Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

NAIC REINSURANCE TASK FORCE DECEMBER 2012 MEETING

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On December 1, 2012, the NAIC’s Reinsurance (E) Task Force convened at the 2012 NAIC Fall Meeting to discuss the status of several regulatory issues. The NAIC staff reported that 11 states have adopted some form of the NAIC Model Credit for Reinsurance Law and Regulation, which allows for reduced collateral requirements for certified reinsurers. The Model Law and Regulation were approved at the Fall Meeting as optional standards, meaning states may continue to require 100% collateral. The Task Force also exposed its Draft NAIC Process for Developing and Maintaining the List of Qualified Jurisdictions for a 45-day comment period and noted that 4 jurisdictions, Bermuda, Germany, Switzerland and the UK, will receive expedited review. Another discussion focused on a survey of states regarding the Dodd-Frank’s Nonadmitted and Reinsurance Reform Act, which brought to light concerns about how to treat reinsurers that have large segments of insurance business for purposes of solvency regulation.

This post written by Abigail Kortz.

See our disclaimer.

CALIFORNIA APPELLATE DECISION TAKES A BROAD VIEW OF CONCEPCION, HIGHLIGHTING THE CURRENT DIVIDE WITHIN CALIFORNIA

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Last week we reported on a decision by one California appellate court holding that U.S. Supreme Court precedent did not overrule the California Supreme Court’s Gentry decision to the extent the latter voids class arbitration waivers that are determined by the court to prevent an employee from vindicating certain statutory rights. Another decision of a different panel of the same California appellate district highlights the broader approach currently taken by California courts on this issue. In an appeal of an order refusing to enforce a class arbitration waiver based on California statutory law, the appellate court reversed, finding that Concepcion made clear that the FAA preempts state law prohibiting a consumer from waiving class action rights. The court noted the current divide with California courts regarding the viability of Gentry, but concluded that it “need not comment on the continuing viability of Gentry because the instant case does not deal with employment issues.” The court did conclude, however, that Concepcion rejects the argument that class action waivers in consumer contracts can be invalidated in order to vindicate statutory rights even if the statutory right is desirable for other reasons” — a position that is apparently not unanimously held in California. Sherf v. Rusnak/Westlake, Case No. B237275 (Cal. Ct. App. October 16, 2012).

This post written by Michael Wolgin.

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COMMENT PERIOD OPEN FOR PROPOSED AMENDMENTS TO NEW YORK’S CREDIT FOR REINSURANCE REGULATIONS

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On November 28, 2012, the New York Department of Financial Services published a notice of proposed rulemaking (with no hearing scheduled) regarding the Credit for Reinsurance regulations to more closely align its program with the recently amended NAIC Credit for Reinsurance Model Law and Regulations. The revisions to New York’s regulations are substantially similar to Section 8 of the Model Regulations, but also require reinsurance contracts to include terms regarding venue and choice of law. Section 8 and New York’s proposed amendment set forth the rating schedule used to determine reduced collateral requirements for reinsurers domiciled outside of the U.S. As previously reported by Carlton Fields LLP, the NAIC amended the Model Law and Regulations in November 2011 to add Section 8 and New York promulgated its Credit for Reinsurance regulations in November 2010 when it became only the second state to adopt a ratings-based framework. The comment period for the proposed amendments to New York’s Credit for Reinsurance regulations ends on January 12, 2013. N.Y. Comp. Codes R. & Regs. tit. 11, § 125 (proposed Nov. 28, 2012).

This post written by Abigail Kortz.

See our disclaimer.

AWARD CONFIRMED IN REINSURANCE DISPUTE INVOLVING 30-YEAR OLD ASBESTOS INJURIES

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In a perfunctory order, a court has confirmed an award related to amounts owed under facultative reinsurance certificates in connection with asbestos injuries and lawsuits dating back to 1980. In 2003, the reinsurer had agreed to pay a portion of the claims, subject to the terms of the underlying commercial liability insurance policy. When the reinsured submitted a claim after the reinsurance attachment point was reached in 2009, however, the reinsurer refused to pay. The parties arbitrated the dispute, and a final award in the reinsured’s favor was issued in June 2011. The reinsured then successfully petitioned the court to confirm the award, arguing that the reinsurer was estopped from contesting it, having failed to object to the award within three months of its entry. ACE Property & Casualty Insurance Co. v. Global Reinsurance Corp. of America, Case No. 1:11-cv-06945 (USDC S.D.N.Y. July 25, 2012).

This post written by Michael Wolgin.

See our disclaimer.

CALIFORNIA APPELLATE COURT HOLDS THAT GENTRY SURVIVES, REJECTING APPLICABILITY OF U.S. SUPREME COURT DECISIONS

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A recent opinion of the Second Appellate District of the California Court of Appeals has reinforced the split among California courts as to the impact in California courts of the U.S. Supreme Court’s recent decisions concerning arbitration procedure. The plaintiff brought a putative class action against his employer, alleging various Labor Code violations, in California State Court. Citing the parties’ arbitration agreement and class arbitration waiver, the defendant moved to compel individual arbitration, which the trial court granted. A California appellate court reversed, relying on the California Supreme Court’s opinion in Gentry, which held that class action waivers should not be enforced if class arbitration is a more effective way to vindicate the class members’ claims than individual arbitration.

Following the reversal, the employer filed a second motion to compel arbitration, contending that the U.S. Supreme Court’s intervening decisions in Stolt-Nielsen and Concepcion effectively overruled Gentry and required individual arbitration. On appeal following the trial court’s denial of the second motion to compel, the California appellate court affirmed, concluding that Gentry remains good law. The court reasoned that Concepcion prohibits only categorical rules against class action waivers, that Concepcion did not preclude a case-specific determination such as that in Gentry, and that a class waiver which prevents an employee from vindicating certain statutory rights was unenforceable. The court also held that Stolt-Nielsen did not overrule Gentry so long as the claims would ultimately proceed in court, rather than in a class arbitration. There may be further guidance on these issues soon, since the U.S. Supreme Court has accepted review of an opinion of the Second Circuit which espoused the waiver of statutory rights theory. Franco v. Arakelian Enterprises, Inc., Case No. B232583 (Cal. Ct. App. December 4, 2012).

This post written by Michael Wolgin.

See our disclaimer.