Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

TWO-YEAR TIME LIMITATION FOR COMMENCING “LEGAL ACTION” BARS PLAINTIFF FROM ARBITRATION

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In this insurance contract case before the Rhode Island Supreme Court, the plaintiff, National Refrigeration, appealed from an entry of summary judgment in favor of the defendant after the plaintiff filed a petition to enforce an arbitration clause in the insurance contract. The lower court granted summary judgment on the grounds that the plaintiff initiated its petition for arbitration years after the two-year limitations provision expressly provided for in the contract between the two parties. On appeal, plaintiffs argued that the trial court erred in ruling that plaintiff’s petition for arbitration was time-barred and that defendant’s actions had not tolled the limitations period. The defendant argued that the contract’s two-year limitation for commencing legal action with respect to damages under the policy applied to petitions for arbitration and that, therefore, plaintiff’s petition was not timely. The Supreme Court affirmed the trial court’s judgment, concluding that a petition for arbitration “fits squarely within the definition of legal action.” The Supreme Court also held that the ongoing settlement negotiations between the parties did not estop the defendant from invoking the time limitation defense. Some other courts have held that the issue of whether arbitration is barred by a limitation agreement is an issue for the arbitrators to decide. See JPD, Inc. v. Chronimed Holdings, Inc., 2008 WL 3876343 (6th Cir. Aug. 22, 2008). Nat’l Refrigeration, Inc. v. Travelers Indemnity Co. of Am., No. 2007-252 (R.I. May 29, 2008).

This post written by Lynn Hawkins.

INSURER HAS NO STANDING TO SEEK A DECLARATORY JUDGMENT ON HYPOTHETICAL CLAIMS

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Tall Tree insured Hewlett Packard, and was reinsured by Munich Reinsurance for amounts Tall Tree was required to pay to Hewlett Packard. Hewlett Packard was involved in litigation under which liabilities arose. Rather than first indemnifying Hewlett Packard, Tall Tree sued Munich Reinsurance in federal district court, seeking a declaratory judgment that Tall Tree was obligated to pay Hewlett Packard and that, in turn, Munich Reinsurance was obligated to pay Tall Tree. The court would not entertain the case: Tall Tree lacked standing to assert its claims. As to the question of whether Tall Tree was obligated to pay Hewlett Packard, the court noted that there was no live controversy before it; Tall Tree “can simply pay HP.” There was also no live controversy on the question of whether Munich Reinsurance was obligated to pay Tall Tree. The “follow the fortunes” doctrine did not apply because Tall Tree had not yet paid Hewlett Packard; there was essentially no “fortune” yet to follow, and the request for declaratory relief hence was premature. The case was dismissed. The Tall Tree Insurance Co. v. Munich Reinsurance America, Inc., Case No. C-08-1060 (USDC N.D. Cal. July 29, 2008).

This post written by Brian Perryman.

COURT OF APPEALS AFFIRMS DISMISSAL OF INDICTMENT DUE TO PROSECUTORIAL MISCONDUCT

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In a July 23, 2007 post, we reported on a decision of a district court dismissing an indictment against former partners and employees of the accounting firm KPMG, finding that the government's conduct in placing conditions on the advancement of legal fees, capping the fees and ultimately ending the payment of fees deprived the defendants of their right to counsel, in violation of the Sixth Amendment to the United States Constitution. In a 68 page opinion, the Second Circuit has affirmed that ruling, finding that the government had failed to cure the Sixth Amendment violation, and that no other remedy would return the defendants to the status quo ante. United States v. Stein, No. 07-3042-cr (2d Cir. Aug. 28, 2008).

This post written by Rollie Goss.

UTAH ADOPTS PROPOSED REGULATIONS FOR CAPTIVE INSURERS

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In a July 28, 2008 post, we reported on regulations proposed by the Utah Insurance Department relating to the financial, reporting, record-keeping and other requirements for captive insurance companies. Shortly after the comment period ended, the Department adopted the proposed regulations, effective August 25, 2008. Here are the final regulations, with the changes redlined.

This post written by Rollie Goss.

CONNECTICUT SUPREME COURT DISMISSES APPEAL BY REINSURANCE BROKER ON PROCEDURAL GROUNDS

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Brown and Brown, Inc., an independent insurance and reinsurance broker, brought suit against Connecticut’s Attorney General in an attempt to resist the Attorney General’s subpoena seeking documents relating to an ongoing investigation into certain insurance practices under investigation for violation of the Connecticut Antitrust Act. Brown & Brown filed the action seeking to protect trade secrets and other confidential commercial and financial information. The trial court denied Brown & Brown’s motion for summary judgment, rejecting its claim that Connecticut General Statutes §35-42 allows a party to restrict disclosure of information to any person outside the Attorney General’s office.

Brown & Brown appealed the ruling, and the Attorney General’s office successfully sought transfer of the appeal to Connecticut’s Supreme Court. Finding that the trial court’s ruling denying summary judgment did not constitute a final judgment, the Court dismissed the appeal for lack of appellate jurisdiction, without addressing the merits of the parties’ arguments. Brown & Brown, Inc. v. Blumenthal, SC 17920, — A.2d — (Conn. 2008).

This post written by John Pitblado.