Reinsurance Claims

SILENCE IS GOLDEN: REINSURER ORDERED TO PAY PREJUDGMENT INTEREST TO INSURANCE COMPANY’S LIQUIDATOR ON AGREEMENT SILENT AS TO INTEREST

March 3, 2014 by Carlton Fields

A New Hampshire insurance company, Home Insurance Company (“Home”), was placed in liquidation in 2003. When its reinsurer Century Indemnity Company (“CIC”) tried to claim an $8 million setoff from amounts owed to Home, the liquidator balked and demanded the $8 million. A New Hampshire statute allows for the payment of prejudgment interest on an “action on a debt or account stated.” Finding no “meaningful distinction” between an “action on a debt” and the dispute at hand, the New Hampshire Supreme Court held that the statute applied and that the liquidator was entitled to prejudgment interest from the date CIC was informed the setoff would not be allowed. The court’s holding was also based on the fact that key agreements between CIC and Home were silent as to interest. Interpreting that contractual silence as to interest, the court declined to write into the contract a provision which made the interest statute inapplicable. In re Rehabilitation of The Home Insurance Company, No. 2012-623 (N.H. Feb. 13, 2014).

This post written by Abigail Kortz.

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COURT STANDS BY DECISION DENYING DISMISSAL OF CASE INVOLVING REINSURANCE OF PERFORMANCE BOND

February 27, 2014 by Carlton Fields

A New York federal district court denied reconsideration of its refusal to dismiss a case for forum non conveniens or lack of personal jurisdiction, in a dispute involving reinsurance of a performance bond insuring the payment of fees for the right to administer Argentina’s postal services. The court was unpersuaded by the fact that the insured’s principal place of business and operations were located in Argentina, given that the reinsurer conducted relevant reinsurance business through its New York office. St. Paul Fire & Marine Insurance Co. v. Aseguradora de Creditos y Granatias, Case No. 1:12-cv-04627 (USDC S.D.N.Y. February 6, 2014).

This post written by Michael Wolgin.

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UTICA AND CENTURY ORDERED TO MANDATORY MEDIATION IN REINSURANCE DISPUTE

February 26, 2014 by Carlton Fields

Utica Mutual Insurance Company brought an action in 2013 against Century Indemnity Company (itself and against certain of its named predecessors) for breach of contract and breach of the duty of utmost good faith, as well as a declaratory claim, regarding alleged amounts due to Utica from Century predecessor Insurance Company of North America under certain reinsurance agreements. The court invited the parties to submit their positions regarding mandatory mediation, but received no response. The Court therefore ordered the parties to participate in the mandatory mediation program, further requiring that they complete it by March 31, 2014. Utica Mutual Insurance Co. v. Century Indemnity Co., Case No. 6:14-CV-995 (USDC N.D.N.Y. Jan. 9, 2014).

This post written by John Pitblado.

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COURT CONFIRMS ARBITRATION AWARD IN REINSURANCE BILLING DISPUTE

February 24, 2014 by Carlton Fields

A New York federal district court affirmed an arbitration award in favor of R&Q Reinsurance Company as against its cedent, Utica Mutual, in a reinsurance dispute arising from certificates issued by R&Q reinsuring certain umbrella coverage Utica had written covering asbestos-related exposure of its insured. The parties began arbitrating a billing dispute in 2008 which, as of May, 2013, involved more than $21.7 million in disputed amounts. Utica sought coverage for four categories of loss: indemnity, defense, “orphan shares,” and declaratory judgment expense. The panel heard the case and decided in Utica’s favor only on the first category, and in R&Q’s favor on the other three. The panel did not, however, indicate in its award the precise amount owed to Utica by R&Q for the indemnity losses. Both parties made various post-award motions for clarification, but Utica never sought in any of these motions for the panel to set out the precise amount Utica was owed under the first category of loss which it was awarded. R&Q thereafter brought an action in court to confirm the award. The court found that Utica’s failure to seek clarification of the amount with the panel precluded vacatur of the award and that, “[f]or better or worse, the parties to this arbitration tasked the arbitral panel with resolving their dispute at a conceptual, rather than a mathematical, level.” R&Q Reinsurance Co. v. Utica Mutual Insurance Co., Case No. 13-Civ-8013 (USDC S.D.N.Y. Feb. 14, 2014).

This post written by John Pitblado.

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JUDGE SURVIVES RECUSAL EFFORTS IN CASE AGAINST HANK GREENBERG ALLEGING FRAUDULENT REINSURANCE TRANSACTIONS

February 12, 2014 by Carlton Fields

A New York appellate court affirmed the denial of Maurice “Hank” Greenberg’s and former AIG CFO Howard Smith’s motion to recuse the trial judge in a case charging the two with fraudulent reinsurance transactions designed to conceal AIG’s negative financial results. The court found that the trial judge’s “comments at oral argument on the recusal motion and purported improprieties at various proceedings,” did not “demonstrate that the court improperly exercised its discretion in denying defendant’s motion for recusal.” The court explained that, while the judge “at times may have been irritated with defense counsel and the prolonged litigation, it cannot be said that his comments, alone or in the aggregate, caused his impartiality to be reasonably questioned.” The court further found to be persuasive the fact that “defendants did not move for recusal until recently, after the court had ruled against them on summary judgment motions, after years of litigation before it.” People v. Greenberg, Case No. 2014 NY Slip Op 00621 (N.Y. Ct. App. Feb. 4, 2014).

This post written by Michael Wolgin.

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