Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

COURT ORDERS UNSEALING OF CONFIDENTIAL REINSURANCE ARBITRATION INFORMATION

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A court recently unsealed certain record documents related to a reinsurance arbitration, at the request of interested nonparties. The documents were originally filed with the court in connection with a petition to confirm the arbitration award and a responsive motion to dismiss. The parties were permitted to file the documents under seal pursuant to an approved confidentiality agreement. In deciding to unseal, the court found that the documents were “judicial documents” relevant to the performance of the judicial function, and thus subject to a “presumption of access.” The weight of the presumption was “high,” in that the documents constituted the heart of the what the court was asked to act upon (notwithstanding that the case settled prior to the court’s consideration of the materials). Neither the existence of a confidentiality agreement, nor the fact that the movant nonparties were engaged in related reinsurance arbitration with one of the parties, could keep the documents protected from public access. Eagle Star Insurance Co. v. Arrowood Indemnity Co., Case No. 1:13-cv-03410 (USDC S.D.N.Y. Sept. 23, 2013).

This post written by Michael Wolgin.

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DUAL REINSURANCE LAWSUITS ALLOWED TO CONTINUE CONCURRENTLY IN DIFFERENT DISTRICTS

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As previously reported, Utica Mutual Insurance Company was successful in seeking transfer of its dispute against two reinsurers from the Southern District of New York to the Northern District of New York. The insurance company has again succeeded, defeating a motion to dismiss, and alternatively a motion to stay the proceeding in the Northern District of New York in favor of a suit initiated by one of the reinsurers against Utica in Wisconsin. Rejecting defendants’ contention that the “first-file rule” requires a stay of the New York lawsuit, the court determined that the New York suit can proceed along side the Wisconsin dispute because: a) the New York suit involves an additional defendant not present in the Wisconsin proceeding, b) the New York suit involves an additional claim under the Federal Arbitration Act, and c) Utica asserts it is not amenable to personal jurisdiction in Wisconsin. Utica Mutual Insurance Co. v. Employers Insurance Co. of Wausau, Case No. 6:12-CV-1293 (N.D.N.Y. Sept. 26, 2013).

This post written by Abigail Kortz.

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FEDERAL COURT ENJOINS ARBITRATION BETWEEN INSURERS AND REINSURER WHILE THE ARBITRATION PROCESS IS INVESTIGATED

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A federal district court has issued an order enjoining the arbitration of a dispute between several workers compensation insurers and reinsurer, National Union Fire Insurance Co. of Pittsburgh, while allegations of misconduct concerning the arbitration process are investigated. The parties’ reinsurance treaty requires disputes to be adjudicated by “disinterested officials” who are “not under the control of either party.” It also provides that each side will choose one arbitrator and that the two will select an umpire. The chosen two arbitrators in the matter could not agree on an umpire; thus, after casting lots, National Union selected an umpire who was a close friend of their chosen arbitrator. The panel issued an interim final award favorable to National Union that addressed liability but left damages issues open. Plaintiffs petitioned the court to stay the arbitration.

Plaintiffs argued that National Union breached the provision in the treaty requiring disputes to be decided by arbitrators not under either party’s control. In support of their motion, plaintiffs presented National Union’s attorneys’ bills (submitted in connection with its attorneys fee request during the arbitration), demonstrating that National Union’s counsel had repeatedly communicated with its arbitrator during the course of the arbitration proceeding in violation of the arbitration panel’s order. Additionally, plaintiffs showed that the arbitration panel had made decisions without the participation of the third arbitrator chosen by plaintiffs. The court issued a corrected preliminary injunction that precludes any further orders from the arbitrators and communications between the parties and the arbitrators pending subsequent order from the court. National Union has filed a notice of appeal in which it indicates it will argue to the Sixth Circuit, among other things, that the court lacked jurisdiction to enjoin an ongoing arbitration proceeding.

Star Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, Case No. 2:13-cv-13807 (USDC E.D. Mich. Sept. 12, 2013).

This post written by Ben Seessel.

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NAIC APPROVES PROCESS FOR DEVELOPING LIST OF QUALIFIED FOREIGN JURISDICTIONS IN SUPPORT OF COLLATERAL REFORM

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At its August 26, 2013 meeting, the National Association of Insurance Commissioners (NAIC) approved and adopted the Process for Developing and Maintaining the NAIC List of Qualified Jurisdictions, a process developed and approved by the Reinsurance (E) Task Force and the Financial Condition (E) Committee. The process now turns to the first four jurisdictions selected for expedited review: Bermuda, Germany, Switzerland, and the United Kingdom. If approved, these jurisdictions would constitute “qualified jurisdictions” within the meaning of NAIC’s Credit for Reinsurance Model Law that has been adopted by 18 states and is being considered by several more.

This post written by John Pitblado.

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COURT DECLINES TO APPOINT UMPIRE OR ORDER SEPARATE ARBITRATIONS IN REINSURANCE DISPUTE

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When a reinsurer refused to reimburse two AIG insurance companies for the insurers’ losses arising out of asbestos litigation, the AIG companies made a demand for a single arbitration under three reinsurance agreements between the parties. The reinsurer delayed the process of appointing an arbitration panel by asserting that differences between the contracts warranted three separate arbitrations. The insurers petitioned the court to appoint an umpire – two other arbitrators having already been appointed by the parties – under Section 5 of the Federal Arbitration and the reinsurer petitioned the court to order separate arbitrations under Section 4 of the Act. The court refused both parties’ demands, concluding that both issues would require the court to decide the core dispute: whether the insurers’ demand for a single arbitration was improper. The court ordered the parties to proceed with the agreed upon arbitrator selection process, so that the single arbitration panel could address the issue of whether the demand for a single arbitration was improper. Granite State Insurance Co. v. Clearwater Insurance Co., Case No. C 13-2924 (USDC N.D. Cal. Aug. 19, 2013).

This post written by Abigail Kortz.

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