Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT HOLDS THAT AN ORDER GRANTING A MOTION TO DISMISS IS AN ARBITRATION “AWARD” DESPITE UNRESOLVED PENDING ISSUES

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A state court of appeals held that the an order granting respondent’s motion to dismiss an arbitration on the merits was an “award” within the meaning of the Uniform Arbitration Act of 1975, separate and apart from a “Final Award” issued two months later in which the arbitrator awarded respondent costs and denied its application for attorney’s fees. Respondent filed a motion in court to confirm the order of dismissal and award of costs; claimant opposed and moved to vacate both orders. The trial court held that the dismissal order constituted a distinct “award,” and, accordingly, the statutory thirty-day period to seek vacatur had expired. The appellate court affirmed, likening the situation to litigation in state and federal court, where an order of dismissal on the merits is final and appealable, notwithstanding extant unresolved issues of attorneys fees and costs. One judge dissented, opining that an “award” is an arbitral decision that represents the complete determination of every issue submitted to arbitration, and that the reference to state and federal judicial procedure is inapposite, given that the scope of judicial review of arbitral awards is strictly limited. American Numismatic Assoc. v. Cipoletti, Case No. 09CA2597 (Colo. Ct. App. Mar. 3, 2011).

This post written by Ben Seessel.

BRITISH COURT ANALYZES TRIGGER FOR EXCESS FACULTATIVE REINSURANCE COVER

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A Justice of the UK Commercial Court (Queen’s Bench Division) has issued an opinion as a result of a trial of a “preliminary issue about the proper construction and the operation of an excess reinsurance policy of professional liability insurance, and more specifically about how it is determined whether the “excess point” that triggers the reinsurance cover has been reached.” Teal Assurance Company Limited alleged that its facultative reinsurance agreement with W.R. Berkeley Insurance (Europe) Limited and Aspen Insurance UK Limited covered certain claims arising from the operations of Teal’s insured, Black & Veatch Holding Company (Teal is a captive insurer subsidiary of Black & Veatch, a large international engineering firm), that were in excess of Black & Veatch’s primary layers of professional liability insurance. The primary insurance covered all of Black & Veatch’s claims, geographically, while the excess facultative reinsurance excluded from coverage all American liabilities. The Court held, contrary to Teal’s position, that the order in which claims should be aggregated for purposes of determining when the reinsurance was triggered (and thus, whether any non-American liabilities exceeded the primary layer), should be based on when those liabilities originated, not when they were paid to the policy limits by the primary insurer. Teal Assurance Co. Ltd. v. W.R. Berkeley Ins. (Europe) Ltd., [2011] EWHC 91 (Comm. Ct. Jan. 31, 2011).

This post written by John Pitblado.

NEW JERSEY ENACTS REINSURANCE COLLATERAL REDUCTION PROGRAM; FLORIDA APPROVES ANOTHER BERMUDA REINSURER FOR ITS PROGRAM

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The New Jersey Governor has signed into law a new bill that creates a reduced collateral reinsurance program similar to those enacted by Florida and New York. The new law, A2670, permits the posting of less than 100% collateral if the reinsurer meets certain financial and regulatory standards. A summary of the new bill is available.

Meanwhile, the Florida Office of Insurance Regulation has authorized another Bermuda-based reinsurer to operate in Florida with reduced collateral requirements. A Consent Order was entered approving Montpelier Reinsurance Ltd. for the program, and the OIR issued a press release announcing the agreement.

This post written by Rollie Goss.

ILLINOIS INSURANCE DIRECTOR NAMED HEAD OF NEW FEDERAL INSURANCE OFFICE

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Michael McRaith, Director of the Illinois Division of Insurance, has been named by Treasury Secretary Geithner to be the initial Director of the new Federal Insurance Office, which was created last year by the Dodd-Frank Act. Director McRaith spent 15 years in private practice in Chicago prior to being appointed as Director of the Illinois Division of Insurance in 2005. Among his clients while in private practice were financial institutions, including insurance companies. He has been active in the NAIC, presently serving as secretary-treasurer. He has served as chair and vice-chair of the NAIC’s Property and Casualty Insurance (C) Committee. Director McRaith will serve as a non-voting member of the Financial Stability Oversight Council. Significantly for our readers, both Director McRaith and Missouri Insurance Director John Huff (a non-voting member of the FSOC appointed by the NAIC) have been members of the NAIC’s Reinsurance Task Force. The “insurance expert” voting member of the FSOC remains to be appointed by President Obama.

This post written by Rollie Goss.

MCCARRAN-FERGUSON ACT “REVERSE-PREEMPTS” FEDERAL JURISDICTION IN INSURANCE REHABILITATION CASE

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A Wisconsin federal district court has held that it may not interfere with an insurance rehabilitation case proceeding in state court. On January 18, 2011, the federal court ruled that it lacked jurisdiction to consider the legality of a state court’s order made in the context of an insurance rehabilitation proceeding. The state court enjoined the United States from taking certain actions against the claims-paying assets of the segregated accounts of Ambac Assurance. Shortly thereafter, the United States commenced a collateral attack against the state court and others, seeking to enjoin the state court from enforcing its rehabilitation plan or any injunction insofar as it affected the United States. The federal court once again ruled it lacked jurisdiction, holding that the McCarran-Ferguson Act “reverse-preempted” I.R.C. § 7401 (which authorizes injunctions for enforcement of internal revenue laws), the federal-question statute, and the federal-tax-issue jurisdiction statute. An injunction would “impair” or “supersede” state laws authorizing the state court to issue rehabilitation orders. The court also rejected the United States’ argument that the McCarran-Ferguson Act cannot preempt sovereign immunity. The case was dismissed for lack of subject matter jurisdiction. United States v. Wisconsin State Circuit Court for Dane County, Case No. 11-99 (USDC W.D. Wis. Feb. 18, 2011).

This post written by John Black.