Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COUNCIL OF THE EUROPEAN UNION AGREES TO NEGOTIATIONS ON REINSURANCE

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On April 21, 2015, the Council of the European Union (“Council”) issued a mandate to the European Commission (“Commission”) to negotiate an agreement with the United States on reinsurance. The mandate consists of a decision authorizing the opening of talks and directives for the negotiation of the agreement. The Commission will negotiate on the EU’s behalf, in consultation with a Council committee. The agreement will be concluded by the Council with the consent of the European Parliament.

These negotiations would be initial steps towards possible removal of collateral requirements in both jurisdictions in order to ensure a risk-based determination for all reinsurers in relation to credit for reinsurance. The Commission likely will negotiate with the Federal Insurance Office (“FIO”), which has authority under the Dodd-Frank Act to negotiate international agreements on behalf of the United States. Any such agreement reached by the FIO would pre-empt state laws, in this case the Model Credit for Reinsurance Act. It will be interesting to see how the NAIC reacts to this development.

This post written by Kelly A. Cruz-Brown.

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PENNSYLVANIA COURT DENIES MOTION FOR SUMMARY JUDGMENT OVER FACULTATIVE REINSURANCE CERTIFICATES

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The Court of Common Pleas of Philadelphia County denied defendant OneBeacon Insurance Company’s (“OneBeacon”) motion for summary judgment against plaintiffs Century Indemnity Company (“Century”) and Pacific Employers Insurance Company (“Pacific”). Century and Pacific, which held reinsurance policies issued by OneBeacon, sued the reinsurer to recover expenses in addition to the stated policy limits and to recover an award of interest on the payments received. OneBeacon  sought summary judgment on two grounds: 1) that the limit stated in the parties’ reinsurance certificates placed a total cap on its liability, and 2) that plaintiffs were not entitled to an award of interest on payments. The court denied OneBeacon’s motion.  First, the court determined that certain conditions placed on premiums in the reinsurance certificates meant that the premium was subject to a condition that excluded expenses in calculating the total loss limit. “If anything,” the court noted, “the terms of the certificates may have created a presumption of expense-exclusiveness.”

Second, the court denied defendant’s motion for summary judgment on collateral estoppel grounds. OneBeacon cited two prior district court cases that considered the “limit-of-liability” issue, but the court held that this legal authority did not “hold the necessary weight of final judgments at this juncture in order to apply collateral estoppel against plaintiffs.”  Finally, because the court had already granted plaintiffs’ separate motion for summary judgment on payments of interest, it denied OneBeacon’s motion on that issue as well.  Century Indem. Co. v. OneBeacon Ins. Co., No. 02928 (Pa. Com. Pl. Mar. 27, 2015).

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

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DISCOVERY OF RESERVE AND REINSURANCE INFORMATION PERMITTED IN COVERAGE AND BAD FAITH ACTION AGAINST INSURERS

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A federal district court in Colorado has denied motions for a protective order filed by the insurers in a coverage litigation where Cantex, a third-party assignee to claims against the insurers, asserts causes of action for breach of contract and bad faith. The discovery dispute concerned the scope of Cantex’s Rule 30(b)(6) deposition designations which sought discovery into areas of reserve and reinsurance, claims handling, underwriting, and insurance contract interpretation. The court found that the 30(b)(6) deposition topics on reserve and reinsurance information were relevant when claims of bad faith were still pending. The court therefore denied the motion for a protective order as to those areas of discovery, but permitted the insurers to interpose objections based on privilege as they deem fit. The court further found that discovery seeking testimony relating to the (1) drafting, marketing, and underwriting of the policy, (2) handling of the claims made to the insurers, including the evaluation of the underlying litigation, and (3) interpretation of the insurance policies, was also relevant. The court denied the insurers’ motions for a protective order in their entirety. Phoenix Insurance Co. v. Cantex, Inc., No. 13-cv-00507 (USDC D. Colo. Apr. 14, 2015).

This post written by Renee Schimkat.

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INSURER LOSES MOTION FOR RECONSIDERATION ON ORDER LIMITING REINSURER’S LIABILITY

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On a motion for reconsideration of a summary judgment entered against it, on which we previously reported, Century Indemnity Company urged a New York federal court to review its order in light of a subsequent decision by a different judge. The ruling Century sought to reverse concluded that the reinsurance limits set forth in each certificate of insurance issued by its reinsurer, Global Reinsurance Corporation of America, were inclusive of costs and expenses and created an overall cap of liability. The intervening decision Century brought to the Court’s attention was Utica Mutual Insurance Co. v. Munich Reinsurance American, Inc., an unpublished 2014 decision by the Second Circuit. Century’s motion was denied. The Utica decision was not controlling law and Century did not introduce new evidence. In addition, Utica would not require a different conclusion given that it was based on the particular language in the certificates in that case, which differed from the language of the certificates issued by Global. Specifically, the language in the certificates in the Utica case made losses and damages subject to the certificates’ limit of liability, but did not include a similar provision for “loss expenses.” Global’s certificates provided a total cap for liability and did not differentiate between reinsurance accepted for loss versus reinsurance accepted for expenses. Global Reinsurance Corp. of America v. Century Indemnity Co., No. 13 Civ. 06577 (USDC S.D.N.Y. Apr. 15, 2015).

This post written by Brian Perryman.

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COURT AFFIRMS ARBITRATION PANEL’S $14 MILLION AWARD IN FAVOR OF INSURED IN REINSURANCE DISPUTE OVER ASBESTOS CLAIMS

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A federal district court has confirmed a $14 million arbitration award entered in favor of Amerisure against its reinsurer Everest. As we earlier reported, the court had previously denied the motion to seal briefing associated with Amerisure’s motion to confirm the award. Now at issue was the confirmation, modification, or vacatur of the award, which directed Everest to indemnify Amerisure for its share of asbestos losses that fell within the parties’ reinsurance treaties. Everest moved to vacate the award on several grounds, including an arbitrator’s “evident partiality” in the proceedings and the panel’s allegedly erroneous procedural and evidentiary rulings. At the core of the reinsurance dispute was whether Amerisure could aggregate individual asbestos losses into a single occurrence in order to exceed the applicable retention and thereby qualify for indemnification under the reinsurance treaties. The panel held that Amerisure could aggregate the losses by relying, in part, on what it found to be the “commonly accepted” business of treating multiple asbestos losses as a single occurrence. The panel rejected the argument that Amerisure’s claim was precluded or undercut by the fact that the underlying claims were settled as individual losses and further discounted the expert opinion testimony offered by Everest as unpersuasive. The district court, in turn, affirmed the award, rejecting all arguments of partiality or erroneous rulings. While Everest had established the panel exceeded its powers in one respect, it did not find that warranted vacatur or modification of the award. Amerisure Mutual Insurance Co. v. Everest Reinsurance Co., Case No. 14-cv-13060 (USDC E.D. Mich. Mar. 18, 2015).

This post written by Renee Schimkat.

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