In 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.
Arbitrators 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.
On 30 March 2017, Lloyd’s of London confirmed that it will establish a new subsidiary in Brussels, which will be operational for the 1 January renewal season in 2019. The announcement follows on immediately from the UK Government’s formal triggering of the Brexit process on 29 March 2017.
Lloyd’s move is specifically designed to avoid the insurance market losing business when the UK leaves the European Union in March 2019 and so that it can carry on underwriting without interruption to business that might be caused by Brexit. The establishment of the Brussels operation means that Lloyd’s will be able to continue to underwrite policies in all 27 EU and 3 EEA states after the UK leaves the EU in 2018.
Lloyd’s presently intends that the Brussels operation will just be an additional subsidiary with just 100 jobs moving from London. However, that position could change if the UK Government fails to secure financial services “passporting” rights (which presently allow UK financial businesses to freely conduct business in other EU states) as part of the Brexit negotiations with the EU. Lloyd’s move follows AIG’s announcement earlier in March that it is to establish an EU subsidiary in Luxembourg to serve EU clients after Brexit.
Notice requirements in liability insurance policies typically require that notice of a claim or lawsuit be given as soon as practicable and in writing to the insurance company. While the exact language differs from policy to policy, the concept of written notice to the insurance company without delay is fairly common. In the normal circumstance, where the policyholder gets sued, sending written notice of claim to its insurance carrier is not very complicated. Where the underlying claimant sues additional insureds arising from an accident on a construction site, notice issues can become more complicated.
When an in-house attorney at an insurance company is asked to analyze complex insurance coverage scenarios and their reinsurance implications by a senior business executive, is the written memorandum prepared by in-house counsel protected from disclosure by any applicable privilege or doctrine? That was the question before a federal magistrate judge in ruling on whether an insurer’s withholding of the in-house counsel’s memo from production was justified.
This quarter’s Squire Patton Boggs Reinsurance Newsletter focuses on the certified question sent to the New York Court of Appeals by the Second Circuit on Bellefonte. It also features regulatory updates on the US-EU Covered Agreement as it affects reinsurance and on the new duty to pay insurance and reinsurance claims in the UK. Finally, the newsletter features our annual retrospective on reinsurance trends from the previous year.
On January 13, 2017, Federal Insurance Office (“FIO”) submitted to the US Congress a Covered Agreement negotiated with the EU addressing: (1) group supervision; (2) reinsurance; and (3) exchange of information between regulators. Once fully implemented, the Covered Agreement eliminates EU collateral and local presence requirements for US insurers operating in the EU, and eliminates US state collateral and local presence requirements for EU insurers operating in the US. The Treasury Department issued a Fact Sheet that explains the Covered Agreement.
At the moment, English law says that insurers and reinsurers are not under a positive duty to pay valid claims within a reasonable time. If an insurer/reinsurer delays in paying a claim, or fails to pay at all, an insured/reinsured can only claim the sums due under the policy and interest. An insured/reinsured cannot claim damages for late payment if it suffers additional losses by reason of a delay.
That position will change after 4 May 2017 when certain parts of the Enterprise Act 2016 introduce a new section 13A into the Insurance Act 2015.
An all-risk policy is meant to cover a loss triggered by any conceivable cause not excluded under the policy. While the burden is on the policyholder to establish a prima facie case for coverage, the policyholder need only show (1) the existence of an all-risk policy, (2) an insurable interest in the subject of the insurance contract, and (3) the fortuitous loss of the covered property. The burden to show fortuity is relatively light and when met, shifts the burden to the insurer to show that an exclusion applies or that the loss was not fortuitous.
Merriam-Webster defines “fortuitous” as “occurring by chance.” The question in a recent marine property damage case was whether an overload or ordinary wear and tear was the cause of the collapse of a mooring pile at a pier, which resulted in the loss. The steel pile was part of the southern inner breasting dolphin used for mooring operations. Got your attention?
When a loss occurs, one of the first things a policyholder should do is let its insurance company know about the loss. I know, some policyholders hesitate to report losses because it might cause their premiums to rise or because they don’t think they have any liability for the loss or because they think they can recover the loss through other means. While there may be some, albeit few, reasons to delay or withhold reporting a loss to an insurance company, the failure to timely advise an insurance company of the loss may result in a second loss — the loss of insurance protection.
In a recent case before the United States Court of Appeals for the Second Circuit, a policyholder found out the hard way what happens when you don’t report a loss to your insurance company in a timely manner.