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.
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.
In Allianz Insurance PLC (formerly Cornhill Insurance PLC) v. Tonicastar Ltd,  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.
Our March 2018 Reinsurance Newsletter is now available for your reading pleasure. This issue covers the Global v. Century decision by the New York Court of Appeals answering the Second Circuit’s certified question as well as our annual review of reinsurance trends in 2017, as well as cases involving reinsurance for the September 11th terrorist attacks and cases on arbitration and discovery. You can find the newsletter here.
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.
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.