Plaintiff, Propak Loigistics, insured workers' compensation risks with Clarendon National Insurance Company, which reinsured the risks with Defendant, Foundation Insurance Company. Foundation entered into a risk sharing agreement directly with Propak, which was essentially an experience rating agreement. Foundation was placed in liquidation. Clarendon filed a timely claim in the liquidation estate, but Propak did not. The liquidation court entered an order distributing the remaining assets of Foundation to Clarendon. Because Propak failed to file notice of its claims under the Liquidation Order, the court held that it was barred from obtaining relief, noting that under South Carolina law, “the failure of a potential creditor to submit a claim in the liquidation estate, or have an ancillary estate opened in a reciprocal state, is conclusive as to that creditor’s rights.” Propak Logistics v. Foundation Ins. Co., No. 04-2178 (W.D.Ark., August 8, 2007).
COURT DISMISSES SECURITIES PUTATIVE CLASS ACTION AGAINST BERMUDA PARENT OF REINSURANCE COMPANY
A securities fraud putative class action was filed against XL Capital Ltd., the Bermuda-based parent of reinsurer XL Reinsurance America, Inc., alleging a massive understatement of necessary loss reserves for liabilities of XL Reinsurance. The court granted a motion to dismiss the Second Amended Complaint, finding that the allegations failed to state a claim under the Private Securities Litigation Reform Act of 1995. Malin v. XL Capital Ltd., Case No. 03-2001 (USDC D. Conn. July 26, 2007).
INSURER NOT PERMITTED TO CHALLENGE ENGLISH ARBITRATION AWARD IN U.S. COURT
A dispute arose between “C” and its insurer “D,” both U.S. corporations. The insurance policy was governed by New York state law, but provided for disputed to be settled in England under the provisions of the English Arbitration Act. The parties agreed to arbitrate in England, and the panel issued a partial award in favor of “C.” “D” threatened to apply to a U.S. court to set aside the award on the basis that it was based on a “manifest disregard of the law.” “C” obtained an interim anti-suit injunction restraining “D” from commencing proceedings in a U.S. court. At the final hearing, Justice Cooke held that because the parties chose England as the seat of arbitration, they must submit any challenge to the eventual award to an English court under English law, regardless of the governing law of the contract. C and D, [2007] EWHC 1541, [Comm], Eng. Comm., QBD (June 28, 2007).
MASSACHUSETTS HIGH COURT HOLDS THAT CLAIMS UNDER FOLLOWING FORM EXCESS POLICIES ARE NOT COVERED BY FOLLOW-THE-FORTUNES
Massachusett's Supreme Judicial Court recently held, in a case of first impression, that a following form excess insurer is not bound by claims payment decisions made by a primary insurer, in an analysis that is akin to the reinsurance follow-the-fortunes doctrine. The Court held that although such an excess policy borrows language from the underlying primary policy, it is a separate insurance policy, and that the excess insurer retains the right to make its own claims decisions absent a provision in its policy to the contrary. This is similar to opinions holding that courts will not imply the follow-the-fortunes doctrine into a reinsurance agreement if it is not explicitly a part of the reinsurance agreement's written terms. Allmerica Financial Corp. v. Certain Underwriters at Lloyd's, London, No. SJC-09834 (Aug. 6, 2007).
FEDERAL COURT GRANTS SOCIETY OF LLOYD’S SUMMARY JUDGMENT PURSUANT TO FLORIDA RECOGNITION ACT
This case involves an attempt to reduce to a UK judgment in favor of Lloyd’s to a US judgment. We reported on the court’s decision on a motion for judgment on the pleadings on April 25, 2007. The case came before the Court on cross motions for summary judgment. The court granted Plaintiff’s motion for summary judgment as to Count I, seeking recognition of an English judgment, pursuant to Florida’s Uniform Out-of-Country Foreign Money Judgment Recognition Act. The court also granted Defendant’s motion for summary judgment as to Count II, which relied on the Ohio Recognition Act.. Lloyd’s v. Sumerel, Case No. 06-329 (USDC M.D. Fla. July 20, 2007).