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Reinsurance Claims

COURT DENIES PETITION TO APPOINT ARBITRATION UMPIRE IN RETROCESSION DISPUTE

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Odyssey Reinsurance Co. petitioned the court to appoint an umpire to serve in arbitration with its retrocessionaries, certain Lloyd’s underwriters and Reliastar Reinsurance Group, over a disputed reinsurance claim. Odyssey argued that arbitration had been unduly delayed due to what it contended were poorly qualified candidates proposed by the retrocessionaires. The court held that Odyssey’s arguments were insufficient to obtain relief from the court at that time, and that in its view, there had “not been a breakdown in the process that justifies court intervention.” The court directed the parties “to proceed to the next stage of arbitrator selection” as described in the agreements between them. Odyssey Reinsurance Co. v. Certain Underwriters at Lloyd’s London Syndicate 53, et al., Case No. 1:13-cv-09014 (USDC S.D.N.Y. June 30, 2014) (Opinion & Order and Judgment).

This post written by Michael Wolgin.

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ELEVENTH CIRCUIT REVERSES COVERAGE RULING UNDER REINSURANCE AGREEMENT

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Public Risk Management of Florida, an intergovernmental risk management association that functions as a primary insurer for certain government entities in Florida, ceded some of its risk to One Beacon under a reinsurance policy. Public Risk’s insured, the City of Wintergarden, made a claim for defense and indemnity for an underlying lawsuit against it by a contractor who performed public works, but was claimed it was underpaid as a result of delays arising from the City’s failure to provide accurate plans and maps. Public Risk defended under a reservation of rights. It also tendered the claim to One Beacon, which disagreed there was a duty to defend. Ultimately, Public Risk was not required to indemnify its insured, but sustained over $286,941.07 in loss for legal fees above the $200,000 retention, which it believed were owed by One Beacon pursuant to the reinsurance agreement. Public Risk sued One Beacon, but the district court found no duty to defend and dismissed the claim. Public Risk appealed, and the Eleventh Circuit reversed the coverage ruling, finding that the underlying claims did not sound entirely in intentional tort, and therefore there was a duty to defend. Public Risk Management of Florida v. One Beacon Insurance Co., No. 13-15254 (11th Cir. June 24, 2014).

This post written by John Pitblado.

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CEDENT WINS BREACH OF CONTRACT CLAIM AGAINST R&Q REINSURANCE

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A Wisconsin federal district court granted summary judgment in favor of plaintiff, Employers Insurance Company of Wausau, and against its reinsurer, R&Q Reinsurance Company, on Employers’ claim that R&Q breached its agreement by failing to pay Employers for those claims paid Employers to its insureds. R&Q unsuccessfully maintained that Employers could not combine its indemnity payments and defense expenses and that it should have calculated the defense expenses using the ratio terms provided on the certificate of insurance. The Court disagreed, finding that the reinsurance agreement did not distinguish between indemnity and defense expenses, which were covered under the agreement, such that Employers was not required to calculate the defense expenses differently from the way it calculated the indemnity payments. The court also rejected R&Q’s argument that Employers had failed to produce sufficient evidence to demonstrate that its payments exceeded the retention amount. The court found that R&Q’s argument was precluded by R&Q’s failure to present contrary evidence on summary judgment where a party must do more than speculate that other evidence supporting its case may exist. The court did, however, find a factual issue existed as to the calculation of prejudgment interest and denied Employer’s motion for summary judgment accordingly. Employers Insurance Company of Wausau v. R&Q Reinsurance Company, Case No. 13-cv-709-bbc (USDC W.D. Wis. July 28, 2014).

This post written by Leonor Lagomasino.

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COURT GRANTS SUMMARY JUDGMENT IN $40M REINSURANCE COMMISSION DISPUTE

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Greenlight Reinsurance brought suit against Appalachian Underwriters (“AUI”), Appalachian Reinsurance (“App Re”) and Insurance Services Group (“ISG”) alleging it had been shortchanged more than $40,000,000 pursuant to three types of agreements it entered into with the respective defendants (1) a reinsurance agreement between Greenlight and AIU, where AIU acted as managing general agent, and was obliged to refund ceded premium beyond contractually defined amounts based on loss ratios; (2) a similar retrocession agreement with App Re; and (3) a guarantee agreement with ISG. Greenlight claimed that, based on loss ratio thresholds, it was owed a return of premium under the reinsurance and retrocession agreements, and that ISG had guaranteed those payments.

The court analyzed the agreements, and, based on the minimum loss ratios, and the undisputed calculations of ceded premium, held that AUI owed Greenlight $16,986,516 under the reinsurance agreement, and App Re owed Greenlight $24,456,213 under the retrocession agreement. The court held, however, that Greenlight failed to demonstrate that the guarantee from ISG was a guarantee of payment. Rather, the court found that it was a parental guarantee, which required ISG, as a parent corporation, to ensure that its subsidiaries, AIU and App Re, remained solvent, but did not require it to make direct payments on their behalf. The court thus granted summary judgment on Greenlight’s claims against AUI and App Re, but denied summary judgment as to ISG. Greenlight Reinsurance, Ltd. V. Appalachian Underwriters, Inc., Case No. 12-CV-8544 (JPO) (USDC S.D.N.Y. July 28, 2014).

This post written by John Pitblado.

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TRAVELERS INDEMNITY SETTLES REINSURANCE DISPUTES WITH EXCALIBUR

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In two related cases, Travelers has settled its claims against Excalibur Reinsurance. A number of prior posts have addressed the substance of the parties’ disputes – for example, discovery issues (sealing portions of deposition testimony) and procedural issues (denying consolidation; requiring pre-hearing security). Stipulations of Dismissal were filed in both cases on May 23, 2014. The Travelers Indemnity Co. v. Excalibur Reinsurance Corp., Case Nos. 3:11-CV-1209 and 3:11-CV-1793 (USDC D. Conn. May 23, 2014).

This post written by Renee Schimkat.

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