Commentary on insurance and reinsurance disputes and related issues and the website of Schiffer Law & Consulting PLLC
My latest IRMI.com reinsurance commentary has been published. You can read it here (registration may be required).
https://www.irmi.com/articles/expert-commentary/when-a-reinsurer-is-the-real-party-of-interest
Very often litigation is brought in state court and the opposing party removes the case to federal court. That removal is often met with a motion to remand back to state court. In a recent case, the service of suit clause in the reinsurance agreements affected the court’s decision on a motion to remand.
Read more: Service of Suit Clause Requires Remand in Reinsurance DisputeIn Humphreys v. Assicurazioni Generali, S.p.A. (UK), 1:25-CV-01142 (M.D. Pa. Mar. 31, 2026), the liquidator of an insolvent ceding insurer sued reinsurers in Pennsylvania state court when reinsurers rejected the liquidator’s claims under a series of reinsurance contracts. The reinsurers removed the case to federal court in Pennsylvania.
The liquidator moved to remand back to state court based on the service of suit clause in the reinsurance contracts. The reinsurers opposed remand and moved to strike two declarations on custom and practice.
In granting the liquidator’s motion to remand, the court addressed whether the service of suit clause in the reinsurance contracts prohibited the reinsurers from removing the case from state court to federal court. The court determined that the parties intended that the reinsurance contracts incorporate N.M.A. 772, which was the service of suit clause used in the London market when the reinsurance contracts were negotiated. That clause, held the court, required the reinsurers to go to and stay in the state court, which precluded them from removing the case to federal court.
As to the motion to strike, the court denied the motion because it recognized that the declarations were presented by the liquidator to prove customary practices in the London market at the time the reinsurance contracts were negotiated and not to prove missing terms in the reinsurance contracts.
Most reinsurance arbitrations proceed under a confidentiality order or agreement. When the arbitration is over, if a party goes to court to confirm or vacate, a motion to seal is often made in an effort to comply with the parties’ agreement on confidentiality. But it is up to the court whether to seal.
Read more: When Petitions to Vacate and Confirm and Motions to Seal CollideIn Tyson International Co., Ltd. v. Partner Reinsurance Europe, SE, No. 1:25-cv-03152 (ALC) (SDNY Mar. 31, 2026), after a long and complicated arbitration involving a captive insurance company’s dispute with its reinsurer over settlement of a substantial fire loss in a poultry rendering facility and the valuation of the property, the arbitration panel issued an award in favor of the cedent but at an amount substantially lower than the amount sought from the reinsurer. Accordingly, the cedent sought to vacate that portion of the award concerning the valuation issue, or alternatively, vacating the entire award and remanding it back to the panel. The reinsurer sought to confirm. Both parties sought to seal various portions of the submissions.
In a separate decision, the court denied the petition to vacate the award and granted the petition to confirm the award. The court found that the cedent did not allege a statutory basis for vacatur and rejected the claims of manifest disregard of the law and that the panel exceeded its authority. Notably, the court quoted the honorable engagement language in the arbitration clause in support of its denial of the motion to vacate.
As to the requests to seal, the court granted the motions in part and denied the motions in part. The court noted that both parties conceded that the documents they sought to seal were judicial documents, which puts the burden on the proponents to show that sealing is necessary to preserve higher values.
The court categorized the exhibits into three categories: (1) the contracts/policies in the underlying dispute; (2) transcripts and opinions from the arbitration; and (3) internal correspondence. This was in addition to the petitions and memoranda of law.
Confidentiality was touted as a key protection of arbitration and the basis for sealing. Also that sealing was appropriate because of proprietary business information in the documents. The court agreed that the documents in category 1 should remain sealed, but denied the request for the other two categories because they contained large portions of non-commercial and non-confidential information. Thus, the court ordered the parties to file redacted portions of the documents in the last two categories.
The Vesttoo scandal has spawned significant disputes between all types of contracting parties. In one dispute, the policyholder’s parent sued a reinsurance intermediary for breach of its reinsurance intermediary authorization agreement (“RIAA”).
Read more: Federal Appeals Court Affirms Dismissal of Most, But Not All, Claims Against Reinsurance BrokerIn Porch.com v. Gallagher Re, Inc., No. 25-10489 (5th Cir. Apr. 2, 2026), the district court granted the intermediary’s motion to dismiss all claims of breach of contract arising out of the Vesttoo scandal. On appeal, the 5th Circuit affirmed dismissal of two of the claims, but allowed one claim of breach to proceed.
The parties entered into an RIAA and the intermediary procured a reinsurance contract. Security for the reinsurance contract was to be a letter of credit but it turned out to be a fraud. New insurance had to be put in place and substantial funds were lost. The insured sued the intermediary for breach of contract under several sections of the RIAA.
Section 5 of the RIAA required the intermediary to retain reinsurance records for 10 years. The circuit court affirmed dismissal of breach of this section because the claim that the intermediary did not obtain the letter of credit documents contradicted the plain meaning of “retained” in Section 5. Nor did Section 5 include an obligation to procure documents not in the intermediary’s possession.
Section 11 of the RIAA required the intermediary to comply with economic sanction laws. The court held that the intermediary did not breach this section by allegedly failing to comply with Texas insurance laws because this section only applied to economic sanctions.
Finally, the court held that there was enough to sustain a claim of breach of contract concerning Section 13 of the RIAA, which requires the intermediary to provide administrative services. The court found the section ambiguous and could be interpreted to encompass duties concerning the letter of credit. Because there were issues of fact as to whether it was customary for an intermediary to perform servicing duties concerning the letter of credit, the court reversed the district court and sustained this one claim against the intermediary.
Claims against reinsurance intermediaries are rare and we will see where this one goes. But when a major scandal occurs, no one in the contracting chain is immune from a lawsuit.
Court decisions on petitions to confirm or vacate arbitration awards often go into some detail about the dispute. In a recent case, the court chose to use the arbitrator’s very comprehensive reasoned award to address both confirmation and vacatur in extreme detail.
Read more: Federal Court Confirms Arbitration Award for Cedent and Denies Reinsurers’ Petition to Vacate Using Details of the Arbitrator’s Reasoned AwardIn Hamilton Managing Agency Ltd. v. ICI Mutual Insurance Co., RRG, No. 2:25-mc-00079-cr, D. VT (Apr. 14, 2026), the cedent paid a claim to an insured under a D&O policy that was reinsured in part. The reinsurers disputed liability under the reinsurance contract and the parties arbitrated before a sole arbitrator. The arbitrator issued interim and final awards in favor of the cedent and apparently issued a detailed reasoned award. The reinsurers petitioned to vacate the award on multiple grounds. The cedent cross-petitioned to confirm the award.
In a lengthy and detailed wide-ranging opinion the court denied the petition to vacate and confirmed the arbitration award. What is different about this case is that the court chose to expound upon the arbitrator’s reasoned award in great detail to address the various grounds for vacatur and to support confirmation.
The issues arbitrated focused on whether “follow-the-fortunes” should be imputed into the reinsurance contract (or whether there even was a “follow-the-fortunes” clause) and whether the prior acts exclusion in the underlying policy precluded coverage of the subject matter of the dispute (reinstatement of financial filings with the SEC).
On the petition to vacate, among other things, the issue of arbitrator disclosure was raised in the context of seeking to vacate because of evident partiality. The ARIAS·U.S. Code of Conduct and its application to the allegations of non-disclosure were part of the court’s decision. The non-disclosure argument focused on the arbitrator’s prior expert testimony concerning whether industry custom and practice requires that “follow-the-fortunes” be imputed into all reinsurance contracts. The issue was raised with the arbitrator, who explained his position, which the court pointed out the reinsurers accepted. Ultimately, the court found that the reinsurers waived the argument. Nevertheless, the court looked at the substance of the argument and found that the arbitrator’s prior testimony on the imputation issue did not provide a basis for finding evident partiality.
The reinsurers also sought to vacate the award based on the arbitrator exceeding his authority and manifest disregard of the law. The court found that the arbitrator’s award was well within the scope of the arbitration clause, which included honorable engagement language. The court also found that the arbitrator provided a colorable justification for the award and that no egregious impropriety was apparent. Notably, the court stated that “[a]n arbitrator cannot manifestly disregard the law when he or she is empowered by the governing agreement to disregard it and follow industry custom and practice instead.” (citation omitted).
Arbitration awards are very hard to vacate. Where you have a well-reasoned award, the task is even harder.
My most recent IRMI.com Expert Commentary – Reinsurance was published on April 3, 2026. It is about why drafting reinsurance contracts in plain English is important. You may have to register to read it. You can access it here.
Proving the existence of an old reinsurance contract, especially a facultative certificate, is a fact-intensive endeavor. Time and time again, long-tail losses, like asbestos losses, result in insurance companies uncovering “evidence” of long-lost reinsurance certificates. Whether that evidence is sufficient to “prove” the contract is often a question of fact.
Continue reading “Illinois Intermediate Appellate Court Reverses Summary Judgment for Reinsurer”
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In my latest IRMI.com Expert Commentary – Reinsurance, I discuss Special Termination provisions in reinsurance contracts and what they mean. You can access the Commentary here.
Asbestos claims continue to spawn reinsurance disputes over facultative reinsurance coverage of expenses in addition to the limits. What happens when the issue is decided in an arbitration between a ceding insurer and one reinsurer and the ceding insurer raises the same issue against another reinsurer in a subsequent litigation?
Read more: Sixth Circuit Affirms Collateral Estoppel in Favor of ReinsurerIn Amerisure Mutual Insurance Co. v. Swiss Reinsurance America Corp., No. 24-1492 (6th Cir. Nov. 4, 2025) (Not Recommended for Publication), the circuit court affirmed an order of the district court granting a reinsurer’s motion for summary judgment based on collateral estoppel. The dispute was over expenses in addition to the limits for defending asbestos cases against the underlying insured. The ceding insurer issued primary and umbrella policies and reinsured the umbrella policies with the reinsurer under facultative certificates.
The real issue here is the ceding insurer’s prior arbitration with another facultative reinsurer where the arbitration panel in its final award held that the reinsurer did not have to pay expenses outside the limits of the umbrella policies under the facultative certificates. Subsequent to that arbitration the ceding insurer sought judicial confirmation of the award (based on other elements of the award that were favorable to the ceding insurer).
When the ceding insurer brought the underlying action against the second reinsurer arguing the same issue concerning whether the facultative certificate had to pay the umbrella expenses in addition to the limits, the reinsurer countered with a motion for summary judgment for collateral estoppel based on the prior arbitration award that was confirmed in court. The district court agreed and granted the reinsurer summary judgment.
On appeal, the Sixth Circuit affirmed. While the opinion is not recommended for publication and is therefore not precedent, the court provides a clear roadmap for analyzing whether a prior arbitration award in favor of a different reinsurer can support collateral estoppel for a different but similarly situated reinsurer so it is worth the read.
In essence, the court found that all the elements of collateral estoppel or issue preclusion applied and rejected the ceding insurer’s arguments to the contrary. The court found that the main issue being litigated — whether the ceding insurer’s reinsurers must reimburse it for defense costs it paid to its insured over the umbrella limits — was raised and actually litigated in the earlier arbitration. The court found that the arbitration record and award indicate that the umbrella drop-down provision was necessarily decided against the ceding insurer even though it was not expressly mentioned in the award.
The court found that the ceding insurer had the opportunity to fully and fairly litigate the defense cost issue in the arbitration. It noted that the ceding insurer sought to confirm the award and rejected the ceding insurer’s argument that the limited opportunity to “appeal” an arbitration award should preclude collateral estoppel. The court also rejected the ceding insurer’s argument that the “honorable engagement clause” and the difference in how an arbitration is conducted compared to a court proceeding should preclude collateral estoppel. The court noted that the ceding insurer had not shown the arbitration to be unfair or that the decision was unreliable.
The court also rejected the argument that mutuality of estoppel precluded collateral estoppel finding that the ceding insurer’s argumentative posture in both proceedings was the same. The court held that requiring mutuality would encourage gamesmanship.
At bottom the court held that precluding the ceding insurer from relitigating the same issue against the second reinsurer served an essential purpose of the collateral estoppel doctrine, which is to promote judicial economy by preventing needless litigation.
