Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT RULES AGAINST CLAIM THAT PARTY-APPOINTED ARBITRATOR IN THREE MEMBER PANEL WAS IMPARTIAL

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Employers Insurance Co. of Wausau brought a petition in Wisconsin Federal Court, in connection with an arbitration proceeding arising from a reinsurance dispute, seeking to have the Court appoint the neutral third arbitrator as the parties’ chosen arbitrators were unable to do so. The respondents cross-petitioned, alleging that (1) enforcement of the arbitration provision was barred by the statute of limitations, estoppel and laches; and (2) the respondents’ party-appointed arbitrator was not impartial and should be disqualified. The Court granted the petition and appointed a neutral third arbitrator, and denied the cross-petition in its entirety, finding that the questions about statutes of limitations and laches should be arbitrated and that there was no showing that the respondents’ selected arbitrator was biased. The cross-petitioners moved for reconsideration of the Order, which motion was denied by Order dated October 23, 2009. The cross-petitioners thereafter filed Notice of Appeal to the Seventh Circuit Court of Appeals. Employers Insurance Company of Wausau v. Certain Underwriters at Lloyds of London, No. 09-cv-201 (W.D. Wis. Sept. 28, 2009).

This post written by John Pitblado.

SUIT AGAINST LLOYD’S DISMISSED FOR LACK OF JURISDICTION BECAUSE ONE OF THE NAMES SHARED CITIZENSHIP WITH PLAINTIFFS

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A federal district court granted the motion of certain underwriters at Lloyd’s of London to dismiss the suit for lack of subject matter jurisdiction, holding that when determining the diversity of citizenship of the parties in a case involving Lloyd’s, all the “names” must be taken into consideration. When federal jurisdiction is founded on 28 U.S.C. § 1332, the parties must be diverse in their citizenship, so that each defendant is a citizen of a state different from each plaintiff. In this case, the plaintiffs, citizens of Louisiana, claimed that an insurance policy with Lloyd’s covered property damaged in Hurricane Katrina. Lloyd’s presented the court with an unsworn declaration that one of the names on the policy also was a citizen of Louisiana. Rejecting plaintiffs’ technical arguments about the unsworn nature of the declaration, the court dismissed the case because the diversity requirement was not met. St. Charles Property Association v. Certain Underwriters at Lloyd’s London, Case No. 09-2504 (USDC E.D. La. Oct. 2, 2009).

This post written by Brian Perryman.

A MESSAGE TO OUR READERS

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We recently experienced a hardware problem and a problem with our e-mail subscription service that resulted in an interruption of our e-mail update service to our subscribers. We have resolved the problem, and are moving to a different e-mail service to ensure greater reliability. When we make the move to the new service, our existing subscribers may receive a Welcome e-mail asking you to re-confirm your subscription. Please do so. Please go to Reinsurance Focus to see the content that was not forwarded to you druing this interruption in the e-mail service. We apologize for this interruption.

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This post written by Rollie Goss.

RECENT ARBITRATION AWARDS IN FEDERAL COURT

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Over the past several months, a number of district and circuit courts have addressed the propriety of arbitration awards. This post briefly summarizes the salient factors from each case:

• Awards confirmed: Bradley v. Merrill Lynch & Co., Inc., Case No. 08-0269-cv (2d Cir. Sept. 2, 2009) (opponent failed to raise any substantial issues with the award, other than that it was unfavorable); Int’l. Brotherhood of Teamsters Local 177 v. UPS, Case No. 09-CV-0903 (D. N.J. Oct. 9, 2009) (none of the exceptions under the functus officio doctrine is applicable, and the award issued did not reflect a manifest disregard of the agreement); Silicon Power Corp. v. GE Zenith, Case No. 08-4331 (E.D. Pa. Sept. 29, 2009); Hughes v. Aloha Tower Development, Corp., Case No. CV 09-00277 (D. Haw. Sept. 9, 2009) (Aloha “bargained for the arbitrator’s interpretation award and is now bound by it”); Marketstar Corp. v. Prosper Bus. Development Corp., Case No. 2:07-CV-00132 (D. Utah Sept. 4, 2009) (also denying motion for pre-judgment interest); Fruehauf Trailer Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, Case No. 98-514 (Bankr. D. Del. Oct. 5, 2009).

• Lack of prejudice: In OneBeacon Am. Ins. Co. v. Mitchell, the Second Circuit Court of Appeals issued a summary order upholding the District Court’s determination that the petitioner was not prejudiced in the arbitration proceedings, and that the arbitration award was justified. OneBeacon Am. Ins. Co. v. Mitchell, Case No. 08-3432-cv; 08-3488-cv (2d Cir. Oct. 9, 2009).

• Remand to arbitrators: In On Time Staffing LLC v. Coast to Coast Installations, Inc., the District of New Jersey ruled on Plaintiff On Time Staffing’s Petition to Confirm the Interim Award. The Court confirmed the arbitration award against Coast to Coast, but remanded to the arbitrators for clarification as to whether the interim award is intended to be a “separate independent claim.” On Time Staffing LLC v. Coast to Coast Installations, Inc., Case No. 09-4158 (D. N.J. Oct. 8, 2009).

This post written by John Black.

CATASTROPHIC CLAIMS COVERAGE DENIED WHERE INSURER FAILED TO PROVE IT PAID PREMIUMS TO ITS REINSURER FOR THE ALLEGEDLY COVERED VEHICLE

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A court granted summary judgment to the Michigan Catastrophic Claims Association, a reinsurer for statutorily mandated no-fault personal injury protection benefits, where the plaintiff, an insurer authorized to write automobile insurance and member of the Association, failed to present evidence that it had paid premiums to the Association. The court therefore declined to address what it considered to be a question of first impression: whether the Association’s obligation to reimburse its member-insurers for no-fault personal injury protection benefits paid in excess of the statutory threshold applied when the insurer’s policy requires its insureds to share financial responsibility for the claim. The Association argued that under Michigan’s no-fault statute, failure to pay a premium to the Association disqualifies the member-insurer from receiving indemnification. Examining the record, the court concluded that the insurer could not establish entitlement to indemnification as it had not provided admissible evidentiary support that it paid the Association a premium on the vehicle involved in the underlying accident. Old Republic Insurance Co. v. Michigan Catastrophic Claims Association, Case No. 08-12522 (USDC E.D. Mich. Sept. 29, 2009).

This post written by Brian Perryman.