Reinsurance Claims

JUDGE GRANTS MOTION FOR LEAVE TO AMEND COMPLAINT TO INCLUDE ADDITIONAL CLAIMS ARISING OUT OF REINSURANCE CONTRACTS

May 20, 2009 by Carlton Fields

Before a United States Magistrate Judge, TIG Insurance Company (“TIG”) moved for leave to amend its complaint for a second time to include breach of contract claims arising out of two additional reinsurance contracts. The defendants opposed the motion and argued that the two new claims were unrelated to the existing claims and that discovery would be substantially increased. However, the Magistrate Judge granted TIG’s motion, reasoning that courts regularly allow amendments of pleadings to join additional claims under Rule 18(a), even when those claims arise out of different transactions, and that the need for additional discovery is a consequence of almost every amendment of the pleadings, which, by itself, does not constitute sufficient prejudice to preclude the amendment. TIG Ins. Co. v. Century Indemnity Co., Case No. 08-7322 (USDC S.D.N.Y. Apr. 8, 2009).

This post written by Dan Crisp.

COMMUTATION’S TANGLED WEB UNWOVEN BY APPELLATE COURT

May 18, 2009 by Carlton Fields

An appellate court in Illinois recently concluded that a decades-old commutation agreement between Old Republic Insurance Company and Central National Insurance Company (predecessor in interest to the defendant), was, in fact, not ambiguous, rendering superfluous the trial at which various extrinsic evidence was introduced in support of the parties’ competing interpretations, after the trial court denied summary judgment based on triable ambiguity.

The parties entered into the agreement in 1990, in an effort to mitigate the effects of Central National’s financial difficulties, which had caused it to be placed in rehabilitation by the State of Nebraska. The parties had come to reinsure one another under various reinsurance agreements. However, Central National argued that the commutation agreement was ambiguous, and was not intended to extinguish certain of Old Republic’s obligations to Central National. The appellate court disagreed, finding the language mutually releasing “all liabilities and obligations of the parties to each other under the reinsurance agreements” to mean just that – that all liabilities and obligations flowing both ways were equally extinguished. Old Republic Ins. Co. v. Ace Property & Casualty Ins. Co., 1-07-2668 (Ill. App. Ct. March 24, 2009).

This post written by John Pitblado.

REINSURER’S CLAIMS SURVIVE (IN PART) EARLY DISPOSITIVE MOTION

May 11, 2009 by Carlton Fields

A court granted in part and denied in part a motion for judgment on the pleadings in a case involving claims by a reinsurer of automobile insurance policies (Lincoln General) against its cedent (U.S. Auto) and the cedent’s affiliates for allegedly intentionally miscalculating amounts owed under certain agreements between Lincoln General and U.S. Auto. Lincoln General argued that it had been underpaid, and was owed millions of dollars from U.S. Auto, and that the affiliates were also liable for U.S. Auto’s actions under various theories of direct and vicarious liability. The court denied that part of the defendants’ motion arguing that Lincoln General failed to set forth facts forming the basis of a viable veil-piercing claim; Lincoln General’s complaint adequately pled an alter ego theory. The court also allowed a tortious interference with contract claim to proceed against some of the defendants. However, the court granted that part of the motion arguing that non-signatories to the guaranty agreements between Lincoln General and U.S. Auto could not be held liable as guarantors, and that Lincoln General’s unjust enrichment claim failed as to those defendants who had written agreements with Lincoln General. Lincoln Gen. Ins. Co. v. U.S. Auto Ins. Servs., Inc., Case No. 07-1985 (USDC N.D. Tex. Apr. 29, 2009).

This post written by Brian Perryman.

MIDWEST EMPLOYERS CAS. CO. VS. LEGION INS. CO. – THE SAGA CONTINUES TOWARDS TRIAL

May 4, 2009 by Carlton Fields

As reported in our previous posts on November 19, 2007 and July 8, 2008, Midwest Employers Casualty Company (“Midwest”) sued Legion Insurance Company (“Legion”), in connection with 43 separate reinsurance certificates issued by Midwest to Legion between 1994 and 2001. The crux of Midwest’s position is that the certificates each establish that the coverage was provided on a “loss occurring basis” rather than a “risk attaching basis,” and also that the agreements contain no agreement to arbitrate. Midwest moved for summary judgment on those bases. However, the federal court agreed with Legion that the nature of the agreements could not be ascertained from the face of the documents submitted, and that the parties’ various oral agreements and understanding as to how the agreements operated potentially conflicted with the certificates, leaving fact questions to be reserved for trial. The court denied the motion and instructed the parties to prepare for trial. Midwest Employers Cas. Co. v. Legion Ins. Co., Case No. 07-870 (USDC W.D. Mo. Mar. 24, 2009).

This post written by John Pitblado.

REINSURANCE GUARANTORS’ APPEAL DISMISSED FOR LACK OF APPELLATE JURISDICTION

April 28, 2009 by Carlton Fields

The Third Circuit has determined it lacked jurisdiction to hear the appeal of parties disputing their obligations in connection with certain reinsurance guarantees. In a breach of contract action, an insurer (Everest) alleged that certain guarantors failed to fulfill their obligations following the reinsurer’s (Founders) refusal to pay over $76 million to Everest under a reinsurance agreement. The guarantors filed counterclaims, in part seeking a declaration that no monies are due and owing under the guarantees because Everest unnecessarily reimbursed lenders for certain claims. In connection with a separate arbitration between Everest and Founders, an arbitral panel ordered Founders to post $70 million in favor of Everest as security. Founders failed to comply. Everest then moved for partial summary judgment in the lawsuit, seeking an order requiring the guarantors to satisfy Founders’s obligation to post security. Everest also moved to dismiss the counterclaims. The district court granted Everest’s motion for partial summary judgment and granted, in part, Everest’s motion to dismiss.

The appellate court found it lacked jurisdiction to hear the appeal on the one remaining counterclaim and on Everest's breach of contract claim, as there was no final order being appealed from, and because the district court’s award was merely one for the payment of money, and not an injunction (which would have accorded the guarantors the right to an interlocutory appeal). The appeal was dismissed. Everest Nat'l Ins. Co. v. Sutton, No. 08-4643 (3d Cir. Apr. 7, 2009).

This post written by Brian Perryman.