Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

SECOND ARBITRATION COMPELLED ON REINSURANCE CLAIMS MADE UNDER TREATY PREVIOUSLY CONSTRUED IN PRIOR ARBITRATION AWARD

by

In a complicated web of proceedings, the initial dispute involved whether the reinsurer, Nationwide Mutual Insurance Co., was permitted to condition payment of reinsurance claims on receiving access to the claim records of the cedent, Liberty Mutual Insurance Co. The arbitration award construed the treaty’s payment provisions as independent of the access to records provision, and ruled that Nationwide must take a coverage position within 60 days of submission of a claim. An additional dispute then arose when Nationwide disputed enforcement of the award against certain reinsurance claims subsequently re-submitted by Liberty Mutual. Various filings were made in state and federal court and with the arbitration panel, including Liberty’s motion to enforce the arbitration award (in state court), and Nationwide’s motion to compel another arbitration (in federal court). The federal district court stayed Nationwide’s motion, pending a ruling by the state court on Liberty’s motion (see our March 13, 2014 post). Ultimately, the panel issued a ruling purporting to “clarify” the initial award, and the state court entered a ruling enforcing the initial award to the extent it had prospective application.

The federal court has now lifted its stay, and compelled arbitration on the meaning of “future claims” under the treaty and whether Liberty Mutual’s resubmitted claims would qualify as such. The federal court declined, however, to compel arbitration again on the issue of access to records under the treaty, which the court deemed barred by the doctrine of issue preclusion. The court also vacated the arbitration panel’s interim ruling purporting to clarify the initial award. The court held that the panel’s clarification was untimely, having been sought more than six months after the original award was entered and after the award had been confirmed. Nationwide Mutual Insurance Co. v. Liberty Mutual Insurance Co., Case Nos. 13-cv-12910, 14-cv-12046 (USDC D. Mass. Nov. 6, 2014).

This post written by Michael Wolgin.

See our disclaimer.

ARBITRATION AWARD ROUNDUP

by

Following is a roundup of recent opinions on motions concerning the confirmation, vacation, and modification of arbitration awards, organized by the issues presented in the motions:

Public Policy

Potenciano L. Aggarao, Jr. v. Mol Ship Mgt. Co. Ltd., et al., Case No. 1:09-cv-3106-CCB (USDC D. Md. Aug. 7, 2014) (granting motion to vacate Philippine arbitration decision on the basis that it violated U.S. public policy because the foreign arbitrator improperly denied an injured seafarer the opportunity to pursue certain remedies to which he was entitled under U.S. general maritime law)

Jurisdiction

Ecopetrol S.A. et al. v. Offshore Exploration and Production, LLC, Case No. 1:14-cv-529-JGK (USDC S.D.N.Y. Sept. 10, 2014) (holding that an interim award was confirmable, that there was no manifest disregard of controlling law concerning the arbitrators’ jurisdiction, and that the arbitrators acted within the scope of their authority and in accordance with the rules governing the International Centre for Dispute Resolution)

Evident Partiality

Cellu-Beep, Inc. v. Telecorp Comm., Inc., Case No. 13-cv-7236-NRB (USDC S.D.N.Y. July 17, 2014) (finding no evident partiality where arbitrator suggested that a statute of limitations defense might apply where neither party had previously raised that issue)

Manifest Disregard

Gerald W. Hayden v. CISCO Sys., Inc., Case No. 3:12-cv-464-VLB (USDC D. Conn. Sep. 2, 2014) (denying motion to vacate, no manifest disregard in age discrimination case)

Galloway Construction, LLC v. Utilipath, LLC, et al., Case No. 3:13-CV-161-PLR-CCS (USDC E.D.Tenn. Oct. 21, 2014) (denying, on reconsideration, a motion to vacate an arbitration award based on alleged manifest disregard of the law)

Vito F. Cardinale, et al. v. 267 Sixth St., LLC, et al., Case No. 1:13-cv-4845 (USDC S.D.N.Y. Sep. 26, 2014) (no manifest disregard, arbitrator did not exceed his authority, award not “irrational”)

This post written by Catherine Acree.

See our disclaimer.

FOURTH CIRCUIT AFFIRMS ORDER DISMISSING CASE TO PERMIT ARBITRATION AGAINST NON-SIGNATORY TO ARBITRATION AGREEMENT

by

An arbitration agreement was contained in a retail installment contract. The Fourth Circuit affirmed the lower court’s dismissal of the case pending arbitration against a non-signatory to the arbitration agreement on two grounds: (1) the dispute, which involved the parties’ obligations under the retail installment contract, had a “significant relationship” to the contract; and (2) the plaintiff’s claims relied on the contract and the plaintiff was therefore “equitably estopped from disclaiming the contract’s arbitration provision.” Lomax v. Weinstock, Friedman & Friedman, P.A., No. 14-1130 (4th Cir. Sept. 4, 2014).

This post written by Michael Wolgin.

See our disclaimer.

EXPENSES ONCE AGAIN FOUND TO BE PART OF COVERAGE LIMIT IN BATTLE AGAINST REINSURER

by

In November, an Illinois appellate court affirmed an order granting defendant MidStates Reinsurance Corporation’s (“MidStates”) motion for judgment on the pleadings because the reinsurer had fulfilled its obligation to pay up to the policy limits of various unambiguous facultative contracts.

Continental Casualty Company (“Continental”) sought reinsurance coverage for excess third-party liability and commercial casualty policies issued for RSR Corporation and Borg-Warner Corporation. In the 1990s and early 2000s, environmental claims arose from injuries linked to asbestos and hazardous waste at these insured facilities. MidStates alleged that subsequent remittances to Continental were in line with the limits provided in the reinsurance certificates. Continental alleged that MidStates breached their contract as the reinsurance certificates did not include limits on expenses.

Relying on Bellefonte Reinsurance Co. v. Aetna Casualty & Surety Co., 903 F.2d 910 (2d Cir. 1990) and its progeny, the court found that the reinsurance certificates placed a limit on indemnity costs and expenses. Looking at the four corners of the contracts, the court found no indication that expenses were removed from the liability limit. The court found that even though only two of the five certificates included the language “inclusive of expenses,” this did not create an ambiguity. Instead, “this inclusion clearly appears to be an abundance of caution rather than an intention to exclude expenses from the liability cap.” Continental Cas. Co. v. MidStates Reinsurance Corp., No. 1-13-3090 (Ill. App. Ct. Nov. 4, 2014).

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

See our disclaimer.

SPECIAL FOCUS: DISCLOSURE OF REINSURANCE AGREEMENTS UNDER FEDERAL RULE OF CIVIL PROCEDURE 26

by

Federal Rule of Civil Procedure 26(a)(1)(A)(iv) requires the disclosure of certain insurance agreements as part of the obligations of a party to make required initial disclosures. Under what circumstances might that provision require the disclosure of reinsurance agreements? John Camp discusses that issue in a Special Focus feature.

This post written by Rollie Goss.

See our disclaimer.