Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

DISTRICT COURT RULES AGAINST TRAVELERS IN DISCOVERY DISPUTE

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On February 25, 2010, the US District Court for the Eastern District of Missouri issued a Memorandum and Order resolving a discovery dispute in Sunnen Products Co. v. Travelers Cas. and Surety Co. At the outset, the Court ruled on a minor issue ordering Travelers to produce any documents withheld based solely on boilerplate, introductory objections. Further, the Court granted Sunnen’s motion to compel information related to similar policies, claims and lawsuit of other insureds finding that the Interrogatories at issue were not ambiguous, prejudicial or overly burdensome at this stage. Explaining that Travelers could raise such issues at the motion in limine stage or at trial, the Court ordered production of a limited class of responsive documents (as proposed by Sunnen). The Court also ordered production of a relevant Reinsurance Agreement as well as certain audits concerning Sunnen’s claim for coverage. Finally, the Court ruled that Sunnen was entitled to discovery of a list of all Missouri law firmed engaged by Travelers, or engaged and consented by Travelers, to defend claims against an insured whose Other Policy placed a duty to defend on Travelers. The Court explained that this information was relevant to Travelers’ claim that Sunnen’s choice of arbitration counsel in the underlying action prejudiced Travelers. Sunnen Products Co. v. Travelers Cas. and Surety Co. of Am., Case No. 09-00889 (E.D. Mo. Feb. 25, 2010).

This post written by John Black.

SPECIAL FOCUS: FEDERAL COURT OF APPEAL ANNOUNCES REVIEW STANDARD APPLICABLE TO RULINGS ON MOTIONS TO STAY LAWSUITS PENDING ARBITRATION

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In this Special Focus Article, Carlton Fields parnter Roland Goss discusses the implications of the First Circuit’s recent decision in Powershare Inc. v. Syntel Inc. In this case, the court addressed the appropriate standard of review to be used by a District Court judge in reviewing a Magistrate Judge’s disposition of a motion to stay litigation pending the completion of a parallel arbitration proceeding.

COURT ORDERS PRE-PLEADING SECURITY POSTED

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In a dispute regarding two quota share reinsurance agreements, Plaintiffs Arrowood Surplus Lines Insurance Company and Arrowood Indemnity Company sought an order requiring Gettysburg National Indemnity to post pre-pleading security pursuant to Connecticut statute. Under Connecticut law, before an “unauthorized insurer” can file a pleading in a case against it, it must either post a pre-pleading security, procure proper authorization to do business in Connecticut or seek an order from the court dispensing with pre-pleading security. The District Court for the District of Connecticut determined that Gettysburg National was required to post pre-pleading security in an amount determined by the contract under the reinsurance agreement between Arrowood and Gettysburg National. Thus, Gettysburg National was ordered to post pre-pleading security in the amount of $660,389. Arrowood Surplus Lines Ins. Co. v. Gettysburg Nat. Ins. Co., Case No. 09-000972 (D. Conn. Apr. 6, 2010).

This post written by John Black.

SECOND CIRCUIT GRANTS MOTION TO STAY PENDING APPEAL OF DECISION VACATING ORDER THAT AN ARBITRATION MUST COMMENCE ANEW

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On August 3, 2009, we reported on a district court vacating its prior order that the arbitration must commence anew and reappointing an arbitrator to the panel after the arbitrator’s health improved. Insurance Company of North America and INA Reinsurance (collectively, “INA”) appealed and also moved for a stay pending appeal arguing that, if the circuit court does not grant a stay, an unauthorized panel would soon hear a key substantive motion, which would potentially compromise INA’s future rights and squander resources in duplicative proceedings. Public Service Mutual Insurance Company moved to dismiss the appeal for lack of jurisdiction. The Second Circuit summarily granted the motion for a stay pending appeal and denied the motion to dismiss. Insurance Co. of N. Am. v. Public Serv. Mut. Ins. Co., No. 09-3640 (2d Cir. Jan. 21, 2010).

This post written by Dan Crisp.

REINSURED ESTOPPED TO AVOID ARBITRATION CLAUSE

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Pronational Insurance Company brought suit against AXA Liabilities Managers, Inc. (AXA’s claims-handling subsidiary), alleging several common law claims in connection with AXA Re’s denial of coverage for a claim made by Pronational under a reinsurance contract. AXA LM moved to compel arbitration under the reinsurance contract, to which Pronational and AXA Re only were signatories. Pronational objected on the basis that AXA LM was not a signatory. The Court granted the motion to compel arbitration, finding that Pronational was equitably estopped to attempt to avoid the arbitration clause in the contract under which the subject claims were made. The reasoning for this decision is contained in a Magistrate Judge’s Report and Recommendation, which the district judge adopted in a very short Order. Pronational Ins. Co. v. AXA Liabilities Managers, Inc., Case No. 08-2022 (USDC N.D. Ala. January 28, 2010).

This post written by John Pitblado.