Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

RES JUDICATA BARRED CLAIMS RESOLVED IN ARBITRATION DESPITE ARBITRATOR’S COMMENTS REGARDING LIMITATIONS ON AUTHORITY

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In a longstanding dispute arising out of an oil development venture, an intermediary seeking additional profits appealed to the Fifth Circuit after the lower court dismissed the intermediary’s RICO claims that had been previously resolved in arbitration. The arbitration award had rejected the intermediary’s claims based on alleged bribes that associated oil companies allegedly paid to foreign officials. Finding that res judicata barred the intermediary’s claims, the Fifth Circuit rejected the intermediary’s argument that the arbitrator had failed to exercise jurisdiction when he stated in the course of dismissing the claims that he lacked authority to determine criminality under RICO. The Fifth Circuit held that the arbitrator’s statement was not indicative of a refusal to consider the intermediary’s claims, that the arbitrator did in fact exercise jurisdiction, and that as a result, the lower court correctly found that res judicata barred the intermediary’s lawsuit. Grynberg v. BP, P.L.C., Case No. 12-20291 (5th Cir. June 7, 2013).

This post written by Michael Wolgin.

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CAPTIVE REINSURANCE LAWSUIT DISMISSED

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A lender defendant successfully moved for the dismissal of a putative class action centered on residential mortgages acquired through National City Mortgage (“National City”). Plaintiffs allege that National City and its reinsurer National City Mortgage Insurance Company conspired with private mortgage insurers to create a “captive reinsurance scheme.” This scheme, with primary insurers paying NCMIC a portion of insurance premiums for the assumption of risk, circumvented the kickback prohibitions of the Real Estate Settlement Procedures Act. These insurance premium payments were allegedly made by the primary insurers for the referral of business. Plaintiffs alleged they were entitled to equitable tolling. The Court rejected this argument holding that the amended complaint contained only general allegations of an agreement between the defendants and contained no tolling date. Plaintiffs also failed to show “an affirmative act of concealment by each defendant.” The Court declined to exercise jurisdiction over a state-law claim for unjust enrichment. White v. PNC Financial Services Group, Inc., Case No. 2:11-cv-07928-LS (USDC E.D. Pa. June, 4, 2013).

This post written by Brian Perryman.

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REINSURER BREACHED CONTRACT TO AVIATION INSURER CONCERNING 9/11 LOSSES

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In a case on which we have previously posted, following a bench trial, a court held that a reinsurer breached its contract to an aviation insurer by overbilling the insurer after entering into commutation agreements. These agreements sought to save the insurer from bankruptcy following massive losses it sustained in connection with the terrorist attacks of September 11, 2001. The court sided with the insurer’s interpretation limiting the insurer’s liability to either 48% or 43.2% of the total amount paid by the reinsurer, following the commutations. Moreover, the insurer was able to maintain that it was not liable for more than a portion of reinstatement premiums paid by the insurer, despite extrinsic evidence casting doubt on the contract itself. Aioi Nissay Dowa Insurance Co. Ltd. v. Prosight Specialty Management Co., Case No. 12-3274 (USDC S.D.N.Y. June 20, 2013).

This post written by Brian Perryman.

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REINSURANCE-RELATED DISCOVERY DENIED IN CONNECTION WITH CHOICE OF LAW ISSUES

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An insurer denied coverage to a corporate insured for losses sustained at one of its Indiana processing plants under the pollution exclusion, arguing that Michigan law should apply and that Michigan law recognizes such exclusions. The corporation argued instead that Indiana law applied and, thus, the exclusion could not be enforced. After both parties moved for summary judgment on the choice of law issue, the corporation sent discovery requests related to reinsurance and premium calculation information, which the magistrate judge determined were irrelevant to the choice of law issue. In addition, the magistrate judge stated that it was inconsistent for the corporation to claim it needed additional discovery to brief the choice of law issue after they had already moved for summary judgment. The district judge affirmed, holding it was only relevant for the choice of law issue where the insurance premiums were paid, not the rationale for calculating premiums. Visteon Corp. v. National Union Fire Insurance Co., Case No. 1:11-cv-200 (USDC S.D. Ind. June 17, 2013).

This post written by Brian Perryman.

See our disclaimer.