Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

SWISS RE ARBITRATION AWARD CONFIRMED BY DISTRICT COURT

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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.

COURT COMPELS DISCOVERY OF REINSURANCE INFORMATION RELATING TO LATE NOTICE DEFENSE

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Global Reinsurance denied reinsurance claims for asbestos claims, in part on the basis that it was notified late of the claims, and then refused to provide discovery that might have revealed that it had been advised of the claims by a third party or that it had sufficient knowledge of the claims to advise its own reinsurers of the claims. The court granted a motion to compel, rejecting the arguments in the opposition to the motion, denying discovery only as to issues that were withdrawn or previously determined, and hence moot in terms of discovery. Pacific Employers Insurance Company v. Global Reinsurance Corp. of America, Case No. 09-6055 (USDC E.D. Pa. Nov. 12, 2010).

This post written by Rollie Goss.

PREJUDGMENT INTEREST AWARDED IN BEER BOTTLER’S BATTLE WITH BREWER

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Coors Brewing Company sought to terminate its distributor agreement with Finger Lakes Bottling. After Finger Lakes refused a check in the amount calculated by Coors to be the fair market value at termination, Coors initiated an arbitration pursuant to the agreement to have an arbitrator determine the amount. The arbitrator set an amount, but specifically declined to rule on pre-judgment interest, finding it beyond the scope of the parties’ submission, and thus denied Finger Lakes’ request for the interest, though without prejudice to raising the issue in enforcement proceedings. Finger Lakes then filed an application to confirm the award. The court confirmed the award and, exercising its discretion, granted Finger Lakes pre-judgment interest at the weekly average one-year Treasury rate. Finger Lakes Bottling Co., Inc. v. Coors Brewing Co., No. 09-6024 (USDC S.D.N.Y. Oct. 18, 2010).

This post written by John Pitblado.

TERMS OF REINSURANCE TREATY USED TO HELP INTERPRET TERRITORIAL LIMITATIONS IN INSURER’S MARKETING AGREEMENT

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A state court of appeals affirmed that the trial court properly interpreted territorial limitations in a general agency agreement to market the insurer’s policies, in part, by looking to warranty limitations in a reinsurance treaty entered into between the insurer and two third-party reinsurers. Apex Lloyds Insurance Company sued its managing general agent, Texas All Risk General Agency Inc. (“TAR”), after TAR allegedly breached the territorial limitations in its agency agreement designed to limit large claims exposure, and included in the agreement to satisfy the department of insurance and Apex’s reinsurers. The reinsurance treaty, which TAR was aware of at the time it entered into the agreement with Apex, provided that only 20% of policies could be sold in a certain county. Texas All Risk General Agency, Inc. v. Apex Lloyds Insurance Co., No. 10-10-017 (Tex. App. Nov. 10, 2010).

This post written by Ben Seessel.

APPELLATE COURT REINSTATES CLAIMS BY BENEFICIARY OF REINSURANCE AGREEMENT

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A New York appellate court reversed the dismissal of contract and breach of fiduciary duty claims asserted against J.P. Morgan, which managed investments on behalf of a foreign reinsurer. The plaintiff – a beneficiary of the investment management agreement between the reinsurer and J.P. Morgan – sued J.P. Morgan as a result of its investment in, and alleged failure to heed plaintiff’s warnings about, certain mortgage-backed securities. The trial court dismissed the claims, but the appellate court reversed, finding that the claims were not pre-empted by New York’s Martin Act, which empowers the Attorney General to bring criminal actions against violators. The Attorney General submitted an amicus brief arguing against pre-emption, pointing to the benefit of parallel civil proceedings by so-called ‘private attorneys general’ such as the plaintiff. Assured Guaranty (UK) Ltd. v. J. P. Morgan Investment Management, Inc., No. 603755/08 (N.Y. App. Div. Nov. 23, 2010).

This post written by John Pitblado.