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Arbitration / Court Decisions

DISTRICT COURT FINDS FRAUDULENT ASSET TRANSFERS, PIERCES CORPORATE VEIL

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In the latest development in the action arising out of a Strategic Alliance Agreement between Continental Casualty Company and IFG Insurance Company relating to a federal crop reinsurance program, the US District Court for the Southern District of Indiana held that CCC (along with 1911 Corp) demonstrated that the counterdefendants (the IFG parties along with IGF Holdings, SIG, Goran Capital, Granite Re, Pafco Gen. Ins. Co., Superior Ins. Co., Gordon Symons, Alan Symons, and Douglas Symons) fraudulently transferred assets in violation of the Indiana Fraudulent Transfer Act, and that the counterdefendants were alter egos of one another. Accordingly, the court pierced the corporate veil as to those parties. However, the court ruled that 1911 Corp failed to introduce evidence supporting its breach of contract claim against IGF Holdings, therefore ruling in favor of IGFH as to that claim. A separate judgment is forthcoming in the case. IGF Ins. Co. v. Continental Casualty Co., Case No. 01-cv-799 (USDC S.D. Ind. Oct. 19, 2009).

This post written by John Black.

COURT DECLINES TO RECONSIDER ORDER DISMISSING SUIT TO ENFORCE ARBITRATION AWARD FOR LACK OF JURISDICTION

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A court has denied reconsideration of its earlier order holding that an award postponing the determination of a remedy is not final and binding and, thus, is not subject to review. We reported on the earlier order in an August 20, 2009 post. The American Postal Workers’ Union brought a suit alleging that the United States Postal Service breached a collective bargaining agreement by failing to comply with an arbitration award finding liability. On July 14, 2009, the court dismissed the case for lack of jurisdiction. The Union moved for reconsideration, principally arguing that that it should be permitted to move forward to enforce the award because it had been granted final injunctive relief. The court found that the Union was simply regurgitating its earlier, unsuccessful argument. Therefore, the motion for reconsideration was denied. American Postal Workers’ Union v. United States Postal Service, Case No. 08-2200 (USDC D.D.C. Sept. 2, 2009).

This post written by Brian Perryman.

EN BANC DECISION HOLDS THAT MCCARRAN-FERGUSON ACT DOES NOT REVERSE-PREEMPT THE CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

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The Fifth Circuit has affirmed en banc a panel decision holding that while the McCarran-Ferguson Act reverse-preempted “Acts of Congress,” that term did not encompass international treaties, which controlled in the face of contrary state law. We reported on the panel decision in an October 14, 2008 post. The district court denied a motion to compel arbitration of a contractual dispute among three insurers, finding that a Louisiana statute barring mandatory arbitration provisions in insurance contracts superseded the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On an interlocutory appeal, the Fifth Circuit panel reversed. Rehearing en banc was granted, vacating the panel opinion. Sitting en banc, the Fifth Circuit concluded that because McCarran-Ferguson does not apply to the Convention or its implementing law (the Convention Act), the district court’s order should be vacated and the case should be remanded for further proceedings. The Court indicated that it “was persuaded that state law does not reverse-preempt federal law in the present case for two related but distinct reasons: (1) Congress did not intend to include a treaty within the scope of an ‘Act of Congress’ when it used those words in the McCarran-Ferguson Act, and (2) in this case, it is when we construe a treaty – specifically, the Convention, rather than the Convention Act – to determine the parties’ respective rights and obligations, that the state law at issue is superseded.” Safety National Casualty Corp. v. Certain Underwriters at Lloyd’s, No. 06-30262 (5th Cir. Nov. 9, 2009).

This post written by Brian Perryman.

ENGLISH COURT HAS JURISDICTION OVER REINSURANCE CLAIM BY A BERMUDA INSURER AGAINST A SWISS REINSURER

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The underlying dispute involves claims made by Gard Marine & Energy, Ltd. (“Gard”), a Bermudan company, against its reinsurers in an English court. One reinsurer, Glacier Reinsurance AG (“Glacier”), domiciled in Switzerland, objected to the court’s jurisdiction. Glacier had originally paid Gard the sum Glacier considered due, but later sued Gard in a Swiss court seeking repayment of the sum paid. The present action was stayed until the Swiss Federal Court declined jurisdiction. The English court then addressed the issues of governing law and jurisdiction.

The English court first addressed whether Swiss or English law applied. Following the principles of the Rome Convention, the court found that Gard established a good, arguable case that English law applied for four reasons, which were: (1) the circumstances of the placement; (2) the use of a Lloyd’s slip and policy; (3) a number of London market wordings incorporated in the slip; and (4) the wording included provisions relevant to English law. The court next addressed jurisdiction. Applying the Lugano Convention (the “Convention”), the court found that it had jurisdiction. The Convention permits Gard to sue Glacier in Glacier’s country of domicile; however, certain provisions in the Convention allow for an exception. Pursuant to Article 6(1) of the Convention, since the English court had jurisdiction over the other defendants, the court had jurisdiction over Glacier because litigation in English and Swiss courts would result in irreconcilable judgments. Gard Marine & Energy Ltd. v. Tuncliffe, [2009] EWHC 2388 (Comm. Oct. 9, 2009).

This post written by Dan Crisp.

THIRD CIRCUIT AFFIRMS DENIAL OF COVERAGE AND REINSURANCE CLAIMS FOR UNDERLYING SUITS UNDER D&O POLICIES

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G-I Holdings, Inc. purchased directors & officers liability coverage from Reliance Insurance Company, covering claims made from 1999 – 2002. Due to Reliance’s putatively impending insolvency at that time, it reached an agreement with Hartford Fire Insurance Company, whereby Hartford agree to take over some of Reliance’s claims administration, and agreed to reinsure obligations under Reliance policies for claims made after July 15, 2000. Reliance remained responsible for covering claims made under its policies prior to July 15, 2000. Thereafter, Reliance became insolvent and went into liquidation. G-I Holdings asserted a claim for coverage for three fraudulent conveyance suits against its CEO and Chairman. The first suit was brought during the Reliance coverage period, and the other two were brought during the period covered by Hartford. However, Hartford declined coverage, and the parties litigated, based on the question of whether the two later suits related back to the Reliance coverage period. The district court agreed with Hartford, finding that all three suits were Reliance’s responsibility. The Third Circuit affirmed. G-I Holdings, Inc. v. Reliance Ins. Co., No. 07-2510 (3d Cir. Oct. 26, 2009)

This post written by John Pitblado.