Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

SETTLEMENT REACHED IN ASBESTOS LIABILITY REINSURANCE DISPUTE

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A suit filed late last year by two subsidiaries of Chartis, Inc. against their reinsurer, Transport Insurance Co, was recently settled and dismissed. The underlying complaint alleged that Transport failed to reinsure in excess of $4.5 million in connection with asbestos claims paid under commercial umbrella liability policies. The parties filed a stipulation of dismissal on October 11, 2011 and an order dismissing the case was entered two days later. Insurance Co. of the State of Pennsylvania v. Transport Ins. Co., Case No. 2:10-cv-09830 (USDC C.D. Cal. Oct. 13, 2011).

This post written by Michael Wolgin.

PREMATURE TO RULE ON EFFECT OF UNUTILIZED REINSURANCE ON OTHER INSURANCE CLAUSE BEFORE LOSSES ESTABLISHED

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In ruling on cross motions for summary judgment, the U.S. District Court for the Western District of Michigan considered a request for a declaration regarding the application of an “Other Insurance” clause in a Directors and Officers liability insurance policy. The insurer (F&D) requested a declaration that any coverage available under the policy is limited to the amount in excess of the $1.25 million of unutilized reinsurance coverage available to the insured (Michigan Millers) from its reinsurer (Employers Reinsurance Corporation). The District Court denied the request for declaration, finding it premature. The court explained that because of the different nature of the F&D and ERC policies, the Other Insurance clause may have to operate as a reimbursement scheme rather than an outright excess insurance provision. So, prior to losses being established, it is premature to rule on the effect of the Other Insurance clause. Michigan Millers Mutual Insurance Co. v. Fidelity and Deposit Co. of Maryland, No. 09-596 (W.D. Mich. Aug. 15, 2011).

This post written by John Black.

COURT DISTINGUISHES CONCEPCION WHERE ARBITRATION OF INDIVIDUAL CLAIMS WAS “INFEASIBLE”

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A state court recently distinguished the U.S. Supreme Court’s Concepcion decision in upholding a prior order that found that arbitration agreements that precluded class arbitration were void as against public policy. A putative consumer class action was brought against Dell Inc. by plaintiffs who had agreed to arbitrate disputes only on an individual basis – and not as a class action. Dell initially prevailed in arbitration, but the appellate court subsequently reversed the award, holding that the agreement barring class arbitration violated state public policy and was unenforceable. After the appellate court issued its ruling, the U.S. Supreme Court decided the Concepcion case, which held the FAA preempts state laws that preclude class action waivers. Arguing that Concepcion rejected the appellate court’s decision in this case, Dell renewed its underlying motion to confirm the arbitration award. The court denied Dell’s motion, distinguishing Concepcion on its facts. Whereas the plaintiffs in Concepcion had sizable individual claims and a favorable procedure in place to arbitrate individual claims, the plaintiffs in this case had small individual claims and no favorable individual claim resolution procedure. State policy against a class waiver prevailed in this case because arbitration of individual claims was “infeasible as a matter of fact” leaving no “federal interest with which the state law might conflict.” Since this rationale arguably is similar to those underlying state law provisions vulnerable under Conception, it will be interesting to see whether this position prevails. Feeney v. Dell, Inc., Case No. MICV 2003-01158 (Mass. Super. Ct. Sept. 30, 2011).

This post written by Michael Wolgin.

SUPREME COURT REQUIRES APPLICATION OF FAA IN STATE COURTS

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The U.S. Supreme Court has issued a per curiam decision holding that the Federal Arbitration Act must be enforced in both state and federal courts. In this case, a Florida state court of appeal upheld a trial court’s refusal to compel arbitration after determining that two of the four claims in a complaint were nonarbitrable. The Supreme Court cited prior precedent requiring that courts send arbitrable claims to arbitration even if it will lead to piecemeal litigation. See Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217 (1985). The Court vacated the judgment and remanded the case so that the lower court could determine if any of the claims were arbitrable. KPMG, LLP v. Cocchi, No. 10-1521, 565 U.S. – (U.S. Nov. 7, 2011).

This post written by John Black.

CONFIRMATION OF ARBITRATION AWARD OF ATTORNEYS FEES AND COSTS AFFIRMED ON APPEAL

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White Springs Agricultural Chemicals, Inc. and Glawson Investments Corp. had a history of property dispute litigation arising from their respective uses of neighboring properties in Florida. They stipulated to a settlement, agreeing that future disputes would be arbitrated. A dispute again arose, and Glawson demanded arbitration in accordance with the agreement. The parties arbitrated, and the panel found in Glawson’s favor, awarding attorneys fees and costs. White Springs sought to vacate the award in federal court, arguing the fee award was improper and beyond the scope of the submission. The court disagreed, confirming the award. White Springs appealed. The Eleventh Circuit affirmed, citing the agreement for the panel’s authority to award attorneys fees, and noting that, while Glawson had not initially sought fees, it was apparent the parties had submitted that issue to the arbitration panel, inasmuch as both parties briefed the issue, and the panel heard argument on the issue before issuing the award. White Springs Agricultural Chemicals, Inc. v. Glawson Investments Corp., No. 10-14532 (11th Cir. Oct. 17, 2011).

This post written by John Pitblado.