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New reinsurance-related and arbitration developments from Carlton Fields

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Arbitration / Court Decisions

PERSONAL ACCIDENT REINSURANCE DISPUTE SETTLES FOR $130 MILLION

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On July 29, 2009, we reported on Willis Limited (“Willis”) settling a dispute with American Reliable Insurance Company and Assurant General Insurance Limited over alleged irregularities in Willis’ placement of personal accident reinsurance. Willis has now settled a similar placement dispute with CNA Financial Corporation for $130 million. The settlement includes a release and waiver of all claims and no admission of wrongdoing. Willis has filed a Form 8-K relating to this settlement.

This post written by Dan Crisp.

District Court Finds “Attorney Fees and Court Costs” Ambiguous: Upholds Arbitration Panel

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Following a dispute over eight reinsurance agreements, Century Indemnity moved to confirm in part and vacate in part an arbitration award ordering Fencourt Reinsurance to pay a certain sum owed under the agreements. The paragraph at issue stated that “all other claim for relief are denied,” meaning that Century could not recover interest, attorneys’ fees and court costs under the agreement. The District Court for the Eastern District of Pennsylvania denied Century’s motion to vacate, finding the portion of the agreement concerning interest, fees and costs was ambiguous as it did not explicitly specify whether it applied before or after arbitration proceedings. Accordingly, the arbitration panel’s interpretation was not “completely irrational” nor did the panel exhibit a “manifest disregard” for the agreement. Century Indem. Co. v. Fencourt Reinsurance, Case No. 09-MC-53 (E.D. Pa. July 22, 2009).

This post written by John Black.

ARBITRATORS’ DISREGARD OF CUBAN ASSETS CONTROL REGULATIONS IS GROUND FOR SETTING ASIDE AWARD

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A court has vacated a FINRA arbitration award on the ground that the arbitrators exhibited manifest disregard of controlling law. Plaintiff moved to vacate the arbitration award denying its claims in FINRA proceedings that the defendant sold it Cuban bearer bonds that had been defaulted on in the wake of the 1959 communist revolution. After a two-day evidentiary hearing, the arbitators denied all of plaintiff’s claims. Plaintiff sought to vacate the defendant’s award on the ground that the arbitrators exceeded their powers, urging that they ignored the Cuban Assets Control Regulations, which prohibits transactions involving Cuban assets. The arbitration decision recognized the Regulations as applicable, but made no other mention of them, and made no findings of fact or conclusions of law regarding them. The court therefore awarded plaintiff its principal, compounded at the legal rate of interest. See More Light Investments v. Morgan Stanley DW Inc., Case No. CV 08-580 (USDC D. Ariz. July 29, 2009).

This post written by Brian Perryman.

DISTRICT COURT FINDS NO SUBJECT MATTER JURISDICTION IN AIG SUIT

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The District Court for the District of New Jersey recently granted defendant AIG’s motion to dismiss Robert Plan Corporation’s claims arising out of a series of reinsurance agreements between the parties. The procedural history of the action is complex, and it involves underlying state court action, financial rehabilitation and bankruptcy proceedings. Robert Plan filed a Notice of Removal in January, 2009, and AIG subsequently moved to dismiss for lack of subject matter jurisdiction. The court granted the motion to dismiss, finding that that there was no case or controversy for the court to decide because the underlying state court action had been dismissed by the time plaintiffs filed their notice of removal. Additionally, because the Court found subject matter jurisdiction lacking, it denied as moot Robert Plan’s Motion to Transfer Venue. The Robert Plan Corp. v. American Int’l Group, Case No. 09-200 (D.N.J. Aug. 10, 2009).

This post written by John Black.

SETTLEMENT REACHED IN REINSURANCE FRAUD DISPUTE

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In a December 22, 2008 post, we reported on a group of litigants in two related lawsuits voluntarily withdrawing motions and claims against each other. In one of the lawsuits, the plaintiff, National Indemnity Company (“NIC”), alleged that the defendants schemed to coerce NIC into relinquishing certain contractual rights and the defendants counterclaimed that NIC schemed to defraud the defendants into purchasing certain stock. The judge in this case has since issued an order removing the motion to dismiss and summary judgment motion from the court’s calendar, stating that the parties reached an agreement to settle the claims and counterclaims. National Indem. Co. v. Greenwich St. Invs. II, LLC, Case No. 08-4067 (USDC S.D.N.Y. Aug. 26, 2009).

This post written by Dan Crisp.