Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

NEW YORK STATE COURT APPROVES CONFIDENTIALITY AGREEMENT

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A New York state court approved a stipulation entered into among the parties in a reinsurance dispute which set forth the terms and conditions upon which the parties agreed produce and exchange confidential and/or proprietary documents and information. The agreement permitted the parties to designate documents and information as confidential and thereby restrict their use and dissemination outside the scope of the litigation. Granite State Insurance Co. v. R&Q Insurance Co., Index No. 654494/2013 (N.Y. Sup. Ct. Aug. 4, 2014).

This post written by Leonor Lagomasino.

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COURT REJECTS CLAIMS OF PRIVILEGE, WORK PRODUCT, AND THE COMMON INTEREST DOCTRINE TO REINSURANCE INFORMATION

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In a discovery dispute between insurer Progressive and the FDIC, as receiver of the insured bank, a federal district court has rejected all claims of attorney-client privilege and work product protection to reinsurance information the court had previously directed Progressive to produce. As reported here, the court had compelled Progressive to produce certain reinsurance information to the FDIC, including communications with its reinsurers regarding potential coverage of the FDIC’s lawsuit against the bank’s directors and officers. Progressive then redacted portions of the communications on the grounds of attorney-client privilege and/or protected work product. The FDIC challenged both grounds. The court first found that the reinsurance information was not protected by work product because the information was created in the ordinary course of business and not “prepared or obtained because of the prospect of litigation.” The court then found that even if the documents contained attorney-client communications, any privilege was waived when Progressive voluntarily disclosed the documents to its reinsurers and broker. Progressive had argued that the common interest doctrine applied to the communications and, therefore, the attorney-client privilege was preserved. The court disagreed, finding the doctrine applied only when the parties shared a common legal interest, not a commercial or financial one. Further, there was no evidence establishing a joint strategy or legal enterprise, which is “central” to the common interest doctrine.

The court did reject the FDIC’s other claims as to alleged deficiencies in Progressive’s production, including Progressive’s failure to produce electronically stored information because Progressive was never previously required to retrieve it. Finally, the court rejected all of the reinsurer’s arguments that it need not comply with the FDIC’s subpoena for documents, including those of privilege, undue burden, and relevance. Progressive Casualty Ins. Co. v. FDIC, Case No. 12-CV-04041 (USDC N.D. Iowa Aug. 22, 2014).

This post written by Renee Schimkat.

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SECOND CIRCUIT FINDS THAT LATE NOTICE BARS CLAIMS AGAINST REINSURER

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The Court of Appeals for the Second Circuit affirmed a lower court’s ruling in favor of TIG Insurance Company, finding that AIU Insurance Company’s belated notice of claim to TIG under nine certificates of facultative reinsurance issued by TIG barred AIU’s claim. AIU submitted its claim almost four years after it settled with its insured regarding numerous asbestos-related lawsuits. Central to the Second Circuit’s ruling was its conclusion that, under New York’s choice of law rules, the substantive law of Illinois – and not New York – applied to the question as to the legal effect of the late notice. Under Illinois law, TIG was not required to prove it was prejudiced resulting from AIU’s late notice. AIU Insurance Co. v. TIG Insurance Co., No. 13-1580-cv (2d Cir. Aug. 27, 2014).

This post written by Leonor Lagomasino.

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REINSURANCE BROKER AND CEDENT SETTLE COMPENSATION DISPUTE

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On March 26, 2014, we reported on a dispute surrounding whether a cedent was responsible to compensate a reinsurance broker under a particular broker authorization agreement. The court had denied summary judgment, finding that the agreement was ambiguous in that one provision required the reinsurer to pay the broker, while a separate provision implied that it was the cedent’s responsibility to do so. On June 27, 2014, the court entered an order dismissing the case based on an unopposed motion informing the court of the parties’ settlement. Global Risk Intermediary, LLC v. Aetna Global Benefits Ltd., Case No. 4:13-CV-0133 (USDC W.D. Ark. June 27, 2014).

This post written by Michael Wolgin.

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MISSOURI COURT DENIES RECONSIDERATION OF ORDER QUASHING SUBPOENA OF UN-ISSUED ARBITRATION AWARD

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Lincoln Memorial Insurance Company and Hannover Life Reinsurance Company of America became engaged in a long-running reinsurance dispute, arising from an allegedly fraudulent scheme by Lincoln and others in the sale of pre-need funeral service contracts. Hannover reinsured some of those contracts. The matter was arbitrated, and Lincoln claim that Hannover wrongfully accused Lincoln of fraud and intentional misconduct during the court of that arbitration.

Ultimately, Lincoln became insolvent and entered into receivership in Texas. Lincoln asserted that Hannover’s conduct in the arbitration was a factor in driving it to insolvency. The Texas Department of Insurance appointed a receiver and issued a permanent injunction, which, among other things, enjoined further arbitration against Lincoln, before the arbitrator ever issued an award.

The Special Deputy Receiver, Jo Ann Howard & Associates, thereafter brought claims in federal court against several entities alleging, among other things, RICO, breach of fiduciary duty, and gross negligence, which purportedly caused or contributed to Lincoln’s insolvency.

As we previously reported, one of the defendants in the action brought by the receiver, National City Bank, subpoenaed the arbitrator in the Hannover Re arbitration, seeking his un-issued award. National City also asserted several special defenses to the receiver’s suit, including failure to mitigate damages. The receiver moved to quash the subpoena and to strike National City’s failure to mitigate affirmative defense. The court granted both motions.

National City thereafter moved for reconsideration and clarification of the Court’s order. Construing the motion as a Rule 60(b) motion to amend, the Court held that National City was not entitled to the “extraordinary relief” available under that rule, as it had not met the high burden of demonstrating “exceptional circumstances” warranting the correction of any error, even if a substantial error had been made, which, the Court duly noted, was not the case. Jo Ann Howard & Associates, P.C. v. Cassity (USDC E.D. Mo. July 15, 2014).

This post written by John Pitblado.

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