Commentary on insurance and reinsurance disputes and related issues and the website of Schiffer Law & Consulting PLLC
It was bound to happen sooner or later. Finally, an appellate court has weighed in on a COVID-19 property damage coverage dispute. This first appellate decision goes into the insurer win column. So what does it mean for future cases?
Continue reading “What Does the First COVID-19 Appellate Decision Mean?”
Reinsurance arbitrations are typically confidential and generally proceed with a confidentiality agreement in place protecting all arbitration information, including the final award, from disclosure. This is in contrast to legal proceedings, including proceedings collateral to arbitrations, where generally the public’s right to judicial documents outweighs the parties’ privacy. In recent years, when parties to reinsurance arbitrations have gone into court to confirm, enforce, modify or vacate arbitration awards, courts have been reluctant to keep the final awards under seal. In fact, some parties have used this trend as a litigation strategy to “unseal” confidential final arbitration awards by going to court to confirm an award where there was no indication that the losing party would not comply with the award.
Bucking that trend, a New York federal court recently allowed the final arbitration award to remain sealed. Is the tide turning?
Continue reading “New York Federal Court Allows Final Arbitration Award to Remain Sealed”
The Lloyd’s of London Renewal and Reconstruction happened some time ago yet it still lives on with disputes over the role and liability of Equitas in the U.S. for pre-1993 liabilities of Lloyd’s underwriters. In a recent reinsurance dispute, reinsurers–certain Lloyd’s syndicates–sought to strike references to Equitas from the factual allegations of the cedent’s counterclaims. The court denied the motion.
Continue reading “Court Refuses to Strike Allegations From Counterclaims in Reinsurance Dispute”
Whether an underlying insured has a direct right of action against reinsurers often depends on whether there is a cut-through clause in the reinsurance contract. A cut-through clause allows the underlying insured to cut through directly to the reinsurers if the policy issuing company becomes insolvent. Check out my colleague Robert M. Hall’s article, Are Cut-Through Clauses Enforceable?, in the ARIAS U.S. Quarterly, Second Quarter, 2021 and my IRMI.com Expert Commentary on cut-through clauses.
In a recent appellate decision in New York, the court affirmed the dismissal of a complaint by a policyholder against its reinsurers because there was no cut-through clause.
Continue reading “Insured’s Claims Against Reinsurers Dismissed Where Reinsurance Contract Had No Cut-Through Clause”
Over the past several years, I authored several reinsurance commentaries for my friends at International Risk Management Institute, Inc. (“IRMI”) on follow-the-fortunes and follow-the-settlements as part of IRMI’s Expert Commentary series on IRMI.com.
This month, I took the liberty of updating, revising and combining all the past Commentaries on the follow-the-fortunes doctrine and follow-the-settlements, including aggregation, into a new Commentary. You can read the new Commentary here. This is part of my series of Commentaries on reinsurance terminology. I hope you find it useful.
When parties participate in an arbitration and obtain a final award, usually that is the end of the dispute. But sometimes there are collateral agreements involved and the losing party may try to bring litigation based on those collateral agreements to obtain a different form of relief. In a recent case in New York involving protected cell reinsurer, a complex reinsurance agreement, and a related trust agreement, the reinsurer brought an action seeking to enforce certain provisions of the trust agreement after the parties received a final arbitration award under the reinsurance agreement.
Continue reading “Reinsurer’s Claims Precluded By Prior Arbitration Award”
The issue of whether an arbitration award can be vacated based on bias or prejudice because of an alleged non-disclosure by the arbitrator has long plagued commercial arbitration. Many arbitration codes and organizations promote robust and fulsome disclosures by arbitrators, yet there are always occasions where the losing party claims that the arbitrator was biased or prejudiced and that the alleged nondisclosure was at the root of the problem.
The courts, however, have found that to vacate an award, there has to be a showing of actual bias or prejudice that affects the award. The courts have also found that while more forthcoming disclosure should have occurred, the alleged nondisclosure, by itself, is often not close enough to support vacatur of the award.
In a recent case, this scenario played out again in the context of a property appraisal under an insurance policy.
Continue reading “Arbitrator Disclosure and Vacating Awards”
Policyholders typically cannot sue reinsurers directly because of a lack of contractual privity. While there are exceptions in the law, those exceptions are few. But sometimes a reinsurance deal gets structured in such a way that the policyholder may be able to bring a direct action. In a recent case in Florida that is exactly what happened; at least at the motion to dismiss phase of the case.
Continue reading “Tortious Interference Case Against Reinsurers Survives Motion to Dismiss”
Reinsurance agreements with non-US off-shore reinsurers usually involve a reinsurance trust with a bank acting as trustee. These trust agreements typically absolve the trustee from nearly all liability because of their ministerial role in the reinsurance transaction. This is very common in off-shore life, annuity and long-term care reinsurance agreements.
In the last several years, however, trustees have come under scrutiny because some off-shore reinsurers were not quite on the up-and-up and the assets placed in the trust accounts and managed by the reinsurers’ affiliated investment managers have been substandard. This, of course, has caused the reinsurance arrangement to collapse, regulatory issues and often the total loss of the assets meant to secure the cedent’s losses. Because these reinsurers typically do not have assets on shore, some of their cedents have gone after the trustees seeking damages.
In a recent case in New York State court, the motion court granted the trustee’s motion to dismiss but the intermediate appellate court found otherwise and reversed.
Continue reading “Reinsurance Trustee May Be on the Hook for Breach of Contract and Breach of Fiduciary Duty Damages”
Losing parties in arbitrations often seek to vacate the arbitration award claiming that the arbitrator was guilty of misconduct or manifestly disregarded the law. Convincing a court to vacate an arbitration award is not easy and is not typically successful. Under US law, particularly the Federal Arbitration Act (“FAA”), there is no appeal from an arbitration award and the bases to vacate the award are narrow and limited. See FAA, § 10.
In a recent Summary Order, the Second Circuit Court of Appeals, reiterated these principles, although the court did grant some relief to the party seeking vacatur.
Continue reading “The Limits on Challenging an Arbitration Award in an Insurance Dispute”
