Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

SERVICE OF SUIT CLAUSE PRESERVING INSURER’S RIGHT TO “SEEK A TRANSFER” DID NOT PERMIT INSURER’S REMOVAL TO FEDERAL COURT

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An insurer’s bid to remove a lawsuit to federal court was stymied. The case involved a “service of suit” paragraph in an insurance policy permitting the insured to select the venue and forum of a dispute under the policy. The court found that the insurer waived the right to remove an action from state to federal court, notwithstanding a provision purporting to preserve the insurer’s right to “seek a transfer” of the case. The court interpreted consecutively each sentence of the relevant paragraph “like the concentric rings of a target.” Among other things, the court considered whether the phrase “seek a transfer” contemplated seeking removal of the action to federal court. That phrase did not include seeking removal, notwithstanding caselaw that had reached a different result in the context of a different forum selection clause employing the word “transfer” in a grammatically and substantively different way. Hanover Insurance Group, Inc. v. Chartis Specialty Insurance Co., Case No. 4:12-cv-40156 (USDC D. Mass. Aug. 19, 2013).

This post written by Michael Wolgin.

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REVISIONS TO CONNECTICUT’S CREDIT FOR REINSURANCE LAW

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Effective August 6, 2013, Connecticut has adopted requirements in line with the November 6, 2011 amendments to the NAIC Credit for Reinsurance Model Law and Regulation that governs how a reinsurer may become certified in Connecticut for purposes of insurers taking a credit for amounts ceded to such reinsurer. As part of its new program, the Connecticut Insurance Department has created a Credit for Reinsurance webpage which contains all of the necessary applications, instructions and regulations in one location. Companies seeking to become certified must contact the Financial Regulation Division before submitting an application. State of Connecticut Insurance Department, Requirements to Become a Connecticut Certified Reinsurer – Updated, Bulletin No. FS-25-1 (Aug. 12, 2013).

This post written by Abigail Kortz.

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REINSURED’S TRIAL COUNSEL INVOLVED IN UNDERLYING DISPUTE DISQUALIFIED FROM TRYING THE CASE

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In a dispute involving tortious interference and conspiracy claims brought by Ford Motor Company against a reinsurer of Ford’s stop-loss insurance policies, a federal court disqualified Ford’s lead trial attorney under the “witness-advocate” rule. The reinsurer argued that, notwithstanding Ford’s stipulation not to call trial counsel as a witness, trial counsel’s involvement in the emails and other underlying communications surrounding the reinsurer’s disputed conduct would result in trial counsel being “free to argue the meaning of his own correspondence and refute the trial and deposition testimony of those with whom he interacted.” The reinsurer further contended that trial counsel would “have the ability, through cross-examination and argument, to explain away his communications … just as if he were testifying as a witness,” and that the reinsurer would be forced to call trial counsel as a witness to support its defenses and to rebut Ford’s theory of the case and evidence. The court agreed with the reinsurer, finding that the testimony the reinsurer intended on seeking from trial counsel and the communications in which trial counsel was involved, were relevant and necessary to the reinsurer’s defenses, and were potentially prejudicial to Ford. The court further found that no exceptions to the witness-advocate rule applied, including the exception of substantial hardship to Ford. Ford Motor Co. v. National Indemnity Co., Case No. 3:12-cv-839 (USDC E.D. Va. Aug. 21, 2013).

This post written by Michael Wolgin.

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FEDERAL COURTS TACKLE STATUTE OF LIMITATIONS ISSUES IN RESPA CAPTIVE REINSURANCE CLASS ACTIONS

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We have reported on several putative class actions brought by purchasers of private mortgage insurance who allege that insurers, lenders, and captive reinsurers unlawfully entered into reinsurance arrangements in violation of the federal Real Estate Settlement Procedures Act (“RESPA”) and other laws. There have been some recent developments in such cases involving RESPA’s one-year statute of limitations.

In Munoz, as we reported in May, a federal magistrate judge in California recommended certification of a class of purchasers of private mortgage insurance whose insurance was included in defendants’ captive reinsurance arrangements. The magistrate judge recently granted a motion to intervene brought by a putative class member who was excluded from the recommended class because her claims were time-barred. The magistrate had not included such persons in the recommended class because their claims were atypical and class plaintiffs, whose claims were not similarly time-barred, had no interest in asserting tolling of the statute of limitations. In the order granting the motion to intervene the parties were instructed to conduct discovery on and brief the issue of whether certification of a tolling subclass is appropriate. Munoz v. PHH Corp., Case No. 1:08-cv-00759 (USDC E.D. Cal. July 29, 2013).

In Menichino, a Pennsylvania federal district court dismissed without prejudice plaintiff’s putative class action complaint alleging RESPA violations premised on alleged kickbacks relating to defendants’ private mortgage insurance and captive reinsurance arrangements. The court held that plaintiff’s complaint was time-barred by RESPA’s one-year statute of limitations and that plaintiff had failed to allege sufficient facts which, taken as true, would have established that RESPA’s limitations period should be tolled. Menichino v. Citibank, N.A., Case No. 12-0058 (USDC W.D. Pa. July 19, 2013).

The court reached the identical conclusion in Manners, a related case, and similarly dismissed the putative class plaintiff’s claims without prejudice. Manners v. Fifth Third Bank, Case No. 12-0442 (USDC W.D. Pa. July 19, 2013).

This post written by Ben Seessel.

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NYDFS REQUESTS INFORMATION FROM REINSURERS REGARDING COMPLIANCE WITH IRAN FREEDOM AND COUNTER-PROLIFERATION ACT OF 2012

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The New York Department of Financial Services issued a circular letter to all accredited reinsurers writing business in New York regarding compliance with the Iran Freedom and Counter-Proliferation Act of 2012. The July 24, 2013 circular expresses the Department’s concern with “recent news reports of a pattern of trades made by Glencore Xstrata and Trafigura with Iranian entities” and notes that while those transactions may not have violated the Act’s sanctions regime, similar such transactions might now result in sanctions. The Department asks reinsurers to respond to a number of questions posed by the Department by which it seeks to assess compliance, including whether any reinsurer insured the Glencore Xstrata and Trafigura trades with Iranian entities. NYDFS Insurance Circular Letter No. 6 (July 24, 2013).

This post written by John Pitblado.

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