Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

FAA JURISDICTION EXISTS TO COMPEL AGREEMENT NON-SIGNATORIES TO ARBITRATE

by

In a suit brought by FR 8 Singapore, a Singapore company, to compel arbitration with the alleged alter ego companies of Albacore Maritime, a Marshall Islands corporation, the court denied the defendants’ motion to dismiss for lack of subject matter jurisdiction, and held the choice of law provision in the agreement between FR 8 and Albacore applied to defendants’ motion to dismiss for failure to state a claim. The dispute stemmed from a failed purchase of a ship by Albacore from FR 8. The purchase agreement was signed by Albacore in Greece and FR 8 in Singapore, and provided for English choice of law and dispute resolution in London. When the purchase failed, arbitration commenced between FR 8 and Albacore, but Albacore’s parent companies (alleged alter egos) refused to participate. FR 8 sued in the United States under the FAA and the Convention in the Recognition and Enforcement of Foreign Arbitral Awards, to compel the alter egos’ participation. The defendants argued that the refusal to participate by the alter egos, which were non-signatories to the agreement, did not render FR 8 a “party aggrieved” under the FAA. The court rejected FR 8’s argument, questioning whether the FAA applied to compel non-signatories to arbitrate, but holding that FR 8 was a “party aggrieved” because correspondence between FR 8 and the defendants’ counsel constituted “an unambiguous demand to arbitrate,” with which the alter egos refused to comply. The court also resolved conflicting precedent on whether federal common law or the parties’ choice of law would apply to defendants’ motion to dismiss for failure to state a claim, holding the choice of English law provision would apply. FR 8 Singapore v. Albacore Maritime Inc., Case No. 10 Civ. 1862 (USDC S.D.N.Y. Dec. 14, 2010).

This post written by Michael Wolgin.

SUIT DISMISSED AGAINST FINNISH REINSURER FOR LACK OF PERSONAL JURISDICTION

by

Neles-Jamesbury Inc. filed suit for breach of contract against Pohjola Ins., a Finnish insurer, arising from a reinsurance contract between Pohjola and Lumbermens Mutual Casualty. NJI sought to hold Pohjola directly liable, alleging that Lumbermens was acting as Pohjola’s agent. Lumbermens had issued a comprehensive insurance policy covering NJI. The policy was stamped “Facultative Reinsurance” and contained the notation “reverse flow business 100% reinsured by Pohjola Ins. Co.” After Lumbermens denied coverage on certain claims, NJI filed suit against Lumbermens in Massachusetts state court. When NJI learned Lumbermens was having financial trouble, it sued Pohjola, which suit was removed to federal court. The federal court granted Pohjola’s motion to dismiss for lack of personal jurisdiction, finding that the Finnish company’s relationship with Lumbermens was not a mere agency and thus the Pohjola’s contacts with Massachusetts did not reach the levels necessary for personal jurisdiction. Neles-Jamesbury, Inc. v. Pohjola Ins. Co., LTD., Case No. 10-40055 (USDC D. Mass. Dec. 7, 2010).

This post written by John Black.

FLORIDA APPROVES SEVENTH REINSURER FOR REDUCED COLLATERAL PROGRAM

by

The Florida Office of Insurance Regulation has approved a seventh reinsurer for participation in Florida’s reinsurance marketplace with modified collateral requirements. Bermuda domiciled Renaissance Re, wholly owned by Bermuda holding company Renaissance Re Holdings, was formed after Hurricane Andrew in 1992 to provide additional cat risk capacity to Florida’s property insurance marketplace and cat insurance in other markets. The holding company’s founding shareholders include GE Investment, GE Pension Trust, USF&G and Warburg and Pincus Investors. The holding company is listed on the New York Stock Exchange. The Florida OIR has, consistent with prior reinsurer approvals, entered into a Consent Order with Renaissance Re outlining the representations made by the company and the conditions of the approval. The Consent Order drops the company’s collateral requirement from 100% to 20%, a dramatic drop. The company is to meet the collateral requirement through letters of credit that comply with certain requirements.

This post written by Rollie Goss.

ARBITRATION ROUND-UP

by

Exceeding Arbitrator’s Authority:

Controlotron Corp. v. Siemens Energy & Automation, Inc., Case No. 09 CV 03112 (USDC S.D.N.Y. Dec. 23, 2010) (denying motion to vacate award; granting motion to confirm award; arbitrator did not exceed authority by permitting amendment of claim and failing to make formal “written findings of fact and conclusions”)

Twin City Yellow Taxi, Inc. v. Farm Bureau Mutual Insurance Co., Case No. A10-775 (Minn. Ct. App. Dec. 28, 2010) (affirming denial of motion to vacate award; insufficient evidence that arbitrator exceeded powers; no evidence of evident partiality; defense not raised below is waived)

William Shirk v. Chicago Title Insurance Co., Case No. B222195 (Cal. Ct. App. Dec. 28, 2010) (affirming confirmation of award; award not procured by fraud; arbitrator did not exceed powers by reserving jurisdiction to decide future indemnity claims)

Class Arbitration:

Louisiana Health Service Indemnity Co. v. Gambro A B, Case No. 05-1450 (USDC W.D. La. Dec. 21, 2010) (denying motion to vacate order compelling class arbitration or limit order to only individual claims; distinguishing Stolt-Nielsen because panel applied FAA law rather than “policy choices”)

Imperfect Execution:

Ewers v. Genuine Motor Cars, Inc., Case No. 1:10 CV 1247 (USDC N.D. Ohio Dec. 10, 2010) (confirming award; denying motion to vacate or modify award; arbitrator did not imperfectly execute powers for failure to provide reasons for award that exceeded treble damages; “arbitrators are not required to explain their decisions” and agreement provided that no written opinion should issue; no manifest disregard of the law)

Consent Award:

American Heritage Life Insurance Co. v. Southwest Reinsure Inc., Case No. 3:10-cv-01040 (M.D. Fla. Nov. 23, 2010) (confirming $3,500,000 consent award)

Finality:

Sensordynamics AG Entwicklungs – UND Produktionsgesellschaft v. Memsco, LLC, Case No. 08-56803 (9th Cir. Dec. 29, 2010) (denying petition to confirm foreign arbitration award; award subject to change is not final and generally not appealable)

This post written by Michael Wolgin.

SWISS RE ARBITRATION AWARD CONFIRMED BY DISTRICT COURT

by

OneBeacon Insurance Company filed a motion to vacate an arbitration award in favor of Swiss Re. OneBeacon argued that the award should be vacated because the arbitrators were guilty of misconduct by refusing to permit necessary discovery and hear certain evidence. The dispute between the parties was governed by a Multiple Line Reinsurance Treaty contract which is an excess loss reinsurance contract containing an arbitration clause. The court denied OneBeacon’s motion to vacate and confirmed Swiss Re’s motion to confirm, finding that the arbitration panel acted reasonably in construing the term “occurrence” under the treaty and that the panel’s discovery and evidentiary decisions were within its discretion. OneBeacon American Insurance Co. v. Swiss Reinsurance Am. Corp., Case No. 09-11495 (USDC D. Mass. Dec. 23, 2010).

This post written by John Black.