The court handling the insurance brokerage antitrust litigation (see prior blog posts dated April 27, 2007 and September 14, 2006) has approved a proposed settlement with Arthur J. Gallagher & Co. and related entities. The settlement relief includes: (1) a $28 million fund to be paid to class members; (2) reform of certain alleged business practices, including prohibitions on accepting contingent compensation, “pay to play” arrangements, “bid rigging” arrangements, reinsurance leveraging, and inappropriate use of wholesale insurance brokers; (3) requirements for certain disclosures to customers; (4) implementation of specified training for Gallagher employees; and (5) payment of attorneys’ fees and costs not to exceed $8.885 million. Two objections were received to the proposed settlement, only one of which challenged the proposed settlement relief. In re Antitrust Brokerage Antitrust Litigation, Case No. 04-5184 (USDC D.N.J. Sept. 4, 2007).
CASE UPDATE: INSURERS ENTITLED TO HEARING ON AMOUNT OF PRE-PLEADING SECURITY
In a prior posting (dated 7/24/2006) this blog reported on a Connecticut Supreme Court decision reversing the dismissal of an appeal by the Court of Appeals, holding that the denial of pre-pleading security was an appealable final judgment, and remanding the case to the Court of Appeals for consideration of the merits of the appeal. The trial court had determined that the relevant statutory text required service to be made on the insurance commissioner or the secretary of the state and precluded service made on the unauthorized insurers’ contractually designated agents for service of process. On remand, the court of appeals disagreed with the trial court’s judgment in favor of the defendant insurers. However, the court was persuaded that on remand, for constitutional reasons, the defendant insurers are entitled to a hearing regarding the amount of pre-pleading security that they must provide. Hartford Accident and Indemnity Co. v. Ace American Reinsurance Co., AC 25661 (Ct. Ct. App. Aug. 14, 2007).
HOUSE PASSES TRIA RENEWAL
On September 19, 2007, in a 312-110 vote, the House passed H.R. 2761, the “Terrorism Risk Insurance Revision and Renewal Act of 1007.” The act extends TRIA for 15 years and includes group life insurance as a covered line of insurance. View H.R. 2761 (as amended) and the Committee Report.
ARBITRATION PANEL CAN PROCEED TO AN AWARD AFTER ONE MEMBER RESIGNS
In Zeiler v. Deitsch, No. 06-1893 (2d Cir. Aug. 23,2007), the Court held that an arbitration panel composed of three rabbis could proceed to make an award after one member had resigned from the panel, because the arbitration agreement permitted that result. The Court also affirmed the confirmation of various accounting awards. This opinion is somewhat unique in that the arbitration was governed by Jewish law. The Court also stated, however, that the result would have been the same had the Federal Artbitration Act controlled.
COURT ALLOWS CASE AGAINST DIRECTORS OF MISSISSIPPI WINDSTORM UNDERWRITERS ASSOCIATION TO PROCEED
It has been estimated that as a result of Hurrican Katrina, the Mississippi Windstorm Underwriters Association will pay its insurance company members approximately $700 million in claims. The Association has only $175 million in reinsurance. A number of members have sued various members of the Association and individuals, who allegedly were members of the Board of Directors of the Association, contending that they breached fiduciary duties and committed other wrongdoing in failing to procure additional reinsurance for the Association. The Association purchased reinsurance to cover a 250 year event; the Plaintiffs contend that it should have purchased reinsurance to cover a 500 year event. A US District Court has denied a motion to dismiss and denied cross motions for summary judgment. The Motion to Dismiss had contended that the dispute was subject to the exclusive jurisdiction of the Mississippi Insurance Commissioner. This theory was rejected, in part because the Court found that any administrative remedy that the Insurance Department could provde would not be adequate. The Motion for Summary Judgment was denied because of factual disputes as to whether Board members were member companies or individuals, and if individuals, whether the individuals served in an individual capacity or as representatives of member companies.