Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT STANDS BY DECISION DENYING DISMISSAL OF CASE INVOLVING REINSURANCE OF PERFORMANCE BOND

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A New York federal district court denied reconsideration of its refusal to dismiss a case for forum non conveniens or lack of personal jurisdiction, in a dispute involving reinsurance of a performance bond insuring the payment of fees for the right to administer Argentina’s postal services. The court was unpersuaded by the fact that the insured’s principal place of business and operations were located in Argentina, given that the reinsurer conducted relevant reinsurance business through its New York office. St. Paul Fire & Marine Insurance Co. v. Aseguradora de Creditos y Granatias, Case No. 1:12-cv-04627 (USDC S.D.N.Y. February 6, 2014).

This post written by Michael Wolgin.

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UTICA AND CENTURY ORDERED TO MANDATORY MEDIATION IN REINSURANCE DISPUTE

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Utica Mutual Insurance Company brought an action in 2013 against Century Indemnity Company (itself and against certain of its named predecessors) for breach of contract and breach of the duty of utmost good faith, as well as a declaratory claim, regarding alleged amounts due to Utica from Century predecessor Insurance Company of North America under certain reinsurance agreements. The court invited the parties to submit their positions regarding mandatory mediation, but received no response. The Court therefore ordered the parties to participate in the mandatory mediation program, further requiring that they complete it by March 31, 2014. Utica Mutual Insurance Co. v. Century Indemnity Co., Case No. 6:14-CV-995 (USDC N.D.N.Y. Jan. 9, 2014).

This post written by John Pitblado.

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REINSURANCE DISCOVERY DISPUTE TRANSFERRED

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The FDIC receiver of a bank served subpoenas on reinsurers, seeking information as to how the cedent insurer interpreted certain ambiguous terms in the underlying liability insurance policy. The insurer and reinsurer objected to the subpoenas, and the receiver filed an action in the reinsurer’s district to compel responses. Rather than ruling on the objections, the court elected to transfer the matter to the court in which the underlying litigation was pending. The transferor court relied on considerations of judicial efficiency and comity, explaining that it was not in a position to resolve arguments over the transferee court’s intentions with respect to the scope of permitted discovery, and that differences in the districts’ respective case law on the relevance of reinsurance information presented a risk of conflicting discovery rulings. The court also noted that recent revisions to the Federal Rule of Civil Procedure governing subpoenas further supported transfer of the action. FDIC v. Everest Reinsurance Holdings, Inc., Case No. 1:13-mc-00381 (USDC S.D.N.Y. January 23, 2014).

This post written by Michael Wolgin.

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COURT CONFIRMS ARBITRATION AWARD IN REINSURANCE BILLING DISPUTE

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A New York federal district court affirmed an arbitration award in favor of R&Q Reinsurance Company as against its cedent, Utica Mutual, in a reinsurance dispute arising from certificates issued by R&Q reinsuring certain umbrella coverage Utica had written covering asbestos-related exposure of its insured. The parties began arbitrating a billing dispute in 2008 which, as of May, 2013, involved more than $21.7 million in disputed amounts. Utica sought coverage for four categories of loss: indemnity, defense, “orphan shares,” and declaratory judgment expense. The panel heard the case and decided in Utica’s favor only on the first category, and in R&Q’s favor on the other three. The panel did not, however, indicate in its award the precise amount owed to Utica by R&Q for the indemnity losses. Both parties made various post-award motions for clarification, but Utica never sought in any of these motions for the panel to set out the precise amount Utica was owed under the first category of loss which it was awarded. R&Q thereafter brought an action in court to confirm the award. The court found that Utica’s failure to seek clarification of the amount with the panel precluded vacatur of the award and that, “[f]or better or worse, the parties to this arbitration tasked the arbitral panel with resolving their dispute at a conceptual, rather than a mathematical, level.” R&Q Reinsurance Co. v. Utica Mutual Insurance Co., Case No. 13-Civ-8013 (USDC S.D.N.Y. Feb. 14, 2014).

This post written by John Pitblado.

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ARBITRATOR IMPROPRIETIES: A EDUCATIONAL LAUNDRY LIST

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The Ninth Circuit Court of Appeals recently affirmed the U.S. District Court of Nevada’s confirmation of an arbitration award allocating attorneys’ fees and denial of a motion to vacate the award.  After first holding, in a separate opinion, that parties may not waive or eliminate judicial review of arbitration awards under Section 10 of the Federal Arbitration Act, the court next communicated a laundry list of reasons for which a district court may vacate an arbitration award: (1) if the arbitrator’s decision is procured by corruption, fraud, or undue means; (2) if the arbitrator was evidently partial or actually biased; (3) if mediation and related fund transfers are undisclosed; (4) if communications are made ex parte; (5) if the arbitrator exceeds arbitral jurisdiction or issues biased rulings; and (6) if the arbitrator fails to disclose material conflicts of interest.  Finding that the district court correctly concluded that the arbitrator had not engaged in any such misconduct and that no prejudice was shown in any event, the Ninth Circuit affirmed.  In re Wal-Mart Wage and Hour Employment Practices Litigation, No. 2:06-cv-00225-PMP-PAL (9th Cir. Dec. 17, 2013).

This post written by Kyle Whitehead.

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