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.
Arbitration / Court Decisions
UK Court interprets loss notification provision of reinsurance agreement
A Justice of the Queen's Bench Division of the UK Commercial Court has interpreted a loss notification provision of a reinsurance agreement to permit the reinsured to recover under the agreement. The analysis used by the Court is similar in some respects to how courts in the United States interpret insurance policies. AIG Europe (Ireland) Limited v. Faraday Capital Limited, [2006] EWHC 2707 (Comm) (Oct. 31, 2006).
North Korea suspected of massive reinsurance fraud
One of the more intriguing articles about reinsurance recently has been one which suggests that North Korea may be engaged in massive reinsurance claim fraud to generate hard currency for its ailing economy. All insurance in North Korea is written through one state-owned company, which reinsures the risks through Lloyds and non-Lloyds reinsurance companies. It is suspected that North Korea has been submitting bogus claims and claims with phony documentation, encompassing losses aggregating as much as $150 million. The closed nature of the society prevents reinsurers or claims agents from investigating the losses. This is interesting reading at Foxnews.com (until they archive the link).
Courts continue strict approach to confirmation of arbitration awards
Two recent opinions continued the trend of courts confirming arbitration awards over a variety of objections:
- In Kuest v. Citigroup Global Markets, Inc., (USDC W.D. Wash. Nov. 14, 2006), an NASD arbitration award was confirmed over contentions that it was irrational and exhibited a manifest disregard of law. The Court found that the Petition to Vacate the award merely complained about evidence rulings by the Arbitration Panel and its weighing of the evidence.
- In Millenium Validation Services, Inc. v. Thompson, (USDC D. Del. Nov. 3, 2006), an arbitration award relating to a shareholder agreement was confirmed, rejecting five grounds proposed for the vacation of the award: (1) the arbitrator exceeded his authority by rejecting the “binding valuation” of the objector's accountant; (2) the award contained “evident material miscalculation of figures;” (3) the arbitrator refused to consider pertinent evidence, amounting to a manifest disregard of law; (4) the arbitrator refused to consider an alleged breach of a contractual provision; and (5) the arbitrator exceeded his authority with respect to attorneys' fees and costs.
These opinions are further examples of courts viewing such complaints as nothing more than impermissible re-argument of the merits of the arbitration under different guises.
Court remands matter to arbitrators for clarification of award
Parties to a reinsurance arrangement arbitrated their disputes, and a question later arose as to whether the conduct of one of the parties was in compliance with the terms of the award entered by the arbitration panel. Finding that the arbitration award was ambiguous, a District Court remanded the dispute to the arbitration panel for clarification of the award, so that the Court could appropriately enforce the award. Security Ins. Co. of Hartford v. Trustmark Ins. Co., Case No. 03-1000 (USDC D. Ct. Nov. 13, 2006).