Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

REINSURANCE BROKER MAY NOT PROCEED TO INTERLOCUTORY APPEAL AFTER DISAPPOINTMENT ON MOTION FOR SUMMARY JUDGMENT

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A reinsurance broker unsuccessfully sought an interlocutory appeal from a federal district court’s denial of its motion for summary judgment. The cause of action in the case was the Pennsylvania tort of negligent misrepresentation. It was alleged that the broker presented material misinformation to an Italian reinsurer that induced the reinsurer to reinsure various property and casualty risks in the United States. The broker argued on summary judgment that, under Pennsylvania law, this tort could not apply to it, since it was not a “professional information provider.” The court denied the summary judgment motion, and the broker subsequently moved to certify the question for immediate appeal to the United States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 1292(b). The district court denied this motion, too. After noting that interlocutory appeals are generally disfavored, the district court found that there was no controlling question of law as to which there was a substantial ground for difference of opinion (a requisite of a § 1292(b) certification). Although the broker contended that Pennsylvania law does not impose liability for negligent misrepresentation on a reinsurance broker who negligently provides information to a potential reinsurer, the district court essentially determined that this was not a per se rule, especially given that part of the service of acting as a reinsurance broker is to provide information about the risk on which a reinsurer expects to be able to rely. The court found, therefore, that it was not clear that the broker’s proposed question was “controlling.” The district court also determined that an immediate appeal would not materially advance the ultimate termination of the litigation (another requisite of certification), observing that the case was already “on the eve of trial.” For these reasons, the motion for leave to appeal was denied. United National Insurance Co. v. Aon, Ltd., Case No. 04-539 (USDC E.D. Pa. Apr. 7, 2008).

This post written by Brian Perryman.

DISCUSSIONS OF LEGAL ADVICE BY CORPORATE EMPLOYEES IS ENCOMPASAED WITHIN THE ATTORNEY-CLIENT PRIVILEGE, EVEN WHEN ATTORNEYS ARE NOT INVOLVED IN THE DISCUSSIONS

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A California court of appeals has held that the corporate attorney-client privilege extends to confidential communications between an insurer’s employees regarding legal advice and strategy if reasonably necessary for the transmission of that information or to further the purpose of the legal consultation, even when the corporation’s attorneys are not directly involved or when the communications do not include excerpts of direct communications from the attorneys. The trial court, relying on the recommendations of a discovery referee, had determined that only documents created by counsel or involving direct communications between the insurer and its counsel were protected under this privilege. Accordingly, it ordered the production of a number of documents from the insurer’s claim files, which contained reserve and reinsurance information. The insurer sought a writ of mandate from the court of appeals to compel the trial court to vacate this production order. The appellate court concluded that corporations could only act through agents, and that the discussion of legal advice by agents for the purpose of implementing that advice came within the attorney-client privilege, whether or not counsel were directly involved in such discussions. Zurich American Insurance Co. v. Superior Court, No. B194793 (Cal. Ct. App. Oct. 11, 2007).

This post written by Brian Perryman.

COURT DISMISSES CASE AGAINST INSURERS ALLEGING UNDERREPORTING OF WORKERS’ COMPENSATION PREMIUMS

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The Workers’ Compensation Reinsurance Association and the Minnesota Workers’ Compensation insurance Association sued nine insurers, alleging violation of the federal RICO statute and unjust enrichment due to the intentional underreporting of the amount of workers’ compensation insurance they had written in order to minimize assessments and reinsurance premiums. Disagreeing with a Magistrate Judge, a District Judge granted a motion to dismiss, dismissing the RICO claims with prejudice and the unjust enrichment claims for lack of jurisdiction. The court found that allegations focusing on the participation of the defendants in their own business, rather than the business of an enterprise, failed to allege a RICO violation. The unjust enrichment claim failed due to the failure properly to allege diversity jurisdiction. The RICO claims were dismissed with prejudice, and the unjust enrichment claims were dismissed without prejudice. Workers’ Compensation Reinsurance Association v. American International Group, Inc., Case No. 07-3371 (USDC D. Minn. Mar. 28, 2008).

This post written by Rollie Goss.

ALTERNATIVE RISK TRANSFER INTERNET PORTAL

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Those interested in alternative risk transfer mechanisms, including captives, cat reinsurance, and weather risks may be interested in a web site dealing with such issues, Artemis. Artemis has been updated to include new headlines and other information. The home page features news headlines, and the site also includes sections with background information on covered topics, a deal directory listing alternative risk transfer transactions and an events calendar. The site also sponsors a blog relating to alternative risk transfer topics, which we are adding to the links section of Reinsurance Focus.

This post written by Rollie Goss.

ENGLISH COURT DENIES AGGREGATION OF CLAIMS; PERMITS INSURER TO SEEK RECOVERY FROM BROKER

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The English Commercial Court has ruled that Standard Life Assurance Ltd can not recover damages from its underwriters arising out of the improper sales of mortgage endowment policies, but could claim against its insurance broker, Aon. Standard Life subscribed to a policy with a liability cover of £75 million in excess of £25 million. The policy contained a provision permitting the aggregation of claims arising from an originating cause or source. The insured aggregated 97,000 small claims and sought to recover the full £75 million excess of £25 million. The underwriters claimed that even if the claims did arise from a single originating cause, the claims could not be aggregated because the policy schedule and slip contained the wording “excess: £25million each and every claim and/or claimant.”

The court agreed with the underwriters, finding that the policy did not allow for the claims to be aggregated together, meaning the excess limit could not be reached. Specifically, the court found no “plausible purpose for the inclusion of the words ‘and/or claimant’ in the excess provision in the slip other than the attempted achievement of a per claimant excess.”

Prior to the court’s ruling, Aon brought its own negligence claim against Reynolds Porter Chamberlain (“RPC”) as a third party to the proceedings. Aon’s claim against RPC argues that the firm did not recognize that the wording of the policy meant the claims could not be grouped together. Standard Life Assurance Ltd. – and – Oak Dedicated Ltd. – and – Aon Ltd., Reynolds Porter Chamberlain, [2008] EWHC 222 (Comm. Feb. 13, 2008).

This post written by Lynn Hawkins.