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Arbitration / Court Decisions

SPECIAL FOCUS: EXPANDED VIEW OF ARTHUR ANDERSEN V. CARLISLE

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Blogmaster Roland Goss is now a regular contributing editor to Harris Martin's Reinsurance publication, contributing articles on arbitration-related issues. We publish his first contribution to Reinsurance here, which is an expanded look at the Supreme Court's decision in Arthur Andersen v. Carlisle, which we previously posted on. The article describes the Circuit conflict that gave rise to this opinion as well as the Court's holding that a non-party to an arbitration agreement may appeal the denial of a motion to stay pending arbitration under the Federal Arbitration Act.

This post written by Rollie Goss.

ARBITRATION AWARD NOT SUBJECT TO REVIEW WHILE REMEDY ISSUE IS PENDING

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Prior to the parties remanding the case for the determination of a remedy, the American Postal Workers’ Union (“APWU”) filed a complaint in federal court alleging that the United States Postal Service (“USPS”) had not unequivocally stated it would comply with the award, which constituted a breach of the collective bargaining agreement. The USPS moved to dismiss for lack of jurisdiction, which the district court granted, reasoning that an award postponing the determination of a remedy is not final and binding and, thus, is not subject to review. The court also stated that the APWU has not shown the exhaustion of remedies to be unworkable. American Postal Workers’ Union v. United States Postal Serv., Case No. 08-2200 (USDC D.D.C. July 14, 2009).

This post written by Dan Crisp.

APPEALS COURT DISMISSES CLAIMS AGAINST REINSURER AS UNRIPE

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New Hampshire Insurance Company brought suit in the Turks and Caicos Islands against its reinsurer, Magellan Reinsurance Company, claiming that Magellan failed to properly fund a trust set up by the parties with a Texas bank, for the deposit by Magellan of all unearned premium reserves plus outstanding loss reserves at the end of each quarter. The premiums derived from a book of vehicle service contract reimbursement policies. New Hampshire, under the terms of the reinsurance agreement, was entitled to withdraw the funds for certain purposes specified in the reinsurance agreement. New Hampshire claimed that Magellan underfunded the trust by approximately $1.4 million. Reversing the holding of the Chief Justice of the Privy Council, the Court of Appeals held that New Hampshire lacked standing to presently pursue the claim, essentially on grounds of ripeness, insofar as it failed to establish any legal right to withdrawal of the amount of funds it claimed were improperly withheld, for any of the specific purposes of withdrawal set forth in the reinsurance agreement. Rather, it merely established that such legal claim of right to those funds would accrue in the future. The appeal was thus dismissed. New Hampshire Ins. Co. v. Magellan Reinsurance Co. Ltd., [2009] UKPC 33 (July 15, 2009)

This post written by John Pitblado.

SELF-INSURER GROUP NOT ENTITLED TO COVERAGE THROUGH STATE INSURANCE GUARANTY ASSOCIATION

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On February 9, 2009, we reported on a Louisiana appellate court holding that the Louisiana Safety Association of Timbermen Self-Insurers Fund (the “Fund”) was entitled to coverage because the Fund was not an insurer and the excess coverage obtained by the Fund from Reliance Indemnity Company, which became insolvent in 2001, was not reinsurance. In this case, the Supreme Court of Louisiana reversed the judgment of the appellate court. First, the court held that the Fund was an insurer based on the court’s interpretation of state statutes and the Fund’s formative documents, which undertook to indemnify members for the full amount of workers’ compensation claims, which members paid premiums and assessments to the Fund for that purpose. Second, in finding that the excess coverage was reinsurance, the court determined that the contractual relationship between the Fund and the insolvent insurer presented a classic instance of reinsurance. Louisiana Safety Assoc. of Timbermen Self-Insurers Fund v. Louisiana Ins. Guaranty Assoc., Case No. 2009-0023 (La. June 26, 2009).

This post written by Dan Crisp.

SELF-INSURED EMPLOYERS HELD NOT TO BE “INSURERS” FOR PURPOSES OF INSURANCE GUARANTY LAWS

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The Nevada Supreme Court held that two employers (MGM and Steel Engineers), who operated as self-insured employers under the state’s workers’ compensation act, were not barred from recovering reimbursement from the Nevada Insurance Guaranty Association because they were not “insurers” for purposes of the act. Thus, they could recover payment for their covered workers’ compensation claims payable by their insolvent excess insurance carrier, for which the Association was otherwise liable. If MGM or Steel Engineers had been deemed “insurers,” their claims would have been outside the scope of “covered claims,” and the Association would not have covered them. Uncertain as to the meaning of the term “insurer,” the Association sought a declaration of its obligations. The trial court held that MG and Steel Engineers were “insurers” and precluded them from seeking reimbursement. But the Supreme Court reversed and remanded, holding that the term “insurer” has a plain meaning, and that MGM and Steel Engineers did not fall within a reasonable connotation of the term, since they were mere employers, and did not engage in the business of insurance. MGM Mirage v. Nevada Insurance Guaranty Association, No. 49445 (Nev. June 25, 2009).

This post written by Brian Perryman.