Allianz Global Corporate & Specialty has issued a $150 million cat bond to transfer the risks of severe river floods in Great Britain and earthquakes in Canada and the United States (excluding California). See various descriptions of this bond. This is believed to be the first cat bond covering flood risks, and was written on a parametric basis, using a model prepared by Risk Management Solutions. This is the first bond issued using Blue Wings Ltd., a Cayman Islands-based special purpose vehicle, and is intended to be the first part of a $1 billion program.
Courts rule on arbitration awards
Three recent decisions addressed whether arbitration awards should be confirmed or vacated:
- In Hudson v. ConAgra Poultry Co., No. 06-2596 (USCA 8th Cir. Apr. 4, 2007), the Court affirmed a District Court judgment, which compelled arbitration of tort claims and denied a motion to vacate an arbitration award, finding that the claims of the party were barred by res judicata. The arbitrability of the tort claim was based upon the language of the agreement containing the arbitration clause, and both state and federal law, while the Court rejected the contention that the arbitration award amounted to manifest disregard of law.
- In Riddle v. Wachovia Securities, No. 06-1177 (USCA 8th Cir. Mar. 30, 2007), a very short opinion, the Court affirmed a District Court decision holding that a party had failed to carry its burden to support vacature of an arbitration award on the ground that the arbitration panel was guilty of misconduct in failing to postpone the final hearing. While the opinion does not disclose the reason for the Panel's action, it appears from the District Court filings that the request was based upon the last minute attempted withdrawal of counsel for Riddle, which Wachovia contended had occurred in two prior arbitrations as a delaying tactic. While denying Riddle's motion to vacate the award, the District Court dismissed the action, denying Wachovia's motion to modify the Order to confirm the award, because Wachovia had not moved for confirmation of the award within the time provided in the Federal Arbitration Act.
- In State Farm Ins. Co. v. Penn. Mfgr's Assn. Inc. Co., Index 8923/05 (NY Supreme Court, App. Div. Mar. 27, 2007), the Court vacated an arbitration award as being against public policy, because the claim for contribution was barred by a prior settlement and releases, and General Obligations Law section 15-108.
COURT GRANTS REINSURANCE INTERMEDIARY LEAVE TO AMEND PLEADING AND ISSUES RULING ON DISCOVERY DISPUTES
In 2004, General Fire & Casualty, an Idaho insurance company, filed a Complaint against Guy Carpenter, a reinsurance intermediary. After the deadline set forth in the Court’s scheduling order, Guy Carpenter filed a motion with the court for leave to amend his complaint (for the fourth time) to add a statute of limitations affirmative defense. Plaintiffs opposed, arguing that the statute of limitations was inapplicable to the action, and therefore amending the pleadings would be futile. The Court disagreed, concluding that the defendant established good cause for modifying the scheduling order under FRCP 16(b) and therefore should be given leave to amend the pleadings under FRCP 15(a).
The Court also addressed Plaintiffs’ Motion to Compel responses to discovery requests. The requests are too numerous and detailed to explain here. The Court granted a majority of Defendant’s requests relating to: (1) contingent commission/steering claims; (2) “finite” contracts and risk transfer issues; and (3) broker duties and training. General Fire & Casualty Co. v. Guy Carpenter, Case No. CV 05-251-S-LMB (D. Idaho, March 2, 2007).
DISTRICT COURT LACKS JURISDICTION TO ENFORCE ARBITRAL SUBPOENA
The District Court of Massachusetts recently granted a Motion to Dismiss a Petition to enforce an arbitration panel’s subpoena duces tecum. Liberty Mutual filed a petition to enforce a subpoena issued by an arbitral panel in an arbitration being conducted in Boston, Massachusetts. The subpoena was served on White Mountains, who was not a party to that arbitration, in New Hampshire. The subpoena required White Mountains to produce certain documents to an attorney in New Hampshire. When White Mountain produced some documents, but not everything that Liberty expected, Liberty filed a petition to enforce the subpoena.
The Plaintiff argued that the district court had subject matter jurisdiction and power to grant the relief requested based on the Federal Arbitration Act, 9 U.S.C. §7. The Court concluded that Liberty’s petition failed to satisfy key requirements of §7. Specifically, the court held that to be judicially enforceable, an arbitral subpoena must be for the attendance of a witness before the arbitration panel to testify rather than for pre-hearing discovery, and must be served within the territorial limitations applicable to trial subpoenas. The Court also concluded that White Mountain did not waive objections to judicial enforcement of the subpoena by volunteering to produce certain non-privileged responsive documents. Liberty Mutual Ins. Co. v. White Mountains Ins. Group, Case No. 06-11901-GAO (D. Mass., Feb. 26, 2007).
Further detail regarding the facts of this matter are available in a Memorandum filed by Liberty Mutual in support of its Petition, a Memorandum filed by White Mountains in support of its Motion to Dismiss, and Liberty Mutual's Memorandum in Opposition to the Motion to Dismiss.
Courts decide issues relating to arbitrability of claims and appointment of arbitrators
Three opinions were issued recently of interest regarding arbitration procedures:
- In Ancon Ins. Co. (U.K.) Limited v. GE Reinsurance Corp., Case No. 06-2106 (USDC D. Kansas Mar. 30, 2007), one party was five days late in appointing an arbitrator due to a mistake by its run-off manager in reporting when an arbitration demand had been received. The party demanding arbitration sought to enforce a provision in the arbitration agreement, which would have allowed it to appoint an arbitrator on behalf of the defaulting party. The Court refused to enforce the provision, allowing the defaulting party to appoint an arbitrator on grounds of fairness and lack of prejudice.
- In International Ins. Agency Services v. Revios Reinsurance U.S., Case No. 04-1190 (USDC N.D. Ill. Mar. 27, 2007), the Court granted the motion of a reinsurer to compel arbitration against an employee benefits firm that developed, marketed, administered and underwrote group life insurance programs on a fronted basis. The reinsurance agreement contained an arbitration provision, but the employee benefits firm was not a party to the agreement. The Court held that the firm was estopped to refuse to arbitrate, since it was asserting claims against the reinsurer based entirely upon alleged damage to its reputation arising out of the reinsurer's attempted repudiation of the reinsurance agreement.
- In Invitrogen Corp. v. Employers Ins. Co. of Wausau, Case No. 06-232 (USDC D. Az. Mar. 9, 2007), the Court granted an injunction prohibiting Wausau from pursuing arbitration against Invitrogen under a reinsurance contract, because it found, as a matter of law, that the claims were barred by a settlement agreement reached in a prior proceeding.