Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

UNAUTHORIZED FOREIGN OR ALIEN INSURERS NOT REQUIRED TO POST SECURITY PRIOR TO FILING A MOTION

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Section 5/123(5) of the Illinois Insurance Code requires unauthorized foreign and alien company’s to post security prior to filing a pleading in any action or arbitration proceeding. An explicit exception is made for the filing of a motion to quash process or set aside service. The Northern District of Illinois recently interpreted this section of the Insurance Code in coverage litigation between an insured and its insurer and determined that the “language does not suggest that the excepted motions are exclusive.” Based on that reasoning, the court denied plaintiff’s motion for an order requiring the defendant to post security prior to filing a motion. Baxter International, Inc. v. AXA Versicherung, Case No. 1:11-cv-09131 (USDC N.D. Ill. Jan. 11, 2013).

This post written by Abigail Kortz.

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NEW YORK AND MISSOURI AMEND THEIR CREDIT FOR REINSURANCE REGULATIONS

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As previously reported by Carlton Fields, LLP, the New York Department of Financial Services published a notice of proposed rulemaking regarding changes to New York’s Credit for Reinsurance regulations in November 2012. The proposed changes were published and took effect on March 20, 2013. Missouri also recently introduced a bill that will change its credit for reinsurance regulations effective January 1, 2014. The changes authorize a reduction in the required statutory trusteed surplus for reinsurers who discontinue underwriting new business for at least three years, provides credit for reinsurance ceded to credited insurers and eligibility requirements for certification, and requires ceding insurers to take steps to diversify their reinsurance programs. Both the New York and Missouri amendments are based upon the NAIC Credit for Reinsurance Model Law and Regulations. N.Y. Comp. Codes R. & Regs. tit. 11, § 125 (2013); S.B. 60, 97th Gen. Assemb., Reg. Sess. (Mo. 2013).

This post written by Abigail Kortz.

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THIRD CIRCUIT AFFIRMS DISTRICT COURT’S HOLDING THAT ARBITRATOR DID NOT ACT WITH EVIDENT PARTIALITY

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The Third Circuit affirmed a district court decision denying a motion to vacate an arbitration award issued in favor of Pittsburgh Glass Works and PGW Auto Glass and against James Freeman. Freeman had asserted age discrimination claims in federal district court against the respondents after being fired from his job. The parties agreed upon a retired state court judge to arbitrate their dispute. The arbitrator had recently lost an election to the Pennsylvania Supreme Court. Freeman moved to have the award vacated on the basis that the arbitrator was biased because she had failed to disclose that she had received $4,500 in campaign contributions from PPG Industries, a minority owner of Pittsburgh Glass and PGW, during her unsuccessful Pennsylvania Supreme Court bid. Further, Freeman argued that the arbitrator had failed to disclose that she co-taught a law school course with a senior employment attorney at PPG Industries.

The district court denied the petition and the Third Circuit affirmed, holding that failing to disclose the existence of judicial campaign contributions did not establish “evident partiality” by the arbitrator, particularly in this instance where PPG Industries’ contributions were relatively small and, moreover, Freeman’s law firm had contributed five times the amount that PPG Industries had to the judge’s campaign. An undisclosed professional relationship with a minority owner was not “powerfully suggestive of bias.” The court made clear that “an arbitrator is evidently partial only if a reasonable person would necessarily conclude that the arbitrator was partial to one side,” and was careful to distinguish that standard from the more exacting appearance of bias standard for federal judges. Freeman v. Pittsburgh Glass Works, LLC, No. 12-2026 (3d Cir. Mar. 6, 2013).

This post written by Ben Seessel.

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REINSURER SETTLES CONFIDENTIALITY BREACH DISPUTE

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We previously reported on Utica Mutual Insurance Company and R & Q Reinsurance Company’s dispute arising out of the alleged breach of three confidentiality agreements, including one entered as an order in the parties’ pending reinsurance arbitration. By Order dated February 27, 2013, the case is reported as settled, though none of the terms were disclosed. Utica Mut. Ins. Co. v. INA Reinsurance Co., No. 6:12-cv-194 (USDC N.D.N.Y. Feb. 27, 2013).

This post written by John Pitblado.

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COURT REJECTS BID TO SEAL DOCUMENTS SUBMITTED IN SUPPORT OF PETITION TO CONFIRM REINSURANCE ARBITRATION AWARD

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First State Insurance Company and National Casualty Company arbitrated a reinsurance dispute in which the panel issued a confidentiality order prohibiting disclosure of confidential arbitration information. First State sought confirmation of an arbitration award in its favor by filing a petition in federal district court attaching the arbitration award to its moving papers. National Casualty moved to seal the record, including the award itself, arguing that public interest in access to the documents was low but an affiliate of National Casualty and third-parties could be injured if the award was made public because the award could be used to their disadvantage in other pending arbitration proceedings. The federal district court rejected National Casualty’s motion, holding that National Casualty had not overcome the presumption of public access to judicial documents, which included First State’s moving papers and the award itself. First State Insurance Co. v. National Casualty Co., Case No. 1:13-cv-00704 (USDC S.D.N.Y. Feb 19, 2013).

This post written by Ben Seessel.

See our disclaimer.