New reinsurance-related and arbitration developments from Carlton Fields
The NAIC's Reinsurance Regulatory Modernization Framework is now the subject of an redlined exposure draft, with a short comment period open until September 5, 2008. Florida and New York also have reinsurance collateral-related proposals pending. Carlton Fields partner Anthony Cicchetti summarizes these proposals in a Special Focus feature. Read the article.
This post written by Rollie Goss.
In 2001, American Growers Insurance Company (“Insurer”) filed an action in Iowa district court against Federal Crop Insurance Corporation (“FCIC”) alleging that the FCIC erred under 7 U.S.C. § 1508(j)(3) by adding prevented planting coverage to basic federal crop insurance policies without increasing the premium rate that the insurance company could charge. The district court granted summary judgment in favor of the FCIC for crop year 1996 and in favor of Insurer for crop year 1997, awarding it over $950,000 in damages. Both sides appealed.
The Eighth Circuit found that the indemnification requirement of 7 U.S.C. § 1508(j)(3), under which insurance providers that provide federal crop insurance may seek indemnification due to errors or omissions on the part of the FCIC, was intended to apply only where a crop insurer had been sued by a producer to recover on a claim for loss and not for errors in calculating premiums. Therefore the insurer did not have a cause of action and its claim should have been dismissed by the district court. American Growers Insurance was declared insolvent in 2005 and liquidated. Am. Growers Ins. Co. v. Federal Crop Ins. Corp., No. 07-1655, 07-1749 (8th Cir. July 15, 2008).
This post written by Lynn Hawkins.
In Mopani Copper Mines PLC v. Millenium Underwriting Limited [2008] EWHC 1331 (Comm. June 16, 2008), the UK Commercial Court determined that under appropriate circumstances it could consider words deleted from a reinsurance slip during the negotiation of its terms in interpreting the scope of coverage ultimately agreed to. The court held that it also could consider the circumstances surrounding the making of the contract, the intention of the parties to the contract, and the terms of a prior agreement, but that it would not consider the content of prior negotiations, communications between the insured and its broker which were not communicated to the reinsurers, and the subjective views of the parties as to what they thought they had achieved. This opinion contains an interesting discussion of the factors considered by English courts in the interpretation of reinsurance slips, and should be read by any of our readers who face such issues, or who enter into slips which may be subject to interpretation under English legal principles.
This post written by Rollie Goss.
Plaintiff, Cameron Parish School Board (“the School Board”) filed a complaint against RSUI Indemnity Company for breach of contract for failure to timely and properly adjust covered losses, and for bad faith in violation of several Louisiana statutes. The School Board filed three separate motions to compel against the defendant, one of which was a motion to compel the production of reinsurance information. Following in camera review of certain documents withheld by the defendant on privilege grounds, as well as a review of three separate privilege logs, the court concluded that even though the reinsurance information was not relevant to plaintiff’s breach of contract claim, the information might be probative of bad faith, and therefore relevant to plaintiffs’ statutory claims. As such, the court ordered the Defendant to produce items listed on their Underwriting Log. Cameron Parish School Bd. v. RSUI Indem. Co., Case No. 2:06-cv-1970 (W.D.La. July 23, 2008).
This post written by Lynn Hawkins.
Boeing insured satellites it manufactured partly through a Bermuda captive, which reinsured 100% of the risks, partly through Lloyds’ syndicates, which syndicates also assumed part of the risk as direct insurers. When a satellite sold to a Middle Eastern company failed, an arbitration was commenced under the auspices of the International Chamber of Commerce in Paris, France, with the governing law being the civil laws of Abu Dhabi, United Arab Emirates. The rules of that proceeding provided for limited discovery. The Lloyds’ syndicates filed a declaratory judgment action against Boeing in Illinois state court, seeking a declaration of their obligations as both direct insurer and reinsurer. The court stayed the lawsuit pending the outcome of the arbitration. The court of appeals affirmed, finding that the action was premature prior to the determination of liability in the arbitration, and that it was an improper attempt to obtain discovery for use in the arbitration. The dual roles of some of the parties in the two proceedings played an important role in the decision. This opinion presents a very interesting analysis of the interface between these two proceedings. Certain Underwriters at Lloyds’ v. Boeing, No. 1-07-1667 (Ill.Ct.App. Je. 30, 2008).
This post written by Rollie Goss.