Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

NEW YORK APPELLATE COURT AFFIRMS GRANTING OF REINSURER’S MOTION TO SEVER

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Munich Reinsurance America, Inc., (“Munich”) moved to sever its suit against cedent Utica Mutual Insurance Company (“Utica”) from Utica’s suit against Transatlantic Reinsurance Company. Utica sought enforcement of reinsurance policies issued to it by both reinsurers, and sued the reinsurers together to avoid removal of the claims against Munich to federal court, according to Munich. The trial court granted Munich’s motion to sever and Utica appealed.

New York’s appellate court affirmed the trial court’s order because it agreed with the trial court that the cases lacked commonality. The court noted that although the claims against both defendants related to insurance payments made by plaintiff to the same insured for asbestos-related losses, defendants had no relationship to one another, and the claims arose from different reinsurance contracts, were triggered by different underlying umbrella polices, and involved different time periods. Moreover, the court continued, defendants asserted different affirmative defenses, and a finding of liability against one defendant would not impact the liability of the other.

Utica Mutual Insurance Co. v. American Re-insurance Co., No CA 15-00408 (N.Y. App. Div., 4th Dep’t. Oct. 9, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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FIFTH CIRCUIT AGAIN REJECTS NLRB RULING THAT EMPLOYMENT AGREEMENTS REQUIRING INDIVIDUAL ARBITRATION ARE UNLAWFUL

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On December 16, 2014, we reported on the National Labor Relations Board’s ruling that Murphy Oil violated the National Labor Relations Act by requiring its employees to sign arbitration agreements which “requir[ed] . . . employees to resolve all employment-related claims through individual arbitration.” The NLRB’s decision reaffirmed its prior D.R. Horton ruling (which we reported on February 16, 2012), but which was reversed by the Fifth Circuit Court of Appeals (which we reported on December 19, 2013). On October 26, 2015, the Fifth Circuit, adhering to its previous decision in D.R. Horton, rejected the NLRB’s ruling in Murphy Oil, holding that the arbitration agreements are not unlawful and that Murphy Oil committed no unfair labor practice by requiring its employees to arbitrate claims on an individual basis, waiving their rights to pursue a class arbitration. The Court upheld the NLRB’s determination that Murphy Oil must take corrective action as to any employees subject to one of its arbitration agreements, which provided that “any and all disputes or claims [employees] may have . . . which relate in any manner . . . to . . . employment” must be resolved by individual arbitration, so that those employees understand that such language did not eliminate their right to pursue claims of unfair labor practices with the NLRB.

Murphy Oil USA, Inc. v. National Labor Relations Board, No. 14-60800 (5th Cir. Oct. 26, 2015).

This post written by Jeanne Kohler.

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ELEVENTH CIRCUIT HOLDS THAT STATUTE TO AID DISCOVERY FOR FOREIGN LITIGATION DOES NOT BAR MATERIAL’S SUBSEQUENT USE IN DOMESTIC LITIGATION

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The Eleventh Circuit Court of Appeals has addressed what it deemed an issue of first impression for any circuit court: Whether documents obtained under 28 U.S.C. § 1782 can be used in a subsequent domestic litigation. The case pitted the former wife of Gaston Glock, founder of the Glock handgun company, against the Glock corporation. The former wife desired to use documents obtained through § 1782 for her Austrian divorce in a RICO action against Glock, Inc. Glock argued that § 1782 did not envision documents being used for such a purpose. The Eleventh Circuit agreed, but in so doing applied the rationale that allowing parties to use, “for purposes of litigation, documents they have lawfully obtained, regardless of whether they could have obtained them through discovery in the case in which they use them,” furthers the goals of the Federal Rules of Civil Procedure. Distinguishing between the former wife using the documents as part of the proceeding and whether the documents would be ultimately admissible, the court reasoned that a blanket rule precluding such use could create a procedural nightmare for lower courts. Such determinations should be committed to the discretion of the district courts to determine if the documents were solely obtained to abuse § 1782. Glock v. Glock, Inc., No. 14-15701 (11th Cir. Aug. 17, 2015).

This post written by Zach Ludens.
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PUTATIVE CLASS REPRESENTATIVE ACCUSING LIFE INSURER OF “HOLLOW ASSET” REINSURANCE LACKS ARTICLE III STANDING

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We previously reported on putative class actions pending against life insurers for allegedly misleading customers by engaging in “shadow” or “hollow” reinsurance transactions, doing so most recently on August 3, 2015. In early October, another judge in the Southern District of New York faced the same arguments and ultimately reached the same conclusion that Article III standing was lacking. Plaintiffs alleged that Metropolitan Life Insurance Company and MetLife, Inc. had not properly disclosed their reinsurance agreements to customers as part of their transaction purchasing life insurance. According to plaintiffs, MetLife engaged in such conduct as obtaining a reserve credit of over $1 billion based upon letters of credit that were backed by contractual parent guarantees. In particular, plaintiffs pointed to a $315 million letter of credit that the New York Department of Financial Services determined was a “hollow asset” even though MetLife reported it as an admitted asset.

Plaintiffs filed a putative class action seeking damages against MetLife for failure to disclose these transactions and for violating sections of the New York Insurance Law. Plaintiffs, however, could not prove an injury-in-fact and, therefore, lacked Article III standing. Plaintiffs lacked Article III standing, the court found, because they could not show a concrete injury as a result of this conduct. In fact, rather than resulting in higher premiums, as Plaintiffs alleged, “according to an economic study annexed as an exhibit to the complaint, using shadow insurance actually reduces the cost of life insurance policies and, if companies discontinued using shadow insurance, premiums might rise by as much as 10–21%.” Finding that the alleged risk of harm was in the future and not concrete, the court dismissed the case for lack of Article III standing. Robainas v. Metropolitan Life Insurance Co., No. 14-cv-09926-DLC (USDC S.D.N.Y. Oct. 9, 2015).

This post written by Zach Ludens.

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COURT DENIES MOTION FOR INTERLOCUTORY APPEAL IN ALLEGED INSURANCE KICKBACK SCHEME

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We have previously reported on a case styled Munoz v. PHH Corp., one of similar suits alleging putative class actions under the Real Estate Settlement Procedures Act arising from purported “sham” reinsurance transfers covering private mortgage insurance. Here, the California district court had granted PHH’s partial motion to dismiss and certified the remainder of the class. Plaintiffs subsequently filed for interlocutory appeal concerning whether a prior decision in the Ninth Circuit concerning equitable tolling and equitable estoppel disturbed the holdings in other California district court opinions. The court found that plaintiffs failed to satisfy the second of three prongs for certification—that there is substantial ground for difference of opinion among the courts. A “party’s strong disagreement with the court’s ruling is not sufficient for there to be a substantial ground for difference.” The court found that the appellate and district court opinions were not inconsistent, instead, “all assume that there are situations in which equitable tolling or equitable estoppel can apply to RESPA violations.” Even divergent application of settled law is not sufficient to show substantial ground for difference. Munoz v. PHH Corp., No 1:08-cv-00759-AWI-BAM (E.D. Cal. Oct. 1, 2015)

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

See our disclaimer.