Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

INSURER AND REINSURER LOCKED IN DISCOVERY ROW

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In a row between Granite State Insurance Company (“Granite”) and R & Q Reinsurance Company (“R & Q”), a New York trial court denied R & Q’s attempt to (1) vacate a prior court order, (2) appoint a special referee, and (3) dismiss counts in the complaint.

By way of history, the court previously found that certain discovery documents were protected under attorney-client privilege. Looking for reconsideration of this order, the court construed R & Q’s motion to vacate as a motion to renew and/or reargue. The court denied R & Q’s motion to renew as it failed to present a change in law or present new facts that would necessitate an alteration of the prior discovery order. The court also denied R& Q’s motion to reargue finding the “common interest” exception to attorney-client privilege inapplicable between an insurer and reinsurer. Without a relevant exception, the court held that R & Q “failed to demonstrate that [the court] overlooked or misapprehended the relevant facts.”

The court also denied R & Q’s attempt to appoint a special referee because an appointment would only extend an already prolonged discovery process without “special circumstances.” Finally, the court noted that Granite and R & Q engaged in a considerable “meet and confer” process in an effort to narrow the scope of discovery, and thus instead of dismissing claims for which discovery had not yet been provided, the court directed R & Q to re-serve its discovery requests directed to those claims, as appropriately revised based on the parties’ “meet and confer” process.

Granite State Ins. Co. v. R & Q Reinsurance Co., No. 654494/2013 (Sup. Ct. July 22, 2015)

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

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SENATE BILL 900 AMENDS OPERATIONS OF TEXAS STATE BACKED INSURER

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On September 1, 2015, Texas Senate Bill 900 went into effect after passing both the Texas House and Senate this past summer. The bill amends the operation of the Texas Windstorm Insurance Association (“TWIA”), a state backed insurer of last resort. The TWIA was created in 1971 to fill in coverage gaps for windstorm and hail protection when private insurance became too expensive or when private insurance simply failed to provide coverage. The goal of the TWIA is to make coverage affordable for residential and commercial properties in areas prone to claims, most notably in certain coastal counties.

Senate Bill 900 makes a few important changes to the association. The insurer’s board of directors will now encompass three members from the insurance industry, three members from coastal Texas counties, and three members from inland Texas. It requires that the insurer maintain “available loss funding” to cover a once in a 100 year storm disaster. It also clarifies the purchasing requirements of reinsurance and alternative risk financing, both used in order to limit payout risk. Finally, Senate Bill 900 allows for the appointment of an administrator to run the insurer.

Texas Senate Bill 900 (2015)

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

See our disclaimer.

COURT MAY APPOINT ARBITRATION UMPIRE UNDER FAA

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On August 26, the Second Circuit Court of Appeals considered whether a trial court had appointment authority under the Federal Arbitration Act (“FAA”). Overturning a prior order that denied Odyssey Reinsurance Company’s (Odyssey) motion to appoint, the Second Circuit found that the trial court not only had the authority to appoint an arbitration umpire but “the obligation to appoint an umpire to correct a breakdown in the umpire selection process.”

The trial court found that it did not need to intervene in a dispute over worker’s compensation billings. The Second Circuit Court disagreed, finding the parties deadlocked as to the interpretation of various terms in the arbitration agreement concerning umpire qualifications. This “lapse” therefore necessitated the trial court to appoint an arbitration umpire.

Odyssey Reinsurance Co. v. Certain Underwriters at Lloyd’s London Syndicate 53, No. 14-2840-cv (2nd Cir. Aug. 26, 2015)

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

See our disclaimer.

TEXAS AMENDS CAPTIVE INSURANCE REGULATION

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Governor Greg Abbott of Texas has recently signed into law amendments to the Texas Insurance Code broadening the authority of captives.  This law is effective as of September 1, 2015.

There are three amendments in this law:

  1. Section 964.052 increases the types of risks that pools can now write to include reinsurance pools composed only of other captives and affiliated captive insurance companies.
  2. Section 964.063 provides that captives can, with the permission of the Commissioner, pay dividends or make distributions to “holders of an equity interest in the captive insurance company.”  Further, the Commissioner is required to issue rules implementing this section.
  3. Section 964.072 sets forth the two requirements that must be satisfied before a captive can participate in a reinsurance pool pursuant to Section 964.052, the pool is composed only of captive insurance companies; and the captive is sufficiently capitalized in order to meet the pool’s financial obligations.

It is clear that Texas is inviting companies to form their captives in Texas. Tex. SB No. 667 (eff. Sept. 1, 2015).

This post written by Barry Weissman.

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DISTRICT COURT WON’T ALLOW INSURER TO “REPACKAGE” ITS BREACH OF UTMOST GOOD FAITH CLAIMS

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We previously reported on Old Republic National Title Insurance Co. v. First American Title Insurance Co., in which the court partially dismissed First American’s claim for breach of good faith and fair dealing to the extent the predicate breach of reinsurance contract claim alleged by First American failed to state a claim. The court has now denied First American’s motion to amend its answer. In the motion, First American attempted to demonstrate the predicate breach of reinsurance contract by contending that Old Republic failed to make payment under the contract based on false accusations and improper document requests. But the court agreed with Old Republic that the claims as pled did not support First American’s new allegations, and could not serve as a basis for a claim for the breach of the utmost duty of good faith. Old Republic Nat. Title Ins. Co. v. First American Title Ins. Co., No. 8:15-cv-126-T-30EAJ (USDC M.D. Fla. July 17, 2015).

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

See our disclaimer.