Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ROUNDUP OF APPELLATE ARBITRATION DECISIONS

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Confirming Award

Mandell v. Reeve, No. 11-5238 (2d. Cir. Feb. 4, 2013) (affirming district court’s confirmation of arbitration award and denial of petition to vacate award; denying appellee’s motion for sanctions, finding that the appeal was not frivolous).

Timegate Studios, Inc. v. Southpeak Interactive, L.L.C., No. 12-20256 (5th Cir. Apr. 9, 2013) (reversing district court’s decision to vacate an arbitration award with instructions to reinstate the award, holding that the arbitrator’s award of a perpetual license as relief to the prevailing party was not inconsistent with the essence of the parties’ contract).

Data & Development, Inc. v. Infokall, Inc., No. 12-2456 (2d Cir. Mar. 13, 2013) (affirming district court’s decision to confirm arbitration award, holding that the arbitrator did not manifestly disregard New York law in awarding lost profits to the prevailing party on breach of contract claim).

Stonebridge Equity v. China Automotive Systems, Inc., No. 12-1548 (6th Cir. Mar. 26, 2013) (affirming district court’s confirmation of arbitration award, holding that arbitrators did not act in manifest disregard of the law by using extrinsic evidence to interpret the parties’ contract and that the district court’s minor modification of the award to assure compliance was in accordance with the FAA).

Johnson Controls, Inc. v. Edman Controls, Inc., Nos. 12-2308 & 12-2623 (7th Cir. Mar. 18, 2013) (affirming district court’s confirmation of arbitration award and denial of petition to vacate award; arbitrator had not disregarded the parties’ choice of law nor exceeded his powers in awarding damages and attorneys fees to prevailing party).

Vacating Award

Town & Country Salida, Inc. v. Dealer Computer Services, Inc., No. 12-1850 (6th Cir. Apr. 9, 2013) (affirming district court’s partial vacatur of arbitration award, holding that the district court did not commit clear error in making the factual determination that an entity was not bound by an arbitration clause).

City of Oswego v. Oswego City Firefighters Association, No. 49 (N.Y. Apr. 2, 2013) (reversing order of appellate division; ordering that an arbitration award be vacated because the award would require a municipality to provide a benefit no longer authorized by law and that the final result would conflict with other laws and well-defined policy considerations).

Class Action Waiver and FAA Preemption

McKenzie Check Advance of Florida, LLC v. Betts, No. SC 11-514 (Fla. Apr. 11, 2013) (FAA preemption prevents court from invalidating class action waiver as void against state public policy because waiver would prevent consumers from vindicating rights under state consumer protection laws).

Jurisdiction

Community State Bank v. Knox, No. 12-1304 (4th Cir. Apr. 11, 2013) (affirming district court’s dismissal of petition to compel arbitration holding that that the FAA by itself does not bestow federal jurisdiction and that there was no independent basis for federal jurisdiction).

This post written by Ben Seessel.

See our disclaimer.

FEDERAL COURT REMANDS CITING SERVICE OF SUIT CLAUSE

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Plaintiff Insurance Company of the State of Pennsylvania (“INSCOP”) brought suit in New York state court against TIG, its reinsurer, alleging it breached six different facultative reinsurance agreements. TIG removed to federal court. INSCOP moved to remand, citing the service of suit clause which, though not quoted in the opinion, presumably authorized service of suit in New York. TIG argued that only some of the agreements contained the clause, but the court found there were no competing service of suit clauses for other jurisdictions, and that the absence of the clauses in some of the treaties did not overcome the presumption in favor of remand where the limits of federal court jurisdiction are at issue. Insurance Co. of the State of Pennsylvania v. TIG Insurance Co., No. 12-CV-6651 (USDC S.D.N.Y. March 11, 2013).

This post written by John Pitblado.

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COURT ORDERS PARTY THAT MISTAKENLY PAID AWARD TO WRONG ENTITY MUST PAY AGREED UPON INTEREST ON AWARD

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As we reported on November 1, 2012, a federal court confirmed an arbitration award in favor of AXA Versicherung AG in a long-running reinsurance dispute with New Hampshire Insurance Company and other AIG affiliated entities. The $10 million award provided interest to be paid at 6.5%, compounded annually. AIG asked AXA for an extension on its deadline to pay the award. AXA agreed on the condition that AIG would not challenge the award and, further, that AIG would pay 6.5% interest until the award was paid in full.

AIG mistakenly sent payment to a former AXA affiliate that had been sold to an unrelated third-party. It took six weeks for the money to be returned to AIG. AIG argued that it should only have to pay interest at the lower stautory rate during this six-week period because AXA had not cooperated in obtaining a return of the funds. The court ruled in AXA’s favor, holding that AIG had to pay the 6.5% interest as agreed and, moreover, that it was AIG’s responsibility to make payment to the proper party. AXA Versicherung AG v. New Hampshire Insurance Co., Case No. 1:12-c-06009 (USDC S.D.N.Y. Apr. 22, 2013)

This post written by Ben Seessel.

See our disclaimer.

EQUITABLE TOLLING ALLOWED IN ALLEGED SCHEME REINSURING PRIVATE MORTGAGE INSURANCE

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Plaintiff homeowners filed a putative class against Bank of America Corp. (“BOA”), Bank of America Reinsurance Corp. (“BOARC”) and three primary insurers that issued private mortgage insurance covering plaintiffs’ mortgages with BOA. Plaintiffs allege they were required by BOA, the mortgage lender, to have private mortgage insurance to cover the risk of default which, under the mortgage agreement, BOA retained the right to place on plaintiffs’ behalf. BOA then allegedly placed the insurance with carriers that had previously agreed to cede a portion of the premium to BOARC, a captive of BOA, for reinsurance. Plaintiffs allege no actual risk was transferred, the reinsurance is illusory, and it therefore constitutes a prohibited “kickback” under the Real Estate Settlement Procedures Act. Defendants moved to dismiss citing the Act’s statute of limitations, but the court accepted plaintiffs’ equitable tolling argument that plaintiffs did not, and could not have, discovered the alleged “kickback” scheme because it was allegedly fraudulently concealed. Riddle v. Bank of America Corp., No. 12-1740 (USDC E.D. Pa. April 11, 2013).

This post written by John Pitblado.

See our disclaimer.

CONNECTICUT INSURANCE DEPARTMENT ISSUES PRACTICAL GUIDANCE REGARDING ITS CREDIT FOR REINSURANCE LAW

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As previously reported on this blog, the Connecticut Insurance Department amended its Credit for Reinsurance law to align with the NAIC Credit for Reinsurance Model Law with an effective date of October 1, 2012. On March 1, 2013, the Department issued a bulletin which provides practical guidance to insurers seeking to become credited reinsurers in Connecticut. The bulletin sets forth the requirements for certification eligibility and includes a checklist addressing those requirements, which must be submitted along with the application for certification. State of Conn. Ins. Dep’t., Requirements to Become a Connecticut Certified Reinsurer, Bulletin No. FS-25 (Mar. 1, 2013).

This post written by Abigail Kortz.

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