Top 10Below are the top 10 blog posts from our Insurance & Reinsurance Disputes Blog for 2018.  These are the ones our readers viewed the most last year. The compilation is diverse as is the topic of insurance and reinsurance disputes.  Please enjoy this stroll down memory lane.

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What Happens When a Policyholder Settles Without Involving Its Insurer?
Posted on September 30, 2018 by Larry P. Schiffer

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?

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Interplay Between Reinsurance and Self-Insured Workers’ Compensation
Posted on May 07, 2018 by Larry P. Schiffer

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.

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Errors and Omissions and Directors and Officers Clash Gets Some Clarity From the Second Circuit
Posted on January 30, 2018 by Larry P. Schiffer

Most companies that provide specialized or professional services, like stock exchanges, carry both directors and officers liability insurance (“D&O”) and errors and omissions insurance (“E&O”). These coverages are meant to be complimentary and not overlapping. D&O covers “wrongful acts” by directors and officers. E&O covers negligent acts in performing professional services. D&O policies typically exclude coverage for claims that arise out of the provision of professional services. All of this seems clear until the actual facts of the claim arise. Then the fight becomes which policy or whether both policies are required to respond to a claim. The Second Circuit recently addressed this issue in the context of claims arising out of an initial public offering on a stock exchange that did not go as well as anticipated.

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Vacating an Arbitration Award for Evident Partiality Just Got Harder
Posted on June 08, 2018 by Larry P. Schiffer

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.

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Direct Claims Against Reinsurer Fail to Succeed
Posted on February 12, 2018 by Larry P. Schiffer

Direct actions against reinsurers have been on the rise for some time. To bring a direct action, a policyholder must get over the contractual privity hurdle and find some basis to show a direct relationship or third-party beneficiary relationship. Many policyholders try to bring these actions, but they more often than not fail at the motion to dismiss level. Sure, there are circumstances where the reinsurer is truly the real party in interest and has the direct responsibility and liability to the policyholder. In those cases a direct action makes sense, but those cases are few and far between. Allowing a direct action against a reinsurer where there is no contractual privity or other basis to succeed would disrupt the manner in which risks are spread through the insurance and reinsurance industry. A recent case, highlighted below, shows how the courts address some of these issues.

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FCA Gets Tough on UK Broker and CEO for Breach of Client Money Rules
Posted on January 30, 2018 by Garon Anthony

In our last blog post, we predicted a likely up-tick in FCA disciplinary activity in 2018. It seems that we might have been right, as the FCA has already issued fines totalling nearly £2.5 million against fines and individuals in the first few weeks of the New Year. And the insurance industry has not escaped regulatory scrutiny. On 26 January, the FCA announced big fines on broker One Call Insurance Services Limited (“OCISL”) and its CEO / majority shareholder, John Radford (“Mr. Radford”) of £684,000 and £468,000 respectively for breaching FCA rules on client money handling. In a rare move, the FCA has also prevented OCISL from charging renewal fees to customers for a period of 121 days, which may cost the firm £4.6 million.

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New York Court of Appeals Looks to Policy Language Again to Allocate Risk Proportionately to Insurers
Posted on April 11, 2018 by Daniel Vinish

On March 27, 2018, New York’s highest court finally brought closure to an appeal of a 2014 decision denying an insurer’s motion for partial summary judgment in its coverage litigation with its policyholder. The Court of Appeals’ decision in Keyspan Gas East Corp. v. Munich Reinsurance America, Inc. is available here. In affirming the Appellate Division’s 2016 reversal of the motion court, this decision is destined to have wide-ranging implications on the insurance market.

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Court Allows Damages for Reinsurance Payments Under Equitable Subrogation
Posted on July 13, 2018 by Larry P. Schiffer

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.

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English Court of Appeal Rules on “Experience of Insurance and Reinsurance” Arbitrator Qualifications Includes Legal Experience
Posted on March 24, 2018 by Garon Anthony

In Allianz Insurance PLC (formerly Cornhill Insurance PLC) v. Tonicastar Ltd, [2018] EWCA Civ 434, the Court of Appeal held that the arbitral qualification of experience of insurance and reinsurance means experience as a lawyer working for the industry and does not mean only those who have worked for the industry qualify.

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State Anti-Arbitration Statutes, the New York Convention and the McCarran-Ferguson Act
Posted on May 08, 2018 by Larry P. Schiffer

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.

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