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Reinsurance Claims

SUIT DISMISSED AGAINST FINNISH REINSURER FOR LACK OF PERSONAL JURISDICTION

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Neles-Jamesbury Inc. filed suit for breach of contract against Pohjola Ins., a Finnish insurer, arising from a reinsurance contract between Pohjola and Lumbermens Mutual Casualty. NJI sought to hold Pohjola directly liable, alleging that Lumbermens was acting as Pohjola’s agent. Lumbermens had issued a comprehensive insurance policy covering NJI. The policy was stamped “Facultative Reinsurance” and contained the notation “reverse flow business 100% reinsured by Pohjola Ins. Co.” After Lumbermens denied coverage on certain claims, NJI filed suit against Lumbermens in Massachusetts state court. When NJI learned Lumbermens was having financial trouble, it sued Pohjola, which suit was removed to federal court. The federal court granted Pohjola’s motion to dismiss for lack of personal jurisdiction, finding that the Finnish company’s relationship with Lumbermens was not a mere agency and thus the Pohjola’s contacts with Massachusetts did not reach the levels necessary for personal jurisdiction. Neles-Jamesbury, Inc. v. Pohjola Ins. Co., LTD., Case No. 10-40055 (USDC D. Mass. Dec. 7, 2010).

This post written by John Black.

PREJUDGMENT INTEREST AWARDED IN BEER BOTTLER’S BATTLE WITH BREWER

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Coors Brewing Company sought to terminate its distributor agreement with Finger Lakes Bottling. After Finger Lakes refused a check in the amount calculated by Coors to be the fair market value at termination, Coors initiated an arbitration pursuant to the agreement to have an arbitrator determine the amount. The arbitrator set an amount, but specifically declined to rule on pre-judgment interest, finding it beyond the scope of the parties’ submission, and thus denied Finger Lakes’ request for the interest, though without prejudice to raising the issue in enforcement proceedings. Finger Lakes then filed an application to confirm the award. The court confirmed the award and, exercising its discretion, granted Finger Lakes pre-judgment interest at the weekly average one-year Treasury rate. Finger Lakes Bottling Co., Inc. v. Coors Brewing Co., No. 09-6024 (USDC S.D.N.Y. Oct. 18, 2010).

This post written by John Pitblado.

DISTRICT COURT AWARDS SWISS RE REPAYMENT OF FUNDS ASSOCIATED WITH DEFENSE OF UNDERLYING LITIGATION

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On cross-motions for summary judgment, a federal court in Minnesota ruled that an indemnitor, SuperValu, was in breach of an indemnity agreement it had entered with the now-defunct Amwest Surety Insurance Company. The suit arose out of a multi-million dollar jury verdict obtained against Tidyman’s Management Services on whose behalf Amwest issued an appeal bond of over $5 million. Swiss Re subsequently entered into a reinsurance agreement to secure and guaranty Amwest’s performance of the appeal bond obligations. At issue was whether Swiss Re was entitled to be reimbursed by SuperValu for payments to the persons who obtained the original jury verdict. Swiss Re was entitled to recover over $100,000, but was not entitled to attorneys’ fees. Amwest’s insolvency did not change the fact that the claims were made “relative to the bond,” the equities favored Swiss Re’s recovery, and Swiss Re acquired Amwest’s right by assignment. Swiss Reinsurance America Co. v. SuperValu, Inc., Case No. 09-3083 (USDC D. Minn. Oct. 15, 2010).

This post written by John Black.

SWISS RE GETS DAMAGES BUT NOT ATTORNEYS’ FEES AND COSTS

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Swiss Re, invoking a Indemnity Agreement SuperValu had entered into with the now defunct Amwest Surety, sought to recover attorneys fees and expenses from SuperValu based upon a reinsurance agreement it had entered into, as reinsurer, to guaranty the performance under an appeal bond. Because SuperValu refused to remit payment pursuant to the Indemnity Agreement (which Swiss Re acquired from Amwest by assignment), the District Court found that SuperValu’s refusal constituted a breach and that Swiss Re was entitled to recover damages incurred as a result. However, the District Court concluded that Swiss Re was not entitled to recover attorneys’ fees and costs incurred in defending, settling, and administering payment of the claim relative to the Bond underlying the action because the Indemnity Agreement did not contain any language supporting the recovery of fees and costs. Thus, the parties’ cross-motions for summary judgment were both granted in part and denied in part. Swiss Reinsurance Am. Co. v. SuperValu, Inc., Case No. 09-3083 (USDC D. Minn. Oct. 15, 2010).

This post written by John Black.

MUTUAL MARINE AND BRITISH LAW INSURANCE DISMISS CASE TO ALLOW FOR ARBITRATION

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In May of 2010, insurer Mutual Marine Office Inc. commenced an action against one of its excess-of-loss reinsurers, British Law Insurance Co. (now known as Sun Alliance Insurance UK Ltd.), in New York County Supreme Court. Mutual Marine and British Law have now agreed to dismiss the case and go to arbitration. The dispute pertains to the application of a settlement into which Mutual Marine and British Law’s parent company had previously entered. The settlement permitted Mutual Marine to submit aggregated claims to British Law, which would be payable on a discounted basis, despite the fact that the governing reinsurance treaties did not contain an express aggregate extension clause. Mutual Marine Office, Inc. v. British Law Ins. Co., Case No. 10-cv-4306 (USDC SDNY, Sept. 15, 2010)

This post written by Michael Wolgin.