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New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

Courts continue strict approach to confirmation of arbitration awards

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Two recent opinions continued the trend of courts confirming arbitration awards over a variety of objections:

  • In Kuest v. Citigroup Global Markets, Inc., (USDC W.D. Wash. Nov. 14, 2006), an NASD arbitration award was confirmed over contentions that it was irrational and exhibited a manifest disregard of law.  The Court found that the Petition to Vacate the award merely complained about evidence rulings by the Arbitration Panel and its weighing of the evidence.
  • In Millenium Validation Services, Inc. v. Thompson, (USDC D. Del. Nov. 3, 2006), an arbitration award relating to a shareholder agreement was confirmed, rejecting five grounds proposed for the vacation of the award: (1) the arbitrator exceeded his authority by rejecting the “binding valuation” of the objector's accountant; (2) the award contained “evident material miscalculation of figures;” (3) the arbitrator refused to consider pertinent evidence, amounting to a manifest disregard of law; (4) the arbitrator refused to consider an alleged breach of a contractual provision; and (5) the arbitrator exceeded his authority with respect to attorneys' fees and costs.

These opinions are further examples of courts viewing such complaints as nothing more than impermissible re-argument of the merits of the arbitration under different guises.

NAIC reinsurance credit proposal and comments posted on NAIC Internet site

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The NAIC's Reinsurance Task Force has posted on its Internet page the proposal to change the present collateral-based reinsurance credit system to one based upon the financial strength of the reinsurer. Proposal to Grant Credit for Ceded Reinsurance, NAIC Reinsurance Evaluation Office (October 31, 2006 draft). Comments on the proposal have already been posted from 17 organizations, including the RAA, Lloyd's and the European Commission. Further comments may be found on the Task Force's Internet page.

Summary judgment denied against parent of reinsured

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Guy Carpenter provided reinsurance intermediary and placement services for General Fire & Casualty. When a dispute arose as to those services, General Fire and its parent holding company sued Guy Carpenter. Guy Carpenter moved for summary judgment as to the claims of the parent, contending that it did not have a relationship with the parent. The USDC for Idaho denied the motion, finding that disputed issues of material fact existed with respect to such claims. General Fire & Casualty Co. v. Guy Carpenter & Co., Case No. 05-251 (USDC Idaho Nov. 7, 2006).

UK Court denies claim over implementation of EEC Insurance Directive

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The UK Commercial Court, Queen's Bench Division, has entered an extensive opinion (with an accompanying Appendix), denying claims asserted by various Names against Her Majesty's Treasury, which alleged that the Names had suffered losses at Lloyd's due to the government’s failure appropriately to implement an EEC Insurance Directive (Directive 73/239/EEC). The Names contended that as a result of the failures in the implementation process, the “true IBNR” for US asbestos-related risks were not disclosed, resulting in the Names participating in the reinsurance of such risks, when they would not have done so had they known the “true IBNR” for such risks. Poole v. Her Majesty’s Treasury, [2006] EWHC 2731 (Comm.) (Nov. 8, 2006). The Court denied the claims on two bases: (1) the Insurance Directive did not grant any relevant rights to the Names; and (2) the claims were time barred.

Court of Appeal holds that California Court had personal jurisdiction over London insurance broker

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A California Court of Appeals, reversing a lower court's decision, has held that the state court could exercise personal jurisdiction over Sedgwick Group Ltd., an English insurance broker which had provided brokerage services for a California excess and surplus lines insurance broker for at least 50 years. The Court found that Sedgwick had “enjoyed decades of profit as a result of purposeful and deliberate business practices aimed at California residents.” In finding the exercise of personal jurisdiction over Sedgwick proper, the Court cited, as being of particular relevance, a Ninth Circuit case that dealt with personal jurisdiction over a London-based insurance broker. Harris Rutsky & Co. Ins. Serv., Inc. v. Bell & Clements, 328 F.3d 1122 (9th Cir. 2003). Swett & Crawford v. Sedgwick Group Ltd., Case No. B183940 (Cal.Ct.App. Oct. 11, 2006).