Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Arbitration / Court Decisions

CONTINENTAL CASUALTY AND SCOR AGREE TO DISMISS REINSURANCE CASE WITH PREJUDICE

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On October 14, the US District Court for the Northern District of Illinois entered an Agreed Order of Dismissal of a reinsurance dispute as to whether the commutation and release agreement between Continental Casualty and SCOR also covered reinsurance contracts purchased from non party insurers Unity Fire and General Ins. Co. and Allstate Ins. Co. Following an April 2009 Order denying SCOR’s motion for a stay pending arbitration, this matter came before the Court by agreement of the parties and the action was dismissed with prejudice. Continental Cas. Co. v. Commercial Risk Re-Insurance Co., Case No. 07-6912 (N.D. Ill. Oct. 14, 2009).

This post written by John Black.

REINSURER’S ROLE IN INSURANCE POLICY FOUND TO BE AMBIGUOUS, SUPPORTING A DIRECT ACTION AGAINST IT BY THE INSURED

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Felman Production, Inc. brought suit against Industrial Risk Insurers (“IRI”), an unincorporated association, after one year of inconclusive coverage discussions. The suit also named two of IRI’s member companies as defendants, one of which was Swiss Reinsurance America Corporation (“Swiss Re”). Swiss Re moved to dismiss, arguing that Swiss Re is merely the reinsurer of the policy, not the original insurer. The court disagreed, finding that Swiss Re’s role was ambiguous pursuant to certain policy language. The court thus denied Swiss Re’s motion to dismiss. Felman Prod., Inc. v. Industrial Risk Insurers, Case No. 09-0481 (USDC S.D. W.Va. Oct. 19, 2009).

This post written by Dan Crisp.

ROUND UP OF RECENT ARBITRATION AWARD CHALLENGES

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DMA International, Inc. v. Qwest Communications International, Inc., No. 08-1392 (10th Cir. Nov. 4, 2009) (affirming confirmation, denial of vacatur of arbitration award in fee dispute. No manifest disregard, arbitrator not partial or corrupt, no violation of public policy, arbitrator did not exceed his powers).

United Forming, Inc. v. FaulknerUSA, LP, No. 09-50073 (5th Cir. Oct. 27, 2009) (affirming confirmation, denial of vacatur of arbitration award in construction contract dispute. No conflict of interest or bias on part of arbitrators, rulings not so grossly incorrect as be “misconduct” or “misbehavior” under the FAA).

Oberwager v. McKechnie, Ltd., No. 08-1117 (3d. Cir. Oct. 20, 2009) (affirming summary judgment ruling that motion to vacate was untimely under FAA in stock purchase agreement dispute).

TSYS Acquiring Resolutions, LLC v. Electronic Payment Systems, LLC, No. CV-09-0155 (USDC D. Ariz. Oct. 22, 2009) (no manifest disregard absent demonstration that arbitrator was aware of controlling law).

Ario v. Cologne Reinsurance (Barbados) Ltd., 1-CV-98-0678 (USDC D. Pa. Nov. 13, 2009) (confirming award, no evident partiality, no manifest disregard of law).

The Householder Group v. Caughran, No. 09-40111 (5th Cir. Nov. 20, 2009) (affirming confirmation of NASD panel arbitration award, no evident partiality or bias)

Busch v. Southwest Securities, Inc., No. Civ-09-661-C (USDC W.D. Okla. Nov. 28, 2009) (confirming award in employment dispute, no arbitrator misconduct or refusal to consider material evidence).

Trustmark Ins. Co. v. Clarendon National Ins. Co., No. 09-C-1673 (USDC N.D. Ill. Nov. 20, 2009) (confirming award in reinsurance treaty dispute, refusing to consider post-award dispute as to payment obligations and “set-off” arguments as beyond purview of limited review of award under FAA).

Nat’l Union Fire Ins. Co. of Pittsburgh v. Odyssey America Reinsurance Corp., No. 05-CV-7539 (USDC S.D.N.Y. Nov. 18, 2009) (denying cross petitions for post-arbitration attorneys fees, and to vacate arbitration award of attorneys fees, respectively, relating to arbitration of reinsurance dispute).

This post written by John Pitblado.

DISTRICT COURT FINDS THAT SERVICE OF SUIT CLAUSE WAIVES RIGHT OF REMOVAL

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In his capacity as Liquidator of Midland Insurance Company, the Superintendent of Insurance of the State of New York brought suit in New York Supreme Court against Dunav Re, a Serbian reinsurance company, seeking reinsurance monies owed. Dunav Re removed the action to federal court based on diversity jurisdiction, and the Superintendent subsequently moved to remand based on the ground that Dunav Re had consented to the jurisdiction of any competent court pursuant to the service of suit clause in the reinsurance agreements. Dunav Re argued that removal was proper because the service of suit clause’s language was ambiguous and the waiver of the right to removal had to be clear and unequivocal. The court found no ambiguity, citing a New York Court of Appeals decision stating the reinsurance industry has known since a 1949 decision that a service of suit clause waived removal, and granted the motion to remand. Dinallo v. Dunav Ins. Co., Case No. 09-5575 (USDC S.D.N.Y. Nov. 19, 2009).

This post written by Dan Crisp.

SPECIAL FOCUS: NEW YORK CONVENTION TRUMPS STATE LAW

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We previously reported on the en banc decision of the United States Court of Appeals for the Fifth Circuit holding that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention), prevailed over a state law that prohibited arbitration provisions in insurance policies. The Second and Fifth Circuits are now in conflict on this important arbitration issue. We offer a Special Focus view of this decision.

This post written by Rollie Goss.