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DISTRICT COURT TRANSFERS BREACH OF CONTRACT ACTION INVOLVING REINSURANCE AGREEMENT

August 12, 2013 by Carlton Fields

In a dispute between an insurance company and a reinsurance company over sums paid pursuant to a reinsurance agreement, the Southern District of New York granted defendant’s motion to transfer to the Northern District of New York (“NDNY”) where a similar dispute involving the same parties, but a different reinsurance agreement, is pending. The court determined that transfer was appropriate because the only witnesses reside in the NDNY, the relevant documents exist in defendant’s headquarters located in the NDNY, and plaintiff’s choice of forum is entitled to little deference since plaintiff is located in New Jersey, not in the forum. The fact that the sister case pending in the NDNY involves common witnesses and documents, and therefore might generate duplicative discovery, also weighed in favor of transfer. Munich Reinsurance America, Inc. v. Utica Mutual Insurance Company, Case No. 13-cv-238 (USCD S.D.N.Y. June 18, 2013).

This post written by Abigail Kortz.

See our disclaimer.

Filed Under: Contract Interpretation, Week's Best Posts

NEW YORK DFS AMENDS RESERVE REQUIREMENTS ON CERTAIN UNIVERSAL LIFE POLICIES

August 8, 2013 by Carlton Fields

New York’s Department of Financial Services issued an amendment to Insurance Regulation 147 (11 NYCRR 98) which changes reserve requirements on universal life with secondary guarantee policies. The amendment is designed to conform Regulation 147 with NAIC’s revisions to actuarial guidelines calling for reserves for all universal life with secondary guarantee business written between July 1, 2005 and December 31, 2012 to be calculated under a “principles-based” approach. For business issued after January 1, 2013, reserves are to be calculated using a formulaic-based approach. Insurers must also file quarterly financial statements based on minimum reserve standards in effect on the date of filing. New York Department of Financial Services Fourth Amendment to 11 NYCRR 98 (May 17, 2013).

This post written by John Pitblado.

See our disclaimer.

Filed Under: Reinsurance Regulation, Reserves

UK SUPREME COURT ENJOINS FOREIGN COURT ACTION IN FAVOR OF POSSIBLE LONDON ARBITRATION

August 7, 2013 by Carlton Fields

Since reinsurance disputes are sometimes multi-jurisdictional we occasionally post on appellate UK and US court opinions dealing with the relationship between proceedings in different countries. The latest example of this involves two parties which entered into a contract concerning a hydroelectric plant in Kazakhstan. The contract is governed by Kazakh law but contains a London arbitration clause. When a dispute arose one party filed suit in Kazakhstan and secured a judgment from the Kazakh Supreme Court invalidating the arbitration provision. The other party filed suit in a UK court seeking a declaration that the arbitration provision was valid and enjoining the action in Kazakhstan. The UK trial court and Court of Appeals ruled that the Kazakh judgment was not binding, upheld the validity of the arbitration provision and enjoined the parties from proceeding with the Kazakh action. The UK Supreme Court agreed, and dismissed the appeal (the UK equivalent of affirming). The UK Supreme Court held that the refusal of the Kazakh court to enforce the arbitration provision compelled it to act to preserve the right to arbitrate. It is perhaps notable that no one had sought to commence an arbitration proceeding. The UK courts were acting to preserve the right of the parties to arbitrate, should they desire to do so. Ust-Kamenogorsk Hydropower Pland JSC v. AES Ust-Kamenogorsk Hydropower Pland LLP, [2013] UKSC 35 (June 12, 2013).

This post written by Rollie Goss.

See our disclaimer.

Filed Under: Jurisdiction Issues, UK Court Opinions

WEST VIRGINIA SUPREME COURT REVERSES “UNCONSCIONABILITY” HOLDINGS, COMPELS ARBITRATION

August 6, 2013 by Carlton Fields

In a consolidated appeal of two cases involving Credit Acceptance Corporation (“CAC”), the West Virginia Supreme Court reversed two trial court decisions denying motions to compel arbitration, and ordered both cases to proceed to arbitration. The trial court had found that the arbitral forums named in the agreements were unavailable, and that the agreements were unconscionable inasmuch as they contained a waiver of the right to a jury trial. It denied CAC’s motions to compel arbitration on those bases in both cases. The West Virginia Supreme Court reversed, finding that (1) while one of the arbitral forums mentioned in the agreement – the National Arbitration Forum – was no longer available for consumer arbitrations, the other entity mentioned – the American Arbitration Association – remained available; and (2) the fact that an arbitration agreement requires an explicit waiver of the right to a jury trial does not render it unconscionable or unenforceable. The Court remanded with directions to the trial court to compel arbitration. Credit Acceptance Corp. v. Front, No. 12-0545 (W.V. June 19, 2013).

This post written by John Pitblado.

See our disclaimer.

Filed Under: Arbitration Process Issues, Week's Best Posts

DISPUTE IN ADMINISTRATION OF CATASTROPHE BOND RESULTS IN LAWSUIT

August 5, 2013 by Carlton Fields

A lawsuit has been filed in the United States District Court for the Southern District of New York concerning the administration of the $100 million Mariah Re Ltd. cat bond, which covers severe weather event risks ceded to Mariah Re by American Family Mutual Insurance Company, with an attachment point of $825 million. The Complaint focuses on the modeling and reporting of a particular storm by ISO Services, Inc,. (d/b/a/ Property Claim Service (“PCS”)) and AIR Worldwide Corp. (“AIR”). Payments under the cat bond are based upon estimated loss modeling by PCS, rather than being indemnity based. The Complaint alleges that PCS impropery issued an amended bulletin reporting on the losses resulting from the storm after it had issued its “final report” concerning the storm, and that PCS improperly backdated the replacement report so that it apepared to have been issued prior to the date of its “final report.” It is alleged that as a result of the replacement report, AIR’s calculation of the losses purportedly chargeable to Mariah Re resulting from the storm increased from $62.2 million to approximately $180.1 million. Apparently, American Family withdrew the entire $100 million limit of the cat bond from the cat bond’s reinsurance trust, approximately $37.8 million more than what it is alleged should have been withdrawn.

Disputes over the administration cat bonds are rare. One source has suggested that this is the first lawsuit concerning the administration of cat bonds. This lawsuit raises the interesting question of whether the use of non-indemnity payment triggers in cat bonds exposes ceding insurers to potential litigation risks which an indemnity payment trigger would avoid.

This post written by Rollie Goss.

See our disclaimer.

Filed Under: Alternative Risk Transfers, Week's Best Posts

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