The United States Court of Appeals for the District of Columbia Circuit has affirmed a summary judgment in favor of the Society of Lloyd's, enforcing an English judgment against a Lloyd's Name who refused to sign on with and pay reinsurance premium to Equitas. Society of Lloyd's v. Siemon-Netto, Case no. 04-7214 (D.C. Cir. August 8, 2006). At oral argument, the Names made it clear that “the underlying basis of their defense is their belief that the English courts have a 'bias and prejudice in favor of Lloyd's under circumstances which make it impossible for a Name to win.'” Under the Uniform Foreign Money Judgments Recognition Act, a foreign judgment may not be enforced if it was “rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” The Names did not go so far as to seek the application of this principle, but the Court noted that if they had attempted to do so, they would have failed. The only evidence of “bias and prejudice” was that other Names who had advanced the same position as Appellants had lost their cases, and the mere fact that they had lost did not establish improper partiality. Indeed, the Court noted that “the fact that Names have lost similar (albeit not identical) cases in eight United States Courts of Appeals … would require us to reach the same conclusion regarding American courts.” With that closing statement, the Court affirmed the District Court's ruling. Carlton Fields represented the Society of Lloyd's in this case.
Reinsurance Claims
Names lose exchange rate issue with Lloyd’s
In another of a series of cases involving Lloyd's enforcing UK judgments against Names for Equitas reinsurance premium, after losing on a summary judgment motion that enforced the UK judgment, a Name moved to set aside the judgment based upon an exchange rate provision. Finding the District Court did not err by applying the Utah Uniform Foreign-Money Claims Act, the Tenth Circuit affirmed the denial of the motion. Society of Lloyd's v. Bennett, Case No. 05-4069 (10th Cir. June 2, 2006). This appears to be one of those cases in which a party simply will not give up. Having lost in the English Courts and in the US District Court, while an appeal was pending to the Tenth Circuit, the Names sought to vacate or modify the District Court's Order by filing a Rule 60 motion. Even this case appears to be near an end.
Names lose exchange rate issue with Lloyd's
In another of a series of cases involving Lloyd's enforcing UK judgments against Names for Equitas reinsurance premium, after losing on a summary judgment motion that enforced the UK judgment, a Name moved to set aside the judgment based upon an exchange rate provision. Finding the District Court did not err by applying the Utah Uniform Foreign-Money Claims Act, the Tenth Circuit affirmed the denial of the motion. Society of Lloyd's v. Bennett, Case No. 05-4069 (10th Cir. June 2, 2006). This appears to be one of those cases in which a party simply will not give up. Having lost in the English Courts and in the US District Court, while an appeal was pending to the Tenth Circuit, the Names sought to vacate or modify the District Court's Order by filing a Rule 60 motion. Even this case appears to be near an end.
Court finds no disputed issue as to the application of the "follow the fortunes" doctrine
In an earlier ruling in this case, the Court had held that the “follow the fortunes” doctrine applied to a request for payment under a reinsurance agreement. The Court then granted the reinsurer a six month period of discovery during which it might take discovery on whether the claims made against its reinsured were within either of two exceptions to the “follow the fortunes” doctrine, i.e., that the claims were manifestly outside the scope of the underlying policy, or that the decision to pay the claims had been fraudulent, collusive, or in bad faith. After the discovery period was completed, the reinsured moved for summary judgment, contending that there was no evidence to support the applicability of either exception to the “follow the fortunes” doctrine. The District Court agreed, and granted the reinsured summary judgment. National Union Fire Insurance Co. v. American Re-Insurance Co., Case No. 03-6999, in the United States District Court, Southern District of New York (July 28, 2006).
SPECIAL FOCUS: solvent schemes of arrangement
Solvent schemes of arrangement are processes through which solvent companies may commute all policies within the purview of the scheme, effecting a voluntary dissolution or clean reorganization with a relatively short tail. Found predominantly in the UK, they have been subject to some recent court decisions, which have included jurisdictional questions, such as whether such schemes can be imposed where some creditors or policy holders are domiciled in the US or other countries. They are controversial with US companies since they effect a reorganization outside bankruptcy laws or “traditional” US insurance rehabilitation/liquidation proceedings:
- This process is described by PriceWaterhouse Coopers and Marsh Risk Consulting in special papers found on their web sites.
- PWC has compiled a guide to specific schemes of arrangement, which describes actual schemes of arrangement administered in the UK.
- Rhode Island is the first US jurisdiction to adopt a statutory structure providing for such a process, which can be utilized only by companies domiciled under Rhode Island law. Since its adoption in 2002, there have not been any reported court opinions relating to the Rhode Island statutes. There has been some speculation as to whether the availability of this “abbreviated” form of reorganization might prompt run-off companies, or those preparing to enter a run-off mode, to re-domicile in Rhode Island.