Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT LAYS OUT VARIOUS GUIDELINES FOR ASSERTING PRIVILEGE IN INSURANCE AND REINSURANCE RELATED DISCOVERY

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The court considered the various privilege assertions of both the insurers (plaintiffs) and the insureds (defendants) in a multi-insurer insurance litigation. In analyzing varying categories of documents, including subsets of documents produced to the court in camera, the court ordered the production of certain documents but not others. Included in the court’s reasoning were the following principles based on New York law: (1) regarding attorney client privilege, discussions between the insurer and its attorney in advance of the denial of coverage are not privileged unless they are “primarily or predominantly a communication of a legal character,” as distinct from routine insurance business activities such as claim investigation; (2) regarding work product, the party seeking to withhold a document “must demonstrate that the document it seeks to withhold was created because of the anticipation of litigation” and in the context of insurers, that presumptively occurs when the insurance claim is denied; (3) documents related to reserves and reinsurance is discoverable unless they are “covered by another relevant privilege”; and (4) documents generated by the insureds that “speak more to the requirements for making a case to the insurers, not a case against the insurers in the courts,” namely, documents generated before the submission of proof of loss, is presumptively not privileged and is discoverable. Great American Insurance Co. of N.Y. v. Castleton Commodities International LLC, Case No. 1:15-cv-03976 (USDC S.D.N.Y. Oct. 15, 2015).

This post written by Michael Wolgin.

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SIXTH CIRCUIT CLARIFIES PRIOR REVERSAL OF AN ORDER THAT HAD VACATED ARBITRATION AWARD AS A MANIFEST DISREGARD OF THE LAW

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After an arbitrator ruled that indemnification agreements between an acquiring company and certain former directors and trustees of employee stock ownership plans, were void under ERISA, the district court vacated the arbitrator’s ruling as a manifest disregard of the law. On the initial appeal of that ruling, the directors argued that district court properly found a manifest disregard of the law based on ERISA, and also because the arbitrator ignored the directors’ alternative arguments based on fraud and estoppel. The Sixth Circuit reversed the vacatur ruling under ERISA, but in passing appeared to reject the remaining arguments asserted by the directors. Accordingly, on remand, the district court precluded the directors from asserting their alternative fraud and estoppel arguments, as the “law of the case.” The directors appealed, and, in a candid opinion, the Sixth Circuit reversed, noting “[w]e regret the extent to which [the Court’s] language was misleading.” The directors’ fraud and estoppel theories were not rejected, and on remand, “the district court should address that argument in the first instance.” Schafer v. Multiband Corp., Case No. 14-2518 (6th Cir. Oct. 20, 2015).

This post written by Michael Wolgin.

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GEORGIA ENACTS NEW INSURANCE REGULATIONS FOR CAPTIVE INSURANCE OVERSIGHT

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On July 1, 2015, Georgia’s House Bill 552 went into effect, marking a change in Georgia’s insurance laws that will make the state more attractive to business. That law lowers the state tax on captive insurance premiums and reduces the capital requirements for such companies. Then on August 24, 2015, Georgia’s Commissioner of Insurance issued an order adopting new insurance regulations that incorporate changes to Georgia’s insurance code from House Bill 552 and to implement additional best practices of the captive industry. The new regulations, among other things, create new reporting and auditing requirements, adds a licensure requirement for captive managers, and changes the way in which captive insurance companies pay into the fraud fund. The new regulations went into effect on October 11, 2015.

Ga Comp. R. & Regs. 120-2-45-.01 to .20; 120-2-72-.05.

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

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CONNECTICUT FEDERAL COURT GRANTS REINSURER’S MOTION FOR SUMMARY JUDGMENT, ENTITLING IT TO COMMISSION ADJUSTMENT PAYMENTS

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In a diversity action arising out of a series of reinsurance agreements, a reinsurer, Odyssey Reinsurance Company, alleged that it was owed sliding scale commission adjustment payments from Cal-Regent Insurance Services Corporation, and sought summary judgment on its breach of contract and declaratory judgment claims. On August 20, 2015, a district court in Connecticut denied Odyssey’s motion for summary judgment without prejudice, and allowed Cal-Regent to amend its answer to comply with the Federal Rules of Civil Procedure and to properly plead that Odyssey breached the reinsurance agreements (which we reported on September 21, 2015). Thereafter, Cal-Regent did not amend its answer, and Odyssey renewed its motion for summary judgment. On October 14, 2015, the Court held that there was no genuine issue of material fact, and that Odyssey is entitled as a matter of law to a declaratory judgment that Cal-Regent breached the reinsurance agreements, allowing Odyssey to recover over $2.7 million in the commission adjustment payments, plus prejudgment interest.

Odyssey Reinsurance Co. v. Cal-Regent Insurance Services Corp., No. 3:14-cv-00458 (USDC D.Conn. Oct. 14, 2015).

This post written by Jeanne Kohler.

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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.

See our disclaimer.