Reinsurance Focus

National Indemnity Company (NICO) sought an injunction in a Nebraska federal district court to prevent Transatlantic Reinsurance Company and its subsidiary (collectively, Transatlantic Re) from commencing arbitration against NICO in Chicago and New York under various reinsurance agreements. Both arbitrations involved asbestos liability transferred to NICO, and separately reinsured by Transatlantic Re. Transatlantic Re had commenced arbitrations in Illinois and New York (and initiated actions in those jurisdictions to compel NICO’s participation), pursuant to applicable forum selection clauses contained in Transatlantic Re’s reinsurance agreements with cedents. The Nebraska court elected not to adjudicate NICO’s injunction claim, but instead decided to sever it into two, and transfer the resulting two claims to Illinois and New York. The court analyzed venue provisions in the Federal Arbitration Act and different judicial approaches thereto, and concluded that Nebraska was limited in its jurisdiction over the claim. Illinois and New York were authorized under the FAA to compel arbitration if necessary, whereas Nebraska possessed jurisdiction only to enjoin NICO’s participation. Transfer, the court concluded, would promote judicial economy. National Indemnity Co. v. Transatlantic Reinsurance Co., Case No. 8:14-cv-00074 (USDC D. Neb. Mar. 31, 2014).

This post written by Michael Wolgin.

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A Missouri federal district court remanded a coverage action brought against Illinois Union Insurance Company (“Illinois Union”) by its insured, holding that the Policy’s Service of Suit Endorsement (“Endorsement”) waived Illinois Union’s right to remove the action to federal court notwithstanding the Policy’s Jurisdiction and Venue clause which stated that the Insurer did not waive its right of removal. The Endorsement provided that, at the insured’s request, Illinois Mutual will submit to the jurisdiction of any court of competent jurisdiction. The Endorsement also included the conspicuous statement “This Endorsement Changes the Policy, Please Read it Carefully.” Characterizing it as “meritless”, the Court rejected Illinois Union’s argument that the Endorsement did not waive Illinois Union’s right of removal because the Endorsement did not explicitly state that it substituted the Jurisdiction and Venue clause. Instead, citing principles of contract interpretation, the Court found that if the terms of the endorsement and the general provisions of the policy conflict, the terms of the endorsement prevail. The Endorsement in this case supplanted the Jurisdiction and Venue clause found in the general provisions of the policy and, therefore, waived Illinois Union’s right to remove the case to federal court. Both of these clauses are commonly found in reinsurance agreements, and this opinion illustrates that careful drafting is necessary to achieve the desired business result. Hazelwood Logistics Center, Inc. v. Illinois Union Insurance Company, No. 4:13-CV-2572 CAS (USDC E.D. Mo. Feb. 28, 2014).

This post written by Leonor Lagomasino.

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A New York federal district court denied reconsideration of its refusal to dismiss a case for forum non conveniens or lack of personal jurisdiction, in a dispute involving reinsurance of a performance bond insuring the payment of fees for the right to administer Argentina’s postal services. The court was unpersuaded by the fact that the insured’s principal place of business and operations were located in Argentina, given that the reinsurer conducted relevant reinsurance business through its New York office. St. Paul Fire & Marine Insurance Co. v. Aseguradora de Creditos y Granatias, Case No. 1:12-cv-04627 (USDC S.D.N.Y. February 6, 2014).

This post written by Michael Wolgin.

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The FDIC receiver of a bank served subpoenas on reinsurers, seeking information as to how the cedent insurer interpreted certain ambiguous terms in the underlying liability insurance policy. The insurer and reinsurer objected to the subpoenas, and the receiver filed an action in the reinsurer’s district to compel responses. Rather than ruling on the objections, the court elected to transfer the matter to the court in which the underlying litigation was pending. The transferor court relied on considerations of judicial efficiency and comity, explaining that it was not in a position to resolve arguments over the transferee court’s intentions with respect to the scope of permitted discovery, and that differences in the districts’ respective case law on the relevance of reinsurance information presented a risk of conflicting discovery rulings. The court also noted that recent revisions to the Federal Rule of Civil Procedure governing subpoenas further supported transfer of the action. FDIC v. Everest Reinsurance Holdings, Inc., Case No. 1:13-mc-00381 (USDC S.D.N.Y. January 23, 2014).

This post written by Michael Wolgin.

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Faced with a question of first impression, the Ninth Circuit recently held that a clause in an arbitration agreement that eliminates any and all federal court review of arbitration awards, including review under § 10 of the Federal Arbitration Act, is unenforeceable. The Court reasoned that allowing parties to “contractually eliminate all judicial review of arbitration awards . . . run[s] counter to the text of the FAA,” and “would also frustrate Congress’s attempt to ensure a minimum level of due process for parties to an arbitration.” In re Wal-Mart Wage and Hour Employment Practices Litigation, No. 11-17718 (9th Cir. Dec. 17, 2013).

This post written by Abigail Kortz.

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The claimant, the Insurance Company of the State of Pennsylvania, sued Equitas under certain reinsurance contracts that provided cover of $15 million, excess of $5 million in underlying insurance for ICP-issued policies covering the Dole Food Co. Dole faced more than $30 million in liabilities arising from alleged personal injuries caused by its use of certain pesticides in its fruit farming operations. Equitas claimed that ICP failed to timely notify Equitas of the claims, barring coverage under the reinsurance contracts. ICP brought suit first in New York, and Equitas filed its own later action in London, arguing that venue in the U.S. was improper, and seeking to enjoin the U.S. action. The English court declined to enjoin the U.S. action. However, it also denied ICP’s motion to stay the English proceeding, leaving the litigation proceeding on parallel tracks in New York and London. Insurance Co. of Pa. v. Equitas, [2013] EWHC 3713 (U.K. High Court of Justice, Comm. Div. Nov. 29, 2013)

This post written by John Pitblado.

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The case involved motions to compel arbitration by multiple defendants, all of which were parties to contracts with the plaintiff, an association captive insurer, but only some of which had signed contracts containing arbitration provisions. The court compelled the plaintiff to arbitrate breach of contract and related claims with the arbitration-signatories, finding that the claims fell under the arbitration provisions’ scope, which covered all disputes “arising out of” the underlying contracts. The court rejected, however, a non-arbitration-signatory’s attempt to compel the plaintiff to arbitrate under an estoppel theory, finding that the nonsignatory was “really arguing” that the court should read the arbitration clause into its non-arbitration agreements. Notwithstanding the court’s decision to only partly compel arbitration, it did stay the entire litigation, finding that some of the issues or claims might eliminate certain issues against the non-arbitration-signatory, and that the arbitration would likely proceed expeditiously. J.M. Woodworth Risk Retention Group, Inc. v. Uni-Ter Underwriting Management Corp., Case No. 2:13-cv-00911 (USDC D. Nev. Sept. 11, 2013).

This post written by Michael Wolgin.

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A court recently unsealed certain record documents related to a reinsurance arbitration, at the request of interested nonparties. The documents were originally filed with the court in connection with a petition to confirm the arbitration award and a responsive motion to dismiss. The parties were permitted to file the documents under seal pursuant to an approved confidentiality agreement. In deciding to unseal, the court found that the documents were “judicial documents” relevant to the performance of the judicial function, and thus subject to a “presumption of access.” The weight of the presumption was “high,” in that the documents constituted the heart of the what the court was asked to act upon (notwithstanding that the case settled prior to the court’s consideration of the materials). Neither the existence of a confidentiality agreement, nor the fact that the movant nonparties were engaged in related reinsurance arbitration with one of the parties, could keep the documents protected from public access. Eagle Star Insurance Co. v. Arrowood Indemnity Co., Case No. 1:13-cv-03410 (USDC S.D.N.Y. Sept. 23, 2013).

This post written by Michael Wolgin.

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As previously reported, Utica Mutual Insurance Company was successful in seeking transfer of its dispute against two reinsurers from the Southern District of New York to the Northern District of New York. The insurance company has again succeeded, defeating a motion to dismiss, and alternatively a motion to stay the proceeding in the Northern District of New York in favor of a suit initiated by one of the reinsurers against Utica in Wisconsin. Rejecting defendants’ contention that the “first-file rule” requires a stay of the New York lawsuit, the court determined that the New York suit can proceed along side the Wisconsin dispute because: a) the New York suit involves an additional defendant not present in the Wisconsin proceeding, b) the New York suit involves an additional claim under the Federal Arbitration Act, and c) Utica asserts it is not amenable to personal jurisdiction in Wisconsin. Utica Mutual Insurance Co. v. Employers Insurance Co. of Wausau, Case No. 6:12-CV-1293 (N.D.N.Y. Sept. 26, 2013).

This post written by Abigail Kortz.

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An insurer’s bid to remove a lawsuit to federal court was stymied. The case involved a “service of suit” paragraph in an insurance policy permitting the insured to select the venue and forum of a dispute under the policy. The court found that the insurer waived the right to remove an action from state to federal court, notwithstanding a provision purporting to preserve the insurer’s right to “seek a transfer” of the case. The court interpreted consecutively each sentence of the relevant paragraph “like the concentric rings of a target.” Among other things, the court considered whether the phrase “seek a transfer” contemplated seeking removal of the action to federal court. That phrase did not include seeking removal, notwithstanding caselaw that had reached a different result in the context of a different forum selection clause employing the word “transfer” in a grammatically and substantively different way. Hanover Insurance Group, Inc. v. Chartis Specialty Insurance Co., Case No. 4:12-cv-40156 (USDC D. Mass. Aug. 19, 2013).

This post written by Michael Wolgin.

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