Reinsurance Claims

COURT DISMISSES ALL CLAIMS BROUGHT BY INSURED AGAINST REINSURANCE INTERMEDIARY AND AGENT IN CONNECTION WITH FRAUDULENT SCHEME AND ILLUSORY AGREEMENT

November 11, 2014 by Carlton Fields

A federal district court has dismissed all claims brought against American Special Risk (ASR), a reinsurance intermediary and agent for insurer Signet, by insured Car Sense. Car Sense sued Signet and ASR in connection with a Buy Back Guarantee program that Signet offered as a way to increase customer participation in certain incentive programs offered by Car Sense. Signet represented that the BBG program was 100% secured via a reinsurance agreement with Hannover Re. ASR acted as Signet’s reinsurance intermediary and agent in negotiating and procuring the reinsurance agreement. As alleged, though Signet represented that the BBG was a legitimate insurance product, the BBG was in fact a fraudulent scheme engineered to generate one-time fees. Moreover, the reinsurance agreement did not provide for 100% security of the BBG as Signet represented but was, in fact, illusory. Car Sense sued Signet and ASR for various claims ranging from breach of contract to fraud.

The court dismissed all claims against ASR finding, in large part, that ASR did not owe any duty, and had not made any misrepresentations, to Car Sense. The court also gave notice of its intention to dismiss all claims against Signet for Car Sense’s failure to serve Signet within the time required by the Federal Rules of Civil Procedure. Car Sense, Inc. v. American Special Risk, LLC, No. 13-CV-5661 (USDC E.D. Pa. Oct. 24, 2014).

This post written by Renee Schimkat.

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NEW YORK APPELLATE COURT DISMISSES CLAIMS AGAINST REINSURER AND ITS CLAIMS ADMINISTRATOR

November 10, 2014 by Carlton Fields

In what began as a dispute between OneBeacon America Insurance Company and its insured, Colgate, over OneBeacon’s asserted right to control the defense of claims against Colgate in connection with numerous personal injury suits, Colgate sued OneBeacon’s reinsurer, National Indemnity Company (“NICO), and its affiliated claims adjuster, Resolute Management. Colgate alleged that OneBeacon’s contractual relationship with NICO and Resolute created a conflict of interest because they served a dual role as both OneBeacon’s reinsurer and the claims adjuster under those policies. Colgate wanted to defend the actions against it, while NICO and Resolute wanted to settle the cases to minimize the legal expenses.

Colgate sued NICO and Resolute under several theories, including declaratory relief, breach of contract, tortious interference, breach of the implied covenant of fair dealing, and a statutory claim under Massachusetts law for unfair deceptive conduct. After the lower court only partially dismissed these claims, NICO and Resolute appealed. The appellate court dismissed all claims against NICO and Resolute. Central to the court’s ruling was the absence of a contract between Colgate and NICO or between Colgate and Resolute. Moreover, the agreement between NICO and Resolute provided that the agreement could not be assigned and that it did not confer any rights on third parties. Absent contractual privity or an assigment, Colgate could not assert any claims against NICO or Resolute despite their dual roles as OneBeacon’s reinsurer and Colgate’s claims administrator. OneBeacon America Insurance Co. v. Colgate-Palmolive, Index No. 651193/11 (N.Y. App. Div. Oct. 28, 2014).

This post written by Leonor Lagomasino.

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SECOND CIRCUIT REFUSES TO HEAR APPEAL BY UNDERWRITER AGAINST REINSURER

October 20, 2014 by Carlton Fields

The Second Circuit refused to hear an appeal in an action brought by Acumen Re Management Corporation, an underwriter, against a reinsurer, General Security National Insurance Company. The crux of the action was Acumen’s allegation that General Security breached the agreement between them by failing to pay Acumen certain commissions which General Security allegedly owed under the parties’ agreement. In the suit, Acumen alleged five distinct theories as to how General Security breached the agreement. The lower court entered partial summary judgment in favor of General Security on four of those theories and further held that, under all five theories, no more than nominal damages were available to Acumen. The lower court certified the partial final summary judgment as to the four counts under Federal Rule of Civil Procedure 54(b) which authorizes, under certain circumstances, entry of a partial final judgment as to one or more, but fewer than all, claims of the parties such that the partial final judgment becomes reviewable on appeal. The Second Circuit determined that the five theories Acumen alleged were not separate and distinct claims; instead, Acumen alleged five various ways in which General Security breached the agreement and the claims were interrelated and dependent upon each other. The Second Circuit concluded that it did not have jurisdiction to review the lower court’s entry of partial summary judgment. Acumen Re Management Corp. v. General Security National Insurance Co., No. 12‐5081‐cv (2d Cir. Oct. 3, 2014).

This post written by Leonor Lagomasino.

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SPECIAL FOCUS: DISMISSAL OF MARIAH RE CAT BOND LAWSUIT

October 13, 2014 by Carlton Fields

We posted previously on the Mariah Re cat bond lawsuit. The court recently dismissed the Amended Complaint in that action with prejudice. Rollie Goss discusses this opinion in a Special Focus article titled Cat Bond Litigation: Unambiguous Bond Documents Cause Court To Dismiss With Prejudice Complaint Seeking to Claw Back Payments Made From a Cat Bond Reinsurance Trust.

This post written by Rollie Goss.

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COURT DETERMINES REINSURER OBLIGATION TO PAY FOR COMBINED LOSS AND EXPENSE CAPPED AT THE DOLLAR AMOUNT STATED IN THE REINSURANCE ACCEPTED SECTION OF CERTIFICATE OF REINSURANCE

October 8, 2014 by Carlton Fields

The United States District Court for the Southern District of New York granted partial summary judgment to plaintiff reinsurer seeking a declaration that the dollar amount stated in the “Reinsurance Acceptance” section of each of nine certificates of reinsurance caps the maximum amount that the reinsurer can be obligated to pay for combined loss and expenses.

The reinsurance certificates at issue in this case contained a “Subject to Clause” stating that the reinsurance was in consideration of the payment of premium and subject to the terms, conditions and amount or limits of liability set forth in the certificate and a “Reinsurance Accepted” section that stated a dollar amount of liability. The court relied upon the plain language of the certificates of reinsurance and the Second Circuit’s binding precedent in Bellefonte Reinsurance Co. v. Aetna Cas. And Sur. Co., 903 F.2d 910, 913 (2d Cir. 1990) and Unigrad Security Ins. Co. v. North River Ins. Co., 4 F.3d 1049, 1070-71 (2d Cir. 1993).

The court noted that the relevant language in the certificates of insurance at issue in this case were nearly identical to the language relied upon by the Second Circuit in Bellefonte and that the Bellefonte and Unigard courts made clear that all other contractual language must be construed in light of the certificate limit because to do otherwise would negate the reinsurance certificate language that the reinsurance is subject to the terms, conditions, and amount of liability set forth in the certificate. The court further noted that if the parties intended to exclude expenses from the total liability cap, the parties could have made that clear in the certificate language.

The court also rejected the defendant’s arguments that the “follow the fortunes” doctrine or the “in addition thereto” language in the reinsurance certificates obligated plaintiff reinsurer to pay for expenses above the certificate limit. The court again relied on Bellefonte, which held that neither the “follow the fortunes” doctrine nor the “in addition thereto” language in the reinsurance certificates exempted defense costs from the clauses limiting the reinsurers’ overall liability under the certificates, as all costs were subject to the express caps on liability set forth in the certificates. Global Reinsurance Corporation of American v. Century Indemnity Company, 1:13-cv-06577-LGS (USDC S.D.N.Y. August 15, 2014).

This post written by Kelly A. Cruz-Brown.

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