Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

FIRST CIRCUIT REVERSES AND REMANDS DISTRICT COURT'S DENIAL OF ARBITRATION ATTORNEYS' FEES AWARD

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The First Circuit Court of Appeals recently considered whether a Massachusetts statute entitling a party to attorneys’ fees following a successful arbitration entitles the same party to attorneys’ fees incurred in successfully defending against an attempt to overturn the arbitral award in court. The arbitration panel had originally awarded attorneys’ fees under Mass. Gen. Laws. ch. 93A § 9(4) & 11. The Court of Appeals first determined, after reviewing Massachusetts state cases, that the district court was not prohibited from awarding attorneys’ fees under the statute. However, based on state cases and statutory language, the Court of Appeals concluded that an award of attorneys’ fees was not mandatory under the statute. Because the district court failed to explain the basis for its denial of the attorneys’ fees award, the Court of Appeals held that there was an abuse of discretion and reversed and remanded for further proceedings consistent with the opinion. Scott v. Tobin, No. 08-1863 (1st Cir. Jul. 8, 2009).

This post written by John Black.

FIRST CIRCUIT REVERSES AND REMANDS DISTRICT COURT’S DENIAL OF ARBITRATION ATTORNEYS’ FEES AWARD

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The First Circuit Court of Appeals recently considered whether a Massachusetts statute entitling a party to attorneys’ fees following a successful arbitration entitles the same party to attorneys’ fees incurred in successfully defending against an attempt to overturn the arbitral award in court. The arbitration panel had originally awarded attorneys’ fees under Mass. Gen. Laws. ch. 93A § 9(4) & 11. The Court of Appeals first determined, after reviewing Massachusetts state cases, that the district court was not prohibited from awarding attorneys’ fees under the statute. However, based on state cases and statutory language, the Court of Appeals concluded that an award of attorneys’ fees was not mandatory under the statute. Because the district court failed to explain the basis for its denial of the attorneys’ fees award, the Court of Appeals held that there was an abuse of discretion and reversed and remanded for further proceedings consistent with the opinion. Scott v. Tobin, No. 08-1863 (1st Cir. Jul. 8, 2009).

This post written by John Black.

REINSURANCE REGULATION: STATE AND FEDERAL LEGISLATIVE UPDATE

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Following are selected bills in the reinsurance area that were recently introduced or adopted in the state or federal legislature:

• S. 5994 was recently introduced in the New York Senate to permit mortgage guaranty insurers to obtain credit for reinsurance in a manner conforming to the requirements prescribed by the Superintendent of Insurance. The bill was referred to the Rules Committee.
• Oregon enacted House Bill No. 2755 (mentioned in our May 8, 2009 post), which requires the Department of Consumer and Business Services to conduct a study of options available for utilizing reinsurance and other mechanisms for spreading risk in individual and small employer group health insurance markets and submit a report to the Legislative Assembly by December 1, 2010.
• A companion bill, S 1363, to H.R. 2571 (mentioned in the June 9, 2009 post) was introduced in the U.S. Senate. The bill proposes to streamline the regulation of non-admitted insurance and reinsurance, and it contains the same principal provisions addressed in H.R. 2571, which were described in our June 9, 2009 post. The bill was referred to the Senate Banking, Housing, and Urban Affairs Committee.

This post written by Karen Benson.

"UNAUTHORIZED" INSURER'S SUIT AGAINST REINSURERS SURVIVES

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A Florida appellate court recently reversed a trial court’s decision to dismiss Advantage General Insurance Company's suit against its reinsurers, KILN and QBE Int’l. The trial court dismissed the suit finding that, under Florida statute § 626.903, Advantage was an unauthorized insurer and was barred from bringing suit in Florida courts. The Court of Appeals, however, ruled that in the reinsurance transaction at issue Advantage was the insured, not the insurer. Further, the Court of Appeals determined that the suit between Advantage and KILN & QBE did not “arise out of” Advantage’s alleged unauthorized sale of insurance to the original insured. Accordingly, the Court of Appeals held that it was improper to bar Advantage from access to the courts, and reversed and remanded the case. Advantage Gen. Ins. Co., Ltd. v. KILN/QBE Int’l, Case No. 4D08-1944, (Fla. Dist. Ct. App. Apr. 9, 2009).

This post written by John Black.

"UNAUTHORIZED" INSURER’S SUIT AGAINST REINSURERS SURVIVES

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A Florida appellate court recently reversed a trial court’s decision to dismiss Advantage General Insurance Company's suit against its reinsurers, KILN and QBE Int’l. The trial court dismissed the suit finding that, under Florida statute § 626.903, Advantage was an unauthorized insurer and was barred from bringing suit in Florida courts. The Court of Appeals, however, ruled that in the reinsurance transaction at issue Advantage was the insured, not the insurer. Further, the Court of Appeals determined that the suit between Advantage and KILN & QBE did not “arise out of” Advantage’s alleged unauthorized sale of insurance to the original insured. Accordingly, the Court of Appeals held that it was improper to bar Advantage from access to the courts, and reversed and remanded the case. Advantage Gen. Ins. Co., Ltd. v. KILN/QBE Int’l, Case No. 4D08-1944, (Fla. Dist. Ct. App. Apr. 9, 2009).

This post written by John Black.