In an unusual twist in a matter unrelated to reinsurance, an arbitration panel awarded a party in a construction dispute approximately $1.4 million, when the Petitioner sought an award of approximately $6 million, and the Respondent’s expert had estimated the losses at approximately $4 million. The parties each filed separate proceedings directed to the award. When the Petitioner’s request for vacation of the award was denied, the Respondent sought to voluntarily dismiss its request for confirmation under Fed. R. Civ. Pro. 41, apparently due to its belief that since the limitation period for confirmation had expired, the award might be unenforceable, and it could try again for a larger award. The district court found the attempted dismissal null and void, and confirmed the award, holding that Rule 41 applied by its terms only to “actions,” and that since requests for confirmation of arbitration awards were motions rather than actions, Rule 41 did not apply. The court proceeded to confirm the award. Alstom Power, Inc. v. S & B Engineers & Constructors, Ltd., Case No. 04-2370 (USDC N.D.Tex. April 30, 2007). The court may have felt that Alstom Power was abusing the Court's process.
Arbitration / Court Decisions
Court Dismisses Shareholder Derivative Suit Against Scottish Re Officers and Directors
A United States District Court, applying the law of the Cayman Islands, has dismissed a shareholder derivative action brought against certain of Scottish Re’s officers and directors, alleging misrepresentations as to the Company’s business and false financial reports in violation of United States securities laws. In accordance with Cayman law, due to the silence of Cayman law as to the relevant issues, the Court consulted English law. Under English law, derivative claims are owned and controlled by the company rather than by its shareholders, and shareholders generally lack standing to bring such claims. Failing to find any applicable exception to this general standing rule, the court dismissed the claims. Winn v. Schafer, Case No. 06-10170 (USDC S.D.N.Y. May 7, 2007).
Law review articles relating to reinsurance
Three articles were recently published in law reviews and journals relating to reinsurance:
- Health care reform – In The Present and Future of Government-Funded Reinsurance, 51 St. Louis U. L. J. 369 (Winter 2007), John Jacobi, a professor at Seton Hall Law School, contends that government-funded reinsurance could play a valuable role in incremental health care reform.
- Reinsurance intermediaries – In Reinsurance Intermediaries: law and litigation, 29 U. Haw. L. Rev. 59 (Winter 2006), Douglas Richmond, a Senior Vice President with Aon Risk Services, analyzes the duties and potential liabilities of reinsurance intermediaries using fairly traditional agency concepts.
- Hedge funds – In The Utility of Hedge Funds: an alternative to traditional reinsurance, 49 For The Defense 32 (April 2007), practitioners James Somers and Katie Lewis Bordeau offer a general description of the participation of hedge funds in the reinsurance market. Although the title of the article describes hedge funds as an “alternative” to reinsurance, the text really describes hedge funds as a source of capital for vehicles such as side cars.
Court affirms dismissal of most claims against Republic of Indonesia and state-owned insurer under Foreign Sovereign Immunities Act
Anglo-Iberia Underwriting Management Company and Industrial Re International sued an employee of the Indonesian state-owned social security insurer, Jamsostek, who while on leave in Colorado studying for an M.B.A. perpetrated an international reinsurance fraud scam that cost the Plaintiffs an estimated $55 million. Plaintiffs also sued Jamsostek and the Republic of Indonesia, alleging that they had breached contractual obligations to Plaintiffs and negligently failed to supervise their employee. The district court had dismissed all claims against Indonesia and Jamsostek based upon the sovereign immunity conferred by the Foreign Sovereign Immunities Act. The Second Circuit addressed the issue of whether the immunity exception for commercial activities applied. The Court of Appeal found that the contract claims were properly dismissed, but that the district court had failed adequately to consider the negligent supervision claim, and remanded for further consideration with respect to that claim. In remanding, the appellate panel set out the standards for the application of the commercial activity exception. Anglo-Iberia Underwriting Management Co. v.Lodderhose, Case No. 03-9260 (2d Cir. May 25, 2007).
Silverstein Properties reaches settlement with seven World Trade Center insurers
New York Governor Eliot Spitzer and Insurance Superintendent Eric Dinallo have assisted in negotiating a settlement of all outstanding insurance claims arising from the destruction of the World Trade Center with seven insurers: Travelers Companies; Zurich American Insurance Company; Swiss Reinsurance Company; Employers Insurance Company of Wausau; Allianz Global Risks US Insurance Company; Industrial Risk Insurers; and Royal Indemnity Company. The amount of the settlement is $2 billion. A press release announcing the settlement states that this will clear the way for construction on the site.