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New reinsurance-related and arbitration developments from Carlton Fields

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Arbitration / Court Decisions

UK COMMERCIAL COURT DENIES LIBYAN INSURER’S CLAIMS AGAINST LONDON BROKER

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In 2004, Aon (a London broker) placed reinsurance for risks that United Insurance Company (a Libyan insurance company) assumed in insuring assets of a Libyan state-owned oil company. Aon also obtained reinsurance for United in relation to a Libyan company in the chemicals industry. Aon placed the business in the London market. After renewing the business in 2005, United brought three claims against Aon. United sought to recover brokerage fees paid to Aon on the basis that Aon misrepresented the nature of cover, commissions, and fees. United was unsuccessful on all of its claims. The Commercial Court found that United’s evidence did not match the relevant contemporary documents and was contradicted by Aon’s evidence. United Insurance Co of Libya v. Aon Ltd., [2007] EWHC 1583 (Comm. July 5, 2007). This opinion is not on the UK Court site, but is available on WESTLAW at 2007 WL 1942745.

This post written by Lynn Hawkins.

COURT FINDS ARBITRATION CLAIMS BARRED BY PRIOR CLASS SETTLEMENT

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Plaintiffs allegedly suffered losses relating to stock options in WorldCom stock. They filed an NASD arbitration asserting claims, and were members of a class certified with respect to WorldCom stock losses. The class action settled and the proposed settlement received final approval one month before the arbitration hearing. The Claimants in the arbitration were members of the settlement class and had not excluded themselves from the class. The settlement's final approval Order included a fairly typical release of claims and an injunction against class members maintaining or participating in legal proceedings seeking to pursue claims that were released by the settlement. The arbitration proceeded, and Claimants recovered an award, at least part of which was for losses released by the class settlement. Both the District Court and the Court of Appeals found that the award should be vacated to the extent that it awarded damages for claims that had been released by the class settlement. Rich v. Spartis, No. 06-1723 (USCA 2d Cir. Feb. 8, 2008).

This post written by Rollie Goss.

LONDON MARKET RESEARCH TOOL

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A subscription-only reporting service on the London reinsurance market cases is available at Lloyd’s Law Reports: insurance and reinsurance, with commentaries on cases by Ian Hunter (QC) and Professor Robert Merkin.  This company also sells a reinsurance treatise titled Reinsurance Practice and the Law.

This post written by Rollie Goss.

‘FOLLOW THE SETTLEMENTS’ LIMITED TO COVER PROVIDED BY SLIP’S TERMS

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According to a recent decision from the UK Commercial Court, a reinsurer’s obligation to “follow the settlements” of its cedent does not apply when the reinsurance contract contains terms making its scope narrower than the original policy. In this case, the cedent, Aegis, sought to recover from its reinsurer, Continental Casualty Company (“CCC”), for claims arising from incidents at an oil refinery. Aegis had settled the claims made by the refinery owner. CCC denied the claim relying on the fact that additional conditions and definitions relating to boiler and machinery cover were attached to the slip which, if found to apply to the entire contract, would exclude recovery. The same definitions did not appear in the underlying policy. The Court found against Aegis on the issue of contract interpretation, and held that since the original policy and the reinsurance policy were not entirely “back to back,” Aegis could not rely on the follow the settlements provision. Aegis Electrical and Gas International Services Co. Ltd. v. Continental Casualty Company, [2007] EWHC 1762 (Comm. July 25, 2007). This opinion is not available on the UK Court site, but is available on WESTLAW at 2007 WL 2041964.

This post written by Lynn Hawkins.

FEDERAL DISTRICT COURT RULES ON FINRA ARBITRATION DISPUTE

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The individual defendants in this matter each brought claims against Plaintiff in arbitration through Defendant FINRA. Plaintiff disputed its obligation to arbitrate and refused to execute the Uniform Submission Agreement required by FINRA. Plaintiff filed a first-amended complaint in the Southern District of Ohio seeking declarative and injunctive relief regarding the duty to arbitrate. Defendants moved to dismiss. The Court granted Defendants’ motions to dismiss. Relying on Sixth Circuit authority which held that the Federal Arbitration Act forbids immediate appeals of interlocutory orders, the court concluded that the Plaintiff was in fact seeking a review of interlocutory orders compelling Plaintiffs to sign the submission agreement. The Court also denied Plaintiffs request for injunctive relief. O.N. Equity Sales Company v. FINRA Disipute Resolution, Inc., Case No. 1:07cv804 (USDC S.D. Ohio).

This post written by Lynn Hawkins.