Reinsurance Claims

INSURER LOSES MOTION FOR RECONSIDERATION ON ORDER LIMITING REINSURER’S LIABILITY

April 29, 2015 by Carlton Fields

On a motion for reconsideration of a summary judgment entered against it, on which we previously reported, Century Indemnity Company urged a New York federal court to review its order in light of a subsequent decision by a different judge. The ruling Century sought to reverse concluded that the reinsurance limits set forth in each certificate of insurance issued by its reinsurer, Global Reinsurance Corporation of America, were inclusive of costs and expenses and created an overall cap of liability. The intervening decision Century brought to the Court’s attention was Utica Mutual Insurance Co. v. Munich Reinsurance American, Inc., an unpublished 2014 decision by the Second Circuit. Century’s motion was denied. The Utica decision was not controlling law and Century did not introduce new evidence. In addition, Utica would not require a different conclusion given that it was based on the particular language in the certificates in that case, which differed from the language of the certificates issued by Global. Specifically, the language in the certificates in the Utica case made losses and damages subject to the certificates’ limit of liability, but did not include a similar provision for “loss expenses.” Global’s certificates provided a total cap for liability and did not differentiate between reinsurance accepted for loss versus reinsurance accepted for expenses. Global Reinsurance Corp. of America v. Century Indemnity Co., No. 13 Civ. 06577 (USDC S.D.N.Y. Apr. 15, 2015).

This post written by Brian Perryman.

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COURT AFFIRMS ARBITRATION PANEL’S $14 MILLION AWARD IN FAVOR OF INSURED IN REINSURANCE DISPUTE OVER ASBESTOS CLAIMS

April 28, 2015 by Carlton Fields

A federal district court has confirmed a $14 million arbitration award entered in favor of Amerisure against its reinsurer Everest. As we earlier reported, the court had previously denied the motion to seal briefing associated with Amerisure’s motion to confirm the award. Now at issue was the confirmation, modification, or vacatur of the award, which directed Everest to indemnify Amerisure for its share of asbestos losses that fell within the parties’ reinsurance treaties. Everest moved to vacate the award on several grounds, including an arbitrator’s “evident partiality” in the proceedings and the panel’s allegedly erroneous procedural and evidentiary rulings. At the core of the reinsurance dispute was whether Amerisure could aggregate individual asbestos losses into a single occurrence in order to exceed the applicable retention and thereby qualify for indemnification under the reinsurance treaties. The panel held that Amerisure could aggregate the losses by relying, in part, on what it found to be the “commonly accepted” business of treating multiple asbestos losses as a single occurrence. The panel rejected the argument that Amerisure’s claim was precluded or undercut by the fact that the underlying claims were settled as individual losses and further discounted the expert opinion testimony offered by Everest as unpersuasive. The district court, in turn, affirmed the award, rejecting all arguments of partiality or erroneous rulings. While Everest had established the panel exceeded its powers in one respect, it did not find that warranted vacatur or modification of the award. Amerisure Mutual Insurance Co. v. Everest Reinsurance Co., Case No. 14-cv-13060 (USDC E.D. Mich. Mar. 18, 2015).

This post written by Renee Schimkat.

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COURT DENIES INSURER’S REQUEST TO ARBITRATE

April 27, 2015 by Carlton Fields

In a case involving a dispute arising from a fire at the Wisconsin County Courthouse, a Wisconsin federal court issued an order denying Lexington Insurance Company’s motion to participate in an arbitration between the two insurers primarily responsible for the losses. Lexington argued it was an excess insurer (or reinsurer – the parties disagreed) for the policy issued by the State of Wisconsin Local Government Property Insurance Fund insuring the county. In addition to coverage afforded by the Fund, the county was also insured by Cincinnati Insurance Company for losses to cover machinery and equipment that might not otherwise be covered by the Fund’s policy.

The Fund and the Cincinnati policies included a joint loss agreement (“JLA”) which provided that in the event of a dispute, the insurers would pay half of the disputed amount to their insured, the county, and arbitrate the dispute thereafter. The county took advantage of this provision. Lexington then sought to intervene in the ensuing arbitration, arguing that while its policy did not include a joint loss agreement, it was a follow-form policy which included that provision. The court agreed with Lexington, finding that although the Lexington policy was “a little strange,” it expressly stated it was a follow-form policy to the Fund’s policy and, further, it did not expressly exclude or supersede the joint loss agreement. The court, however, disagreed with Lexington’s view that it was entitled to participate in the arbitration between the Fund and Cincinnati. The joint loss agreement did not apply in this case because it did not apply to Lexington or allow for Lexington’s participation in the arbitration. State of Wisconsin Local Government Property Insurance Fund v. Lexington Insurance Co., Case No. 15-CV-142-JPS (USDC E.D. Wis. Apr. 17, 2015).

This post written by Brian Perryman.

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SECOND CIRCUIT AFFIRMS APPLICATION OF ILLINOIS NOTICE/PREJUDICE RULE IN REINSURANCE ROW

April 13, 2015 by Carlton Fields

Granite State Insurance Company (“Granite State”) brought an action against Clearwater Insurance Company (“Clearwater”) regarding a dispute over reinsurance claims Granite State made, and which Clearwater denied based on late notice. The claims pertained to underlying settlements of a large number of asbestos claims. The reinsurance certificates required prompt notice “of any event or development” which Granite State “reasonably believe[d] might result in a claim.” The district court found that Granite State’s notice to Clearwater under the reinsurance certificates at issue was untimely, and the Second Circuit affirmed.

In particular, the Second Circuit resolved a question raised on appeal pertaining to which state law applied. The parties agreed that, if there was a conflict of laws, Illinois law would apply under a “significant contacts” analysis, versus the law of the state where the action was pending – New York. But Granite State argued that Illinois law did not clearly conflict with New York law, and that therefore the New York federal court should have applied New York’s late notice rule, which requires an affirmative showing of prejudice on the part of the party asserting late notice as a bar to recovery.

The Second Circuit affirmed, finding that Illinois law was sufficiently clear on the issue, and does not require a showing of prejudice. Therefore, the laws were truly in conflict, and conflict of law analysis required application of Illinois law. Clearwater was thus not required to demonstrate that it was prejudiced by Granite State’s late notice in order to refuse to pay Granite State’s claims for reinsurance coverage. Granite State Ins. Co v. Clearwater Ins. Co., No. 14-1494 (2d Cir. April 2, 2015).

This post written by Catherine Acree.

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COURT AFFIRMS REINSURANCE ARBITRATION AWARD IN FAVOR OF FIRST STATE INURANCE COMPANY AND NEW ENGLAND REINSURANCE CORPORATION

April 8, 2015 by Carlton Fields

Phased arbitration proceedings involving First State Insurance Company and New England Reinsuance Corporation against Nationwide Mutual Insurance Company addressed claims arising under numerous reinsurance agreements between First State and Nationwide. The arbitration panel entered three orders, one as to each phase, in favor of First State and, as part of its decision, crafted certain remedial measures under the reinsurance agreements between the parties. The arbitration panel’s rulings engendered additional litigation on both procedural and substantive grounds before the federal court. Procedurally, the federal court ruled that First State’s motion to confirm the award as to the first phase was premature when filed because the arbitration panel had not yet ruled on the remaining phases. On reconsideration of its prior order dismissing the motion to confirm as premature, the court ruled that the motion should have been deferred and not dismissed as premature. The court consolidated the motion with First State’s other motions seeking to confirm the awards on the subsequent phases of the arbitration proceedings. Substantively, the court rejected Nationwide’s argument that the panel exceeded its authority in crafting the remedial measures in light of the high level of deference given to arbitral awards by reviewing courts. First State Insurance Co. v. Nationwide Mutual Insurance Co., Case No. 13-cv-11322-IT (USDC D. Mass. Mar. 25, 2015).

This post written by Leonor Lagomasino.

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