Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

BROKER CREATING PRIVATE ANTI-PIRACY NAVY

by

An interesting story appeared in the press recently about London broker JLT developing the Convoy Escort Program, what amounts to a private navy that will provide armed escort services to subscribing vessels through pirate waters off the African coast. Although details have not been made public, it appears that shipping companies who have insurance for piracy-related losses are being asked to fund a non-profit corporation that will hire ex-military personnel to provide escorts to several vessels in small convoys. It is thought that if the cost of such services is less than the amounts being paid in ransom that it would be an economically viable option, and will permit the professional military vessels to patrol further from the coast, where pirate activity has been increasing.

This post written by Rollie Goss.

U.K. HIGH COURT ENDORSES EXPOSURE TRIGGER FOR ASBESTOS-RELATED LIABILITIES

by

The U.K. Court of Appeals ruled on trigger of coverage issues in a consolidated appeal of cases involving underlying personal injury litigation arising from exposure to asbestos, in light of employers liability policies that generally cover liability for injury “sustained” during the policy year in question. The opinion discusses the unique long latency of mesothelioma, a cancer caused by exposure to asbestos, but which typically does not manifest into disease for as long as forty years or more. The court held generally that the insurer on the risk at the time of exposure — not the time of manifestation of the disease — is responsible for the liability. The ruling is grounded in industry custom, but addresses recent conflicting precedents, generally arising from differing policy wordings over time. The court distinguished a prior ruling, Wasa Int’l Ins. Co. Ltd. v. Lexington Ins. Co., [2009], which involved a conflict between the plain language of a reinsurance contract and a presumption arising from industry custom that insurance and reinsurance cover the same risks, and which ultimately applied the plain policy language as written, despite the presumption. Nevertheless, the court distinguished the Wasa case, noting the varying policy wordings in the employers liability policies at issue. It also recognized the consequences of its ruling on reinsurance liabilities and wordings as well, which it noted have likewise varied over time. Employers’ Liability Insurance “Trigger” Litigation, [2010] EWCA Civ. 1096 (U.K. Court App. Civ. Div. Oct. 8, 2010).

This post written by John Pitblado.

DODD-FRANK ACT IMPLEMENTATION

by

Those in the insurance sector may have a much better idea of how the Dodd-Frank Act may affect them soon, as the implementation of the Act continues, and rulemaking is starting to specify some of the requirements of the Act. With this post, we offer a Special Focus article which provides a high level review of relevant recent activities. For further detail, or for advice on particular needs, contact a member of our blog staff.

This post written by Rollie Goss.

STAY OF PREMATURE ARBITRATION DID NOT RENDER SUBSEQUENT PROCEEDINGS OR AWARD VOID

by

Where a court of appeals reversed a lower court’s order compelling arbitration, and mandated a stay of ongoing arbitration proceedings, the proceedings conducted in arbitration both before and after the institution of the stay were not void. The case surrounded a coverage dispute under an automobile insurance policy. The lower court had improperly compelled arbitration prior to determining whether coverage existed under the policy. After the court of appeals reversed, remanded, and stayed arbitration, the lower court found coverage existed and the arbitration resumed. The arbitrator then issued an award for the insureds, and the insurer appealed, contending the stay of the premature arbitration effectively voided all subsequent arbitral proceedings. Quoting a legal dictionary, the court held: “A stay does not vacate anything, but it is instead only the postponement or halting of a proceeding, judgment, or the like.” United Automobile Insurance Co. v. Wilson, Case No. 1-09-3061 (Ill. Ct. App. Jan. 18, 2011).

This post written by Michael Wolgin.

SECOND CIRCUIT AFFIRMS DISTRICT COURT’S DECISION IN CARDELL DISPUTE

by

In the latest development in the dispute between Cardell Financial and Suchodolski Associates, the Second Circuit issued a summary order affirming the district court’s judgment confirming an arbitration award and injunctive relief in Cardell’s favor. (We earlier posted on this case at the district court-level on January 20, 2010.) The underlying dispute chiefly concerned two separate agreements: the first – a $12.8 million promissory note, the second – a nonrecourse stock pledge agreement. The district court determined that the arbitrator had not manifestly disregarded the law by, among other things, refusing to apply New York law. Suchodolski Associates appealed, asserting the same theory for overturning the award. The Second Circuit affirmed for substantially the same reasons stated by the district court. Cardell Fin. Corp. v. Suchodolski Associates, Inc., No. 10-226 (2d Cir. Feb. 9, 2011).

This post written by John Black.