Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

THE IMPLICATIONS OF FEDERAL REGULATORY CHANGES FOR THE REINSURANCE INDUSTRY

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On June 17,2009, the Administration published its proposals for the regulation of the financial services industry. Reinsurance Focus presents its analysis of these proposals as they may affect the reinsurance industry. The prior day, the U.S. House Subcommittee on Capital Markets, Insurance and Government Enterprises held a hearing on the regulation of systemic risk in the economy, which is one of the principal focuses of the Administration's proposals. Franklin Nutter, President of the Reinsurance Association of America, testified at that hearing, and a written copy of his testimony is provided here to add background to the potential reinsurance implications of the regulation of systemic risk. Other written testimonies from the hearing are available on the Subcommittee's web site. There is also a link on that page to a video webcast version of the hearing.

This post written by Rollie Goss.

NAIC SUMMER MEETINGS RESULT IN MINIMAL PROGRESS ON REINSURANCE ISSUES

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The NAIC held its Summer 2009 meetings in Minneapolis last week, and there was only very modest progress on reinsurance-related issues. The Reinsurance Task Force meeting summary relates the following items:

  • Guidance Memorandum regarding reinsurance collateral: The exposure draft of this Guidance Memorandum (see our April 13, 2009 post) was adopted, for distribution to all state insurance commissioners.

  • Reinsurance Regulatory Modernization Framework: There was further discussion of the implementation of this initiative. The exposed draft Congressional bill is on hold pending the receipt of a legal opinion from Sidley Austin, LLP on constitutional issues that have been raised about this initiative.

  • Nonadmitted and Reinsurance Reform Act: An update was received on the status of this Congressional session’s version of this bill (HR 2571) (see our June 9, 2009 legislative update post). This bill was referred to committee upon its filing, without any progress since that time.

  • Credit for Reinsurance Model Act: Comments were received on a proposed amendment to this Act, which would provide a commissioner the authority to lower the minimum trusted surplus requirement applicable to a multiple-beneficiary trust maintained by an assuming insurer in run-off. Staff was directed to initiate the process for consideration of this amendment, and an additional amendment related to the implementation of the Reinsurance Regulatory Modernization Framework.

  • International Association of Insurance Supervisors’ Reinsurance Subcommittee and Reinsurance Transparency Subgroup: An update on recent activity of this group was received.

This post written by Rollie Goss.

RECENT ARBITRABILITY DECISIONS: THE GOOD, THE BAD, AND THE VOID

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There have been a number of decisions recently on the issue of arbitability:

  • Denial of motion to compel affirmed:  Arbitration provision void due to agreement’s non-compliance with California workers compensation insurance laws. Ceradyne, Inc. v. Argonaut Ins. Co., G039873 (Cal. Ct. App. June 2, 2009)

  • Motion to compel individual arbitration denied:  Class arbitration waiver void as unconscionable under Washington state law. Coneff v. AT&T Corp., No. C06-944 (W.D. Wa. May 22, 2009)

  • Denial of motion to compel affirmed:  Arbitration provision void under California arbitration statute for possibility of conflicting rulings. Schwartz v. Vista Pointe Salton Sea, LLC, D052988 (Cal. Ct. App. June 2, 2009)

  • Motion to compel granted, no procedural or substantive unconscionability:  Nayal v. Hip Network Services IPA, Inc., 08-10170 (S.D.N.Y. May 28, 2009)

  • Motion to vacate order compelling arbitration granted for defendant’s waiver:   Apple & Eve, LLC v. Yantai North Andre Juice Co., Ltd., 07-745 (E.D.N.Y. April 27, 2009)

This post written by John Pitblado.

VARIOUS RULINGS WITH RESPECT TO ARBITRATION AWARDS

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  • Manifest Disregard of Law: Macromex Srl v. Globex Int’l Inc., No. 08-2255 (2d Cir. May 26, 2009) (affirming district court’s confirmation of award, finding no manifest disregard of law); Brezden v. Associated Sec. Corp., Case No. 09-2771 (USDC C.D. Cal. June 1, 2009) (denying petition to vacate, finding no manifest disregard of law) (respondents have since filed a Notice of Appeal); Holland v. Wachovia Sec., LLC, Case No. 08-1772 (USDC S.D. Cal. May 15, 2009) (dismissing petition to vacate; manifest disregard of law allegation did not necessarily depend on resolution of a substantial question of federal law). None of these opinions discuss the continued viability of this doctrine after the Supreme Court’s Hall Street Associates opinion.

  • Petitions to Vacate: United Gov’t. Sec. Officers of Am., Int’l Union v. Pinkerton Gov’t Servs., Inc., Case No. 08-285 (USDC E.D. Tenn. June 03, 2009) (denying defendant’s motion to dismiss an action to vacate and modify an award, finding the court was not deprived of its concurrent jurisdiction); Steward v. H & R Block Fin. Advisors, Inc., Case No. 08-5994 (USDC D. Minn. May 28, 2009) (dismissing petition to vacate, rejecting petitioner’s numerous claims).

  • Public Policy: Columbia Gas of Ohio, Inc. v. Util. Workers Union of Am., Local 349, No. 08-3616 (6th Cir. May 15, 2009) (affirming the district court’s confirmation of award, enforcement of the contract agreement not contrary to public policy).

  • Miscellaneous: Parham v. Am. Bankers Ins. Co. of Fla., Case No. 07-706 (Ala. May 29, 2009) (finding no indication that the clerk entered the arbitrator’s order as the judgment of that court as required, ruling that the trial court’s order is void and vacated, dismissing the appeal for lack of subject matter jurisdiction as no final judgment exists); Med. Shoppe Int’l., Inc. v. Turner Invs., Inc., Case No. 09-00102 (USDC E.D. Mo. May 7, 2009) (granting application to confirm award as the allegations of bias failed and the court lacked jurisdiction to review allegations of factual errors); Dzanoucakis v. The Chase Manhattan Bank, USA, Case No. 06-5673 (USDC E.D.N.Y. Mar. 31, 2009) (granting motion to confirm award, finding sufficient evidentiary basis to establish the existence of an arbitration agreement and no evidence of impartiality).

This post written by Dan Crisp.

REINSURANCE INFORMATION NOT DISCOVERABLE

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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.