The Financial Services Authority, which regulates the UK insurance markets, has issued a report titled Financial Risk Outlook 2007, a 115 page report which evaluates priority risks in the financial markets, economic and financial conditions, developments in the industry, consumer's engagement with the industry, financial crime, and the legal and regulatory framework of the financial markets. While there is not a specific section discussing the reinsurance markets, there is a brief discussion of general insurance markets and life insurance in particular.
ENGLISH HIGH COURT GRANTS ANTI-SUIT INJUNCTION
The English High Court considered an application by Noble and Shell for an anti-suit injunction to restrain Gerling from continuing proceedings in the Vermont courts against both Noble and Shell where there had been a final arbitration award rendered in a London arbitration.
In November 2006 the Vermont court held that it had no jurisdiction to vacate the arbitration award since the seat of the award was London, but accepted subject matter jurisdiction over the claims to rescind the contracts for misrepresentation. In granting the ex parte injunction, the Court held that the misrepresentation claim fell within the scope of the arbitration agreement. The Court also held that the claims raised in the Vermont proceedings could have been raised in the London arbitration and that Gerling was estopped from raising those claims in the Vermont proceedings.
On the inter partes hearing for a final injunction, the Court held that Gerling’s conduct in attempting to nullify the effect of the arbitration award by court proceedings in Vermont against both Noble and its parent Shell, based on assertions contrary to the findings in the award, was vexatious, oppressive, an abuse of process and unconscionable. This decision confirms the jurisdiction of the English court to grant an anti-suit injunction to protect an arbitration award after the arbitration proceedings have concluded, and not only exiting arbitration proceeding prior to the delivery of an award. Noble Assurance Company and Shell Petroleum Inc. v. Gerling-Konzern General Insurance Company, 2006 EWHC 253 (February 22, 2007).
Court Reverses Dismissal of Insurer’s Complaint Against Parent Corporation For Misappropriation of Net Operating Loss
The California Court of Appeal reversed a trial court’s judgment dismissing a subsidiary insurer’s complaint against its parent company. The subsidiary insurer, Fremont Indemnity, (by and through the Insurance Commissioner as its liquidator) sued Fremont General, the parent company, alleging the defendants misappropriated net operating losses of its predecessor in interest and misappropriated other assets of its former subsidiary. Fremont Indemnity also asserted a claim for conversion of the net operating losses, in addition to alleging improper distributions in violation of the California Insurance Code.
The defendants demurred to the complaint. In support of the demurrer, the defendants sought judicial notice of a letter that provided for the Insurance Commissioner to supervise and provide regulatory oversight of Fremont Indemnity. Defendants alleged that the letter allowed Fremont General to use the net operating losses in the manner alleged. They also argued the conversion claim failed because the unauthorized taking of an intangible property interest in not an actionable conversion.
The appellate court held that it was improper for the trial court to take judicial notice of the letter. Specifically, the court stated “[a]lthough the existence of a document may be judicially noticeable, the truth of statements contained in the document and its proper interpretation are not subject to judicial notice if those matters are reasonably disputable.” Additionally, the court concluded conversion is not restricted to tangible property and held a net operating loss and the owner’s alleged right of ownership and exclusive possession to this loss are sufficiently definite to support a conversion claim. Poizner v. Fremont General Corporation, No. BC320766 (Ct. App. Cal., Feb. 28, 2007).
State legislative update
Bills have been introduced in state legislatures with a wide variety of reinsurance-related topics:
- cat reinsurance: Connecticut Bill No. 65 would establish a state catastrophe fund to offer reinsurance to the private market; Florida SB 2806 would provide additional reform in allowing the state to sell reinsurance in the state hurricane catastrophe fund;
- cat funds: New York A 4011 would establish a state catastrophe fund;
- captives: District of Columbia B16-0897 would authorize the use of special purpose financial captive insurance companies to facilitate risk securitization; Missouri HB 238 would add 50 sections to the state's captive insurance company act, including allowing the creation of special purpose life reinsurance companies (bill text; bill summary);
- credit for reinsurance: New Hampshire new regulation Part Ins 601 would provide rules for allowing credit for reinsurance; and
- health care reinsurance: Arkansas SB 769 would enact the Small Employer Health Reinsurance Program Act of 2007; South Dakota SB 129 would establish a state health reinsurance pool to spread the expenses of high-cost individuals.
SECOND CIRCUIT FINDS JURISDICTION UNDER FAA TO HEAR INTERLOCUTORY APPEAL
This ruling addresses the narrow issue of whether or not an appellate court has jurisdiction under the FAA to hear an interlocutory appeal of a decision denying a motion to compel arbitration. In 2004 appellees filed a class action against several American Express companies (collectively, “Amex”) alleging conspiracy to fix fees for transactions in foreign currencies and conspiracy to impose compulsory arbitration clauses on their cardholders in order to suppress competition and deprive their cardholders of a meaningful choice concerning the arbitration of disputes.
Amex moved to compel arbitration pursuant to the arbitration clauses contained in the cardholder agreements. The District Court denied the motion, reasoning that, because the plaintiffs/appellees had raised an antitrust claim concerning the validity of the arbitration clauses, a jury trial was necessary to determine the validity of the arbitration clauses prior to enforcement.
Amex appealed, invoking Section 16 of the FAA, which grants jurisdiction to courts of appeals over interlocutory appeals from refusals to stay an action under 9 U.S.C. § 3 and from denials of petitions to compel arbitration under 9 U.S.C. § 4. Appellees filed a motion to dismiss on the ground that Section 16 of the FAA does not apply in cases where arbitration is required by principles of equitable estoppel.
The Second Circuit denied appellee’s motion to dismiss the appeal, holding that “when a District Court finds that a signatory to a written arbitration agreement is equitably estopped from avoiding arbitration with a non-signatory, the writing requirement of Section 16 of the FAA is met.” Ross v. American Express Company, Case No. 06-4598 (2d Cir. February 13, 2007).