Nobody likes to get sued. When a lawsuit or a demand letter comes in, the first thing that crosses the mind of the party being sued (or claimed against) is how can I resolve this quickly? That may be a reasonable visceral reaction to the suit, but what happens when insurance is involved? Continue Reading
In late 2017, the New York Court of Appeals, in Global Reinsurance Corp. of Am. v. Century Indemn. Co., 30 N.Y.3d 508 (2017), provided guidance to the Second Circuit Court of Appeals on how New York law interprets reinsurance contracts and, in particular, the stated limits in facultative certificates and whether those stated limits are presumptive caps on the facultative reinsurer’s liability. That guidance is evident in a recent case decided by the Second Circuit Court of Appeals in yet another dispute over facultative coverage for asbestos settlement liabilities.
The Squire Patton Boggs September 2018 Reinsurance Newsletter is now available here. This quarter’s newsletter discusses the recent Second Circuit case on evident partiality, a case on equitable subrogation and reinsurance damages arising out of the 9/11 terrorist attacks and a trial court’s decision to allow evidence of follow-the-settlements on the question of whether the doctrine should be implied into a facultative certificate. Please enjoy.
In a recent case, a New York federal court in one of the September 11, 2001 lawsuits against Al Qaeda granted plaintiff insurance carriers’ motion for an award of damages on a default judgment against the terrorist organization. The damages requested included both insurance payments made to insureds as a result of the September 11th terrorist attacks and reinsurance payments made to cedents. The decision is interesting because of the potential conflict between the traditional concept of privity in reinsurance and the scope of equitable subrogation.
In AEI Life LLC v. Lincoln Benefit Life Co., No. 17-224, 2018 U.S. App. LEXIS 15485 (2d Cir. Jun. 8, 2018), a Trust purchased a $6.5 million life insurance policy on an individual. On the application, it claimed that the named individual had a net worth of $87 million and an annual income of $1.5 million. It would later prove that this simply wasn’t true. But in the meantime, a stranger to the policy deposited money into the Trust, which was used to pay the $205,000 in yearly premiums.
Vacating an arbitration award has always been tough. The Federal Arbitration Act only has limited bases to seek vacatur. One of those bases is when there is “evident partiality” by the arbitrator. 9 U.S.C. § 10(a)(2). In “traditional” reinsurance arbitrations, the arbitration panel includes two party-appointed arbitrators, each of whom may be predisposed toward the position of the party that appointed them, and a third arbitrator or umpire, who is neutral. Where there is a challenge to an arbitration award rendered by an arbitration panel that includes party-appointed arbitrators that are not required to be neutral, what does the challenging party need to show to obtain vacatur based on evident partiality? In other words, what is the standard or burden of proof? Is it based on the standard governing neutral arbitrators, or should there be a higher standard of proof needed when there are party -appointed arbitrators? The Second Circuit Court of Appeals has now answered that question.
The application of New York Insurance Law § 3420(d)(2), which requires notice of disclaimer as soon as reasonably possible under a liability policy, has resulted in quite a few cases testing its outer limits and proper implementation. In a recent case, a New York intermediate appellate court was asked to address § 3420(d)(2)’s application in the context of a liability policy issued by a foreign risk retention group (“RRG”). The court affirmed summary judgment in favor of the RRG based, in part, on preemption by the Liability Risk Retention Act of 1986 (“LRRA”).
The Squire Patton Boggs June 2018 Reinsurance Newsletter is out. You can access it here. This quarter’s newsletter covers the Second Circuit’s remand of Global v. Century, an interesting Massachusetts case involving self-insured workers’ compensation programs and follow-on reinsurance, and a McCarran-Ferguson reverse preemption case. Please enjoy.
Arbitration provisions in insurance or reinsurance contracts periodically are challenged based on state anti-arbitration statutes. Often, when non-US insurers or reinsurers are involved, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“) is raised as a basis to enforce the arbitration provisions in federal court. The counterpoint to that argument is reverse preemption under the McCarran-Ferguson Act. This is a heady academic subject that has real world consequences when a party is trying to enforce an arbitration provision in an insurance or reinsurance contract.
There is a somewhat complicated statutory scheme in many states concerning an employer’s ability to self-insure its workers’ compensation obligations. Reinsurance often plays a role where an employer self-insures. Typically, that role is to provide “reinsurance” in excess of a self-insured retention to protect the employer’s top end. If an employer fails to insure or to qualify as a self-insured entity, many states have workers’ compensation trust funds that step in and pay benefits to injured workers when there is no alternative source of funding.
In a recent case under Massachusetts law, a Massachusetts appeals court addressed the interplay between a reinsurer and a self-insured employer that became insolvent.