Reinsurance Claims

DISTRICT COURT REFUSES TO DISQUALIFY ARBITRATORS IN REINSURANCE DISPUTE

October 31, 2011 by Carlton Fields

IRB-Brasil and National Indemnity Company recently filed cross petitions concerning the ongoing arbitration between the parties. The arbitration arises out of a dispute over reinsurance policies issued by NICO to IRB. IRB sought to stay the arbitration, to disqualify NICO’s appointed arbitrator, and to appoint one in his place. It sought further to consolidate the two arbitration proceedings pending between the parties. In the alternative, IRB sought to form an arbitration panel to determine whether the arbitrations should be consolidated. NICO, for its part, sought to designate a neutral third-party arbitrator in one of the pending arbitrations. The court denied all petitions, concluding that under the Federal Arbitration Act it was not authorized to disqualify an arbitrator chosen in accordance with the parties agreement to arbitrate. The agreement specified only that the arbitrators be “active or retired officers of insurance or reinsurance companies,” a criterion that had been fulfilled. All other decisions before the Court stemmed from this conclusion and the petitions were accordingly denied. IRB-Brasil Resseguros v. National Indem. Co., No. 11-1965 (USDC S.D.N.Y. Oct. 6, 2011).

This post written by John Black.

PRINCETON INSURANCE AND COVERIUM RE SETTLE

October 20, 2011 by Carlton Fields

In what may be the final development in the ongoing saga between Princeton Insurance and Coverium Reinsurance, the parties agreed to settle their lawsuit in its entirety. The court dismissed the action without prejudice to reopen if the settlement between the parties is not consummated. The dispute had centered on liability limit of an employers’ liability reinsurance agreement. Please see our prior posts on April 7, 2008, August 6, 2008, and September 21, 2009 for more detail. Princeton Insurance Company v. Coverium Reinsurance (NA), Inc., No. 06-599 (USDC D.N.J. Sept. 14, 2011).

This post written by John Black.

EIGHTH CIRCUIT AFFIRMS DECISION AGAINST REINSURER UNDER “FOLLOW THE SETTLEMENTS” DOCTRINE

October 10, 2011 by Carlton Fields

The Eighth Circuit Court of Appeals affirmed judgment in favor of Massachusetts Mutual Life Insurance Company (“Mass Mutual”) in a case brought against it by its reinsurer, Employers Reinsurance Company (“ERC”). ERC and Mass Mutual were parties to an Excess Disability Income Reinsurance Agreement. ERC and Mass Mutual later entered into a Claim Review Agreement, allowing ERC to make non-binding settlement recommendations. After Mass Mutual revealed some of its own claims reporting errors to ERC, ERC concluded that Mass Mutual had breached the reinsurance treaty and sued Mass Mutual, asserting breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory claims. Mass Mutual countered, making similar claims against ERC. The parties cross-moved for summary judgment and the trial court granted Mass Mutual’s motion and denied ERC’s. ERC appealed, but the Eighth Circuit Court affirmed the trial court’s decision and findings that the reinsurance agreement contained a “follow the settlements” provision, and that this ultimately allowed Mass Mutual to settle claims as it saw fit, whether or not the CRA required it to consider ERC’s non-binding recommendations. (We posted on the District Court’s decisions four times: September 15, 2010 (pre-judgment interest), July 12, 2010 (1292(b) appeal certification request), November 20, 2008 (reconsideration and appeal certification) and September 2, 2008 (summary judgment). Employers Reinsurance Co v. Massachusetts Mutual Life Ins. Co., No. 10-3099 (8th Cir. Sept. 7, 2011).

This post written by John Pitblado.

AIG TRANSFERS REINSURANCE DISPUTE TO BANKRUPTCY COURT

October 6, 2011 by Carlton Fields

Following removal to federal district court of an action against AIG, defendants petitioned to refer the case to the district’s bankruptcy court. Plaintiffs’ claims arose out of a reinsurance arrangement between AIG and non-party The Robert Plan Corporation, who were engaged in the automobile insurance business. After a dispute regarding administration of the reinsurance treaties, plaintiffs – “family members and former shareholders” of TRP – allege TRP agreed to accept a certain sum as payment pursuant to AIG’s allegedly fabricated representations about its loss reserves. Following this dispute, TRP filed Chapter 11 bankruptcy. The District Court agreed to refer the case, holding that plaintiffs’ claims “could conceivably have an effect” on TRP’s bankruptcy estate and are therefore related to the case under Title 11. The Court noted that plaintiffs did not dispute AIG’s arguments. Wallach v. American International Group, Inc., No. 11-3025 (USDC E.D.N.Y. Sept. 12, 2011).

This post written by John Black.

COURT FINDS UNJUST ENRICHMENT CLAIM INAPPROPRIATE IN REINSURANCE CLAIM BREACH OF CONTRACT LAWSUIT

September 27, 2011 by Carlton Fields

A federal district court dismissed Lexington Insurance Company’s unjust enrichment claim against reinsurer Tokio Marine, holding that the parties’ dispute was governed by their reinsurance contract. Lexington had issued two layers of excess property coverage to the Port Authority, which owned the World Trade Center. Tokio Marine reinsured 100% of the risk. Tenants of the World Trade Center successfully argued to a jury that the September 11, 2001 attacks constituted two separate occurrences and the judgment was affirmed by the Second Circuit. Lexington paid its policy limits for one occurrence and was fully reimbursed by Tokio Marine. After engaging in coverage litigation over whether the Port Authority could recover for a second occurrence, Lexington and the primary carrier, American Home, settled with the Port Authority for a second payment. Lexington sued Tokio Marine after it rejected Lexington’s claim as to the second payment, arguing that the primary carrier should have paid a larger share. The court held that Lexington’s dispute was governed by the parties’ reinsurance agreement and not properly brought as an unjust enrichment claim. The breach of contract claim is still pending. Lexington Ins. Co. v. Tokio Marine & Nichido Fire Ins. Co., Case No. 11-391 (USDC S.D.N.Y. Sept. 7, 2011).

This post written by Ben Seessel.