Following are summaries of three recently announced settlements of reinsurance-related disputes.
Mortgage insurance dispute – This class action suit alleged violations of the Real Estate Settlement Procedures Act (“RESPA”) for acceptance of “kickbacks” from mortgage insurers under “captive reinsurance agreements” in exchange for the referral of business. Wells Fargo has agreed to pay roughly $12,750,000 to class members, which includes over $4,000,000 in attorneys fees and litigation costs and a case contribution award of $7,500 for each named plaintiff as approved by the court. Liguori v. Wells Fargo & Co., Case No. 08-479 (USDC E.D. Pa. Feb. 7, 2013) (final approval Order and Order approving attorneys’ fees, costs and class representative incentive payments).
Life insurance retrocession – Swiss Re and Berkshire Hathaway announced the settlement of a dispute over a life retrocession agreement entered into in 2010 by allowing Swiss Re to recapture certain treaties from the portfolio of term life business in return for a payment of $610 million from Berkshire Hathaway, and a reduction in the assumption of losses by Berkshire Hathaway from $1.5 billion to $1.05 billion. The payment is expected to result in a gain of approximately $100 million for Swiss Re in the first quarter of 2013. See Swiss Re’s press release.
Workers’ compensation reinsurance – In this dispute, members of a pool for workers’ compensation reinsurance sought $3.1 billion from AIG for underreporting premiums, which caused other pool members to bear a disproportionate share of the pool’s losses. The district court approved a class settlement for $450 million, which Safeco challenged on appeal, claiming that the settlement did not adequately compensate it for individual claims against AIG. The Seventh Circuit dismissed the appeal based on Safeco and AIG’s representations that they have reached an additional settlement regarding the individual claims. Judge Posner dissented, finding dismissal to be premature since the terms of the additional settlement were not disclosed to the court. Safeco Ins. Co. of Am. v. Am. Int’l Group, Inc., No. 12-1157 (7th Cir. Mar. 25, 2013).
This post written by Abigail Kortz.
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