Litigating 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.
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.
A 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
In 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.
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.