Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

CONFIDENTIAL ARBITRATION AWARD AGAINST AXA RE CONFIRMED WITHOUT OPPOSITION

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A court recently confirmed an arbitration award against AXA Re in a reinsurance dispute involving reinsurance contracts entered into by predecessor companies in the 1970s. Details on the underlying arbitration are not available, as the petitioners’ filing was sealed by court order in accordance with a confidentiality agreement entered into by the parties in the arbitration. AXA Re did not oppose the petition nor appear in the court action, which was filed pursuant to the New York Convention. ACE Property & Casualty Insurance Co. v. AXA Re, Case No. 1:11-cv-07050 (USDC S.D.N.Y. Jan. 9, 2012).

This post written by Michael Wolgin.

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COURT CONSOLIDATES REINSURANCE CASES BEFORE EXISTING ARBITRATION PANEL

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A federal district court consolidated several reinsurance cases to be heard before an arbitration panel already formed to hear a dispute between the parties, as well as a corporation which the parties agreed to keep confidential. The court determined that, to avoid duplicative litigation and conserve litigation, all three actions could be consolidated and resolved through arbitration. Further, because all three actions arose from the same set of operative facts the arbitration panel already in existence could determine the correct reading of the arbitration agreements contained in each reinsurance agreement. The panel would first determine if each dispute should be heard by an independent panel. The court stayed the actions pending resolution by the existing arbitration panel. Arrowood Indemnity Co. v. Harper Insurance Co., No. 12-2 (USDC W.D.N.C. Jan. 19, 2012).

This post written by John Black.

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COURT CONFIRMS REINSURANCE ARBITRATION ORDERS OVER TIMELINESS AND FINALITY CONCERNS; REFUSES TO STRIKE CONFIDENTIAL FACTS IN PETITION

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A court has granted two unopposed petitions to confirm two arbitration orders under the New York Convention, in what was a dispute over documentation requirements of a forty-year old asbestos claims reinsurance agreement between Century Indemnity Company and certain London market reinsurers (LMRs). The first arbitration order required one of the LMRs to post letters of credit to secure Century’s then-outstanding claims. While the panel initially entered the order in 2006, the letters of credit were subsequently addressed in another order by the panel in 2008. The second order, entered in 2007 and made final in 2009, related to the panel’s findings on the merits of the reinsurance agreement’s documentation requirements. The court found that both orders were “necessarily incorporated” in the respective 2008 and 2009 orders, and were thus timely under the New York Convention’s three-year statute of limitations. In confirming the first order, the court explained that although it technically was not a final award (which is a requirement for jurisdiction under the Federal Arbitration Act), it was “sufficiently separate and final for federal court review and confirmation.”

Also noteworthy was the court’s denial of Century’s motion to strike, which argued that portions of the LMR’s petition contained gratuitous assertions that violated the parties’ confidentiality agreement and were intended to be a “press release for use in other matters.” The court found that the language at issue was related to the underlying controversy, that the panel’s orders were made public in the court record, and that “the mere fact that the parties ha[d] designated certain documents as confidential among themselves is insufficient to rebut the ‘strong presumption of public access to court records’ that exists in federal courts.” Century Indemnity Co. v. Certain Underwriters at Lloyd’s London, Case No. 1:11-cv-01040 (USDC S.D.N.Y. Jan. 10, 2012).

This post written by Michael Wolgin.

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NEW YORK APPELLATE COURT AFFIRMS SUMMARY JUDGMENT TO USF&G IN ASBESTOS REINSURANCE CASE

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In a dispute arising out of reinsurance coverage regarding asbestos litigation spanning several decades, the New York Supreme Court Appellate Division reviewed a decision granting summary judgment to USF&G against reinsurers American Re and Excess Casualty Reinsurance Association. American Re and ECRA argued that USF&G’s bad faith, including an initial denial of its duty to indemnify and defend the asbestos producer tainted the entire case and warranted summary judgment. They further argued that USF&G’s bad faith breached its duty of utmost good faith to them as reinsurers. The court distilled these contentions into a basic issue of fact and a basic issue of law. The question of fact concerned the increase in the retention of the reinsurance treaties to $3 million, which ECRA alleged was agreed to by all parties. The issue of law concerned the application of the follow the fortunes doctrine. As to the issue of fact, the court found that the facts demonstrated that USF&G only increased the retention for certain years, rather than all claims post-1981, as argued by ECRA. On the question of law, the court concluded that the follow the fortunes doctrine required defendants to accept the reinsurance presentation made by USF&G on the asbestos claims. Accordingly, the motion for summary judgment in favor of USF&G was affirmed. One judge dissented, arguing that a triable issue of fact existed regarding USF&G’s alleged bad faith. United States Fidelity & Guaranty Co. v. American Re-Insurance Co., No. 5205 (N.Y. App. Div. Jan. 24, 2012).

This post written by John Black.

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INTERNATIONAL ARBITRATION RULES AMENDED

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The International Chamber of Commerce has amended its rules for the arbitration of international disputes involving commercial disputes, effective January 1, 2012. Two principal areas of amendment are: (1) to provide for the appointment of an emergency arbitrator to order pre-arbitration relief, usually to preserve assets and the status quo; and (2) to facilitate the consolidation of disputes involving multiple contracts, multiple parties and claims between multiple parties. Among the many other amendments are provisions governing disclosures by arbitrators and updated case management procedures. The amendments are found in the ICC’s Arbitration and ADR Rules.

This post written by Rollie Goss.

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