Crumbling and Cracking Is Not a Collapse Under an All-Risks Policy

Intuitively, an all-risks policy is supposed to cover all risks.  But we know that even all-risks policies have exclusions.  Sometimes, however, an exclusion is reinstated in part to provide coverage for a limited species of the excluded item.  For example, an all-risks policy may exclude “collapse,” but may write back that coverage to a limited degree by providing coverage for sudden and accidental direct physical loss.  In a recent case, the Second Circuit addressed a series of claims under homeowners’ all-risk policies seeking coverage for horizontal and vertical cracks in basement walls — the so-called “crumbling concrete cases.”

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Liquidator’s Motion to Dismiss Petition to Confirm Reinsurance Arbitration Award Denied

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In some states receivers may bring claims inside or outside the receivership court, including reinsurance arbitrations. In other states receivership proceedings end the ability of either party to bring a reinsurance arbitration outside of the liquidation court.  In a recent case, a receiver of an insolvent cedent commenced a reinsurance arbitration outside of the receivership court.  The reinsurer brought counterclaims and an award was issued in favor of the reinsurer against the insolvent cedent.  When the reinsurer sought to confirm the award, the receiver moved to dismiss claiming that the court did not have jurisdiction to decide a confirmation petition.  The court disagreed with the receiver.

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When Is a Claim for Rescission Ripe for Adjudication?

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Once in a while an insurance company learns that its insured did not accurately portray its risk when applying for the insurance policy.  In many cases, the insurance company will just cancel the policy, but sometimes the insurance company will want to rescind the policy so that no claims can be filed for the period between policy issuance and cancellation.  If an insurance company learns that the application was not accurate, and decides to rescind the policy, can it bring an action in court for rescission if there are no claims pending or threatened?  The Second Circuit recently addressed this issue.

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Partial Final Award Not Ripe For Confirmation

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Under Section 9 of the Federal Arbitration Act, a court must confirm an arbitration award when a timely request is made unless there is a basis to vacate or modify the award.  But a court has no ability to confirm an arbitration award unless the award is considered a “final” award.  The law in virtually all circuits requires the award to be final and that the panel has completed its determination of every issue relative to the matters put before it for adjudication.

In a recent case, an arbitration panel issued a Partial Final Award on the affirmative claims, saving a determination on counterclaims for phase II, but the court declined to confirm.

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Private Interest Outweighs Public Interest In Sealing of Arbitration Documents

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In the past several years, motions to seal arbitration documents generally have been denied in favor of the public’s right to have access to documents filed in court.  We discussed this in a prior blog post in the context of arbitration awards.  But not every court will deny a motion to seal arising from a reinsurance arbitration.

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March 2019 Reinsurance Newsletter

Our March 2019 Reinsurance Newsletter is available for your reading pleasure.  It covers reinsurance developments since December 2018 and also includes regulatory and policy updates as well as our annual Brief Review of Reinsurance Trends.  Please enjoy.  You can access the Newsletter here.

Enforcement of Arbitration Subpoenas and Summonses

Subpoena for Court Legal Documents Law

Sometimes it is necessary to obtain evidence from non-parties during a reinsurance arbitration.  Yet, the Federal Arbitration Act (“FAA”) does not expressly sanction non-party (or for that matter any) pre-hearing discovery.  In practice, however, most parties ask the arbitration panel to issue a subpoena to a “hearing” and then negotiate with the non-party about producing documents without the need to appear at a hearing with a witness.  Most non-parties just want the subpoena for their records (to protect against criticism from others about volunteering information) and will eventually agree to produce a negotiated set of documents. Moreover, nothing in the FAA bars a party from negotiating a common-sense resolution to a subpoena request.

But what happens if it turns out that a non-party witness is needed at the hearing or additional documents that the non-party did not produce are required?  If the non-party does not voluntarily appear, a hearing subpoena or a summons is necessary to compel the testimony and documents.  And what happens if the non-party fails to appear?  A recent case addressed this issue in the context of a petition for enforcement of a hearing summons.

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Arbitration of Insurance Coverage Disputes

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Coverage disputes between insurance carriers and policyholders are ripe for resolution through arbitration.  ARIAS•U.S. is working on a project to create an arbitration pathway, including modified rules and requirements for certified arbitrators, for these types of disputes and others.  But unless the parties agree or the insurance contract contains an arbitration clause, the arbitration option is not available.

There are, however, a number of insurance policies written for industrial companies by the global insurance marketplace that contain arbitration clauses.  Where non-US insurers are involved and where a coverage dispute arises, can these non-US insurers compel arbitration?  That question was recently answered by a New Jersey federal court.

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When Arbitrators Exceed Their Powers


When an arbitration panel issues a final award any challenge to that award faces an uphill battle.  That is because under the Federal Arbitration Act (“FAA”) a final arbitration award must be confirmed (if requested) and can only be vacated for a very narrow set of reasons.  Of the four grounds for vacatur under Section 10 of the FAA, subsection (a)(4) provides that an award may be vacated  “where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”  Where the arbitration award draws its essence from the parties’ contract, courts typically will not find that the arbitrators exceeded their powers even if their award interprets the contract differently than the court.  But where the arbitrators mete out their own brand of industrial justice and read provisions out of the contract, a finding that the arbitrators have exceeded their powers is a likely outcome.

In a recent 9th Circuit non-insurance/reinsurance case, both the district court and the circuit court found that the arbitrator in a government contract-related dispute over termination exceeded his powers by issuing an award that essentially wrote out of the contracts essential terms required by the federal government for government contractors.

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Pleading Standards and Consequential Damages In Coverage Disputes

When a policyholder sues its carrier for breach of contract or bad faith, one question that arises is whether the policyholder should have to plead alleged damages with particularity, or whether the policyholder can sustain its claims with less specific allegations.  A New York appellate court recently declined to impose that higher, particularity standard.

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