Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Arbitration / Court Decisions / Reinsurance Claims

Reinsurance Claims

REINSURER PREVAILS ON IMPROPER PLACEMENT OF RISKS

by

In two prior posts (February 28 and October 1, 2007), we reported on discovery disputes in a case in which a reinsurer contended that it was not liable on trucking risks due to the improper placement of the risks by a broker. The reinsurer has now prevailed on summary judgment, having established that trucking risks could not be ceded to its reinsurance without specific permission or special acceptance, and that the broker did not seek such permission or acceptance. Scottsdale Ins. Co. v. American Re-Insurance Co., Case No. 06-16 (USDC D. Neb. May 6, 2008).

This post written by Rollie Goss.

FOLLOW THE SETTLEMENT DOCTRINE DOES NOT APPLY TO CLAIM BY PRIMARY INSURER TO EXCESS INSURER’S REINSURER

by

This lawsuit addresses the responsibility of several insurers to cover the settlement of a medical malpractice claim. Texas Farmers Insurance provided primary coverage, Ordway Indemnity provided excess coverage and Lexington Insurance provided reinsurance to Ordway. Texas Farmers contended that it had paid amounts in excess of its coverage, and sought reimbursement from Lexington, as Ordway's reinsurer. Texas Farmers contended that the follow the settlements doctrine applied, and required reimbursement by Lexington. The court disagreed, finding that the doctrine did not apply since Lexington was not Texas Farmer's reinsurer, and found in any event that the entire settlement amount fell within the limits of Texas Farmer's coverage. Since the primary coverage was not exhausted, the excess cover was not triggered, and Lexington had no payment obligation. Texas Farmers Insur. Co. v. Lexington Insur. Co., Case No. 06-8220 (USDC C.D. Cal. Apr. 21, 2008).

This post written by Rollie Goss.

FOLLOW THE SETTLEMENT DOCTRINE DOES NOT APPLY TO CLAIM BY PRIMARY INSURER TO EXCESS INSURER'S REINSURER

by

This lawsuit addresses the responsibility of several insurers to cover the settlement of a medical malpractice claim. Texas Farmers Insurance provided primary coverage, Ordway Indemnity provided excess coverage and Lexington Insurance provided reinsurance to Ordway. Texas Farmers contended that it had paid amounts in excess of its coverage, and sought reimbursement from Lexington, as Ordway's reinsurer. Texas Farmers contended that the follow the settlements doctrine applied, and required reimbursement by Lexington. The court disagreed, finding that the doctrine did not apply since Lexington was not Texas Farmer's reinsurer, and found in any event that the entire settlement amount fell within the limits of Texas Farmer's coverage. Since the primary coverage was not exhausted, the excess cover was not triggered, and Lexington had no payment obligation. Texas Farmers Insur. Co. v. Lexington Insur. Co., Case No. 06-8220 (USDC C.D. Cal. Apr. 21, 2008).

This post written by Rollie Goss.

REINSURER’S COUNTERCLAIMS (MOSTLY) SURVIVE MOTION TO DISMISS

by

A reinsurer may proceed with its counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent misrepresentation and violation of the Connecticut Unfair Trade Practices Act, a federal district court held. The reinsurer, Universal, was a “rent-a-captive” under an alternative risk insurance program establishing a loss fund composed of the net premium under the insurance program. The loss fund was to be used to pay claims under the program. After a lawsuit was filed, Universal countersued for breach of contract, alleging that it suffered damages because it was denied access to certain funds for a year, and by virtue of its contingent liability. The plaintiff contended that this alleged breach caused only incidental expenses and unrecoverable attorneys’ fees. Construing the allegations in Universal’s favor on the motion, the court found that damages had been sufficiently alleged, but that attorneys’ fees were unrecoverable. The court next found that the elements of the breach of good faith had been pled, and that the circumstances of the alleged fraudulent misrepresentation had been stated with particularity. Finally, the court ruled that the unfair trade practices claim would survive since Connecticut courts had recognized such claims where a party consciously refuses to honor an agreement by which it is bound. Arrowood Indemnity Co. v. Universal Reinsurance Co., Case No. 06 CV 158 (USDC D. Conn. May 6, 2008).

This post written by Brian Perryman.

UPDATE: LETTER OF CREDIT DISPUTE RESOLVED

by

In a March 25, 2008 posting, we reported on the Order of a district court which denied a motion to dismiss claims arising out of the refusal to release letters of credit which had been posted as security for a rent-a-captive reinsurance program. Less than two weeks after the entry of that Order, the parties filed a stipulation for dismissal of the action with prejudice. The Order apparently facilitated the resolution of the issues. WEB Management LLC v. Arrowood Indemnity Co., Case No. 07-424 (USDC D. Conn. Mar. 17, 2008).

This post written by Rollie Goss.