacific for costs beyond the $1 million cap on “reinsurance accepted” under a facultative certificate issued to Pacific by Global (see our May 5, 2010 post for details about the initial ruling). The court denied Pacific’s motion for reconsideration, noting that it failed to point to new evidence or a change in controlling law. The court also denied Pacific’s alternative motions seeking to have the previous order certified as final for immediate appeal, or to have the matter certified for an interlocutory appeal to the Third Circuit. The court held that claims for relief remain to be adjudicated, and that any appeal is premature and unwarranted. Pacific Employers Ins. Co. v. Global Reinsurance Corp. of America, Case No. 09-6055 (USDC E.D. Pa. June 9, 2010).

This post written by John Pitblado.

UNDISCLOSED CONTINGENT COMMISSION PROGRAM VIOLATES CONNECTICUT UNFAIR TRADE PRACTICES ACT

June 17, 2010 by Carlton Fields

The State of Connecticut brought an action pursuant to Connecticut’s Unfair Trade Practices Act against Acordia, Inc. alleging unfair trade practices that harmed a class of insurance companies. Acordia is an independent insurance agent and broker working through a contingent commission program called the Millennium Partnership Program, in which which five insurers (Travelers, The Hartford, Chubb, Atlantic Mutual and Sun Alliance) agreed to participate. The Connecticut Superior Court found that Acordia’s non-disclosure of the MPP to its clients constituted a conflict of interest in violation of its fiduciary obligations which in turn violated Connecticut’s Unfair Trade Practices Act. However, because the violation was predicated on 1999-2002 common law (and does not constitute a violation of public policy in 2010) the Court declined to issue an injunction. Acordia was, however, order to account for non-disclosed MPP based commissions for products purchased by consumers in the State of Connecticut. State of Connecticut v. Acordia, Inc., Case No. 074020455S (Conn. Super. Ct. Apr. 10, 2010).

This post written by John Black.

EXCESS INSURER’S REINSURER NOT LIABLE TO PRIMARY INSURER

June 16, 2010 by Carlton Fields

This case focused on whether the entire amount of a $3.2 million settlement of medical malpractice claims that was reached in an arbitration was covered by a primary insurance policy issued by Texas Farmers Insurance. The determining factor was whether the claim occurred during a policy period in which there was $5 million in primary coverage, or during a renewal period in which there was $1 million in primary coverage and $10 million in excess coverage. Lexington Insurance had issued a “following form” facultative reinsurance policy to the excess insurer.

The court held that the loss occurred while the $5 million limit was in effect. Even though Lexington had not provided reinsurance for that policy year, and never reinsured Texas Farmers, Texas Farmers sought to recover from Lexington, as reinsurer, based upon the “follow the settlements” doctrine. The District Court denied this recovery, holding that the doctrine did not apply, and the Court of Appeals agreed, finding that Lexington was not Texas Farmer’s reinsurer. Texas Farmers Insurance Co. v. Lexington Insurance Co., No. 08-55835 (9th Cir. May 21, 2010).

This post written by Brian Perryman.