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Arbitration / Court Decisions

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.

THIRD CIRCUIT RULES THAT HOMEBUYER PLAINTIFFS HAVE STANDING TO CHALLENGE A PRIVATE MORTGAGE REINSURANCE ARRANGEMENT

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On December 26, 2008, we reported on a putative class action brought by homebuyers alleging that their private mortgage insurance premiums were subject to an unlawful captive reinsurance arrangement in violation of the Real Estate Settlement Procedures Act (“RESPA”). The district court had granted the defendants’ motion to dismiss, construing RESPA as requiring the plaintiffs to allege an overcharge in order to sue for damages. The Third Circuit reversed the order of the district court, finding that RESPA’s plan, unambiguous language did not require the plaintiffs to allege an overcharge and that the plaintiffs had suffered an injury-in-fact sufficient to support Article III standing, with or without an overcharge. The circuit court further found the filed rate doctrine inapplicable as the plaintiffs challenged allegedly unlawful conduct, not the reasonableness of the rate triggering the conduct. Alston v. Countrywide Financial Corp., No. 08-4334 (3d Cir. Oct. 28, 2009).

This post written by Dan Crisp.

COURT RULES AGAINST CLAIM THAT PARTY-APPOINTED ARBITRATOR IN THREE MEMBER PANEL WAS IMPARTIAL

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Employers Insurance Co. of Wausau brought a petition in Wisconsin Federal Court, in connection with an arbitration proceeding arising from a reinsurance dispute, seeking to have the Court appoint the neutral third arbitrator as the parties’ chosen arbitrators were unable to do so. The respondents cross-petitioned, alleging that (1) enforcement of the arbitration provision was barred by the statute of limitations, estoppel and laches; and (2) the respondents’ party-appointed arbitrator was not impartial and should be disqualified. The Court granted the petition and appointed a neutral third arbitrator, and denied the cross-petition in its entirety, finding that the questions about statutes of limitations and laches should be arbitrated and that there was no showing that the respondents’ selected arbitrator was biased. The cross-petitioners moved for reconsideration of the Order, which motion was denied by Order dated October 23, 2009. The cross-petitioners thereafter filed Notice of Appeal to the Seventh Circuit Court of Appeals. Employers Insurance Company of Wausau v. Certain Underwriters at Lloyds of London, No. 09-cv-201 (W.D. Wis. Sept. 28, 2009).

This post written by John Pitblado.

SUIT AGAINST LLOYD’S DISMISSED FOR LACK OF JURISDICTION BECAUSE ONE OF THE NAMES SHARED CITIZENSHIP WITH PLAINTIFFS

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A federal district court granted the motion of certain underwriters at Lloyd’s of London to dismiss the suit for lack of subject matter jurisdiction, holding that when determining the diversity of citizenship of the parties in a case involving Lloyd’s, all the “names” must be taken into consideration. When federal jurisdiction is founded on 28 U.S.C. § 1332, the parties must be diverse in their citizenship, so that each defendant is a citizen of a state different from each plaintiff. In this case, the plaintiffs, citizens of Louisiana, claimed that an insurance policy with Lloyd’s covered property damaged in Hurricane Katrina. Lloyd’s presented the court with an unsworn declaration that one of the names on the policy also was a citizen of Louisiana. Rejecting plaintiffs’ technical arguments about the unsworn nature of the declaration, the court dismissed the case because the diversity requirement was not met. St. Charles Property Association v. Certain Underwriters at Lloyd’s London, Case No. 09-2504 (USDC E.D. La. Oct. 2, 2009).

This post written by Brian Perryman.