Reinsurance Claims

MOTION FOR RECONSIDERATION OF PARTIAL SUMMARY JUDGMENT DENIED CONCERNING LIABILITY CAP ON REINSURANCE CERTIFICATES

May 27, 2015 by Carlton Fields

A district court in New York denied an insurer’s motion for reconsideration of a partial summary judgment order in favor of the reinsurer that concluded that the reinsurance limits set forth nine certificates of reinsurance at issue in the case were inclusive of costs and expenses, and created an overall cap of liability on the certificates. The insured moved for reconsideration of the district court’s opinion based on the Second Circuit’s intervening unpublished opinion, not to be cited as precedent, in Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc., 594 F. App’x 700 (2d Cir. 2014). The district court denied the motion for reconsideration because the insurer conceded that the Utica decision represented an important clarification of existing law and was not in of itself an intervening change in law. Thus, the insurer failed to point to any change in controlling law or any new evidence that might reasonably be expected to alter the conclusion reached by the Court in granting the reinsurer’s partial summary motion. Global Reinsurance Corp. v. Century Indemnity Co., Case No. 13 Civ. 06577 (USDC S.D.N.Y. April 15, 2015).

This post written by Kelly A. Cruz-Brown.

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REINSURERS’ MOTION TO VACATE ARBITRATION AWARD HELD TIME-BARRED

May 26, 2015 by Carlton Fields

A federal judge in New York has denied reinsurers’ motions for relief from a prior judgment. The reinsurers, Equitas Insurance Limited and Certain Underwriters at Lloyd’s of London, argued that they were entitled to judicial relief because the insured, Arrowood Indemnity Company, procured an arbitration award later confirmed by the Southern District through fraud. Arrowood entered into a casualty reinsurance agreement with the underwriters. To recover under this agreement, claims needed to fall within one of three types of coverage. The underwriters denied a series of Arrowood’s asbestos claims under the “Common Cause Coverage” because it believed that the asbestos claims needed to be noticed during the original contract period. The parties submitted the matter to arbitration, where the panel agreed that Arrowood’s interpretation of the contract: that Common Cause Coverage was intended only to prevent recovery on known losses whose “common cause” occurred before the term of the original contract. The court confirmed the award.

Months later, the underwriters obtained a letter produced by Arrowood in a separate action that revealed Arrowood interpreted the Common Cause Coverage clause in the same way the underwriters had posited in the previous arbitration. The underwriters filed a motion seeking to relieve it from the judgment because of fraud. While relief on this basis under the Federal Rules of Civil Procedure is not time-limited, similar relief under the Federal Arbitration Act imposes a time limit – a motion to vacate an arbitration award must be served upon the adverse party within three months after the award is filed or delivered. Because the Act trumps civil rules when those rules conflict, the underwriters were time-barred. Arrowood Indemnity Co. v. Equitas Insurance Ltd., Case No. 13 Civ. 7680 (USDC S.D.N.Y. May 14, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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SUMMARY JUDGMENT OVERTURNED IN COVERAGE DISPUTE

May 14, 2015 by Carlton Fields

In late April, the Indiana Supreme Court held that Continental Casualty Company (“CNA”) must provide insurable relief for Anthem Insurance Companies, Inc. (“Anthem”), reversing a lower court decision. Anthem’s expenditures were covered under their excess reinsurance policy.

Anthem, which later merged with co-defendant WellPoint Inc., was originally subject to multiple lawsuits in Florida and Connecticut for failing to pay claims in a timely manner, breach of state and federal statutes, breach of good faith and fair dealing, unjust enrichment, negligent misrepresentation, and violations of Racketeer Influenced and Corrupt Organizations Act. Anthem later settled, without admitting wrongdoing or liability, a multi-district litigation that consolidated the various state actions. Anthem then sought indemnification from their reinsurers.

Anthem self-insured E&O liability coverage and also purchased additional reinsurance coverage. CNA and other implicated excess reinsurers denied coverage for Anthem’s underlying litigation expenses. The trial court granted summary judgment in favor of CNA. Twin City Fire Insurance Company (“Twin City”) later joined that verdict. A court of appeals affirmed that decision.

CNA argued that (1) Anthem’s alleged conduct was not solely in performance of “Professional Services,” a requirement under their reinsurance agreement; (2) that Anthem’s coverage relief was barred under Indiana public policy; and (3) Anthem’s alleged conduct was barred under the reinsurance agreements “dishonest or fraudulent act or omission” exception. The court found that Anthem’s coverage extended to “loss of the insured resulting from any claim or claims…for any Wrongful Act of the Insured…but only if such Wrongful Act…occurs solely in the rendering of or failure to render Professional services.” The court found that Anthem’s alleged conduct fit under this guidance, as the conduct was a part of Anthems handling of health claims. The court also noted a strong presumption for the enforceability of contracts, especially between CNA and Anthem, both sophisticated parties. For these and other reasons, the court reversed the trial court and granted in large part, summary judgment for Anthem.

WellPoint, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 49S05-1404-PL-244 (Ind. Apr. 22, 2015).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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DISTRICT COURT DISMISSES BREACH OF CONTRACT CLAIM, ALLOWS BREACH OF DUTY OF UTMOST GOOD FAITH CLAIM IN REINSURANCE DISPUTE

May 6, 2015 by John Pitblado

The District Court for the Middle District of Florida recently held that defendant First American Title Insurance Company (“First American”) could maintain its breach of the utmost duty of good faith counterclaim against plaintiff Old Republic National Title Insurance Company (“Old Republic”), but that it could not countersue Old Republic for breach of contract. First American alleged that Old Republic breached the Reinsurance Agreement (“Agreement”) the parties shared by 1) paying First American under a reservation of rights to assert claims against First American, 2) disputing Old Republic’s obligation to pay First American, and 3) improperly trying to claw back the $3.8 million payment. The court held that First American’s claims were insufficient because the Agreement did not explicitly prohibit Old Republic’s actions, a necessary basis for a breach of contract claim. The court did, however, find sufficient First American’s claim that Old Republic breached the utmost duty of good faith. As the court noted, “generously construing First American’s allegations under this count in conjunction with its claim that Old Republic breached the Reinsurance Agreement by failing to pay its share of defense costs,” the pleaded facts for First American’s “utmost good faith” claim were sufficient to survive the motion to dismiss stage.

Old Republic Nat. Title Ins. Co. v. First American Title Ins. Co., No. 8:15-cv-126-T-30EAJ, 2015 WL 1530611 (USDC M.D. Fla. Apr. 6, 2015)

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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PENNSYLVANIA COURT DENIES MOTION FOR SUMMARY JUDGMENT OVER FACULTATIVE REINSURANCE CERTIFICATES

May 4, 2015 by Carlton Fields

The Court of Common Pleas of Philadelphia County denied defendant OneBeacon Insurance Company’s (“OneBeacon”) motion for summary judgment against plaintiffs Century Indemnity Company (“Century”) and Pacific Employers Insurance Company (“Pacific”). Century and Pacific, which held reinsurance policies issued by OneBeacon, sued the reinsurer to recover expenses in addition to the stated policy limits and to recover an award of interest on the payments received. OneBeacon sought summary judgment on two grounds: 1) that the limit stated in the parties’ reinsurance certificates placed a total cap on its liability, and 2) that plaintiffs were not entitled to an award of interest on payments. The court denied OneBeacon’s motion. First, the court determined that certain conditions placed on premiums in the reinsurance certificates meant that the premium was subject to a condition that excluded expenses in calculating the total loss limit. “If anything,” the court noted, “the terms of the certificates may have created a presumption of expense-exclusiveness.”

Second, the court denied defendant’s motion for summary judgment on collateral estoppel grounds. OneBeacon cited two prior district court cases that considered the “limit-of-liability” issue, but the court held that this legal authority did not “hold the necessary weight of final judgments at this juncture in order to apply collateral estoppel against plaintiffs.” Finally, because the court had already granted plaintiffs’ separate motion for summary judgment on payments of interest, it denied OneBeacon’s motion on that issue as well. Century Indem. Co. v. OneBeacon Ins. Co., No. 02928 (Pa. Com. Pl. Mar. 27, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

See our disclaimer.