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HARRISMARTIN REINSURANCE SUMMIT: FRESH PERSPECTIVES ON THE REINSURANCE FRONT

August 22nd, 2011 Arbitration Practice and Procedure, Events, Reinsurance Arbitration, Reinsurance Claims, Reinsurance Mediation No Comments »

The frequency of reinsurance disputes, like most things in the insurance industry, is cyclical in nature, and over the last three or four years or so, the number of new disputes each year has declined fairly significantly compared to 1990 through 2005 levels. I don’t have statistics to back that statement up, but it is informed by personal experience and numerous discussions with industry participants and their service providers.

Reduced dispute frequency is good news for the industry, but it doesn’t mean that industry executives should assume that reinsurance disputes are a thing of the past, ignore important developments that bear on their resolution, or become less proactive in their efforts to prevent them. Keeping apprised of recent, pertinent reinsurance- and dispute-resolution-related legal, regulatory and economic developments is particularly important today, because there have been – and will likely continue to be – many that may bear on the nature and frequency of future reinsurance disputes.

To that end, a number of experienced industry executives and in-house counsel, and a small group of outside counsel, have joined forces with HarrisMartin Publishing to put together a two-day conference designed to survey important, recent developments concerning reinsurance and reinsurance dispute resolution. The conference — entitled “Reinsurance Summit: Fresh Perspectives on the Reinsurance Front” — is scheduled to take place at the Lowes Philadelphia Hotel on September 22-23, 2011.

It promises to be an excellent opportunity to keep abreast of what’s happening in the world of reinsurance and reinsurance-dispute-resolution, network with friends and colleagues, and earn CLE credits if you need them. Admission is $895.00, but HarrisMartin is offering a $100.00 discount to those who register by September 2, 2011. Registration, CLE and hotel information is here (HarrisMartin has negotiated a reduced, $199.00 per night hotel rate for conference attendees).

Here’s the program as described by HarrisMartin:

Day 1, Thursday, September 22, 2011

8:15 a.m. – 8:30 a.m.

WELCOME BY CO-CHAIRS

Edward K. Lenci, Hinshaw & Culbertson LLP, NewYork

Leslie J. Davis, Vice President & Assistant General Counsel, General Re, and Senior Vice President & General Counsel, US Aviation Underwriters, Stamford, CT

Wendy R. Taylor, Vice President and Associate Counsel, Chubb & Son, a division of Federal Insurance Company, Warren, NJ

8:30 a.m. – 9:45 a.m.

STATUTORY AND REGULATORY UPDATE: DODD-FRANK, THE NON-ADMITTED AND REINSURANCE REFORM ACT, AND THE FEDERAL INSURANCE OFFICE

• Title V of the Dodd Frank Act: A discussion of the major interests lobbying for this legislation and against it, how and when the reinsurance provisions will be implemented and enforced, and the likely practical impact on reinsurance transactions.

• The Non-admitted and Reinsurance Reform Act: A discussion of issues relating to preemption, the future role of the NAIC, the changes to the significance of an insurer’s state of domicile, and how states and ceding companies may respond.

• The Federal Insurance Office: A discussion of this new office, “covered agreements,” the influence of Solvency II and international governing bodies, and the impact on state law, including a discussion of federalism and constitutionality.

Moderator:

A. Lindsay Doering, Law Office of A. Lindsay Doering, Philadelphia

Panel:

Patrick H. Cantilo, Cantilo & Bennett LLP, Austin, TX

Kimberly M. Welsh, Vice President and Assistant General Counsel, Reinsurance Association of America, Washington, D.C.

Daniel Schelp, Managing Attorney, National Association of Insurance Commissioners

9:45 a.m. – 10:45 a.m.

THE JUDICIAL SCRUTINY OF ARBITRAL AWARDS

Over the last few years, courts, including the U.S. Supreme Court, have decided a number of controversial cases concerning the power of courts to vacate arbitral awards on the grounds of excess-of-powers, evident partiality and procedural misconduct. Several of those cases involved arbitrations concerning reinsurance disputes. This panel will discuss recent developments pertinent to judicial review of arbitral awards, including outcome-based review, arbitral authority to award attorney fees and costs, adequacy of arbitrator disclosures, arbitrator qualifications, and arbitral “due process.” Among the controversial cases the panel will discuss are:

• Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp. (U.S. Supreme Court)

• AT&T Mobility v. Concepcion (U.S. Supreme Court)

• Reliastar Life Ins. Co. v. EMC Nat’l Life Co. (2nd Circuit)

• PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd. (3rd Circuit)

• Dealer Computer Services, Inc. v. Dub Herring Ford, et al. (6th Circuit)

• Trustmark Ins. Co. v. John Hancock Life Ins. Co. (7th Circuit)

• Scandinavian Re Co. Ltd. v. St. Paul Fire & Marine Ins. Co. (S.D.N.Y.) (appeal pending)

• Amerisure Mut. Ins. Co., et al. v. GLOBAL Reins. Corp. of Am. (Ill. App. 1st Dist.)

Panel:

Philip J. Loree Jr., Loree & Loree, Manhasset, NY

John M. Nonna, Dewey & LeBoeuf LLP, NewYork

Richard Faulkner, Blume, Faulkner, Skeen & Northam, PLLC, Richardson, TX

10:45 a.m. – 11:00 a.m.

REFRESHMENT BREAK

11:00 a.m. – 12:00 p.m.

REINSURANCE CONTRACT WORDING: BE CAREFUL WHAT YOU ASK FOR!

Reinsurance contract wording is changing, due in part to the increasingly global nature of reinsurance and the competing regulatory requirements of different jurisdictions around the world. As a result, seemingly straightforward requests may have unintended consequences. Some of the complex clauses and issues that this panel will discuss include:

• Governing Law, Jurisdiction and Venue: Enforceability of choice of law; the legacy of Wasa v. Lexington; the impact on arbitrators’ power; application of procedural law; and the possible collision of governing law with the negotiated and paid for coverage for punitive damages, ECO/XPL.

• Economic and Trade Sanctions: The recent rise in demand for sanction exclusionary language and the ramifications of wordings currently circulating, including a comparison of the traditional territorial exclusion, the US/OFAC exclusionary wording and the London Market exclusionary wording; the counter forces of anti-blocking legislation; and highlights of trade sanction programs, including discussion of particular countries and jurisdictions).

• Claims Cooperation: An examination of different clauses, why they are requested, how they help or hinder the parties, and the differences between the U.S. and U.K/Europe.

• Commutations and Sunset: Loss notice provisions; Mandatory or permissive commutations; formalized contractual commutation methodologies; appraisal provisions; actuarial arbitrations.

Panel:

Wendy R. Taylor, Vice President and Associate Counsel, Chubb & Son, a division of Federal Insurance Company, Warren, NJ

Myra E. Lobel, Managing Director, Guy Carpenter & Company LLC, NewYork

David A. Silva, Mound CottonWollan & Greengrass, New York

David N. Kragseth, Senior Contract Wording Specialist, Munich Reinsurance America, Inc., Princeton, NJ

12:00 p.m. – 1:30 p.m.

LUNCH

1:30 p.m. – 2:30 p.m.

WHAT, EXACTLY, IS BAD FAITH IN REINSURANCE?

The duty of utmost good faith is a two-way street. Two in-house attorneys will explore the duties and obligations of cedents and reinsurers with respect to underwriting, presentation and acceptance of the risk, renewals, claim handling, claim presentation, and arbitration or litigation.

Panel:

Leslie J. Davis, Vice President & Assistant General Counsel, General Re, and Senior Vice President & General Counsel, US Aviation Underwriters, Stamford, CT

Susan Grondine-Dauwer, General Counsel,R&Q USA, Boston

Jeanne M. Kohler, Edwards Angell Palmer & Dodge LLP, New York

2:30 p.m. – 2:45 p.m.

REFRESHMENT BREAK

2:45 p.m. – 3:45 p.m.

DISPUTE RESOLUTION ALTERNATIVES: LITIGATION, MEDIATION, ARBITRATION

In-house counsel will share insights and address the “pros and cons” of the litigation, arbitration and mediation of reinsurance disputes as well as alternative arbitral rules and fora, such as offered by AIRROC. Moderated by Bina T. Dagar, this panel will deliver a balanced view of cedent and assumed perspectives to ADR. The discussions will include:

• Options available to resolve reinsurance disputes

• Benfits and challenges posed by each alternative

• Ad Hoc vs. institutional arbitration/mediation

• Organizations as clearinghouses – ReMedi, AAA, AIRROC, ARIAS, CPR and JAMS

Attendees will be asked to complete a Zoomerang survey ahead of the Conference to be incorporated into the presentation.

Moderator:

Bina T. Dagar, Ameya Consulting, LLC, Livingston,NJ

Panel: Steven Agosta, General Counsel, XLRe America, Stamford, CT

Scott P. Birrell, Vice President and Associate General Counsel, Travelers Insurance Co., Hartford, CT

Anthony Vidovich, Vice President & Assistant General Counsel, Director of Reinsurance Law, The Hartford, Hartford, CT

Michael Zeller, Vice President, Reinsurance Services Division, AIG, Inc., New York

3:45 p.m. – 5:30 p.m.

THE VERY MODEL OF A REINSURANCE ARBITRATOR: INDUSTRY EXECUTIVES SPEAK OUT

The in-house counsel on our faculty will serve on this panel, to be moderated by Fritz K. Huszagh of Hinshaw & Culbertson in Chicago. Among the issues the panelists will address, from the insurers’ and reinsurers’ perspectives, in this potentially lively session are:

• What qualifications should an ideal arbitrator and umpire have?

• What disclosures should they make?

• Is there any value to “certification” of arbitrators and umpires?

• If so, what factors should be considered in the certification process?

• Should arbitrators accept conflicting assignments?

• What is a fair fee for arbitrators and umpires?

• Which expenses are proper and which are not?

• Should arbitrators and umpires be paid non-refundable retainers?

• Should they be paid hearing cancellation fees?

Moderator:

Fritz K. Huszagh, Hinshaw & Culbertson, Chicago

Panel:

Steven Agosta, General Counsel, XL Re America, Stamford, CT

Scott P. Birrell, Vice President and Associate General Counsel, Travelers Insurance Co., Hartford, CT

Ali E. Rifai, General Counsel, Zurich Insurance CMB Division, and former Interim General Counsel, Zurich Insurance Middle East Region

Susan Grondine-Dauwer, General Counsel, R&Q USA, Boston

Leslie J. Davis, Vice President & Assistant General Counsel, General Re, and Senior Vice President & General Counsel, US Aviation Underwriters, Stamford, CT

Thomas Freudenstein, COO, GLOBAL Reinsurance Corporation of America and Director and Attorney at GLOBALE Rückversicherungs-AG, New York and Cologne, Germany

Myra E. Lobel, Managing Director, Guy Carpenter & Company LLC, NewYork

Anthony Vidovich, Vice President & Assistant General Counsel, Director of Reinsurance Law, The Hartford, Hartford, CT

Michael Zeller, Vice President, Reinsurance Services Division, AIG, Inc., NewYork

5:30 p.m. – 7:00 p.m.

NETWORKING COCKTAIL RECEPTION

Day 2, Friday, September 23, 2011

7:30 a.m. – 8:30 a.m.

CONTINENTAL BREAKFAST

8:30 a.m. – 9:30 a.m.

ETHICAL CONSIDERATIONS FOR LAWYERS SERVING AS UMPIRES AND ARBITRATORS

An interactive talk on how state rules concerning the ethical obligations of lawyers impact lawyers who are serving as umpires and arbitrators.

Daniel E. Tranen, Hinshaw & Culbertson LLP,Boston

9:30 a.m. – 12:30 p.m.

DEVELOPMENTS IN REINSURANCE AROUND THE WORLD

In an ever-increasingly globalized economy, businesspersons and lawyers need to know what’s happening around the world. Each panelist will cover a different region of the world, providing crucial information about current market trends, governmental regulations, resolution of disputes and the like. (A Refreshment break will be held during this panel from 10:30 – 10:45 a.m.)

Panel:

UK: Peter W. Ambler, Managing Director, Towers Watson (Re)Insurance Brokers Ltd., London

Europe: Thomas Freudenstein, COO, GLOBAL Reinsurance Corp. of America and Director and Attorney at GLOBALE Rückversicherungs-AG, New York & Cologne, Germany

Latin America: M. Machua Millett, Senior Vice President, Senior Advisory Specialist and Global GPL Team Leader, Marsh USA Inc., Boston

Middle East: Ali E. Rifai, General Counsel, Zurich Insurance CMB Division, and former Interim General Counsel, Zurich Insurance Middle East Region

Canada: Stuart S. Carruthers, Stikeman Elliott, Toronto

I hope to see you there!

LinkedIn’s Reinsurance Claims Group is 100 Members Strong!

August 24th, 2010 Reinsurance Claims, Reinsurance Claims Group, Reinsurance Social Media 2 Comments »

On July 30, 2010 we announced the formation of LinkedIn’s Reinsurance Claims group. (Post here) On August 14, 2010 we introduced the co-managers of the group: Nigel Shepherd, Robert Bear, Marc Lanzkowsky, Theresa Hajost, Bill Hook and me. (Post here) Today we are happy to report that we admitted our 100th member after having been in existence for less than one month!

The group actively discusses issues concerning U.S. and international ceded and assumed reinsurance claims. It enables members to share information; discuss and debate issues; access a number of excellent reinsurance- and insurance-related blogs; and network with others in the domestic and international reinsurance community.

The group welcomes new members, and encourages (but does not require) active participation. The only requirement for membership is a bona fide interest in reinsurance claims. The group is not a forum for, and does not permit, advertising or blatant self-promotion, so our members need not be concerned about being subject to sales pitches and the like.

If you are already a member of LinkedIn, please click here to apply for membership in the group. If you are not a LinkedIn member, please click here and you will be guided through the process of creating a profile (which does not need to be completed in one step). Once your profile is started, and you have a user name and password, you can click here to apply for membership in the group. Joining LinkedIn is free, as is joining the group.

We look forward to meeting you online!

[Editor's Note: If you are also interested in reinsurance and other types of arbitration and mediation, then we invite you to join LinkedIn's Commercial and Industry Arbitration and Mediation Group, which is now over 900 members strong. (Post here, which contains information on how to join.)]

Meet the Reinsurance Claims Group Co-Managers

August 14th, 2010 ADR Social Media, Reinsurance Claims No Comments »

On July 30, 2010 we announced the formation of LinkedIn’s Reinsurance Claims group, which is a forum for the discussion of issues concerning U.S. and international ceded and assumed reinsurance claims. (Post here) We would like to introduce the co-managers of the group: Nigel Shepherd, Robert Bear, Marc Lanzkowsky, Theresa Hajost, Bill Hook and me. It is an honor to work with such a talented and professionally diverse group of people, and their commitment to the group bodes well for its success.

But there is more. Every one of these people is a great human being that is a pleasure to know and with whom it is a privilege to collaborate. All are readily approachable and willing to share freely their impressive knowledge, skills and experience. And that is what makes for a great Web 2.0 discussion and networking group. Continue Reading »

Reinsurance Nuts & Bolts: What is an Aggregate Extraction Clause?

August 10th, 2010 Accumulation of Loss, Aggregate Cover, Nuts & Bolts, Nuts & Bolts: Reinsurance, Reinsurance Allocation, Reinsurance Claims No Comments »

A. Introduction

Over a year ago we ran a Reinsurance Nuts & Bolts feature entitled “Aggregate Extension Clauses” (here). To our considerable surprise, that article was, and remains, one of our more popular ones.

At the close of the article we said (tongue in cheek): “If you, the reader, have gotten this far, then perhaps you would like to delve into a discussion of ‘Aggregate Extraction Clauses.’ But these clauses – which conjure up some of the more frightening scenes from Marathon Man (1976) – are better left for another day. . . . ” Brace yourselves, for we fear that day has arrived. . . . Continue Reading »

Announcing a New LinkedIn Group: Reinsurance Claims

July 30th, 2010 ADR Social Media, Reinsurance Claims, Reinsurance Social Media 2 Comments »

Readers know that I own and co-manage with other ADR professionals LinkedIn’s Commercial and Industry Arbitration and Mediation Group. (See most recent post here.) For some time, however, I have been planning to start a LinkedIn group that focused on reinsurance-related matters, and on July 28, 2010, my good friends Nigel Shepherd and Robert Bear and I took the plunge and formed Reinsurance Claims.

After being in existence for only two days, the group has grown to 38 members, and our good friends Marc Lanzkowsky, Theresa Hajost and George Simpson, IV have graciously agreed to join Nigel, Robert and me on the co-management team. We intend to publish a shortly an article discussing the backgrounds and credentials of our very talented and diverse team.

The group is a forum for the open discussion of issues and sharing of information concerning ceded and assumed reinsurance claims in the U.S. and overseas markets. Topics of discussion may include, but are not limited to the presentation, adjustment, processing, settlement and payment of ceded and assumed reinsurance claims; claims dispute resolution, including litigation, arbitration, mediation and other forms of ADR; commutation; handling claims for a company in run-off; handling claims for an active writer; collections, including collections from companies in run off; comparative claims practices and procedures (e.g., London versus U.S. market); claims issues pertinent to insurance insolvencies; and coordination between the claims department and other departments of the company. The group welcomes members from both the U.S. and international community.

Persons who should consider joining the group include in-house claims professionals; in-house and outside counsel; claims consultants and experts; actuaries; reinsurance arbitrators and mediators; brokers with claims responsibilities; and anyone genuinely interested in learning more about the subject. The purpose of the group is information sharing and professional networking.

If you are already a member of LinkedIn, please click here to apply for membership in the group. If you are not a LinkedIn member, click here, and you will be guided through the process of creating a profile (which does not need to be completed in one step). Once your profile is started, and you have a log-in name and password, you can click here to apply for membership in the group. Joining LinkedIn is free, as is joining the group.

We hope you’ll join up!

The Great Debate Over Written Claims Guidelines and Procedures

February 18th, 2010 Asbestos-Related Claims, Bad Faith, Claims Guidelines and Procedures, Claims Handling, Claims Spot, Environmental Contamination Claims, Internal Controls, Late Notice, Reinsurance Claims, Utmost Good Faith 2 Comments »

Our friend and fellow Long Islander Marc Lanzkowsky, Founder and Principal of Lanzko Consulting, Inc., recently launched the blog Claims Spot, which discusses and comments on direct, excess and reinsurance-related claims issues. Marc has done a great job with Claims Spot and, not surprisingly, his blog is drawing some heavy traffic.

A controversial issue that Marc has been covering is whether or not insurance companies should have in place written claims guidelines and procedures. One school of thought is fearful of their use (or abuse) by insureds in coverage actions. For example, a company employee might mistakenly not follow written guidelines and procedures in the course of handling a claim, and a dispute might arise as a result. The insured will legitimately be able to argue that the company’s handling of the claim did not comply with its own guidelines and procedures, and that, accordingly, the company mishandled the claim. Proponents of this view will say that having claims guidelines and procedures is fine as long as they are merely aspirational and not in writing.

Others advocate the “damned if you do, damned if you don’t” view. If a large, professional insurer has no written guidelines and procedures, then the insured’s refrain in a coverage or bad faith action will be that the company is grossly negligent because it lacks the internal or external controls necessary to regulate a very significant portion of its business operations. But if the company has written claims guidelines and procedures, then surely they will come back to haunt it in the event of litigation.

Others, including Marc, believe the benefits associated with well-drafted and carefully considered claims guidelines and procedures outweigh the costs associated with formulating and implementing them, and, more importantly, whatever costs might be incurred by the insured’s potential use or abuse of the procedures in the event of a dispute. Drawing on his experience as a lawyer and a claims executive for two major insurance companies, Marc offers assistance to companies that are interested in implementing written claims guidelines and procedures or improving existing ones.

Marc recently brought the discussion up to the reinsurance level in his post, “Absence of Procedures to Notify Reinsurance is a Basis for Bad Faith.” He was kind enough to mention what inspired his thoughtful post — an interesting discussion he and I had about the subject not long ago over a delicious sushi and bento box lunch at Misaki — Manhasset, New York’s best (and only) Japanese restaurant.

As Marc points out there has been law in the Second Circuit for some time stating that a ceding company’s failure to have in place procedures for notifying reinsurers of claims can constitute bad faith, which may relieve a reinsurer of liability for a late-noticed claim without any showing of prejudice. That is a pretty good argument for having in place written, ceded-claims handling procedures designed to ensure timely notice to reinsurers.

In the reinsurance-late-notice context the cost-benefit analysis is probably less challenging than it might be in the direct-insurance-bad-faith context. If the ceding company does not have in place written guidelines and procedures, and cannot establish by credible and consistent testimony the existence of unwritten guidelines and procedures, then, at least in a case pending in court (as opposed to arbitration), the reinsurer may get a “pass” on a claim based on late notice without any showing of prejudice. (Prejudice has been defined as “tangible economic injury.”)

On the other hand, if the ceding company has written procedures in place, but they are not followed in a given case, then that, in conjunction with other evidence, may establish that notice was late. But the reinsurer still has to show prejudice to be relieved of liability.

So in our hypothetical, counsel for the reinsurer may be able to make some hay at a deposition concerning the cedent’s failure to follow its own guidelines and procedures. But points scored at depositions can be (and in this case are) ephemeral: without evidence of prejudice, failure to comply with the guidelines is, for all practical purposes, irrelevant.

In this day and age of internal controls and corporate responsibility, it seems to us that appropriate written claims guidelines and procedures can benefit insurers, cedents and reinsurers, provided they are carefully drafted, implemented and managed. We offer the following, very general and non-exclusive list of things companies might consider:

1. If written claims procedures are to be adopted and implemented they should be carefully prepared by claims experts and reviewed by experienced counsel. Poorly drafted and ill-conceived written claims procedures are probably worse than none at all.

2. Careful thought should be given to privilege issues associated with in-house or outside attorney review of draft guidelines and the involvement of counsel in other aspects of the drafting and implementation process. The process should be carefully managed and attention should be paid to the company’s document retention policies as respects the maintenance or destruction of drafts. Remember, in a future litigation or arbitration the insured’s attorneys will likely request prior drafts and depositions of all involved in the preparation and implementation process. While the insured may or may not be successful in obtaining all the discovery it seeks, it will likely get at least some of it.

3. Written claims procedures should be drafted to confer upon claims personnel an appropriate degree of discretion where such discretion is appropriate. Locking adjusters into particular claims positions without regard to the facts, circumstances and practical realities can cause a myriad of problems.

4. To the extent claims procedures provide a certain period of time within which a particular action must be taken, and to the extent that the period is not an inflexible one provided by law or contract, flexibility should be built in to account for minor delays caused by special circumstances or the press of business.

5. If written claims guidelines and procedures are to be adopted, the company should ensure claims personnel take them very seriously and do their best to abide by them at all times.

6. Written claims procedures should be subject to periodic review by in-house counsel and the claims department to ensure that they comply with current legislation and recent case law developments.

7. Outside counsel handling coverage or other, claims-related matters for the company should keep the company’s general counsel apprised of any problems that might be caused or exacerbated by written guidelines and procedures.

Some Helpful Rules and Tips for Policyholders and Cedents Courtesy of Settlement Perspectives

December 15th, 2009 Commercial and Industry Arbitration and Mediation Group, Follow-the-Settlements/Follow-the Fortunes, General, Negotiation, Reinsurance Allocation, Reinsurance Claims 1 Comment »

Our friend, colleague and fellow Commercial and Industry Arbitration and Mediation Group member, John DeGroote, has written and published in his Settlement Perspectives blog an excellent article offering some very practical and sound guidance to corporate policyholders who are confronted with litigation that may fall within the scope of their liability insurance, and who desire to increase the odds of securing coverage. John, who is President, Chief Legal Officer and Secretary of management and technology consulting firm BearingPoint, Inc. (formerly KPMG Consulting), was kind enough to seek our input on the article. It is entitled Insurance Coverage: 4 Rules and 10 Tips for Policyholders, and features a link to a longer, more detailed article John co-wrote on the same subject for an Association of Corporate Counsel (“ACC”) publication.

When I read John’s draft the first thing that struck me was that the rules and tips he offers are, for all intents and purposes, applicable to cedents pursuing reinsurance recoveries. He stresses, among other things, the importance of honesty, good faith, open communication and not colluding with the claimant in an effort to obtain coverage. These attributes are ones to which diligent, ceded claims personnel should aspire in their dealings with their company’s reinsurers, because they tend to increase the odds of achieving a successful recovery and avoiding time-consuming and expensive reinsurance disputes (all other things being equal).

John was also kind enough to quote my comments in his article, which are reproduced below:

As I discussed these rules with Philip J. Loree Jr. at the Loree Reinsurance and Arbitration Law Forum the other day, I learned that they don’t only apply to policyholders – apparently insurers must live by these same rules to collect from their reinsurers:

You would be surprised how frequently reinsurers contend that the carrier colluded with the policyholder in direct insurance coverage litigation. If the reinsurer can establish collusion concerning the fact, amount or allocation of coverage, or if the reinsurer otherwise shows that the carrier acted in bad faith, then the reinsurer will usually be relieved of liability for the claim. Like policyholders making direct insurance claims, carriers making reinsurance claims need to avoid even the appearance of collusion or bad faith, and following rules analogous to yours helps them do that.

Whether you happen to be a corporate or individual policyholder, or a cedent wishing to increase the odds of successfully collecting from reinsurers, John’s fine article comes highly recommended. In fact if you are at all interested in settlement and ADR, we highly recommend that you follow Settlement Perspectives. John writes high-quality, insightful and practical articles on a variety of pertinent topics. Who could ask for more?

Arbitration Nuts & Bolts: New York Court of Appeals Says the Submission Defines the Scope of the Panel’s Authority

October 26th, 2009 Arbitrability, Authority of Arbitrators, New York Court of Appeals, Nuts & Bolts, Nuts & Bolts: Arbitration, Reinsurance Arbitration, Reinsurance Claims, functus officio 2 Comments »

On October 15, 2009 The New York Court of Appeals decided Re Joan Hansen & Co v. Everlast World’s Boxing Headquarters Corp., ___ N.Y.3d ___, slip op. (Oct. 15, 2009) (here), a case which demonstrates how important the parties’ submission is in determining arbitral authority. The Court held that, after an award, a party cannot reopen an arbitration proceeding to request that the arbitrators decide an issue that had not previously been submitted to the arbitrators.

The power of arbitrators appointed to resolve a particular dispute or disputes is defined by the submission, not the arbitration agreement. The scope of the agreement to arbitrate tells us only what must be submitted to arbitration. It is the submission itself that “serves not only to define, but to circumscribe the authority of the arbitrators.” Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987) (here).

As the United States Court of Appeals for the Fifth Circuit explained, a predispute arbitration agreement generally is “not self-executing” — “[b]efore arbitration can … proceed, it is necessary for the parties to supplement the agreement to arbitrate by defining the issue to be submitted to the arbitrator and by explicitly giving him the authority to act.” Piggly Wiggly Operators’ Warehouse Inc v. Piggly Wiggly Operators’ Warehouse Independent Truck Drivers Union, 611 F2d 580 (5th Cir. 1980) (here). The disputes presented to the panel for resolution without objection constitute the submission, which may be embodied in a formal submission agreement or determined from the arbitration demand in conjunction with the arguments and contentions made by the parties during the proceeding. Continue Reading »

House of Lords Hands Down Landmark Reinsurance Decision: Lexington Insurance Co. v. AGF Insurance Ltd.

August 22nd, 2009 Asbestos-Related Claims, Environmental Contamination Claims, Follow-the-Settlements/Follow-the Fortunes, House of Lords, Reinsurance Allocation, Reinsurance Claims No Comments »

Part II of a Two-Part Post

Introduction

In Part I we discussed the controversy surrounding the House of Lords decision in Lexington Insurance Co. v. AGF Insurance Co. [2009] UKHL 40. The House ruled that two proportional facultative reinsurers were not obligated to indemnify the cedent for their share of the entire amount of a judgment a Washington State court rendered against the cedent in an environmental coverage action. The judgment, which was based on Pennsylvania law, rendered the cedent liable under the policy jointly and severally for property damage caused by environmental contamination that occurred before, during and after the three-year policy period. The House ruled that the reinsurers could be held liable only for their respective shares of the loss that occurred during the three-year term of the reinsurance contract (which was concurrent with that of the cedent’s policy), not their shares of the total amount of loss for which the Washington judgment held the cedent liable under the reinsured policy.

In this Part II we briefly summarize the pertinent background of the case, walk the reader through the House’s reasoning and offer a few parting thoughts. Continue Reading »

House of Lords Hands Down Landmark Reinsurance Decision: Lexington Insurance Co. v. AGF Insurance Ltd.

August 18th, 2009 Asbestos-Related Claims, Environmental Contamination Claims, Follow-the-Settlements/Follow-the Fortunes, House of Lords, Reinsurance Allocation, Reinsurance Claims No Comments »

Part I of a Two-Part Post

Introduction

Effective October 1, 2009 the House of Lords will be replaced by the Supreme Court of the United Kingdom (more information here). In what may be among its last official acts, on July 30, 2009 the House decided an important reinsurance case concerning the scope of a reinsurer’s indemnity obligation to a U.S. cedent under English law. See Lexington Insurance Co. v. AGF Insurance Co. [2009] UKHL 40. The reinsurance contract was back-to-back with the reinsured policy in all but one respect: it was governed by English law, while the insurance policy was, in the event of coverage litigation, potentially subject to the laws of any number of U.S. jurisdictions, depending on venue, applicable choice of law rules and other considerations. Relying on a long-line of English law precedent, and distinguishing other precedent, the House ruled that a proportional facultative reinsurer was not obligated to indemnify the cedent for the reinsurer’s share of the entire amount of a judgment a state court in Washington rendered against the cedent. The judgment resulted from a Washington Supreme Court decision which, applying Pennsylvania law, ruled that the cedent was jointly and severally liable under its policy for property damage caused by environmental contamination that occurred before, during and after the cedent’s three-year policy period. The House said that, judgment or no judgment, the reinsurer agreed to reinsure only loss or damage occurring during the coterminous, three-year period of the reinsurance contract, and the reinsurer’s obligation was limited to its share of that loss.

The House’s decision is likely to be controversial. In this Part I of a two-part post, we shall discuss the controversy and seek to allay it a bit. In Part II we’ll walk the reader through that reasoning and offer some parting comments.

The Controversy

Complex environmental-contamination and asbestos-related claims are anything if not costly. American insurers have been fighting an expensive, multi-front war with their insureds for many years over the scope and extent of their liability for these claims. They raise a myriad of issues and are potentially governed by the laws of at least fifty different jurisdictions (some sympathetic to insurers, some not). These jurisdictions have adopted different approaches to resolving the issues (some favorable to insurers, some not), which means that no matter where may be the venue, complex choice-of-law questions are likely to arise. And the coverage actions usually involve multiple insurers, sites, claimants, years of coverage, and layers of coverage. The amount at stake and the concomitant expense can be staggering. For the most part, these claims and coverage disputes — let alone how some courts might resolve them – could not reasonably have been anticipated at the time when most of the occurrence policies on which they arose were written (generally prior to 1980 and sometimes going back to the 1930s). Continue Reading »

Archive for the ‘Reinsurance Claims’ Category

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