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Arbitration / Court Decisions

COURT DISMISSES CLAIMS AGAINST AIG FOR LACK OF STANDING

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As reported in our March 27, 2008 and April 6, 2009 posts, The National Council on Compensation Insurance (“NCCI”), as attorney-in-fact for participating companies of the National Workers Compensation Reinsurance Pool (“the Pool”), brought claims against AIG and several of its subsidiaries (“AIG”). The suit generally alleged that payments made by AIG in resolution of charges against it by the New York Attorney General’s office arising from an allegedly fraudulent workers compensation premium accounting scheme, were insufficient to compensate Pool members for their losses.

AIG moved to dismiss the claims brought by NCCI, asserting (1) NCCI lacked standing to bring claims in its capacity as “attorney-in-fact;” (2) NCCI suffered no direct injury; and (3) NCCI did not have associational standing to bring the claims on behalf of individual companies. The Court agreed with AIG, finding that there was no transfer of title or assignment of interest of any affected rights in the agreement Pool members made with NCCI to act as “attorney-in-fact.” The Court also agreed that NCCI suffered no direct injury of its own, and that NCCI could not demonstrate associational standing because of the underlying conflicts between member companies. However, while the Court dismissed the claims, it noted that the litigation continues because individual pool members’ claims were “reassigned for relatedness” to the Court, and those Pool members now seek to bring those claims as a class action. National Council on Compensation Ins., Inc. v. American Int’l Group, Inc., No. 07-C-2898 (USDC N.D. Ill. August 20, 2009).

This post written by John Pitblado.

DISTRICT COURT DENIES AON’S MOTION FOR NEW TRIAL; ADDS INTEREST TO DAMAGES

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We have previously reported on the ongoing action between UNG and Aon for indemnity and contribution. On July 24, 2009, the Eastern District of Pennsylvania decided two post-trial motions arising out of a reinsurance agreement between United National Insurance Co. (“UNG” as plaintiff) and its Italian reinsurer Riunione Adriatica di Sicurta and UNG’s broker, Aon, Ltd. (defendant). In 1999 RAS commenced arbitration seeking to rescind the reinsurance agreement alleging it had been misled by one or both of the other parties. The arbitrator ruled in favor of RAS; UNG subsequently filed the present action for indemnity or contribution against Aon. The jury, applying Pennsylvania law, returned a $16.8 million dollar indemnification verdict for UNG. Following the trial, Aon filed a Motion for Judgment as a Matter of Law or for a New Trial. UNG, for its part, filed a motion for a discretionary grant of interest on its awarded damages.

The district court denied Aon’s motion for a new trial, holding that it was reasonable for a jury to conclude that Aon was in the business of supplying information as a broker (and did so in connection with this reinsurance agreement). The court found no error in the jury’s conclusions, and found it inappropriate to order a new trial. Conversely, the court granted UNG's motion to alter or amend the judgment, finding that an interest award was appropriate under Pennsylvania law, and applied the interest grant to the entire award including attorneys’ fees and costs. The court granted UNG an additional $8.2 million in damages. United Nat’l Ins. Co. v. Aon Ltd., Case No. 04-539 (USDC E.D. Pa. July 24, 2009).

This post written by John Black.

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.