Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

REINSURANCE INFORMATION NOT DISCOVERABLE

by

The Flintkote Company (“Flintkote”), an insolvent asbestos manufacturer, brought this action against its insurers for failure to defend or indemnify for claims allegedly covered under a policy in force between 1958 and 1961 and requested discovery of its insurer’s reserves and reinsurance information. In allowing discovery of reserves information, the district court found this information relevant to the plaintiff’s claims of bad faith in that the information could be relevant to show the difference between what the insurers expected to pay for claims and communication with the plaintiff regarding the scope of loss. The court then denied plaintiff’s request to discover reinsurance documents, determining that the reinsurance agreements were not directly at issue or relevant to the litigation. The Flintkote Co. v. Gen. Accident Assurance Co., Case No. 04-01827 (USDC N.D. Cal. May 26, 2009).

This post written by Dan Crisp.

REINSURER’S CLAIM FOR SETOFF IN LIQUIDATION PROCEEDING FOR PAYMENT OF LIQUIDATED COMPANY’S OBLIGATION DENIED

by

Century Indemnity Company (“CIC”) reinsured The Home Insurance Company (“Home”). Due to Home’s liquidation proceedings, which began in 2003, CIC became fully liable for a $13 million settlement of certain environmental claims for which CIC and Home were both primarily liable under the parties’ respective insurance contracts. CIC, a debtor in the Home proceedings, sought a setoff of $8 million against other obligations owed to Home, for Home’s share of the settlement that CIC paid in full. The New Hampshire Supreme Court reversed the trial court’s order permitting the setoff. Finding that the trial court’s reading of the statute governing setoff was too narrow, the Court cited the remedial nature of the statute, and the legislative purpose of obtaining “full payment from reinsurers despite an insurer’s insolvency.” In Re Liquidation of The Home Ins. Co., No. 2008-407 (N.H. May 27, 2009).

This post written by John Pitblado.

NEW SIDEBAR AREA REGARDING REINSURANCE MARKET

by

Observant readers will have noticed a new addition to the right sidebar of Reinsurance Focus titled Reinsurance Market. In discussions with our clients, many have mentioned the higher reinsurance rates this season, and the particular difficulty in obtaining acceptably priced reinsurance for cat risks. Although the cat bond market basically dried up during the second half of 2008, early 2009 has seen a number of cat bonds successfully issued and sold, using a somewhat different model and cost structure than before. Since our tracking of how many readers view each of our posts reveals that a large number of our readers are interested in such topics, we have added this new area to provide links to publicly available studies and analysis of the reinsurance market and cat risk bond market. It is not our intention to provide “newsy” items in this area, but rather to bring to the attention of our readers particularly thoughtful reports and studies which might provide a basis for creative thinking to help get your company or clients through difficult times. Let us know what additional types of information might be useful to you.

This post written by Rollie Goss.

ENGLISH COURT CIRCUMVENTS ARBITRATION CLAUSE AND RETAINS JURISDICTION OVER DISPUTE BETWEEN FRENCH AND ENGLISH CO-INSURERS

by

A UK appellate court recently dismissed a French insurer’s jurisdictional challenge to a lawsuit initiated against it by an English insurer. After settling a personal injury claim, the French insurer sought to recover $2.45 million from the English insurer as its proportionate share of the settlement. The English insurer, however, denied coverage for the claim, and commenced proceedings in England for a declaration of non-liability. In response, the French insurer argued that the English court lacked jurisdiction because of an arbitration clause in the insurance policy that required all disputes to be arbitrated in Paris. It further noted that European Union Regulation 44/2001 has an arbitration exclusion that precluded English jurisdiction. The lower court rejected this argument, and the French insurer appealed.

The appellate court rejected the French insurers’ jurisdictional argument, holding that—under the EU Regulation—both the subject matter of the claim and the preliminary issue of the enforceability of the arbitration clause were within the English court’s jurisdiction. The court reasoned that “the mere fact that a claim is the subject of an arbitration agreement does not deprive a court of its jurisdiction to determine the dispute.” Rather, a court has to look at the subject matter of the proceeding to decide whether it is within the scope of the arbitration agreement or the EU Regulation. Applying this standard, the court found that the English insurer’s claim did not arise from the insurance policy’s arbitration agreement; instead, it arose out of a separate liability agreement between the co-insurers. Youell v. La Reunion Aerienne [2009] EWCA Civ 175.

This post written by John Black.

ARBITRATION AWARD SUMMARILY CONFIRMED WHERE NO DISPUTE ABOUT THE AWARD EXISTED

by

A petition to confirm a $187,000 reinsurance arbitration award was granted where there was no dispute that the court had jurisdiction over the parties and subject matter of the action, or that the claims at issue were properly submitted to the arbitration panel for resolution. In fact, the amount of the award had already been paid. The petitioner apparently wished the award confirmed simply to avoid any doubt in future litigation. That request was granted. Global Reinsurance Corp. v. Argonaut Ins. Co., Case No. 08-8482 (USDC S.D.N.Y. May 22, 2009).

This post written by Brian Perryman.