Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

MULTI-STATE COMPACT FOR SURPLUS LINES TAX COLLECTION (NIMA) IS SHEDDING MEMBERS

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Several states have recently withdrawn from the Nonadmitted Insurance Multi-State Agreement (“NIMA”), the interstate compact sponsored by the NAIC to collect and allocate surplus lines tax revenues consistent with Dodd Frank’s Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”). We have reported earlier on NIMA’s development and progress. States that have withdrawn include Alaska, Connecticut, Mississippi, Nebraska and Hawaii. Departing states have cited several reasons for withdrawing: the lack of a financial benefit from participating; the increased burden and cost in overseeing and auditing NIMA’s Clearinghouse; increased costs imposed on brokers and insureds from the Clearinghouse’s service fee; and conflict with state insurance laws on reporting requirements. Mississippi is among the states withdrawing notwithstanding that its insurance commissioner was a principal officer of NIMA. NIMA’s remaining members include only Florida, Louisiana, Nevada, Puerto Rico, South Dakota, Utah and Wyoming.

This post written by Ben Seessel.

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CLASS ACTION HALTED AFTER CERTIFICATION GRANTED AND ORDERED TO INDIVIDUAL ARBITRATION IN LIGHT OF CONCEPCION

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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. Plaintiff appealed. Shortly thereafter, in 2007, the California Supreme Court decided Gentry v. Superior Court, which held that class action waivers should not be enforced if class arbitration was a more effective way to vindicate the class members’ claims than individual arbitration. The Appellate Court thus reversed and remanded in light of Gentry. After the case proceeded and the trial court certified the class, the U.S. Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion. The defendant renewed its motion to compel arbitration in light of Concepcion. The trial court granted the motion, and the Appellate Court affirmed. Iskanian v. CLS Transportation Los Angeles, LLC, No. B23158 (Cal. App. Ct. June 4, 2012).

This post written by John Pitblado.

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REINSURER SEEKS UNDERLYING CLAIM FILES IN DISPUTE OVER SCOPE OF “LOSS,” NOTWITHSTANDING “FOLLOW THE FORTUNES” DOCTRINE

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On March 8, 2012, we reported on a settlement of Travelers’s claims against certain of its “excess of loss” reinsurers in a dispute over the extent to which Travelers could claim that its settlement of thousands of underlying asbestos insurance claims constituted one “loss” or occurrence for purposes of meeting the dollar amount threshold for entitlement to reinsurance coverage. Nationwide Mutual, a reinsurer still a defendant in the action, has sought discovery from Travelers, including Travelers’s files related to its settlement of the underlying insurance claims. Travelers has disputed Nationwide’s entitlement to these materials, contending that the “follow the fortunes” doctrine renders irrelevant the details of Travelers adjudication of the underlying claims. The court recently denied (on non-substantive grounds) Nationwide’s motion to compel the discovery, without prejudice for Nationwide to re-file a more detailed motion. Travelers Casualty & Surety Co. v. Nationwide Mutual Insurance Co., Case No. 2:11-cv-00063 (USDC S.D. Ohio May 10, 2012).

This post written by Michael Wolgin.

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COURT GRANTS DECLARATION IN FAVOR OF LEXINGTON INSURANCE; PARTIES SUBSEQUENTLY SETTLE

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Several important developments have occurred in a reinsurance dispute we last reported on in a September 27, 2011 post. The dispute is between Lexington Insurance and Tokio Marine & Nichido Fire Insurance. On March 28, the federal district court granted Lexington’s motion for judgment on the pleadings seeking a declaration that its obligations to provide excess insurance coverage to the Port Authority was not contingent upon exhaustion of the limits of the underlying primary insurance policy. The court, examining the agreement between the parties, found that nothing in the contract language contained any express or implied requirement that the underlying policy be exhausted in order to trigger Lexington’s obligation to pay its share of covered damages. Following this decision, the parties entered into settlement discussions. On May 31, the parties stipulated to the dismissal of the action with prejudice. Lexington Insurance Co. v. Tokio Marine & Nichido Fire Insurance Co. Ltd., No. 11-cv-00391 (USDC S.D.N.Y. May 31, 2012).

This post written by John Black.

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INSURANCE POLICIES CONTROL CALCULATION OF “LOSS” APPLICABLE TO “EXCESS OF LOSS” REINSURANCE

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In a case involving disputed claims made under “excess of loss” facultative reinsurance certificates, a court recently held that the reinsurer’s liability for “losses” should follow the meaning of “loss” and “expense” in the underlying insurance polices, rather than the meanings of those terms as used in the reinsurance certificates. The dispute surrounded whether the reinsurance covered litigation expenses, in addition to the indemnity paid under the underlying insurance policies. The court analyzed the certificates and determined that the liability of the reinsurer in this case should be determined by the scope of liability provided by the underlying insurance policies. Because the reinsurer “had copies of the underlying insurance polices, or at the very least had access to the underlying insurance policies” the reinsurer could be charged with knowledge of the policies’ terms. The court distinguished reinsurance expressly designated as “non-current,” or reinsurance that limits in the certificates coverage to only specific delineated risks. In that scenario, the court explained, “loss” and “expense” would be determined by the certificate, as opposed to the underlying policies. ACE Property & Casualty Insurance Co. v. R & Q Reinsurance Co., Case No. 11081920 (Pa. Ct. Comm. Pl. May 15, 2012).

This post written by Michael Wolgin.

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