Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

DEVELOPMENTS IN TWO PRIOR REPORTED UK MATTERS REGARDING BROKERS AND NORTH KOREA

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In posts to this blog on September 22, 2006 and February 21, 2007, we reported on developments in a case in UK courts alleging fraud by a broker in the placement of reinsurance and a fraudulent, undisclosed binder addendum that substantially increased the brokers' compensation. The UK Court of Appeals has affirmed decisions of the lower court in this matter. R + V Versicherung AG v. Risk Insurance and Reinsurance Solutions SA, [2007] EWCA Civ. 807 (July 30, 2007).

In a December 5, 2006 post, we described a dispute over allegedly fraudulent reinsurance claims from North Korean insurers. The insurers filed suit in the UK to enforce the judgment of a North Korean court, and a judge has stricken a defense alleged by the reinsurers that they had reached a settlement of the claims. The court found that there was no reasonable prospect that the defense could be established given the absence of a written confirmation of the alleged settlement. Other defenses remain at issue. Korea National Insurance Corp. v. Allianz Global Corporate & Specialty AG, [2007] EWHC 1744 (Comm. July 24, 2007).

COURT ORDERS ‘UNSEALING’ OF DOCUMENTS DESPITE POSSIBLE CONFIDENTIALITY AGREEMENT IN UNDERLYING ARBITRATION

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This action arose out of an arbitration proceeding between petitioner, Nationwide Mutual Insurance Company (“Nationwide”), and Respondent R&Q Reinsurance Company (“R&Q”). The arbitration was resolved in Nationwide’s favor and Nationwide filed a petition to enforce the arbitration award. Shortly afterwards, R&Q filed a motion for leave to file a motion for summary judgment under seal. Nationwide objected to the filing of the motion under seal on the grounds that a confidentiality order was never in effect during the arbitration, and in the alternative, R&Q waived compliance with the order by filing documents in the court given the presumption that all documents filed in court will be open to the public.

The court found the latter argument dispositive, concluding that “the public interest in access to court records outweighs any prejudice to R&Q from unsealing its filing.” This decision illustrates the importance of properly documenting and implementing any desired confidentiality restriction. Nationwide Mutual Ins. Co. v. Randall & Quilter Reinsurance Co., Case No. 2:07-cv-0120 (S.D. Ohio Aug. 10, 2007).

CONTINGENT COMMISSION PUTATIVE CLASS ACTION FILED AGAINST LLOYD'S SYNDICATES AND BROKERS

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A putative class action case has been filed in United States District Court in Miami against a number of Lloyd's syndicates, three Marsh entities, two Aon entities and two Willis entities, alleging wrongful conduct in the payment of undisclosed contingent commissions and undisclosed conflicts of interest in the placement of insurance. The Complaint alleges federal and state antitrust, federal RICO, fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, civil conspiracy, and unjust enrichment claims. The case was filed by a group of law firms, some of which have significant experience as class counsel in insurance sales practice cases. Although reinsurance is not specifically mentioned, and the coverages at issue are direct writings, this may be of interest since it challenges practices in placements with Lloyd's syndicates. Lincoln Adventures, LLC v. Those Certain Underwriters at Lloyd's, London, Case No. 07-60991 (USDC S.D. Fla. July 13, 2007).

CONTINGENT COMMISSION PUTATIVE CLASS ACTION FILED AGAINST LLOYD’S SYNDICATES AND BROKERS

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A putative class action case has been filed in United States District Court in Miami against a number of Lloyd's syndicates, three Marsh entities, two Aon entities and two Willis entities, alleging wrongful conduct in the payment of undisclosed contingent commissions and undisclosed conflicts of interest in the placement of insurance. The Complaint alleges federal and state antitrust, federal RICO, fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, civil conspiracy, and unjust enrichment claims. The case was filed by a group of law firms, some of which have significant experience as class counsel in insurance sales practice cases. Although reinsurance is not specifically mentioned, and the coverages at issue are direct writings, this may be of interest since it challenges practices in placements with Lloyd's syndicates. Lincoln Adventures, LLC v. Those Certain Underwriters at Lloyd's, London, Case No. 07-60991 (USDC S.D. Fla. July 13, 2007).

RIGHT TO ARBITRATION SURVIVES TERMINATION OF UNDERLYING AGREEMENT

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In 1997, DDT Trucking of North America (“DDT NA”) entered into a distributorship agreement with DDT Holding’s predecessor. That agreement contained an arbitration agreement and stated that if DDT Holdings was sold, it should simultaneously terminate the distributorship agreement and compensate DDT NA. In 1999, the parties terminated the agreement. A dispute arose as to whether this nullified the agreement, such that DDT Holdings did not have to provide any compensation to DDT NA and as to whether this nullified the agreement to arbitrate. Relying on Section 7 of the Arbitration Act of 1996 as well as English precedent, Justice Cooke concluded that the right to compensation and arbitration does not end when the underlying contract is terminated. DDT Trucks of North America Ltd. and DDT Holdings Ltd., [2007] EWHC 1542 [Comm], Eng. Comm., QBD (June 29, 2007).