The European Union and the United States have today signed their pending Bilateral Agreement on Prudential Insurance and Reinsurance Measures. In the US, the Agreement is the Covered Agreement under the Dodd-Frank Act; in the EU, it is an Agreement under Article 218 of The Treaty on the Functioning of the European Union. The language of the Agreement was finalized and submitted to the United States Congress in January 2017.
Recently on our eSquire Global Crossings Blog we shared an article first published in the Bankruptcy Strategist, where Norman Kinel and Elliot Smith explore the practical impact of the Sixth Circuit Court of Appeal’s recent decision in Indian Harbor Insurance Company v. Zucker, et al., 2017 U.S. App. LEXIS 10821, which bankruptcy practitioners – particularly those representing creditors’ committees – need to consider, because having the wrong plaintiff or the wrong mechanism in place to pursue claims against a debtor’s officers and directors could result in losing the ability to recover value for creditors.
You can read the full article online here.
Other aspects of the Zucker case were previously examined by Christopher Meyer in his post ‘“Insured Versus Insured” – – Who is the Debtor-in-Possession, Anyway’.
On September 4, 2017, Florida’s Governor, Rick Scott, declared a state of emergency in every county in Florida in anticipation of Hurricane Irma, through Executive Order No. 17-235, triggering Insurance Commissioner David Altmaier’s related emergency authority. Fla. Stat. § 252.63(1). On September 13, 2017, Commissioner Altmaier issued the Office of Insurance Regulation’s (the “Office”) Emergency Order establishing and amending certain rules for insurance companies post Hurricane Irma.
The Emergency Order applies to insurers and other entities regulated under the Florida Insurance Code. It institutes temporary rules regarding cancelling or nonrenewing residential and commercial residential policies; temporary rules regarding rate filings, the “file and use” rate filing processes, and the “use and file” rate filing processes; new rules on time periods for action by insureds; and detailed notice and cancellation requirements for premium finance companies.
As we all (or at least some of us) wait breathlessly for the New York Court of Appeals to answer the Second Circuit’s certified question in Global Reinsurance Corp. of Am. v. Century Indemn. Co., 843 F.3d 120 (2d Cir. 2016), which is now scheduled for argument on Wednesday, November 15, 2017 at 2:00 p.m., a Pennsylvania intermediate appeals court has affirmed a lower court order denying summary judgment to a reinsurer seeking to cap its liabilities based on the limits of a facultative certificate and granting judgment to the ceding companies on their claim for recovery of expenses. In a non-precedential decision, the court affirmed the lower court’s determination that the facultative certificate was ambiguous, allowed and credited the cedent’s extrinsic evidence, including expert testimony on custom and practice, and provided a detailed analysis of Bellefonte and its progeny, through Global Reinsurance.
As yet another hurricane bears down on the US, the insurance press is reporting a surge in Cat Bonds and other alternative capital. Cat Bonds and the amounts reinsured are apparently at a high. Cat bonds, as we know, respond to catastrophic loss events. Cat Bonds exist for various types of large property loss events, but windstorms make up the majority of the Cat Bonds. When the wind doesn’t blow, the Cat Bond investors make a nice profit. But when the wind blows, the Cat Bond investors often lose their investment because the bond has to pay based on the parametric trigger, often an industry wide loss figure. The projected losses for Harvey are quite large and with Irma bearing down on Florida, the projections are going to skyrocket. While you may think Cat Bonds simply either have to pay or don’t depending on the declared loss, in fact, there are some issues that have arisen that need to be considered as this string of hurricanes parades across the Southern US.
The aftermath of Hurricane Harvey will include a surge in insurance claims by homeowners and commercial entities. Property and casualty insurers should be aware of a Texas insurance reform law relating to claims dispute litigation and recent directives issued by the Texas Department of Insurance.
INITIATING CLAIMS DISPUTE LITIGATION – TEXAS HOUSE BILL 1774
House Bill 1774, signed into law by the Texas Governor in May 2017 and effective on September 1, 2017, will impact the process for insureds to initiate claims dispute litigation in Texas. The new law includes a 60-day written notice period before a lawsuit can be filed and imposes relatively short follow-up deadlines on insurers once notice is given. House Bill 1774 also reduces the amount of interest that can be awarded to a claimant and imposes new limits on recoverable attorney fees.
As noted in an August 31, 2017 Statement issued by Ken Paxton, Attorney General of Texas, HB 1774 does not impact claims under the federal flood insurance program or Texas windstorm Insurance Association. Although Attorney General Paxton’s Statement notes that “the legislation does not change the claim filing process or the time for filing claims”, the provisions of HB 1774 (and perhaps the urging of the plaintiffs’ bar) make it likely that some policyholders will try to submit claims before the September 1, 2017 effective date. In any event, the application and import of the new restrictions on interest and fees is sure to be at issue in cases filed by individual claimants and proposed class representatives.
The full text of HB 1774 is available here.
Our September 2017 Reinsurance Newsletter includes a featured article on discovery of reserves and reinsurance information as well as an update on the US-EU Covered Agreement. It also reports on recent cases, including a manifest disregard case, a case on Insurance Law 1213 security and reinsurance collection issues by the assignee of a liquidator. Please enjoy.
In many jurisdictions, a rule exists that allows the injured party to collect damages from a tortfeasor even if the injured party has received benefits from sources independent of the tortfeasor. The theory is that the tortfeasor should not be allowed to benefit from the injured party’s foresight in acquiring insurance to protect him or herself. If an insurance company suffers a loss because of the alleged malpractice of its attorney, does the collateral source rule apply to allow the insurance company, as cedent, to still obtain damages even though it obtained a reinsurance recovery on the underlying loss?
In Part III, we discuss discovery of reinsurance information.
In Part II, we will discuss discovery of reserve information in the context of a bad faith case.