In Positive Software Solutions, Inc. v. New Century Mortgage Corp., No. 04-11432 (Jan. 11, 2006), the United States Court of Appeals for the Fifth Circuit (in a case which did not involve reinsurance) affirmed the judgment of a District Court vacating an arbitration award due to the failure of the sole arbitrator to disclose that his law firm served as co-counsel in an unrelated case with counsel for one of the parties in 1990 – 1996. The Court found that the failure to disclose the prior relationship created a reasonable impression of possible partiality that warranted vacating the arbitration award. The evidence was undisputed that the party against which the arbitration award had been entered did not know of the relationship until after the entry of the award. On May 5, 2006, the Fifth Circuit granted a petition for rehearing en banc, setting the matter for argument in September 2006.
Arbitration / Court Decisions
Motion to transfer venue in reinsurance case denied
The United States District Court for the Western District of Missouri denied a motion by a defendant/reinsured to transfer venue of a case involving reinsurance claims, finding that the movant had not made a clear showing that the balance of interests weighed in favor of transfer. Employers Reinsurance Corp. v. Mass. Mutual Life Ins. Co., No. 06-0188 (May 4, 2006).
UK Court of Appeals speaks on the materiality standard for contract avoidance
In North Star Shipping Ltd v Sphere Drake Insurance Plc, [2006] EWCA Civ 378 (April 7, 2006), the UK Court of Appeals stated that when a party seeks to avoid insurance on the basis of the non-disclosure of a “material circumstance,” a material circumstance “is one that would have an effect on the mind of a prudent insurer in estimating the risk and it is not necessary that it should have a decisive effect on his acceptance of the risk or the amount of premium to be paid.” Id., paragraph 18.
Stay of confirmation of arbitration award due to insolvency denied
In Century Indemnity Company v. Paladin Reinsurance Corp., Civil Action No. 05-3755, in the United States District Court for the Eastern District of Pennsylvania, the Court denied a motion to stay the confirmation of an arbitration award on equitable or prudential grounds, due to the insolvency of the party against which the award had been entered. The Court rejected the arguments that confirmation would provide the holder of the award an unfair advantage over other creditors, or that confirmation would interfere with ongoing regulatory proceedings before the New York Insurance Department.
Finite Reinsurance Case Development
The Court hearing a criminal case involving finite reinsurance transactions involving American Internaitonal Group and General Reinsurance has granted a motion to transfer the case from the Eastern District of Virginia to the District of Connecticut. United States v. Ferguson, et al., Criminal Action No. 1:06-33, in the Untied States District Court for the Eastern District of Virginia (April 10, 2006).