Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

FOURTH CIRCUIT AFFIRMS ARBITRATION AWARD, FINDING ARBITRATORS HAD AUTHORITY TO DETERMINE VALIDITY OF AGREEMENT

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The Fourth Circuit Court of Appeal recently issued its decision concerning Central West Virginia Energy’s consolidated appeal of two judgments affirming an arbitration award handed down by a Charleston, WV arbitration panel in favor of Bayer Cropscience, arising out of actions by two different arbitral panels. The issue was whether the validity of a particular contract should have been decided by a court or the arbitral panels (and if by arbitrators, which ones). Interpreting the recent Stolt-Nielsen decision, the Fourth Circuit upheld the decision of the two district courts and determined that this was a procedural rather than a jurisdictional issue, and as such was subject to decision by the arbitral panels rather than the courts. The Court of Appeal, emphasizing the “highly deferential standard of review due arbitration awards,” upheld the award concluding that the Charleston Panel had not exceeded its powers. Central West Virginia Energy, Inc. v. Bayer Cropscience LP, No. 10-348 (4th Cir. July 14, 2011).

This post written by John Black.

ARBITRATORS ORDERED TO SELECT UMPIRE WITHOUT ATTORNEY INTERMEDDLING

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A federal court has ordered party-selected arbitrators to proceed with the umpire selection process “without intermeddling, obstruction, interference, or other direction from the parties or counsel.” Liberty Mutual’s petition claimed counsel for the reinsurer defendants “injected himself” into the umpire selection process, causing unnecessary complication and delay. The reinsurers’ memorandum in opposition claimed that Liberty Mutual’s petition was prematurely filed, and that the selection process had only been shut down by Liberty Mutual’s filing of a petition in court. The main point of contention was whether the reinsurance agreements at issue contained provisions requiring that prospective umpires fill out written questionnaires as part of the selection process. The court’s two-paragraph order avoids any analysis of the issues addressed by counsel, with the apparent implication that the umpire selection issues are to be worked out entirely by the arbitrators. Liberty Mutual Insurance Co. v. Nationwide Mutual Insurance Co., No. 11-10651 (USDC D. Mass. July 6, 2011).

This post written by John Pitblado.

CEDENT ORDERED TO PRODUCE CONSULTANT ANALYSES IN DISCOVERY

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A federal court granted in part a motion to compel filed by the defendant reinsurer, Clearwater, against the plaintiff cedent, Granite State. Clearwater reinsured Granite State under a facultative reinsurance agreement covering certain losses arising from underlying asbestos bodily injury claims against Granite State’s insured. Granite State made claim for payment under the agreement to Clearwater. Clearwater disputed its obligation to pay under the agreement, claiming that Granite State failed to promptly notify Clearwater of the claims. Granite State sued. In discovery, Clearwater sought information pertaining to Granite State’s reserving, relative to an underlying settlement of certain asbestos claim coverage disputes. Granite State objected to the request. The court, in a summary opinion, ordered Granite State to produce “copies of any final reviews, analyses or studies, conducted by any consultants or other third parties, on the principal subject of the adequacy of Granite State’s reserves for asbestos exposures, claims, and/or losses, during the period from 1980 through 2009.” Granite State Insurance Co. v. Clearwater Insurance Co., No. 09-Civ-10607 (USDC S.D.N.Y. June 27, 2011).

This post written by John Pitblado.

COURT ORDERS LIQUIDATION OF REINSURANCE COMPANY OF AMERICA

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An Illinois circuit court entered an order for the liquidation of Reinsurance Company of America based upon a finding of insolvency. The court appointed Michael T. McRaith, Illinois Director of Insurance, as liquidator, vesting him with broad powers to take action as required to serve the interests of RCA, its policyholders, beneficiaries, creditors, and the public. RCA’s sole stockholder consented to the entry of the order. People v. Reinsurance Co. of America, Case No. 10 CH 6207 (Ill. Cir. Ct. Apr. 27, 2011).

This post written by Ben Seessel.