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New reinsurance-related and arbitration developments from Carlton Fields

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Reorganization and Liquidation

APPELLATE COURT PRECLUDES ASSIGNEE OF REINSURANCE CLAIMS FROM RE-LITIGATING LACK OF ENTITLEMENT TO ARBITRATION

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In 1986, Pine Top Insurance Company became insolvent and was placed into liquidation. The liquidator eventually sold Pine Top’s accounts receivable, including reinsurance claims, to an entity named Pine Top Receivables of Illinois, LLC. In 2015, Pine Top Receivables sued Transfercom, Ltd. to collect on an assigned reinsurance claim and sought to compel Transfercom to arbitrate the claim pursuant to the underlying reinsurance agreement.

Several years earlier, Pine Top had unsuccessfully sued a Uruguayan entity in a federal district court in Illinois, and similarly sought to compel arbitration. That court and the Seventh Circuit Court of Appeals determined that Pine Top Receivables had no right to enforce the arbitration clause in the reinsurance contract because, among other reasons, the assignment of the reinsurance claims from the liquidator conveyed only the right to collect the debt but did not convey the contractual right to demand arbitration.

In the current litigation, Transfercom argued that the Seventh Circuit’s decision collaterally estopped Pine Top Receivables from relitigating the issue of whether it was entitled to demand arbitration with respect to the assigned reinsurance claims. The trial court agreed with Transfercom and denied Pine Top’s motion to compel. And on appeal, the court affirmed the judgment of the trial court. The appellate court reasoned that the earlier case resolved on the merits the issue of whether Pine Top Receivables was entitled to demand arbitration of claims assigned to it by the liquidator. The appellate court further explained that once the Seventh Circuit resolved the arbitration issue in Pine Top Receivables’s interlocutory appeal in the earlier litigation, the issue could not be revisited and the judgment on that issue was final. Pine Top Receivables of Illinois, LLC v. Transfercom, Ltd., Case No. 15 L 009145, (Ill. App. Ct. Mar. 31, 2017).

This post written by Gail Jankowski.

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UPDATE ON LIQUIDATION OF THE HOME INSURANCE COMPANY

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The New Hampshire liquidation court approved the commutation, settlement, and release agreement between The Home Insurance Company (liquidating) and Pennsylvania Manufacturers Association Insurance Company (PMAIC). The commutation agreement was approved February 10, 2017 and provides for the commutation of all of Home’s ceded and assumed business to or from PMAIC, as well as the resolution of all of PMAIC’s contribution claims against Home. A redacted copy of the commutation agreement, with economic terms removed, was filed with Home’s motion for approval. Additionally, in New York, in a contested claim between the liquidator and a Danish non-admitted reinsurer, the court approved the reinsurer’s posting of a security bond in the stipulated amount of $259,886.13. In re Liquidation of The Home Insurance Co., 217-2003-EQ-00106 (N.H. Sup. Ct. Feb. 10, 2017) (order approving commutation); Motion for Approval (Dec. 15, 2016); Sevigny v. Trygvesta Forsikring A/S, Case No. 16 Civ. 4874 (USDC S.D.N.Y. Jan. 30, 2017) (stipulation and bond); (Feb. 14, 2017) (bond).

This post written by Gail Jankowski.

See our disclaimer.

COMMUTATION, SETTLEMENT, AND RELEASE AGREEMENT OF THE HOME INSURANCE COMPANY APPROVED

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A New Hampshire court has approved the commutation, settlement, and release agreement between The Home Insurance Company (in Liquidation) and Providence Washington Insurance Company (PWIC), as successor to Unigard Mutual Insurance Company, which merged with Seaton Insurance Company.

Home entered liquidation in 2003, and the New Hampshire Insurance Commissioner was appointed as Liquidator. Prior to the merger of PWIC with Seaton, the Liquidator entered into a separate commutation agreement effective March of 2015 as to all PWIC business. The instant commutation agreement (approved in December 2016), provides for the commutation of all of Home’s ceded and assumed business to/from Seaton (pre-merger), as well as resolution of all of Seaton’s contribution claims against Home (which related to increased payments Seaton made to insureds common to both parties as the result of Home’s insolvency). A redacted copy of the commutation agreement, with economic terms removed, was filed with Home’s motion for approval. In re Liquidation of The Home Insurance Co., 217-2003-EQ-00106 (N.H. Sup. Ct. Dec. 12, 2016) (order approving commutation); Motion for Approval (Oct. 18, 2016).

This post written by Brooke L. French.

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COURT APPROVES DIRECT PAYMENT OF REINSURANCE TO INSURED IN RELIANCE INSURANCE COMPANY LIQUIDATION

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The court handling the liquidation of Reliance Insurance Company has approved an application for the direct payment of reinsurance proceeds by United Insurance Company to Reliance’s insured, Hoechst Celanese Corporation, with respect to certain workers compensation and employers liability policies issued to Hoechst for the policy periods of 1989 and 1990. The court found that United had unequivocally assumed Reliance’s direct coverage obligations to Hoechst, that Hoechst had consented to this direct payment and released Reliance for all related claims, and that permitting such direct payment complied with the Section 534 of Article V of the Pennsylvania Insurance Department Act of 1921, the court’s own guidelines for enforcement of the Act, and the applicable reinsurance agreement.

In re Reliance Insurance Company, No. 1 REL 2001 (Pa. Comm. Ct. Nov. 22, 2016 )

This post written by Jason Brost.

See our disclaimer.

Reliance Liquidation Court Approves Application for Direct Payments from Reliance’s Reinsurers to Certain Insureds

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Recently, there have been several developments in the ongoing liquidation of Reliance Insurance Company. The liquidation court recently approved the application for the assumption by one of Reliance’s reinsurers, EFH Vermont Insurance Company, of a direct coverage obligation to Reliance’s insured, LSGT Gas Company LLC, and approved the direct payment to LSGT from EFH. The liquidation court also approved the application for the assumption by another of Reliance’s reinsurers, NAFCO Insurance Company, Ltd., of a direct coverage obligation to Reliance’s insured, Carlson Holdings, Inc., and approved the direct payment to Carlson from NAFCO.