Reinsurance Claims

THIRD CIRCUIT AFFIRMS DECISIONS COMPELLING ARBITRATION AND CONFIRMING RESULT IN RETROCESSION DISPUTE

November 23, 2009 by Carlton Fields

Century Indemnity Company (“Century”) made claim under certain retrocession agreements between it and Certain Underwriters at Lloyd’s, London (“Lloyd’s”) for a portion of the payment Century made to its reinsured, Argonaut Insurance Company (“Argonaut”) in connection with underlying asbestos coverage litigation expenses. Lloyd’s denied the claim, asserting that Century’s payment to Argonaut was not warranted under the reinsurance treaties. Century sued to recover the approximately $2 million in dispute. Lloyd’s moved to compel arbitration. Although it was undisputed that the retrocession agreements did not contain an arbitration clause, the trial court agreed with Lloyd’s that the retrocession agreements incorporated the underlying reinsurance treaties by reference, which treaties did contain arbitration provisions, and therefore granted the motion to compel arbitration. The parties arbitrated, and the three-member panel found in Lloyd’s favor, finding the reinsurance treaties did not obligate Century to pay Argonaut, and therefore Lloyd’s was not obligated to pay Century any portion of the payment to Argonaut. Century moved to vacate the award, contending that the arbitral panel had manifestly disregarded the law and failed to admit evidence which should have been admitted. The district court denied the motion. Century appealed to the Third Circuit Court of Appeals, which affirmed both the decision to compel arbitration, and the decision denying the motion to vacate the award. Century Indemnity Company v. Certain Underwriters at Lloyd’s, London, No. 08-2924 (3d Cir. Oct. 15, 2009).

This post written by John Pitblado.

DISTRICT COURT FINDS FRAUDULENT ASSET TRANSFERS, PIERCES CORPORATE VEIL

November 19, 2009 by Carlton Fields

In the latest development in the action arising out of a Strategic Alliance Agreement between Continental Casualty Company and IFG Insurance Company relating to a federal crop reinsurance program, the US District Court for the Southern District of Indiana held that CCC (along with 1911 Corp) demonstrated that the counterdefendants (the IFG parties along with IGF Holdings, SIG, Goran Capital, Granite Re, Pafco Gen. Ins. Co., Superior Ins. Co., Gordon Symons, Alan Symons, and Douglas Symons) fraudulently transferred assets in violation of the Indiana Fraudulent Transfer Act, and that the counterdefendants were alter egos of one another. Accordingly, the court pierced the corporate veil as to those parties. However, the court ruled that 1911 Corp failed to introduce evidence supporting its breach of contract claim against IGF Holdings, therefore ruling in favor of IGFH as to that claim. A separate judgment is forthcoming in the case. IGF Ins. Co. v. Continental Casualty Co., Case No. 01-cv-799 (USDC S.D. Ind. Oct. 19, 2009).

This post written by John Black.

ENGLISH COURT HAS JURISDICTION OVER REINSURANCE CLAIM BY A BERMUDA INSURER AGAINST A SWISS REINSURER

November 12, 2009 by Carlton Fields

The underlying dispute involves claims made by Gard Marine & Energy, Ltd. (“Gard”), a Bermudan company, against its reinsurers in an English court. One reinsurer, Glacier Reinsurance AG (“Glacier”), domiciled in Switzerland, objected to the court’s jurisdiction. Glacier had originally paid Gard the sum Glacier considered due, but later sued Gard in a Swiss court seeking repayment of the sum paid. The present action was stayed until the Swiss Federal Court declined jurisdiction. The English court then addressed the issues of governing law and jurisdiction.

The English court first addressed whether Swiss or English law applied. Following the principles of the Rome Convention, the court found that Gard established a good, arguable case that English law applied for four reasons, which were: (1) the circumstances of the placement; (2) the use of a Lloyd’s slip and policy; (3) a number of London market wordings incorporated in the slip; and (4) the wording included provisions relevant to English law. The court next addressed jurisdiction. Applying the Lugano Convention (the “Convention”), the court found that it had jurisdiction. The Convention permits Gard to sue Glacier in Glacier’s country of domicile; however, certain provisions in the Convention allow for an exception. Pursuant to Article 6(1) of the Convention, since the English court had jurisdiction over the other defendants, the court had jurisdiction over Glacier because litigation in English and Swiss courts would result in irreconcilable judgments. Gard Marine & Energy Ltd. v. Tuncliffe, [2009] EWHC 2388 (Comm. Oct. 9, 2009).

This post written by Dan Crisp.

THIRD CIRCUIT AFFIRMS DENIAL OF COVERAGE AND REINSURANCE CLAIMS FOR UNDERLYING SUITS UNDER D&O POLICIES

November 11, 2009 by Carlton Fields

G-I Holdings, Inc. purchased directors & officers liability coverage from Reliance Insurance Company, covering claims made from 1999 – 2002. Due to Reliance’s putatively impending insolvency at that time, it reached an agreement with Hartford Fire Insurance Company, whereby Hartford agree to take over some of Reliance’s claims administration, and agreed to reinsure obligations under Reliance policies for claims made after July 15, 2000. Reliance remained responsible for covering claims made under its policies prior to July 15, 2000. Thereafter, Reliance became insolvent and went into liquidation. G-I Holdings asserted a claim for coverage for three fraudulent conveyance suits against its CEO and Chairman. The first suit was brought during the Reliance coverage period, and the other two were brought during the period covered by Hartford. However, Hartford declined coverage, and the parties litigated, based on the question of whether the two later suits related back to the Reliance coverage period. The district court agreed with Hartford, finding that all three suits were Reliance’s responsibility. The Third Circuit affirmed. G-I Holdings, Inc. v. Reliance Ins. Co., No. 07-2510 (3d Cir. Oct. 26, 2009)

This post written by John Pitblado.

THIRD CIRCUIT RULES THAT HOMEBUYER PLAINTIFFS HAVE STANDING TO CHALLENGE A PRIVATE MORTGAGE REINSURANCE ARRANGEMENT

November 10, 2009 by Carlton Fields

On December 26, 2008, we reported on a putative class action brought by homebuyers alleging that their private mortgage insurance premiums were subject to an unlawful captive reinsurance arrangement in violation of the Real Estate Settlement Procedures Act (“RESPA”). The district court had granted the defendants’ motion to dismiss, construing RESPA as requiring the plaintiffs to allege an overcharge in order to sue for damages. The Third Circuit reversed the order of the district court, finding that RESPA’s plan, unambiguous language did not require the plaintiffs to allege an overcharge and that the plaintiffs had suffered an injury-in-fact sufficient to support Article III standing, with or without an overcharge. The circuit court further found the filed rate doctrine inapplicable as the plaintiffs challenged allegedly unlawful conduct, not the reasonableness of the rate triggering the conduct. Alston v. Countrywide Financial Corp., No. 08-4334 (3d Cir. Oct. 28, 2009).

This post written by Dan Crisp.