Reinsurance Claims

TRAVELERS CASUALTY AND SURETY CO. SETTLES REINSURANCE DISPUTE WITH EXCALIBUR REINSURANCE CORP.

February 28, 2013 by Carlton Fields

Travelers and runoff reinsurer Excalibur have settled Traveler’s suit for reinsurance benefits allegedly owed to Travelers for asbestos claims coverage reinsured by three facultative certificates. Travelers had filed suit in federal court for breach of contract and account stated, seeking $451,809.66 in allegedly unpaid claims made in 2011 and 2012. The reinsurance claims were based on benefits Travelers paid to its insured, Zurn Industries, Inc., further to a settlement entered into in 2003. Travelers alleged that Excalibur had previously paid reinsurance claims based on the subject insurance coverage, but had failed to pay the 2011 and 2012 claims. Travelers Casualty & Surety Co. v. Excalibur Reinsurance Corp., Case No. 3:12-cv-01701 (D. Conn. Jan. 31, 2013) (notice of dismissal).

This post written by Michael Wolgin.

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COVERAGE DISPUTE BETWEEN INSURED AND INSURER HELD NOT A FORESEEABLE CONSEQUENCE OF ATTORNEY MALPRACTICE

February 21, 2013 by Carlton Fields

A minor injured in a softball game obtained a verdict exceeding the $2 million limit on a policy issued to the United States Sports Specialty Association by United States Fidelity and Guarantee Co. and reinsured by Lloyds of London. The reinsurers, USF&G’s behalf, paid a settlement amount also significantly exceeding the policy limits. USF&G filed suit seeking reimbursement from USSSA for amounts paid beyond policy limits. The state supreme court rejected the claim, holding there was no extracontractual right to restitution between an insurer and its insured. The reinsurers, as subrogees of USF&G and the insured, added malpractice claims against the law firm that had been appointed to represent the insured, seeking, among other damages, the litigation expenses incurred by the USF&G and USSSA in determining whether USF&G was entitled to reimbursement from USSSA for amounts spent beyond policy limits. The court granted partial summary judgment to the law firm on this theory, holding that the coverage dispute between USF&G and USSSA was not a foreseeable consequence of the law firm’s alleged malpractice. National Indemnity Co. v. Nelson, Chipman & Burt, Case No. 2:07-CV-996 TS (USDC D. Utah Jan. 18, 2013).

This post written by Ben Seessel.

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COURT DECLINES TO ORDER PREJUDGMENT SECURITY FROM A FOREIGN NATIONAL DOING REINSURANCE BUSINESS

February 20, 2013 by Carlton Fields

Pine Top Receivables LLC (“PTR”) was formed when a buyer purchased the assigned rights under certain reinsurance contracts from the Illinois liquidator handling the Pine Top Insurance Company receivership. PTR then brought suit against reinsurer Banco De Seguros Del Estados, which had entered into reinsurance contracts with Pine Top. PTR alleged that Banco owed more than $2,000,000 in overdue balances on the contracts. PTR’s suit sought to compel arbitration. Banco filed a motion to dismiss on jurisdictional grounds. PTR moved to strike the motion, on the grounds that Banco had not paid prejudgment security under Illinois’ statute requiring security by a nonresident reinsurer. Banco resisted the motion, asserting that the Foreign Sovereign Immunities Act prohibited the assessment of any “attachment” on a foreign governmental entity. The Court agreed with Banco, finding that it is a government instrumentality of the Republic of Uruguay, and that pre-judgment security under the statute was effectively an “attachment” as the term is used in the Act. Pine Top Receivables of Illinois, LLC v. Banco De Seguros Del Estados, No. 12 C 6357 (USDC N.D. Ill. Dec. 13, 2012).

This post written by John Pitblado.

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NEW YORK COURT ORDERS THAT UMPIRE BE APPOINTED TO COMPLETE REINSURANCE ARBITRATION PANEL

February 19, 2013 by Carlton Fields

Petitioner American Home Assurance Company sought appointment of an umpire, or a third arbitrator under certain treaties, to preside over arbitrations of disputes arising under three reinsurance treaties with respondent Clearwater Insurance Company. The treaties provided that each side would select an arbitrator and the two would select an umpire or third arbitrator; the parties had each selected an arbitrator but the two arbitrators had not chosen an umpire or third arbitrator. The court granted petitioner’s request pursuant to New York CPLR 7504, which provides that a court shall appoint an arbitrator if the method the parties’ agreed upon “fails or for any reason is not followed.” In so holding, the court rejected respondent’s argument that CPLR 7504 did not apply because it was not mentioned in the reinsurance treaties, holding that the law was in existence at the time of the formation of the contracts and thus incorporated in them. The court also dispensed with respondent’s argument that the arbitrations should proceed before an umpire is selected, i.e., that an umpire need not be selected unless the two arbitrators failed to agree, reasoning that having an umpire present during the arbitrations to hear the proof is the more practical approach. The court ordered a specific selection process for the umpire (or third arbitrator) – a hybrid of the ARIAS-US ranking method and the “strike and draw” method. In re American Home Assurance Co., Case No. 653079/2012 (N.Y. Sup. Ct. Jan. 15, 2013)

This post written by Ben Seessel.

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COURT CERTIFIES APPEAL IN COMMUTATION/COMMISSION DISPUTE

January 9, 2013 by Carlton Fields

In our September 17, 2012 post, we reported on Acumen Re Management Corporation’s reinsurance-related suit against General Security National Insurance Company, in which it claimed that General improperly entered into commutation agreements with insurers with respect to accounts for which Acumen was receiving, and expected to continue receiving, premium commissions, based on the parties’ agency contracts. General denied any breach. The parties cross-moved for summary judgment. Acumen’s motion was denied outright. General’s motion was granted in part and denied in part. Acumen moved to reconsider, or, in the alternative, for certification for immediate appeal. The court declined reconsideration, but granted certification to appeal, finding the appeal could efficiently dispose of a number of issues before trial. Acumen Re Management Corp. v. General Security National Insurance Co., No. 09-Civ-1796 (USDC S.D.N.Y. Dec. 4, 2012)

This post written by John Pitblado.

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