Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Week's Best Posts

Week's Best Posts

AMICO DISPUTES CASH HOLDINGS IN MANHATTAN RE REHABILITATION

by

In response to a rehabilitation plan for Delaware insurance company Manhattan Re proposed by its receiver, American Motorists Insurance Company (a reinsurer of Manhattan Re) filed objections with the Delaware Court of Chancery. AMICO argued that the plan should be rejected because the receiver improperly intended to dispose of certain cash holdings that AMICO claimed constituted cash collateral under its reinsurance agreements with the company. Additionally, AMICO moved to have the parties’ dispute referred to arbitration, and for a preliminary injunction to preserve the disputed cash until arbitration is resolved. The court found that Delaware law permits enforcement of the arbitration clause in the reinsurance agreement which compelled the parties to arbitrate their dispute over the cash. Additionally, the court issued a partial stay of the proceedings pending resolution of the arbitration. In re Rehabilitation of Manhattan Reinsurance Co., No. 2844 (Del. Ct. Ch. Oct. 4, 2011).

This post written by John Black.

STATE COURT INTERVENES TO FACILITATE SELECTION OF NEUTRAL ARBITRATOR

by

Arrowood Indemnity Co. filed suit in state court, complaining that Clearwater Insurance Co. failed to name three neutral umpire candidates in accordance with the parties’ arbitration agreement. Arrowood asked the court to issue orders facilitating the designation of a neutral arbitrator. Clearwater moved to dismiss, arguing that the court lacked subject matter jurisdiction because the FAA, which undisputedly governed, does not allow for pre-award challenges to an arbitration panel. The court denied Clearwater’s motion, holding that the FAA does not preclude state court involvement in procedural pre-arbitration matters and that it should intervene to facilitate the selection of a neutral arbitrator to protect the integrity of the arbitration process. To court directed the parties to schedule an evidentiary hearing where Clearwater could make challenges to a slate of neutral arbitrators proposed by Arrowood. Arrowood Indem. Co. v. Clearwater Ins. Co., Case No. 11-6018055-S (Conn. Super. Ct. July 26, 2011).

This post written by Ben Seessel.

EIGHTH CIRCUIT AFFIRMS DECISION AGAINST REINSURER UNDER “FOLLOW THE SETTLEMENTS” DOCTRINE

by

The Eighth Circuit Court of Appeals affirmed judgment in favor of Massachusetts Mutual Life Insurance Company (“Mass Mutual”) in a case brought against it by its reinsurer, Employers Reinsurance Company (“ERC”). ERC and Mass Mutual were parties to an Excess Disability Income Reinsurance Agreement. ERC and Mass Mutual later entered into a Claim Review Agreement, allowing ERC to make non-binding settlement recommendations. After Mass Mutual revealed some of its own claims reporting errors to ERC, ERC concluded that Mass Mutual had breached the reinsurance treaty and sued Mass Mutual, asserting breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory claims. Mass Mutual countered, making similar claims against ERC. The parties cross-moved for summary judgment and the trial court granted Mass Mutual’s motion and denied ERC’s. ERC appealed, but the Eighth Circuit Court affirmed the trial court’s decision and findings that the reinsurance agreement contained a “follow the settlements” provision, and that this ultimately allowed Mass Mutual to settle claims as it saw fit, whether or not the CRA required it to consider ERC’s non-binding recommendations. (We posted on the District Court’s decisions four times: September 15, 2010 (pre-judgment interest), July 12, 2010 (1292(b) appeal certification request), November 20, 2008 (reconsideration and appeal certification) and September 2, 2008 (summary judgment). Employers Reinsurance Co v. Massachusetts Mutual Life Ins. Co., No. 10-3099 (8th Cir. Sept. 7, 2011).

This post written by John Pitblado.

LEVELING THE PLAYING FIELD: NAIC FINANCIAL CONDITION (E) COMMITTEE ADOPTS REVISIONS TO CREDIT FOR REINSURANCE MODELS

by

The NAIC’s Financial Condition (E) Committee has adopted revisions to the NAIC Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786). In this edition of Special Focus, Tony Cicchetti discusses the revisions’ ramifications for reinsurance regulation.

This post written by Anthony Cicchetti.

WOODALL CONFIRMED AS VOTING MEMBER OF FSOC

by

The full Senate has confirmed former Kentucky regulator S. Roy Woodall for a voting position on the Financial Stability Oversight Council. The FSOC is tasked with monitoring the country’s financial system to protect against the failure of large bank holding companies and financial institutions. The Dodd-Frank Act requires that the FSOC have one voting member with insurance background among its ten voting members, which includes the Treasury Secretary and the Federal Reserve Chairman. The Council also includes five non-voting members, two of whom are insurance representatives. Mr. Woodall gave testimony to the Senate Banking Committee on July 26, 2011.

This post written by John Black.