Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT DENIES MOTIONS TO COMPEL PRODUCTION OF DOCUMENTS UNRELATED TO REINSURANCE POLICIES AT ISSUE IN ACTION

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The dispute continues between Utica Mutual and Clearwater Insurance in the Northern District of New York where the court recently denied, in large part, the parties’ respective motions to compel discovery of insurance and reinsurance documents unrelated to the specific facultative reinsurance policies at issue in the action. In this case, on which we have previously reported, the issue is whether reinsurance is due under contracts between Utica Mutual and Clearwater for a reinsurance claim relating to a settlement with one of Utica Mutual’s insureds. Utica Mutual sought to compel Clearwater to produce unrelated reinsurance contracts, claim notices, claim files, claim billing information, and other documents concerning contractual relationships with non-parties, arguing these documents were relevant to Clearwater’s defenses and counterclaim that it was misled into paying amounts toward that settlement. Clearwater, in turn, sought to compel Utica Mutual to produce information about primary commercial insurance policies issued by Utica Mutual to a number of its commercial insureds, claiming the information was needed, in part, to determine damages relating to the underlying settlement.

The court denied the parties’ motions, finding the documents sought were not relevant and noting that any issues as to the underlying settlement were already litigated and resolved. Discovery of entirely different contracts and documents that are “not germane or are only faintly relevant” would create confusion and diversion. The court did grant that part of Utica Mutual’s motion seeking to compel Clearwater to respond to an interrogatory requesting the factual and legal bases for Clearwater’s assertions that the amounts it paid to Utica Mutual were not due and payable. That single interrogatory, the court found, sought relevant information. Utica Mutual Insurance Co. v. Clearwater Insurance Co., No. 6:13-cv-01178 (USDC N.D.N.Y. Jan. 20, 2015).

This post written by Renee Schimkat.

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SPECIAL FOCUS: ALTERNATIVE CAPITAL AND REINSURERS

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One hot topic in the reinsurance industry over the last year or two has been the influx and role of alternative capital.  In a Special Focus article titled Alternative Capital Proving That For Reinsurers, Size Does Not Matter, Bob Shapiro and Scott Shine explore some of the issues in this area.

This post written by Rollie Goss.

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SEVENTH CIRCUIT FINDS ATTORNEY FEE DISPUTE ARBITRABLE

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The Seventh Circuit recently held that a cost-sharing agreement (“CSA”) between Hennessy Industries Inc. (“Hennessy”) and National Union Fire Insurance Co. (“National Union”) required the parties to arbitrate a dispute over attorneys’ fees stemming from asbestos-related personal injury claims. Hennessy and National Union entered into a CSA that set forth a framework to govern asbestos claims handling and payment in 2008. The CSA was governed by Illinois law and contained an agreement that the parties would submit disputes to arbitration, though arbitrators would not have jurisdiction to award punitive damages, fines, or penalties.

Despite the language of the CSA, Hennessy sued National Union in federal court, seeking penalties, attorneys’ fees, and costs as provided by Section 155 of Illinois’s insurance law. National Union moved to compel arbitration of that claim, but the district court denied the motion, finding that the Section 155 claim was not within the scope of the parties’ arbitration agreement. National Union appealed to the Seventh Circuit, which reversed the district court’s ruling. Judge Posner, writing for the court, held: (1) Section 155 “regulate[s] the business of insurance” and thus could not be preempted by the Federal Arbitration Act; and (2) Section 155 was within the scope of the arbitration agreement, and so it was arbitrable by its terms. Hennessy Industries, Inc. v. National Union Fire Ins. Co. of Pittsburgh, No. 14-1277 (7th Cir. Oct. 28, 2014)

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

See our disclaimer.

COURT COMPELS DISCOVERY OF REINSURANCE AND OTHER INSURANCE DOCUMENTATION FROM INSURER IN GARNISHMENT PROCEEDINGS

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The judgment was entered in a class action by plaintiffs who lost their tuition payments for computer training programs at schools that abruptly closed in 2009. In attempting to collect on the judgment, plaintiffs served subpoenas on the schools’ insurers. Overruling objections to the relevance of the documents sought by the subpoenas, the magistrate compelled substantial discovery, including reinsurance policies and information, subject to a procedure where the insurer must verify “the accuracy and completeness of all the searches performed” by way of an affidavit and a subsequent deposition. The district court judge affirmed the decision of the magistrate, and rejected argument that the court lacked jurisdiction over garnishment proceedings. Smith v. Computertraining.com, Inc., Case No. 2:10-cv-11490 (USDC E.D. Mich. Sept. 26, 2014 & Dec. 29, 2014).

This post written by Michael Wolgin.

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CALIFORNIA COURT OF APPEAL SIDES WITH FEDERAL ARBITRATION ACT OVER STATE LAW UNCONSCIONABILITY RULE

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The California Court of Appeals recently held that the Federal Arbitration Act (“FAA”) preempts California’s Broughton-Cruz rule, which states that arbitration agreements for injunctive relief under California’s unfair competition and false advertising laws are against public policy and invalid.

In McGill v. Citibank, plaintiff sued Citibank for state law claims of unfair competition and false advertising, alleging that Citibank had violated her rights as a consumer in offering a credit insurance plan she purchased to protect her credit card account. Citibank moved to compel plaintiff to arbitrate her claims pursuant to the arbitration provision in her account contract. The trial court granted the motion with regard to plaintiff’s claims for monetary damages and restitution but refused to order arbitration of the claim for injunctive relief. Citibank appealed the decision as to the damages and restitution claims.

California’s appellate court held that the California Broughton-Cruz rule did not survive the Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion, __ U.S. __, 131 S. Ct. 1740 (2011). In Concepcion, the Court held that the FAA preempts state laws, such as laws that prohibit class arbitration waivers in certain contexts or otherwise impede the FAA’s objective of enforcing arbitration agreements according to their terms. The California court reversed and remanded the case for the trial court to order all of plaintiff’s claims to arbitration. McGill v. Citibank, N.A., No. G049838 (Cal. Ct. App. Dec. 18, 2014).

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

See our disclaimer.