Arbitration Award Clarification Confirmation

BoardroomGenerally, when an arbitration panel issues a final award the panel is “functus officio“; its powers expired and its duties relieved because it has finished its work and there’s no more to be done.  Sometimes, however, an arbitration panel will retain jurisdiction for a period of time after the final award is issued in case the parties cannot resolve reconciliation or other issues based on the final award. Retaining jurisdiction holds off the functus officio doctrine for that brief period of time.

There are also judicial exceptions to the functus officio doctrine, which allow an arbitration panel to correct a mistake apparent on the face of the award, or where the award fails to adjudicate an issue submitted to arbitration for resolution, or where the award results in an ambiguity that requires clarification. In a recent case, the latter situation arose and the court had to determine whether it could confirm a clarified award.

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Court Won’t Decide Motion to Compel Arbitration Until Insurer Posts a Bond

A close-up of the word bond with a yellow tintA number of states, New York included, have provisions in their insurance law that require an unauthorized foreign or alien insurer to post a bond or procure a license before filing any pleading in any proceeding against it in a court in that state.  The reason for this provision is to make sure that an insurance company that is not licensed in the state, but provides an insurance policy to a policyholder in the state, has sufficient financial accountability in the state to satisfy any potential judgment against it from any legal proceeding brought against it in the state.  One question that periodically arises in disputes over whether a bond must be posted in a proceeding is whether the filling by the unlicensed insurer is a “pleading.”  This issue was recently addressed by a New York Bankruptcy Court in the context of a motion to compel arbitration.

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Additional Insured Endorsement Clarified By New York Court of Appeals

Tunnel WorkerThe New York Court of Appeals recently issued an important decision on how the Additional Insured endorsement to a Commercial General Liability insurance policy should be interpreted.  It did  so in a split decision and by reversing a decision by the Appellate Division. A vigorous dissent accompanied the opinion.  Commentators are already discussing the ramifications of this decision, including whether the Insurance Services Office (“ISO”) will modify its Additional Insured endorsement because of this decision. What follows is a brief analysis.

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June 2017 Reinsurance Newsletter

This quarter’s Squire Patton Boggs Reinsurance Newsletter leads off with a summary of a New York federal case where an arbitration award was vacated for evident partiality.  It also features an update on the US-EU Covered Agreement.

Please enjoy.

Ratification and Rescission of Insurance Policies

businessman is holding a burning contractRescission of an insurance contract is a drastic remedy. It generally requires a showing of fraud or material misrepresentation in the policy application and underwriting process.  Once an insurance company obtains the requisite knowledge of the policyholder’s fraud, it must seek rescission in a timely fashion. If, after obtaining that requisite knowledge, the insurance company commits an act that ratifies or affirms the insurance policy, the insurance company can no longer seek rescission of the policy. In a recent case, the Second Circuit Court of Appeals explored the ratification issue in a case seeking rescission of an insurance policy.

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Proving a Reinsurance Contractual Relationship Exists

Businessman pressing contract on a screen, concept about businessLitigating a reinsurance contract dispute is not much different than litigating any commercial contract dispute. The party seeking recovery under the contract has to prove that the contract exists. Proving the policy can be a big issue with claims asserted under old policies and reinsurance contracts. This certainly has been an issue with asbestos and other long-tail claims that take many years to manifest. Lost policies, extrinsic evidence, secondary sources all may come into play, but typically the issue is not raised at the pleading stage.

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The Constitutional Challenge to Florida Unclaimed Property Law

Treasure chest on white.

In 2016, the Florida legislature amended its unclaimed property law to require life insurance companies to conduct annual Death Master File (“DMF”) searches on active and terminated policies dating back to 1992. Fla. Stat, § 717.107.  One life insurer immediately filed suit against Florida’s Chief Financial Officer and the Florida Dept. of Financial Services to overturn the law on constitutional grounds, most notably its retroactive application.  United Ins. Co. of Am. v. Jeff Atwater, No. 2016-CA-1009 (Fla. Cir. Ct. 2d Dist. Leon Cty).   On May 16, 2017, the life insurer voluntarily dismissed one of its two counts in that lawsuit and now seeks declaratory and injunctive relief from the retroactive application of the amended statute on due process grounds alone.  The due process claim alleges that the statute adversely affects vested rights, imposes new obligations regarding DMF searches and beneficiary outreach, and imposes additional penalties for failure to perform the new obligations.

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Battle of Other Insurance Clauses In CGL Policies for Contractors

Insurance claim form and insurance policyA recent Summary Order from the Second Circuit Court of Appeals highlights the difficulties that often arise with other insurance clauses and additional insureds. Which carrier has the primary duty to defend and indemnify an underlying action is a question that turns up with frequency when there are multiple parties sued and multiple possible applicable insurance policies. This is especially true in construction litigation where owners, general contractors and others are often required to be named as additional insureds in subcontractor policies by the underlying construction contracts. How that all shakes out depends on the specific language in the policies. Continue Reading

Precluded By Issue Preclusion From Enforcing Reinsurance Arbitration Clause

Stop HandIn a recent state court appellate decision on a reinsurance collections dispute, the court affirmed a lower court order denying a motion to compel arbitration based on the collateral estoppel or issue preclusion effect of a prior decision. Collateral estoppel or issue preclusion may be used offensively or defensively. It is a civil procedure doctrine that precludes a bound party from re-litigating an issue that a court has already decided. It doesn’t come up that much in public reinsurance cases because most reinsurance disputes are governed by arbitration clauses and it is up to the arbitrators, in private, confidential arbitrations, to determine the collateral estoppel effect, if any, of a prior ruling. Here, the issue arose to preclude arbitration in the first place because of the unique circumstances of the case.

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Relationship? What Relationship?: Evident Partiality and Arbitrator Disclosure

A businessman and a woman with their backs touchingArbitrators have a special responsibility to disclose all relevant relationships to the parties so that any potential conflicts can be vetted. There are some obvious relationships that need to be disclosed like prior employment by one of the parties. There are other relationships that may be disclosed out of an abundance of caution, but typically are non-issues; like meeting one of the party representatives at an industry conference five years earlier. And of course there are the grey areas.

In a recent case, a federal court had to determine whether the non-disclosure of an arbitrator’s connection to one of the parties was significant enough to rise to the level of evident partiality.

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