Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

“RIGHT TO KNOW” LAW INAPPLICABLE TO RECORDS SOUGHT IN INSURER’S LIQUIDATION PROCEEDINGS

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A court vacated an order of the Pennsylvania Office of Open Records that denied a request for documents in the possession of the department of insurance related to the drafting of the reinsurance offset guidelines of a liquidating insurer. The OOR had found that the documents were exempt from disclosure as “internal predecisional deliberations” in the possession of the department, which was serving as the insurer’s statutory liquidator. On appeal, while the court tended to agree with the OOR’s reasoning, it found that the state disclosure law was “inapplicable to rehabilitation or liquidation proceedings because [the records] are solely within the control of the court under the Insurance Act.” As a result, the court held that it, and not the OOR, had jurisdiction over the documents relating to the drafting of the guidelines. Greenberger v. Pennsylvania Insurance Department, Case No. 931 C.D. 2011 (Pa. Commw. Ct. March 7, 2012).

This post written by Michael Wolgin.

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APPALACHIAN AND INA SETTLE ASBESTOS REINSURANCE DISPUTE

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Appalachian Insurance Company recently settled and voluntarily dismissed its action against Insurance Company of North America pending in US District Court for the Eastern District of Pennsylvania. Appalachian’s claims arose out of INA’s alleged breach of a facultative reinsurance agreement between the parties. Appalachian had settled with Union Carbide after UC was sued for claims related to asbestos. Subsequently, Appalachian filed this action seeking to apply the reinsurance agreement’s “follow the settlements” clause. Appalachian asserted claims for breach of contract and declaratory relief. Appalachian Ins. Co. v. Insurance Co. of North Am., Case No. 10-7614 (E.D. Pa. Jan. 5, 2012).

This post written by John Black.

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SECOND CIRCUIT ORDERS DISMISSAL OF SUIT TO CONFIRM A PERUVIAN ARBITRATION AWARD IN NEW YORK ON FORUM NON CONVENIENS GROUNDS

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The Peruvian arbitration awarded over $21 million in connection with a consulting agreement for engineering studies on water and sewage services in Peru. A Peruvian statute, however, significantly limited the amount the consultant could recover from the Peruvian government. Consequently, the consultant filed a petition to confirm the award in U.S. district court in New York, where the consultant hoped to collect the full amount of the award from Peruvian assets located there. The lower court denied dismissal of the petition, in part, due to the policy supporting international arbitration under the Panama Convention. Over a vigorous dissenting opinion, the Second Circuit panel majority reversed, holding that “the cap statute is a highly significant public factor warranting [forum non conveniens] dismissal.” The court acknowledged: “Although enforcement of [international] awards is normally a favored policy of the United States and is specifically contemplated by the Panama Convention, that general policy must give way to the significant public factor of Peru’s cap statute.” Figueiredo Ferraz v. Republic of Peru, No. 09-3925 (2d Cir. Dec. 14, 2011).

This post written by Michael Wolgin.

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NINTH AND THIRD CIRCUITS HOLD THAT FAA PREEMPTS STATE UNCONSCIONABILITY LAW PER CONCEPCION

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Two US Courts of Appeals recently issued opinions bearing on the unconscionability of arbitration agreements. In Coneff v. AT&T, the Ninth Circuit reversed a district court’s refusal to enforce an arbitration agreement between AT&T and current and former customers. The district court had ruled that the agreement’s class action waiver provision was unconscionable based on Washington’s state law invalidating class action waivers. The Ninth Circuit reversed, holding specifically that the Supreme Court’s recent decision in Concepcion controlled. Thus, the FAA preempted the Washington state law. Further, the Court remanded the case to the district court to apply Washington choice of law rules on the putative class action plaintiffs’ procedural unconscionability arguments. Coneff v. AT&T Corp., No. 09-035563 (9th Cir. Mar. 16, 2012).

In Quilloin v. Tenet Healthsystem Philadelphia, Inc., the Third Circuit also reversed a district court’s determination that an arbitration provision was unconscionable and unenforceable. As a threshold issue, the Third Circuit held that the plaintiff did not agree to arbitrate the question of arbitrability itself so the district court did not err in addressing the validity of the arbitration agreement. The Court applied Concepcion and found no basis for substantive unconscionability under Pennsylvania law. Specifically, the Court determined that, among other things, Pennsylvania’s prohibition against class action waivers was preempted by the FAA. Additionally, the Court ruled that the plaintiff did not lack a meaningful choice in agreeing to arbitrate, and thus raised no genuine issue of material fact with regard to procedural unconscionability. The case was reversed and remanded with instruction to stay the proceedings and compel arbitration. Quilloin v. Tenet HealthSystem Philadelphia, Inc., No. 11-1393 (3d Cir. Mar. 13, 2012).

This post written by John Black.

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