New reinsurance-related and arbitration developments from Carlton Fields
The NAIC's Financial Condition (E Committee) has approved the pending Reinsurance Regulatory Modernization Framework proposal. For a complete description of this action, as well as an update on the status of similar actions in Florida and New York, see the attached memorandum
This post written by Rollie Goss.
Claims brought by individuals who were defrauded by rogue real estate title insurance agents against the title insurer and its reinsurer, Attorneys Title Insurance Fund (“ATIF”). The plaintiffs alleged that the insurer and reinsurer had become aware that the title insurance agents were defrauding borrowers, but did not take appropriate action. The plaintiffs also asserted contract claims arising from the reinsurance treaty between ATIF and the title insurers.
The Court granted summary judgment to the defendants, finding that the plaintiffs failed to establish the necessary agency relationship between ATIF and the rogue agents, despite the fact that the agents’ placement of title insurance for the plaintiffs created an automatic reinsurance obligation on the part of ATIF to the reinsured title insurers. The Court rejected plaintiffs’ argument that the rogue agents were impliedly acting on behalf of both the title insurers and ATIF, pointedly noting that “there is no contract between the reinsurer and the insured.” The Court also granted summary judgment on the contract claims, holding alternatively that: (1) no valid insurance contract was actually created between the title insurer and the plaintiffs (as a result of the rogue agent’s fraud, and despite the plaintiffs’ claims of an oral contract); and (2) the Reinsurance Treaty specifically excluded liability for losses caused by the title insurers’ agents’ fraud. The plaintiffs have appealed the decision to the Tenth Circuit Court of Appeals. Albright v. Attorneys’ Title Insurance Fund, Case No. 2:03-CV-00517 (D. Utah 2008).
This post written by John Pitblado.
3M Company (“3M”) and Amtex Security, Inc. (“Amtex”) entered into two agreements, a master agreement and a sub-agreement. While the sub-agreement contained an arbitration provision, the master agreement did not. Despite their titles, the parties agreed that the sub-agreement controlled to the extent the two agreements conflicted. A dispute arose, and Amtex filed a complaint in Texas state court. 3M removed the case to federal district court, demanded arbitration and filed a motion to compel arbitration in federal district court in Minnesota. Amtex then filed an amended complaint that included fraud claims and requested punitive damages. The district court in Texas granted 3M’s motion to stay pending a decision by the court in Minnesota as to whether the disputes should be arbitrated. The Minnesota district court granted 3M’s motion to compel arbitration, and Amtex appealed.
In affirming, the Eighth Circuit ruled that the order compelling arbitration is final and appealable since the motion to compel arbitration was the only matter brought before the Minnesota district court. In affirming the order of the district court, the court reasoned that the definitions of the terms in the arbitration agreement indicated an intent to arbitrate a broad range of disputes. The court then looked to the underlying factual allegations in the amended complaint and determined that the broad scope of the arbitration clause could cover each of Amtex’s claims. 3M Co. v. Amtex Sec., Inc., No. 07-3519 (8th Cir. Sept. 16, 2008).
This post written by Dan Crisp.
The Texas legislature created the Texas Windstorm Insurance Association (“the Association”) as a means of providing property insurance to homeowners in certain areas at elevated risk of hurricane damage. The Association’s membership consists of all property insurers authorized to do business by Texas’ department of insurance. The Association is run by a board of directors made up of member representatives nominated to the board by the office of public insurance counsel, and the Association’s board in turn reports to the Texas commissioner of insurance. Notably, the Court listed some of the powers of the board, as set forth in its plan of operation appearing in the Texas Administrative Code, which powers include “assuming reinsurance from and ceding reinsurance to members, and purchasing reinsurance on behalf of members” (though the Association’s reinsurance rights and obligations were not at issue).
The Association became engaged in an appraisal dispute with homeowners to whom it issued a policy, and whose property was damaged by Hurricane Rita. In seeking to clarify its obligations under the policy, the Association filed a petition for declaratory relief in state court. The homeowners challenged the Association’s capacity to sue, asserting that the power to sue was not enumerated among the enumerated powers in the governing statutes and regulations. The Court rejected that argument, finding that, inherent in the Association’s general power to “perform all other duties reasonably necessary to accomplish the purpose” of its authorizing statute, was the power to seek resolution of inevitable disputes in Texas’ courts. Texas Windstorm Insurance Association v. Poole, No. 07-07-0061-CV (Tex. App. 7th Dist. 2008).
This post written by John Pitblado.
Courts have continued to brush aside objections and confirm arbitration awards, with an uneven consideration of the impact of Hall Street Associates on the manifest disregard of law doctrine.
This post written by Rollie Goss.