Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

NINTH CIRCUIT VACATES CERTIFICATION ORDER AND ORDERS PARTIES TO INDIVIDUAL ARBITRATION

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A recent California district court ruling denied the defendant’s motion to compel arbitration in an employment dispute, and also certified a class against the defendant. The district court found that the defendant waived its right to arbitrate through litigation conduct. The Ninth Circuit disagreed, reversing, and remanding with instructions to order the plaintiff and defendant to arbitrate, because the plaintiff had failed to demonstrate any prejudice arising from the “litigation conduct” which the district court found constituted a waiver. The Court also vacated the district court’s certification order, noting that the parties’ employment agreement prohibited class arbitration. Richards v. Ernst & Young, LLP, No. 11-17530 (9th Cir. Aug. 21, 2013).

This post written by John Pitblado.

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SILENCE ON EXPENSE LIABILITY IN CONTRACT FAVORS REINSURER

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In one of the sister cases previously reported on involving Utica Mutual Insurance Company and one of its reinsurers Munich Reinsurance, a federal district court granted Munich’s motion for summary judgment. Utica sought reimbursement under the reinsurance contract for expenses incurred in litigation with an insured. At issue was whether the reinsurance contract subjected those expenses to Munich’s limit of liability or whether Munich was obligated to pay for those expenses in addition to its $5 million limit of liability. Based on Second Circuit and New York Court of Appeals precedent regarding limit-of-liability provisions in reinsurance contracts, the court held that the limit-of-liability provision applicable to Munich was unambiguously cost-inclusive and that Munich was obligated to Utica for no more than the $5 million. Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc., Case No. 6:12-CV-0196 (N.D.N.Y. Sept. 30, 2013).

This post written by Abigail Kortz.

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MORE TRACTION FOR THE CREDIT FOR REINSURANCE MODELS

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In an effort to implement reduced collateral requirements for ceding insurers, New Hampshire and Delaware have both enacted legislation that conforms with the NAIC’s amendments to its Credit for Reinsurance Model Law and Regulations. New Hampshire’s amended Reinsurance law, introduced as House Bill 231 on January 1, 2013, took effect on September 13, 2013. N.H. Rev. Stat. Ann. § 405:45-:52-a. New Hampshire is also considering amending its related regulation, N.H. Code Admin. R. Ins. 600, as originally proposed on July 18, 2013. Delaware’s amended Credit for Reinsurance regulation was first published for comments on May 1, 2013, and became effective on August 15, 2013. 18 Del. Admin. Code § 1003. Though not a Model state, Hawaii also recently adopted amendments, effective July 1, 2013, relating to conditions under which risk retention captive insurers may qualify for reinsurance credits on risks ceded to a reinsurer. Haw. Rev. Stat. § 431:19-111.

This post written by Kyle Whitehead.

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ELEVENTH CIRCUIT AFFIRMS ARBITRATOR DECISION TO CERTIFY ARBITRATION CLASS

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The Eleventh Circuit heard an appeal from a district court’s decision denying vacatur of an arbitrator’s decision to certify an arbitration class against a telecommunications provider. The appellant, Southern Communications, was a respondent in an arbitration brought by a consumer who contested certain penalty fees. The arbitration agreement was silent as to class action arbitration. The consumer moved for certification of an arbitration class, and the arbitrator granted the motion, certifying a class. Southern Communications sought vacatur of the decision in federal court, but the court denied vacatur. Southern Communications appealed, but the Eleventh Circuit affirmed, pointing to the Supreme Court’s recent decision Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) – which resolved a circuit split as to whether class arbitration was allowable where the arbitration agreement was silent – and the difficult burden for establishing grounds for vacatur under the Federal Arbitration Act. Southern Communications Services, Inc. v. Thomas, No. 11-15587 (11th Cir. July 12, 2013)

This post written by John Pitblado.

See our disclaimer.