The financial collapse of Reciprocal of America, an insurer and reinsurer, resulted in a number of lawsuits, including a series of lawsuits by policyholders and state Insurance Commissioners in Alabama and in other states against the company's officers and directors. When two officers pleaded guilty to criminal charges relating to the operation of the company, the company's D&O insurer filed a declaratory judgment action, seeking rescission of the policies it had issued. While the actions filed by the policyholders and Insurance Commissioners were granted MDL status, the MDL Panel declined to add the D&O insurer's action to that proceeding. The District Court dismissed the D&O insurer's action, on the basis that it would abstain from hearing the claims in deference to the parallel state court actions. The Fourth Circuit reversed, vacating the decision, finding that the requirements for abstention were not present, and that the rescission action should go forward. Great American Ins. Co. v. Gross, Case No. 05-2069 (4th Cir. Oct. 30, 2006).
Arbitration / Court Decisions
UK Court construes jurisdiction reference in reinsurance slip
The UK Court of Appeals has interpreted a provision in a reinsurance slip that simply said “Jurisdiction Clause” as being essentially meaningless, evidencing an intention to agree upon a jurisdiction clause, where such an agreement was never reached. The Court considered extrinsic evidence, and declined to import a clause from underlying insurance that provided for jurisdiction in Mauritius. The effect of the decision was to permit the courts to apply UK law to the dispute. Dornoch Ltd. v. Mauritius Union Assur. Co., [2005] EWHC 1887 (Comm.) (April 10, 2006).
Court holds that policies covering WTC provided for replacement only
A District Court has held that policies providing property coverage for the World Trade Center (“WTC”) complex , which provided “replacement cost” coverage, provided coverage limited to what it would cost to replace the covered buildings as they stood immediately prior to their destruction, and did not cover additional amounts to make the re-built WTC safe, modern and politically palatable. SR International Business Ins. Co. v. World Trade Center Properties LLC, Case No. 01-9291 (USDC SDNY Oct. 31, 2006).
UPDATE: Argonaut Insurance arbitrator appointment dispute
In an August 24 post, we reported on a District Court decision allowing Lloyds to appoint both arbitrators in a dispute with Argonaut Insurance due to Argonaut not appointing an arbitrator in a timely manner. Argonaut filed a Notice of Appeal of that decision, but the District Court recently entered an Order denying Argonaut's motion for a stay of the enforcement of the decision pending the appeal. This likely means that the arbitration will proceed with the two arbitrators appointed by Lloyds while the appeal proceeds.
District Court adopts Magistrate Judge’s recommendations as to personal jurisdiction
A District Court has entered an Order adopting a Magistrate Judge's Report and Recommendation, denying a motion to dismiss, for lack of personal jurisdiction, filed by a guarantor of a quota share reinsurance agreement. Sirius America Ins. Co. v. SCPIE Indemnity Co., Case no. 05-7923 (USDC S.D.N.Y. Nov. 1, 2006). The Report & Recommendation was the subject of an October 5 posting on this blog. The Order recites that the Court had not received any objections to the Report & Recommendation.