New reinsurance-related and arbitration developments from Carlton Fields
Willis Re has reported that the reinsurance market is overcapitalized, resulting in reductions in reinsurance rates for January 1, 2011 renewals of from 5% to 10%. Visit Willis Re’s web site for a summary of the report and the full report.
This post written by Rollie Goss.
Granite Reinsurance Company won an award for unpaid premiums from Acceptance Insurance Company (in rehabilitation) in a bankruptcy adversary proceeding. The unpaid premiums amounted to $9 million on a $15 million dollar policy that was purchased to cover Acceptance for five years. The parties had agreed to a $3 million per year premium payment schedule, due at the beginning of each of the five years covered under the reinsurance agreement. However, a dispute arose as to the calculation of pre-judgment interest on the award. The bankruptcy court awarded Granite Re pre-judgment interest calculated from the date each $3 million dollar premium payment became due (a different date for each of the three unpaid premium payments), and also awarded post-judgment interest from the date of judgment. In Re Acceptance Ins. Cos., Inc. No. BK-of-80059 (USDC Bankr. D. Neb. Jan. 19, 2011).
This post written by John Pitblado.
In a suit between an insurer and Louisiana-based reinsurance intermediaries over the return of an excess deposit on a reinsurance contract, the court sua sponte found that the insurer failed to demonstrate diversity of citizenship under the recently established “nerve center” test and dismissed for lack of subject matter jurisdiction. While the insurer had alleged in the complaint that it was domiciled in Nevada, it failed to allege the location of its principal place of business. The court found that information regarding where the majority of the insurer’s board of directors is located and holds meetings is insufficient under the “nerve center” test. Rather, the court held, the nerve center was the “single place” where direction, control and coordination originates. The evidence showed that to be Louisiana, the state where the insurer’s president, secretary, and director were located. Health Facilities of California Mutual Insurance Co., Inc. v. British American Insurance Group, Ltd., Case No. CV 10-3736 (USDC C.D. Cal. Jan. 11, 2011).
This post written by Michael Wolgin.
On October 7, 2009, we reported on See More Light Investments v. Morgan Stanley DW Inc., Case No. CV 08-580 (USDC D. Ariz. July 29, 2009), in which a court vacated an arbitration award for “manifest disregard of the law” based on the failure to apply the Cuban Assets Control Regulations (CACR), which the arbitrators had initially recognized as applicable law. On January 14, 2011, the Ninth Circuit Court of Appeals reversed, holding that the CACR is not “well defined, explicit, and clearly applicable” to the transaction at issue because the arbitrators may have concluded that the CACR should not apply based on its provisions, or simply “interpreted the CACR differently, then the district court did.” See More Light Investments v. Morgan Stanley DW Inc., No. 09-16953 (9th Cir. Jan. 14, 2011).
This post written by Michael Wolgin.
In September, 2010, Instituto Nacional de Seguros filed an amended complaint against two reinsurance brokers (Hemispheric Reinsurance and Howden Insurance) alleging breach of contract, negligence, and breach of fiduciary duty, alleging that the two brokers failed to provide reinsurance slips and other requested information, and when finally forced to do so, the documents revealed significant brokerage overcharges. Howden subsequently filed a motion to dismiss. A Florida state court General Magistrate has recommended the denial of the motion, finding that INS did not impermissibly commingle separate and distinct claims in a single count. Instituto Nacional De Seguros v. Hemispheric Reinsurance Group, LLC, Case No. 10-33653 (Fla. Cir. Ct. Dec. 13, 2010).
This post written by John Black.