Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

A FEDERAL “SOLUTION” FOR REINSURANCE FOR CATASTROPHE RISKS?

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There are three bills pending in Congress concerning reinsurance for catastrophe risks. Such bills have been introduced in prior years and generally have died in committee, and the same is true so far this year. H.R. 240 would authorize the Treasury Department to provide reinsurance to “eligible state programs” for homeowners cat risks. The bill specifically provides that this program “shall not displace or compete with the private insurance or reinsurance markets or the capital market ….” H.R. 737 would establish a non-profit entity which could issue what amounts to cat bonds for its members. The members of this organization would be a state which has established “a reinsurance fund or has authorized the operation of a State residual insurance market entity, or State-sponsored provider of natural catastrophe insurance ….” H.R. 1101 would provide a federal reinsurance program for individual state or multi-state cat risk plans. None of these bills have progressed beyond being referred to a committee. Given the current capacity and pricing of cat risk private reinsurance and cat bonds, these bills appear to present a “solution” in search of a problem.

This post written by Rollie Goss.

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NINTH CIRCUIT VACATES CERTIFICATION ORDER AND ORDERS PARTIES TO INDIVIDUAL ARBITRATION

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A recent California district court ruling denied the defendant’s motion to compel arbitration in an employment dispute, and also certified a class against the defendant. The district court found that the defendant waived its right to arbitrate through litigation conduct. The Ninth Circuit disagreed, reversing, and remanding with instructions to order the plaintiff and defendant to arbitrate, because the plaintiff had failed to demonstrate any prejudice arising from the “litigation conduct” which the district court found constituted a waiver. The Court also vacated the district court’s certification order, noting that the parties’ employment agreement prohibited class arbitration. Richards v. Ernst & Young, LLP, No. 11-17530 (9th Cir. Aug. 21, 2013).

This post written by John Pitblado.

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COURT ENFORCES ARBITRATION AGREEMENT AGAINST INSURER AND ITS SUBSIDIARY DESPITE THRESHOLD CONTRACTUAL DEFENSES

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The court compelled arbitration in a dispute over asbestos insurance coverage that had reached an impasse after six years of mediation. The insured sought to compel arbitration against the insurer and the insurer’s nonsignatory subsidiary, which had purportedly separately contracted with the insurer to reimburse a portion of the risk. The court compelled arbitration against the subsidiary because the insured had entered into a broad agreement with the subsidiary to arbitrate disputes related to asbestos claims, and the threshold question of whether the subsidiary agreed to provide insurance coverage was subject to arbitration. The court also compelled arbitration against the signatory insurer over the insurer’s objection that it had a separate written agreement with the insured to resolve disputes only through litigation. The court found that although the insurer never agreed to arbitrate, the insurer had “exploited” the arbitration agreement of its subsidiary by mediating the dispute for six years. The insurer was estopped from avoiding arbitration because the insured had relied on the insurer’s “exploit[s]” to its detriment, having “lost the time value of money” and “spent six years attempting to reach resolution through mediation.” Fintkote Co. v. Indemnity Marine Assurance Co., Case No. 1:13-cv-00935 (USDC D. Del. Sept. 30, 2013).

This post written by Michael Wolgin.

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REINSURER’S APPEAL OF FAVORABLE ORDER ON CONTRIBUTION CLAIMS DISMISSED AS MOOT

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On May 17, 2012, we reported on a district court decision granting summary judgment to a reinsurer on contribution claims asserted against it by two cedents. The cedents had sought contribution after they faced litigation arising out of their denial of defense and indemnity coverage to their insured under liability insurance policies, related to a government-mandated cleanup of polluted lands. The district court granted summary judgment on the ground that the claim for defense and indemnity, upon which the claim for contribution was based, was barred by limitations. The Eighth Circuit has now affirmed the district court’s order, and dismissed as moot the reinsurer’s appeal, which argued against contribution in the event that the appellate court were to reverse. Land O’ Lakes, Inc. v. Employers Insurance Co. of Wausau, No. 12-1887 (8th Cir. Aug. 29, 2013).

This post written by Michael Wolgin.

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