New York recently joined Florida in adopting a regulation approving reduced collateral for certain reinsurance agreements based largely upon the financial strength of the reinsurer. In this Special Focus article, Carlton Fields partner Anthony Cicchetti provides an analysis of the New York regulation, which takes effect January 1, 2011.
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SECOND CIRCUIT AFFIRMS WAIVER OF REMOVAL BASED ON SERVICE OF SUIT PROVISION IN REINSURANCE TREATY
In two prior posts (December 8, 2009 and February 11, 2010), we reported on Dinallo v. Dunav Ins. Co., a case between a liquidator of an insurance company and the company’s reinsurer, Dunav Re. The Southern District of New York had remanded the action to New York State Court and denied reconsideration, holding that Dunav Re waived removal based on a service of suit provision in its reinsurance treaty with the insurer. Dunav Re appealed to the Second Circuit Court of Appeals, which, after de novo review, has now affirmed “substantially for the same reasons articulated by the district court.” In other cases, some parties have persuaded courts that the service of suit clause does not waive a right to arbitrate under an arbitration provision, because it merely provides for consent to jurisdiction and venue to enforce such an agreement to arbitrate. The same kind of argument was not persuasive in the context of this case. Dinallo v. Dunav Ins. Co., No. 09-5235 (2d Cir. Dec. 1, 2010).
This post written by Michael Wolgin.
SPECIAL FOCUS: STORM WARNINGS FOR THE REINSURANCE INDUSTRY
The concept of “storm warnings” triggering a duty to inquire and the starting of the running of statute of limitation periods has been prevalent in securities and other financial fraud litigation. Carlton Fields associate Paul Williams explores the application of this doctrine to reinsurance disputes in a Special Focus article.
This post written by Rollie Goss.
REINSURANCE BROKER’S SALES COMMISSIONS ARE AN “IDENTIFIABLE CHATTEL” AND SUPPORT A CONVERSION CLAIM
In a dispute between reinsurance brokers, Guy Carpenter sued its competitor, Lockton, arising from broker fees alleged owed to Guy Carpenter as a result of its placement of reinsurance on behalf of two reinsurers, whose business went (after placement) to Lockton when one of Carpenter’s brokers switched his employment to Lockton. Carpenter asserted that the broker fees, which were established and became payable upon placement of the reinsurance at issue, were improperly withheld by Lockton after they were received from the reinsurers. Lockton moved to dismiss all three claims asserted by Carpenter, including conversion, tortious interference with contract, and unjust enrichment. The court denied the motion (save for its dismissal of the unjust enrichment claim), notably holding that the monies owed to Carpenter constitute an “identifiable chattel” and thus supported the conversion claim. The court also held that Lockton’s alleged withholding of money owed pursuant to the broker agreement between the reinsurers and Carpenter adequately stated a tortious interference with contract claim. Guy Carpenter & Co., LLC v. Lockton Re, LP, No. 10-Civ-4932 (USDC S.D.N.Y. Nov. 4, 2010)
This post written by John Pitblado.
REINSURANCE COLLATERAL, CREDIT AND SURPLUS LINES REGULATORY UPDATE
There has been a flurry of activity on the regulatory front on a variety of issues that the Dodd-Frank Act deferred to the states:
- The New York Department of Insurance has approved a reinsurance collateral regulation (effective 1/1/2011) which is somewhat similar to Florida’s regulation. The Department’s final review of comments submitted on the proposed regulation is also available. We will post a Special Focus piece on this new regulation soon.
- The NAIC: (1) has reinsurance collateral recommendations pending, which are being framed as accreditation issues; (2) has a proposal under consideration for a surplus lines interstate compact; and (3) may consider amendments to the model acts and regulations regarding reinsurance credit. According to some media reports, there has been some disagreement within the NAIC as to the scope of the NAIC’s surplus lines initiative, with some states seeking to limit the scope to premium tax issues and a larger number seeking to broaden the scope to cover other areas of surplus lines operation mentioned in Dodd-Frank. The proponents of the narrower premium tax only approach apparently are prevailing
- NCOIL recently approved a proposal addressing various surplus lines issues, but has not been active on the reinsurance collateral issue. Unlike the relatively narrow NAIC approach, NCOIL’s surplus lines proposal addresses not only premium tax issues, but also other issues, including some related to eligibility, brokerage and placement activities.
This post written by Rollie Goss.