New York Court of Appeals Reaffirms Contract Language Controls Allocation and Exhaustion Methodologies

iStock_000061959038_SmallLong-tail claims from asbestos and other toxic exposures have plagued policyholders and their insurers for decades. Myriad issues arise when trying to determine when injuries are incurred, how policies are triggered, how liability should be allocated among multiple policies and when excess policies are required to cover the losses. None of this is easy and there is no uniformity among the various courts that have dealt with these issues.

That brings us to the latest pronouncement from the New York Court of Appeals, which was asked by the Delaware Supreme Court to answer certified questions under New York law about whether “all sums” or “pro rata” allocation applies in an excess insurance situation that contain non-cumulation and prior insurance provisions and whether horizontal or vertical allocation is required before the excess policies attach in an asbestos situation.

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Reinsurance Premiums, Overcharges and Intermediaries

iStock_000017546606_SmallThe reinsurance industry has always had reinsurance auditors that performed various tasks for cedents and reinsurers to monitor programs and determine whether the counter-parties were complying with the contracts. In the past few years, a newish type of auditor has appeared (at least newish to me). This type of auditor looks at reinsurance programs to determine if the cedent has overpaid reinsurance premiums and has been underpaid for reinsurance recoveries. A recent case in Pennsylvania highlights this type of audit work. Continue Reading

New York Appellate Court Affirms Denial of Coverage Under Blanket Ordinance or Law Coverage Endorsement

iStock_000008336516_SmallWhen a building is damaged sometimes the repair and remediation has to be enhanced because of newly discovered building code or ordinance or law violations. For example, a windstorm causes a facade to collapse off a building and that collapse reveals that the method used to mount the facade on the concrete slabs violates the current building code and requires a different and more costly method to bring the building into compliance. If the building had insurance with a Blanket Ordinance or Law Coverage Endorsement, it is possible that the insurance company will have to pay the additional costs to bring the building in line with the building code. But depending on the nature of the loss and its connection to the building code issue, this coverage may be elusive.

A recent decision by a New York intermediate appellate court addressed the Blanket Ordinance or Law Coverage endorsement and affirmed the motion court’s finding in favor of the insurance company and against the policyholder. St. George Tower v. Insurance Company of Greater New York, No. 651746/12 (N.Y. App. Div. 1st Dep’t Apr. 21, 2016).

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California Weighs In on Enforcement of Other Insurance Clauses

iStock_000018132202_SmallOn Monday, in Certain Underwriters at Lloyd’s, London v. Arch Specialty Ins. Co., 16 C.D.O.S. 3833 (Cal. Ct. App. Apr. 11, 2016), the California Court of Appeal (Third District) rejected Arch Specialty Insurance’s attempt to enforce “other insurance” clauses in the conditions and coverage grant of the relevant policies.

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The Wellington Agreement’s Confidentiality Provision Lives On

lock and chain in confidential agreement document background

You remember the Wellington Agreement don’t you? This was the settlement agreement entered into back in 1985 to resolve numerous coverage disputes between Owens-Corning Fiberglass Corp. and its producers and insurers over pending asbestos litigation. Confidential arbitrations took place as part of the Wellington Agreement to resolve these coverage disputes. Much evidence was created as part of those proceedings under the confidentiality umbrella.

In a recent case, a court was faced with an application by a non-signatory to the Wellington Agreement seeking discovery and a subpoena to obtain evidence from one of the arbitrations under the Wellington Agreement for use in its own coverage dispute.

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Frontal Assault on Bellefonte at Second Circuit

Businessman PunchingThose of you who dabble in reinsurance disputes are familiar with Bellefonte Reins. Co. v. Aetna Cas. & Sur. Co., 930 F.2d 910 (2d Cir. 1990) and its progeny. Many trees have been sacrificed explaining and arguing for and against the “rule” set in Bellefonte and its affect on claims expenses and limits in facultative certificates and reinsurance coverage for long-tail liabilities like asbestos and environmental exposures. On May 5, 2016, the Second Circuit Court of Appeals will hear argument in yet another case decided based on the Bellefonte principle.

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Confirming a Reinsurance Arbitration Award After Payment Is Made

Woman taking batch of hundred dollar bills. Hands close up

The Federal Arbitration Act provides that “[i]f the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” 9 U.S.C. § 9. When you break this sentence down to its components, it first requires that the agreement to arbitrate expressly state that a judgment of the court shall be entered upon the arbitration award. Most reinsurance contracts have that phraseology in their arbitration clauses ( e.g., “Judgment upon the award rendered may be entered in any court having jurisdiction thereof.” BRMA 6 A). It then states that any of the parties may apply to the court to confirm the award. Any party does not necessarily mean the prevailing party. Finally, if these two criteria are met, then the court must confirm the award unless it is otherwise vacated, modified or corrected.

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Umpire Disclosure and Vacatur

DIsclosure form on typewriter

There is no doubt that the issue of arbitrator disclosures is a very important issue in reinsurance arbitrations and especially in arbitrations conducted under the traditional US party-appointed system. Disclosures are even more important in the selection of the umpire. A recent decision in a long-running reinsurance battle addresses the issue of the timeliness of disclosures and whether there is a pre-selection disclosure obligation. Nat’l Indem. Co. v. IRB Brasil Resseguros S.A., No. 15 Civ. 3975 (NRB), 2016 U.S. Dist. LEXIS 30871 (S.D.N.Y. Mar. 10, 2016).

This case has lots in it and it comes from a judge who (my guess only) first cut her teeth on reinsurance in the 1980s as a Magistrate Judge in a case that I was involved in for a few years. My comments focus on the disclosure issue.

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Late Notice Bars Claim Against Excess Claims-Made D&O Policy

Time is moneyIn a recent blog post we discussed whether prejudice must be shown for a claims-made carrier to prevail on a late notice claim. In that case, the answer was no prejudice need be shown. A United States Court of Appeals for the Sixth Circuit decision on an excess claims-made policy reaches the same result.

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Construing Collapse Under a Homeowners’ Insurance Policy

collapsed-houseHomeowners’ policies have become more complex as more and more homes have been built around the country. With the increase in natural and other disasters, including construction defect claims, homeowners have looked to their policies for coverage when disasters have destroyed or nearly destroyed their homes. A recent case highlights a couple of the issues that courts have faced in construing whether a homeowners’ policy must respond to a collapse or near collapse.

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