Arbitration / Court Decisions

COURT DENIES MOTION TO COMPEL PRODUCTION OF REINSURANCE INFORMATION

October 15, 2008 by Carlton Fields

This case arises out of a state court lawsuit asserting claims from a motor vehicle accident, in which Bituminous Casualty sought a declaratory judgment that it did not owe its insured, the defendant in the state court action, a defense under its policy. The plaintiff in the state court action, which was not insured by Bituminous, sought the production of Bituminous’ reinsurance agreements and correspondence with its reinsurers. Although the court compelled the production of other documents, it denied the motion to compel to the extent that it sought information about Bituminous’ reserves, reinsurance agreements and other documents relating to reinsurance. Bituminous Cas. Corp. v. Smith Bros., Inc., Case No. 2:07-cv-354-KS-MTP (USDC S.D. Miss. Sept. 22, 2008).

This post written by Dan Crisp.

MCCARRAN-FERGUSON ACT DOES NOT PERMIT STATE LAW TO INVALIDATE CONTRACTUAL PROVISION FOR ARBITRATION UNDER INTERNATIONAL TREATY

October 14, 2008 by Carlton Fields

Plaintiff Louisiana Safety Association of Timbermen – Self Insurers (“LSAT”) filed an action in federal district court in Louisiana seeking to enforce the assignment of a reinsurance contract entered into between its predecessor in interest, Safety National Casualty Corporation (“SNCC”), and SNCC’s reinsurer, Certain Underwriters at Llloyd’s, London (“Lloyd’s”). Lloyd’s refused to recognize the attempted assignment by SNCC to LSAT of SNCC’s rights under the reinsurance contract on the ground that the reinsurance pertained to underlying personal injury claims under workers compensation insurance, and thus were non-assignable rights.

Lloyd’s sought, in response to LSAT’s suit, an order referring the matter to arbitration, as required under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”). The Convention, an international treaty, requires that courts of signatory states “shall, at the request of one of the parties, refer the parties to arbitration. . .” LSAT contended that a Louisiana statute barring mandatory arbitration provisions in insurance contracts reverse-preempted the Convention, under the McCarran-Ferguson Act. The district court granted summary judgment to LSAT, finding that the Louisiana statute supersedes the Convention. Lloyd’s appealed. The Fifth Circuit reversed, holding that while McCarran-Ferguson reverse-preempted “Acts of Congress,” that term did not encompass international treaties, which controlled in the face of contrary state law. Safety Nat’l. Cas. Corp. v. Certain Underwriters at Lloyd’s, London, et al., No. 06-30262 (5th Cir. Sept. 29, 2008).

This post written by John Pitblado.

COURT GRANTS PARTIAL SUMMARY JUDGMENT TO REINSURER ON CLAIMS OF TORTIOUS AND FRAUDULENT CONSPIRACY AND CONCEALMENT

October 13, 2008 by Carlton Fields

Plaintiff Mike Robinson and other selling agents of Commonwealth National Life Insurance Company (“Commonwealth”) brought claims against Guarantee Trust Life Insurance Company (“GTL”) arising from an Assumption Reinsurance Agreement entered into between Commonwealth and GTL. Under the reinsurance agreement, GTL assumed certain of Commonwealth’s Medicare supplement policies, as well as Commonwealth’s obligations to its agents who originally placed the policies. The plaintiffs alleged that through its agreements and in conspiracy with Commonwealth, GTL improperly avoided payment of commissions.

The district court granted partial summary judgment to GTL, finding that there was no evidence GTL was obligated to continue paying commissions on inactive or replaced Commonwealth policies, but found that there were genuine issues of fact pertaining to whether the plaintiffs were third party beneficiaries under the reinsurance agreement. GTL later moved again for partial summary judgment on such claims as tortious and fraudulent conspiracy and concealment, and the court found that those claims were unsupported by evidence of any prior knowledge of or conduct by GTL relating to the inactive and replacement Commonwealth policies, and granted partial summary judgment in GTL’s favor. Robinson v. Guarantee Trust Life Ins. Co., Case No. 2:00-CV-243-B-B, et al. (N.D. Miss. Sept. 22, 2008).

This post written by John Pitblado.

COURT RULES ON MOTIONS IN LIMINE IN CASE AGAINST REINSURANCE BROKER FOR NEGLIGENT MISREPRESENTATION

October 9, 2008 by Carlton Fields

On April 24, 2008, we reported on a reinsurance broker’s failed bid to take an interlocutory appeal from a federal district court’s denial of its motion for summary judgment in a case alleging that the broker negligently presented misinformation to the plaintiff reinsurer. Since that time, the parties filed, and the court ruled on, a number of motions in limine to exclude certain evidence at trial:

(1) The broker’s motion to preclude evidence of “pure omissions” and evidence of alleged misrepresentations not presented at a prior arbitration was denied. Among other things, the court rejected the argument that the information supplied by the broker was necessarily complete in itself. It was for the jury to decide whether the information was misleadingly incomplete.

(2) The broker’s motion to preclude the use of an expert’s supplemental report as untimely disclosing all the expert’s underlying data was also denied. The court, however, did allow the broker the opportunity to allow a supplemental deposition on the new data.

(3) The record of a prior arbitration between the plaintiff and a non-party, including the reports of two experts submitted in the arbitration, was precluded in part because it appeared to be hearsay not covered by an exception.

(4) The plaintiff’s motion to preclude the testimony of an expert who intended to ruminate on what the arbitral panel might have been thinking was excluded as purely speculative.

(5) A motion to exclude two English legal decisions as inadmissible hearsay was denied. The broker successfully argued that its expert properly referenced the foreign decisions as establishing the basis of industry practices and was therefore admissible under Federal Rule of Evidence 703.

United National Insurance Co. v. Aon Ltd., Case No. 04-539 (USDC E.D. Pa. Aug. 7, 2008).

This post written by Brian Perryman.

UNDERLYING INSURED DENIED RIGHT TO SEEK DISCOVERY FROM FORMER REINSURER

October 7, 2008 by Carlton Fields

A reinsurer successfully appealed a Connecticut court’s ruling granting plaintiffs, the underlying insured, a bill of discovery. In December 2000, the plaintiff, H&L Chevrolet, purchased an insurance policy from National Warranty Insurance Group (“National Warranty”). At that time, the defendant, Berkley Insurance Company, reinsured National Warranty for certain losses, including losses that might arise from the policy issued to H&L. Unbeknownst to H&L at the time it purchased coverage, the reinsurance policy issued by the defendant was scheduled to expire (and did expire) on January 1, 2001. In mid-2003, National Warranty filed a petition for bankruptcy and ceased making payments to H&L for claims made.

Plaintiffs filed a petition for a bill of discovery, seeking from the defendant disclosure of documents and other information concerning its reinsurance agreement with National Warranty. The appellate court concluded that plaintiffs did not meet their burden of demonstrating that probable cause existed to bring a cause of action for breach of contract, fraud, or violation of the Connecticut Unfair Trade Practices Act against the defendant, nor did plaintiffs demonstrate that they were third party beneficiaries to the reinsurance contract. The court’s based its decision largely on the fact that the reinsurance contract expired on January 1, 2001, more than two years prior to the time National Warranty ceased making payments. H and L Chevrolet, Inc., et al., v. Berkley Ins. Co., No. 27670 (Ct. App. Ct. September 23, 2008).

This post written by Lynn Hawkins.