Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

TENTH CIRCUIT HOLDS POST-JUDGMENT INTEREST RATE IN “BROAD” ARBITRATION PROVISION TRUMPS STATUTORY RATE

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On November 17, 2008, we reported on a Colorado district court’s decision in a reinsurance dispute to alter the post-judgment interest rate provided in the arbitration panel’s final award and replace it with a statutory rate.

Earlier this month, however, the Tenth Circuit reversed the district court, holding that the post-judgment interest entitlement and rate decided by the arbitration panel should govern. The court reasoned that parties are permitted to set their own rate of post-judgment interest through contract, and the arbitration provision at issue in this case was a “broad” provision. The court further held that “the parties’ intent is a quintessential fact question, and we see no reason why an arbitration panel with authority to decide a contractual dispute cannot also determine whether the contract in question includes language clearly, unambiguously, and unequivocally stating the parties’ intent to bypass § 1961[, the post-judgment interest statute].” Newmont USA LTD v. Ins. Co. of N. Am., Nos. 08-1347 & 08-1370 (10th Cir. Aug. 11, 2010).

This post written by Michael Wolgin.

LLOYD’S UNDERWRITERS MUST REVEAL “NAMES” TO ESTABLISH JURISDICTION

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Certain Underwriters at Lloyd’s, London brought suit in Florida federal court to seek adjudication of the binding effect of a purported settlement agreement it had entered with insureds pertaining to coverage for an underlying all terrain vehicle accident. Lloyd’s and the insureds had been approaching a tentative agreement on a settlement, but the parties’ stories diverged from there, with Lloyd’s asserting settlement had been in fact been reached in principle, and the insureds asserting that no final agreement had been reached. Lloyd’s brought suit in federal court to resolve the dispute, and the trial court rejected the insureds’ challenge to jurisdiction, by way of motion to dismiss, asserting that Lloyd’s had to specifically allege the residence of each of the “names” actually sponsoring the insurance, and for whom liability attaches severally under pertinent British statutory laws governing Lloyd’s. The Eleventh Circuit Court reversed that decision, detailing the history of Lloyd’s, its nature as an unincorporated association of “names” who sign on to particular risks, which are administered by “syndicates,” and the manner in which liability attaches to the “names,” akin to the members of a partnership. The Court held that Lloyd’s must allege each of the actual “names” bringing suit for purposes of establishing diversity jurisdiction. Underwriters at Lloyd’s, London v. Osting-Schwinn, No. 08-15809 (11th Cir. August 5, 2010).

This post written by John Pitblado.

NEW YORK PUBLICIZES DRAFT AMENDMENTS TO CREDIT FOR REINSURANCE REGS

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In what appears to be one of the first, if not the first, state insurance department action in response to the Nonadmitted and Reinsurance Reform provisions of the Dodd-Frank Act (DFA), New York recently issued for comment a draft of proposed amendments to its regulations governing credit for reinsurance. As we discussed in Carlton Fields’s recent webinar on reinsurance aspects of DFA, New York was one of the states that previously had publicized proposed modifications, or enacted actual modifications, to their reinsurance laws to, among other things, address the perceived inequality confronted by non-U.S. reinsurers relating to collateral requirements for U.S. ceded business. In this regard, New York’s latest draft carries forward its previous proposal, which calls for a ratings-based framework for the determination of collateral requirements. Notably, however, several changes now embodied in New York’s proposal appear to respond directly to DFA.

For example, whereas it previously aimed to reach “authorized insurers,” New York under this draft amendment would expressly exclude from the provision’s reach situations where the cedent’s state of domicile (other than New York) recognizes credit for the ceded risk and is an NAIC-accredited state, or has financial solvency requirements substantially similar to the requirements for NAIC accreditation. In addition, those who participated in our webinar will recall that DFA includes provisions relating to the law that may govern a reinsurance contract. On this front, New York’s proposal states that the reinsurance contract must provide that disputes thereunder be governed by and construed in accordance with one of three options: (1) the laws of New York, (2) the laws of the cedent’s domicile, or (3) the laws of any state chosen by the cedent. New York’s draft proposal expressly provides that an agreement by the parties to arbitrate disputes is not overridden by such governing law provisions, consistent with DFA. The brief public comment period for New York’s draft proposed amendment ended on August 4th.

Absent further initiative by the NAIC to move forward with its previous proposal to “modernize” reinsurance regulation as it relates to collateral requirements, New York’s approach, if it goes into effect, could represent another piece in a patchwork whereby various states adopt their own modified collateral requirements within the parameters of DFA, while others maintain the status quo. We will continue to monitor such developments to keep our readers informed.

This post written by Tony Cicchetti.