Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ARBITRATION AWARD CONFIRMED, FINDING ARBITRATION CLAUSE APPLIED, DESPITE FAILURE TO NAME BOTH PARTIES IN FORM CONTRACT

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Plaintiff, Philip Green, filed a wrongful discharge complaint in federal court in the Southern District of Texas against Defendant, Service Corporation International (“SCI”), an affiliate of his former employer. SCI moved to compel arbitration of the claim under Green’s employment contract, which contained an arbitration clause which explicitly applied to the employer’s “affiliates.” Green objected to SCI’s motion to compel arbitration, arguing that the employment contract left blank the name of the employer, though the cover page of the contract identified SCI. The Court granted SCI’s motion to compel arbitration, finding that the only possible reading of the contract indicated that SCI, as an “affiliate” of Plaintiff’s employer, was clearly covered by the arbitration clause, insofar as Green was plainly aware of the identity of his employer, and SCI was indisputably its affiliate. Reconsideration was denied.

When the panel convened, Green challenged the panel’s jurisdiction, raising the same contract interpretation issue again, which the panel rejected, entering an award against Green. Green moved to vacate the award, raising the same issue yet again to a court which already had rejected the argument twice. Not surprisingly, the Court denied Green’s motion to vacate and confirmed the award. Still not willing to give up, Green has filed a notice of appeal. Green v. Service Corp. Int’l., Case No. 06-833 (USDC S.D. Tex. August 25, 2008).

This post written by John Pitblado.

CLAIMS START UP FEE COMPENSABLE AS LOSS ADJUSTMENT EXPENSE UNDER REINSURANCE AGREEMENT

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In this contract construction case, the parties disagreed over whether a “claims start up fee” paid pursuant to an administrative services agreement should be included in calculating the losses incurred under a reinsurance contract. Both parties filed motions for partial summary judgment on the issue. The trial court granted American Southwest’s motion, and Employers appealed. In reversing the trial court and granting Employers’ motion for partial summary judgment, the appellate court held that the fee should be included in calculating Employers’ losses incurred. The decision turned on the characterization of the fee. The court ruled that the fee was a compensable loss adjustment expense. Employers Reinsurance Corp. v. Am. Sw. Ins. Managers, Inc., No. 05-06-01284 (Tex. App. Aug. 14, 2008).

This post written by Dan Crisp.

TITLE REINSURER GRANTED SUMMARY JUDGMENT ON TORT AND CONTRACT CLAIMS BROUGHT BY REINSURED’S DEFRAUDED TITLE INSURANCE CLIENTS

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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.