National Indemnity Company provided reinsurance to Seaton Insurance Company and Stonewall Insurance Company, both of which were in run-off. Castlewood, Inc. entered into an agreement with Seaton and Stonewall to provide administratrive services for the run-off of their business. When arbitrations commenced between NICO and Seaton and Stonewall on their reinsurance agreements, NICO sought to add Castlewood to the arbitrations, despite the lack of an arbitration agreement in Castlewood's agreements with Seaton and Stonewall. The Court granted Castlewood's request for a preliminary injunction preventing its addition to the arbitrations, subject to a $1 million injunction bond. Castlwood, Inc., v. National Indemnity Co., Case No. 06-6842 (USDC S. D. N.Y. Oct. 24, 2006). NICO sought to compel Castlewood to arbitrate based upon theories of assumption and estoppel, and because Castlewood's agreement provided that its administration of the run-off would not conflict with the reinsurance obligations of Seaton and Stonewall. The Court found this an insufficient basis to compel Castlewood's participation in arbitration.
RICO claims against Gen Re dismissed in ROA case
A US District Court has dismissed RICO claims asserted in a Second Amended Complaint against Gen Re (with leave to amend) arising out of the insolvency of Reciprocal of America, and Gen Re's provision of “accommodation reinsurance” that involved an undisclosed side agreement. The Court found a failure to appropriately plead proximate cause and reliance. State law claims were dismissed without prejudice since the only federal law claims were dismissed. In re Reciprocal of America Sales Practices Lit., MDL 1551 (USDC W. D. Ten. Sept. 29, 2006).
New York AG pressuring companies not to pay employees' attorneys fees
New York AG (now Governor-elect) Eliot Spitzer has been obtaining provisions in settlement agreements with financial institutions that have been targets of investigations by his office prohibiting the organizations from paying the attorneys fees of employees who face criminal charges. A September 26 post in this blog reported on the criticism by a US District Judge of a similar practice by the Justice Department in criminal proceedings against former partners and employees of KPMG. It will be interesting to see whether this practice spreads to finite reinsurance investigations.
New York AG pressuring companies not to pay employees’ attorneys fees
New York AG (now Governor-elect) Eliot Spitzer has been obtaining provisions in settlement agreements with financial institutions that have been targets of investigations by his office prohibiting the organizations from paying the attorneys fees of employees who face criminal charges. A September 26 post in this blog reported on the criticism by a US District Judge of a similar practice by the Justice Department in criminal proceedings against former partners and employees of KPMG. It will be interesting to see whether this practice spreads to finite reinsurance investigations.
Florida Department adopts new regulations for financing of Hurricane Catastrophe Fund
The Florida Office of Insurance has adopted new regulations providing for the issuance of bonds to help finance the Florida Hurricane Catastrophe Fund.