Week's Best Posts

NINTH CIRCUIT AFFIRMS SUMMARY JUDGMENT IN CHALLENGE OF ARBITRATION AWARD

February 13, 2009 by Carlton Fields

Collier appealed from the district court’s sua sponte grant of summary judgment, confirming an arbitration award. Finding the case suitable for decision without oral argument, the Ninth Circuit concluded that summary judgment was properly granted because Collier initiated and fully participated in arbitration proceedings and, as a consequence, waived any argument that the dispute was not arbitrable. Additionally, the Ninth Circuit affirmed the district court’s conclusion that Collier failed to satisfy the statutory requirements to vacate or modify the arbitrator’s award. This opinion demonstrates the importance of preserving objections to the arbitration process. Collier v. State of New York, No. 07-55474 (9th Cir. Jan. 15, 2009).

This post written by Dan Crisp.

COURT GRANTS MOTION TO SEAL ARBITRATION AWARD

February 10, 2009 by Carlton Fields

Parties to a reinsurance agreement arbitrated a claims dispute, agreeing that the final award and all “arbitration information” be kept confidential. The prevailing party moved to confirm the award and to seal the award. The court found that there was a strong presumption of access to court records, and that the award should be sealed only if there was a showing that the material was of the kind of information that courts will protect, and that disclosure would work a clearly defined and serious injury to the party seeking closure. Evaluating the factors to be considered in evaluating a request to seal a portion of a court record set forth by the Third Circuit, the court found that the award should be sealed. Century Indem. Co. v. Certain Underwriters at Lloyd's, London, Case No. 08-219 (USDC E.D. Pa. Jan. 12, 2009).

This post written by Rollie Goss.

APPELLATE COURT HOLDS THAT SELF-INSURER GROUP IS ENTITLED TO COVERAGE THROUGH STATE INSURANCE GUARANTY ASSOCIATION

February 9, 2009 by Carlton Fields

The Louisiana Safety Association of Timbermen – Self Insurers Fund (the “Fund”) is a self-insurance group formed by member companies as a means of securing workers compensation coverage for their employees. In 1998, the Fund obtained statutorily required excess coverage from Reliance Indemnity Company, and in 2001 Reliance became insolvent. The Fund filed proofs of claim against Reliance with the Louisiana Insurance Guaranty Association (“LIGA”). LIGA denied the claims, asserting that the Fund was an insurer and the excess coverage was reinsurance, thus removing the claims from coverage by LIGA under the terms of governing state statutes. The fund brought suit to establish coverage for all past and future claims.

The trial court granted summary judgment to the Fund. The Louisiana Appellate Court affirmed, citing the terms of applicable workers compensation and insurance guaranty association statutes to support its determination that the excess coverage the Fund obtained was not “reinsurance” as that term is used under applicable statutes and that the Fund is not an “insurer” causing it to become statutorily exempt from coverage through LIGA. The Court also rejected LIGA’s argument that a statutory exclusion of coverage to any self-insured corporation with a net worth above $25,000,000 should apply to the Fund’s member companies in the aggregate. The court found that the member companies were not “affiliates” of one another as the term is used in the statute and thus held that their net worth should not be aggregated for purposes of the statutory exclusion. Louisiana Safety Assoc. of Timbermen – Self Insurers Fund v. Louisiana Ins. Guaranty Assoc., No. 43,615–CA (La. Ct. App. Dec. 3, 2008).

This post written by John Pitblado.

NEW YORK INSURANCE DEPARTMENT PROPOSES CHANGES TO REINSURANCE CREDIT REGULATION

February 6, 2009 by Carlton Fields

The New York Insurance Department has proposed a revision to Regulation No. 20 (121 NYCRR 125) – Credit for Reinsurance from Unauthorized Insurers. The Department has published a summary of the proposed amendment, and the Notice of Proposed Rule Making notes that comments will be accepted until 45 days after the publication of the Notice. We have confirmed with the Department that the comment period closes February 9, 2009. The amendment proposes to apply principle-based credit risk management standards to all licensed ceded insurers, and provides an alternative credit for reinsurance ceded to unauthorized reinsurers, which adjusts the credit that the ceding insurer may take on its financial statement based upon the financial strength of the unauthorized assuming reinsurer. The financial strength determination is based upon ratings by Standard & Poor’s, Moody’s Investor Services, Fitch Ratings, A.M. Best Company or any other rating agency recognized by the Securities Valuation Office of the NAIC.

This post written by Rollie Goss.

COURT CONFIRMS REINSURANCE ARBITRATION AWARD, REJECTING NUMEROUS PROCEDURAL CHALLENGES

February 3, 2009 by Carlton Fields

When a dispute arose over the allocation and payment of losses under a reinsurance agreement pursuant to which Global International Reinsurance Company agreed to reinsure TIG Insurance Company, the parties took their dispute to arbitration. An arbitrator granted TIG’s motion for partial summary judgment, finding that Global had released its right to audit and dispute certain claims. The dispute arose out of transactions and claims which had been the subject of a prior arbitration and settlement agreement. The parties disagreed as to their current claim audit rights and payment obligations under the reinsurance agreement and the prior settlement agreement. The arbitrator granted partial summary judgment based upon an interpretation of the various agreements and the prior arbitration award, after four hours of oral argument but no evidentiary hearing.

Global sought the vacation of the award, contending that it had been denied a fundamentally fair hearing because the arbitrator had refused to hear evidence, disregarded the standards of summary judgment, and resolved material factual disputes without discovery or an evidentiary hearing, in violation of the standards contained in Section 10(a)(3) of the Federal Arbitration Act. The district court confirmed the award, noting: (1) that the settlement agreement gave the arbitrator the authority to resolve “any dispute” arising from or relating to the settlement agreement and other agreements; (2) that arbitrators have “great latitude to determine the procedures governing their proceedings and to restrict or control evidentiary proceedings;” and (3) that a court has very narrow authority to vacate arbitration awards, even if it disagrees with the merits of the arbitrator’s decision, so long as there is a “barely colorable justification for the outcome reached.” The court found that the arbitrator had acted within the scope of the authority delegated by the very broad provision and within the scope of his broad authority to manage the arbitration process. This opinion illustrates the expansive authority that arbitrators have to manage and conclude arbitrations. Global Int’l. Reinsur. Co. v. TIG Insur. Co., Case No. 08-7338 (USDC S.D.N.Y. Jan. 20, 2009).

This post written by Rollie Goss.