Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Arbitration / Court Decisions

Arbitration / Court Decisions

ARBITRATION AWARD SUMMARILY CONFIRMED WHERE NO DISPUTE ABOUT THE AWARD EXISTED

by

A petition to confirm a $187,000 reinsurance arbitration award was granted where there was no dispute that the court had jurisdiction over the parties and subject matter of the action, or that the claims at issue were properly submitted to the arbitration panel for resolution. In fact, the amount of the award had already been paid. The petitioner apparently wished the award confirmed simply to avoid any doubt in future litigation. That request was granted. Global Reinsurance Corp. v. Argonaut Ins. Co., Case No. 08-8482 (USDC S.D.N.Y. May 22, 2009).

This post written by Brian Perryman.

BREACH OF ORAL PROMISE TO SIGN REINSURANCE AGREEMENT DOES NOT REMOVE THE AGREEMENT FROM THE STATUTE OF FRAUDS’ SIGNING REQUIREMENT

by

ACE Capital Title Reinsurance Company (“ACE”) proposed a joint venture for insurance and reinsurance with Olympic Holding Company, L.L.C., (“Olympic”), but, before signing any agreements, ACE backed out of the venture, and Olympic brought suit. The trial court granted summary judgment for ACE on the breach-of-contract and breach-of-fiduciary-duty claims, but the appellate court reversed, finding that ACE should be equitably estopped from using the statute of frauds as an affirmative defense and that parties to an implied joint venture may incur fiduciary obligations. In reversing the appellate court’s judgment and remanding the action to the trial court, the Ohio Supreme Court held that: (1) the breach of oral promise to sign an agreement did not remove the statute of frauds’ signing requirement, and, thus, promissory estoppel may not be used to bar the statute of frauds; (2) the agreement was unenforceable; and (3) no fiduciary duties were imposed on the parties. Finally, the Ohio Supreme Court stated that Olympic’s claim for reliance damages, still pending in state court, was an adequate remedy to recover damages from relying on an allegedly false promise. Olympic Holding Co., L.L.C., v. ACE Ltd., No. 2009-2057 (Ohio May 7, 2009).

This post written by Dan Crisp.

SUMMARY JUDGMENT AGAINST SWISS RE REVERSED BY THIRD CIRCUIT COURT OF APPEALS

by

As we reported on September 18, 2007, a federal court granted summary judgment to Airport Industrial Park, doing business as P.E.C. Contracting Engineers (“PEC”), as against Swiss Reinsurance America Corp. (“Swiss Re”), the reinsurer of a party with whom PEC contracted on a government construction project, which contracting included a general indemnity agreement (“GIA”). Swiss Re appealed, and the Third Circuit Court of Appeals held in its favor, reversing the trial court and remanding for further proceedings. First, the Circuit Court held that Swiss Re was unambiguously an intended beneficiary of the GIA, as “reinsurers” were explicitly mentioned therein, along with other “affiliates” of the reinsured. Second, the Court held that, even if the GIA was unambiguous, Pennsylvania law nonetheless allows a court to look to the parties’ custom and usage in interpreting a contract’s terms. It then cited material disputes of fact (and a less-than-complete factual record) with regard to the parties’ competing interpretations of the contract vis-à-vis the underlying parties’ custom and usage. Swiss Reinsurance America Corp. v. Airport Industrial Park, Inc., d/b/a P.E.C. Contracting Engineers, No. 07-3749 (3d Cir. May 5, 2009).

This post written by John Pitblado.

TWO RECENT CASES ADDRESS REVERSE-PREEMPTION UNDER THE MCCARRAN-FERGUSON ACT

by

On March 15, 2007, we reported on an Oklahoma district court’s denial of a motion to compel arbitration, finding that an Oklahoma statute prohibiting enforcement of arbitration clauses in insurance contracts controlled pursuant to the McCarran-Ferguson Act. Soon thereafter, the Oklahoma legislature amended the statute excepting reinsurance contracts from the prohibition. On appeal, despite the legislature not specifying whether the amendment would apply retroactively, the Tenth Circuit found that the statute itself was retroactive by its express terms and as interpreted by the Oklahoma Supreme Court, and, after acknowledging that arbitration agreements are contrary to Oklahoma public policy, the Tenth Circuit then found that specific legislative approval rendered the agreements valid and enforceable. Mid-Continent Cas. Co. v. Gen. Reins. Corp., No. 07-5050 (10th Cir. May 22, 2009).

Theodore L. Kessner (“Kessner”), appointed as the Special Deputy Liquidator of an insolvent insurer, filed an action in Nebraska state court seeking to recover on a reinsurance policy issued by One Beacon Insurance Company, which removed the action to federal court based on diversity jurisdiction. Kessner then moved to remand, arguing that the McCarran-Ferguson Act reverse-preempted the federal removal statute. In the Report and Recommendation, the Magistrate Judge concluded that the matters at issue related to the business of insurance and that a proceeding in the district court would likely invalidate, impair or supersede the Nebraska insurer liquidation statutes utilized in the state liquidation proceeding, requiring remand. A short, two paragraph opinion by the District Judge adopted the Magistrate Judge’s Report and Recommendation, with a colorful conclusion that “intervention by a federal court could screw up the comprehensive scheme Nebraska has set up to deal with matters like this one. Federal law has a bias against such meddling.” Kessner v. One Beacon Ins. Co., Case No. 09-3003 (USDC D. Neb. Apr. 20, 2009).

This post written by Dan Crisp.