New reinsurance-related and arbitration developments from Carlton Fields
The Dodd-Frank Act encouraged states to cooperate in the regulation of surplus lines insurance premium tax allocation. In a Special Focus article, John Pitblado provides an update on the efforts of the states to address this issue.
This post written by John Pitblado.
A federal judge in Houston recently vacated an arbitration award where the reinsurance agreement specified that the arbitration of any disputes would proceed “under the auspices of the ICC,” but the arbitration actually proceeded under the American Arbitration Association’s Commercial Arbitration Rules. The Court found that the parties to the reinsurance agreements selected the International Chamber of Commerce, and application of its rules, as a mandatory and essential condition of their agreement to arbitrate. Because this did not occur, the selected arbitrator lacked jurisdiction to hear the claims presented. The court noted that generally, after the conclusion of an arbitration, a court cannot second guess the arbitrator’s jurisdiction and decision so long as the arbitrator (1) is arguably construing or applying the contract, and (2) is acting within the scope of his authority. The court found, however, that the case presented a rare example of the second exception, in which an arbitrator assumed authority over a dispute that the parties’ agreements mandated be referred to a different forum, namely the ICC. This error fundamentally prejudiced the proceedings. PoolRe Insurance Corp. v. Organizational Strategies, Inc., Case No. H-13-1857 (USDC S.D. Tex. Mar. 31, 2014).
This post written by Catherine Acree.
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The Third Circuit recently vacated a lower court’s decision granting a motion to compel arbitration of (1) direct claims by certain cardiac services health providers against CIGNA and (2) claims by those providers on behalf of employee benefit plan participants who were initially denied coverage of the cardiac services by CIGNA but subsequently provided such services by the providers in exchange for assignment of their rights and claims under ERISA against CIGNA to the providers. After observing that the plain language of an arbitration agreement controls and that the presumption of arbitrability applies only where an arbitration provision is ambiguous, the Court of Appeals first held that the alleged facts underlying the direct claims unambiguously did not concern “the performance or interpretation” of the administrative agreement between CIGNA and the providers, as required by the arbitration clause, because the claims involved a CIGNA policy update document distinct from, and sent years after, the administrative agreement. As for the derivative claims, which related to CIGNA’s decision to deny coverage of the cardiac services to the participants, the court concluded that such coverage decision was subject to the terms or conditions of the applicable benefit plan and governed by ERISA, not the administrative agreement. The participants’ rights to pursue their ERISA claims in court could not be diluted through compelled arbitration just because the providers, as assignees, had promised to arbitrate certain of the direct claims they might bring against CIGNA. CardioNet, Inc. v. CIGNA Health Corp., No. 13-2496 (3d Cir. May 6, 2014).
This post written by Kyle Whitehead.
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We previously reported on December 17, 2013, about a dispute in federal court between Nationwide Mutual Insurance Company, National Casualty Company, and Employers Insurance Company of Wausau (collectively, “Nationwide”) and Arrowood Indemnity Company. The dispute concerned the process for appointing a “tie-breaking” umpire in a series of reinsurance coverage arbitrations. Most of the reinsurance agreements contained express provisions regarding the steps to be taken to select the umpire, including the “drawing of lots.” However, certain of the treaties – referred to as the 1967 Treaties – did not provide a clear process for what to do if the two party-appointed arbitrators failed to agree on the selection of the umpire. The court instructed the parties to follow the procedure set forth in the other treaties, and then report back regarding how to handle the appointment under the 1967 Treaties. Once an umpire had been validly appointed pursuant to the terms of the other treaties, the same umpire would be “presumptively appropriate for appointment by the Court” for the remaining disputes under the 1967 Treaties.
After the court issued those instructions, Joseph Goldberg was selected as the umpire pursuant to the terms of the other treaties. Thereafter, Nationwide moved the court to appoint Goldberg as the umpire for the remaining disputes regarding the 1967 Treaties. Arrowood objected, arguing that the decision about Goldberg’s appointment under the 1967 Treaties was premature because the parties had not yet had an opportunity to obtain disclosures from Goldberg in connection with organizational meetings to determine whether he could be neutral. On April 9, 2014, the court agreed with Arrowood and deferred ruling until after the organizational meetings have been held and the parties have had sufficient opportunity to consider the resulting disclosures. Employers Insurance Co. of Wausau v. Arrowood Indemnity Co., Case No. 12-cv-08005-LLS (USDC S.D.N.Y April 9, 2014).
This post written by Catherine Acree.
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A reinsurance dispute between Guarantee Trust and American Medical has been ongoing for some time; we posted prior updates in March 2011 and July 2013. Most recently, Guarantee Trust filed motions seeking to file a second amended complaint to add a request for specific performance and seeking a preliminary injunction requiring American Medical to post a bond to prevent a potential insolvency from impeding Guarantee Trust’s collection of any future judgment. The court denied both motions. No amended complaint would be allowed because Guarantee Trust could not show “excusable neglect” for having waited so long after its “need” for the equitable remedy first arose – months after the deteriorated financial strength of American Medical was publicized. Because Guarantee Trust had no equitable relief in its complaint and only a claim for money damages, the court ruled that it had no power to enjoin American Medical’s use of its property by requiring it to post a bond. Guarantee Trust Life Insurance Co. v. American Medical & Life Insurance Co., Case No. 10 C 2125 (USDCN.D. Ill. May 5, 2014).
This post written by Kyle Whitehead.
See our disclaimer.