Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT REFUSES BLANKET MATERIALITY RULE FOR INSURANCE APPLICATION MISREPRESENTATIONS

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The parties in this case moved for summary judgment as to whether the theft of Defendants' boat was covered under a maritime insurance policy. Plaintiff Great Lakes Reinsurance PLC asserted that because the defendant failed to disclose a prior theft of a boat on the insurance application, the insurance should be void ab initio under the doctrine of ubberimae fidei, which frequently has application in reinsurance matters. The insurance application specifically asked whether the prospective insured had suffered a “marine loss” in the prior ten years. This question was answered in the negative, despite the fact that the responding party had a boat stolen the prior year. The court found that there was no disputed issue of fact that this response was a misrepresentation, but that there was insufficient evidence to support summary judgment as to whether the question was material, which was required for avoidance. The court declined to follow Ninth Circuit precedent that every specific question on an application is material, holding that controlling Eleventh Circuit precedent required a factual demonstration of materiality. The detailed opinion is in a Magistrate Judge's Report and Recommendation, which were adopted by the district court judge. Great Lakes Reinsurance PLC v. Roca, Case No. 07-23322 (USDC S.D.Fl. Jan. 6, 2009).

This post written by John Black.

NINTH CIRCUIT AFFIRMS SUMMARY JUDGMENT IN CHALLENGE OF ARBITRATION AWARD

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Collier appealed from the district court’s sua sponte grant of summary judgment, confirming an arbitration award. Finding the case suitable for decision without oral argument, the Ninth Circuit concluded that summary judgment was properly granted because Collier initiated and fully participated in arbitration proceedings and, as a consequence, waived any argument that the dispute was not arbitrable. Additionally, the Ninth Circuit affirmed the district court’s conclusion that Collier failed to satisfy the statutory requirements to vacate or modify the arbitrator’s award. This opinion demonstrates the importance of preserving objections to the arbitration process. Collier v. State of New York, No. 07-55474 (9th Cir. Jan. 15, 2009).

This post written by Dan Crisp.

COURT GIVES PARTIES A DEADLINE TO APPOINT A THIRD ARBITRATOR

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National Casualty Company (“NCC”) filed a complaint in federal court against several of its reinsureds (collectively, “MMO”) alleging that, under the treaties, MMO’s demand for arbitration was ineffective to commence arbitration. Specifically, NCC claimed the demand for arbitration was not properly served and did not identify the dispute with sufficient particularity. Further detail regarding this dispute is set forth in the Complaint and in the memoranda in support of and in opposition to MMO’s Motion to Stay or Dismiss, Compel Arbitration and Appoint an Arbitrator.

When the arbitrators appointed by the parties failed to agree on a third arbitrator, the court held a telephone conference with the parties. The court then stated its preference that, pursuant to the parties’ agreements, the previously selected arbitrators choose a third arbitrator by December 23, 2008, failing which the court would appoint a third arbitrator, giving consideration to the names submitted by the parties. Finally, the district court ordered the action dismissed with prejudice. National Casualty Co. v. Mutual Marine Office, Inc., Case No. 08-8062 (USDC S.D.N.Y. Dec. 11, 2008).

This post written by Dan Crisp.

U.K. COURT FINDS IN FAVOR OF INSURER ON CLAIMS AGAINST ROGUE AGENTS

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A British commercial court tried claims on December 8 and 9, 2008 made by Markel International Insurance Company (“Markel”) and QBE Insurance (Europe) Limited and Amalfi Underwriting Limited as against certain allegedly rogue agents who devised a scheme to defraud the plaintiffs of premium. The agents signed a number of unauthorized bonds on behalf of the principals, and shielded the receipt of premium through a complex accounting scheme.

The court found certain of the agents more or less culpable depending on their level of involvement in the conspiracy. The court also analyzed the appropriate quantum of damages in reference to the amount of premium concealed, and declined to entertain a number of failure-to-mitigate arguments raised by the defendants as untimely, having first been raised after trial. Markel International Insurance Company Limited v. Surety Guarantee Consultants Limited, [2008] EWHC 3087 (Comm. Ct. Queens Bench Div. Dec. 17, 2008)

This post written by John Pitblado.

COURT GRANTS MOTION TO SEAL ARBITRATION AWARD

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Parties to a reinsurance agreement arbitrated a claims dispute, agreeing that the final award and all “arbitration information” be kept confidential. The prevailing party moved to confirm the award and to seal the award. The court found that there was a strong presumption of access to court records, and that the award should be sealed only if there was a showing that the material was of the kind of information that courts will protect, and that disclosure would work a clearly defined and serious injury to the party seeking closure. Evaluating the factors to be considered in evaluating a request to seal a portion of a court record set forth by the Third Circuit, the court found that the award should be sealed. Century Indem. Co. v. Certain Underwriters at Lloyd's, London, Case No. 08-219 (USDC E.D. Pa. Jan. 12, 2009).

This post written by Rollie Goss.