Second Circuit Rules Facultative Certificates Respond On a Cost-Inclusive Basis in Asbestos Dispute

Insurance coverage and reinsurance disputes over asbestos settlements continue to occupy the courts. Many of the reinsurance disputes revolve around how facultative certificates of reinsurance must respond to underlying asbestos settlements involving umbrella policies. The issue typically involves whether the expenses associated with the defense of the underlying claims is recoverable in excess of the underlying policy limits. In a recent case, the Second Circuit issued a fairly long decision on this issue.

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Court Disqualifies Party-Appointed Reinsurance Arbitrator Prior to Arbitration

Challenging the qualifications of an arbitrator is difficult. Most courts reject pre-arbitration challenges and require the objecting party to wait for a final award to raise a challenge. But sometimes the stars align and the challenge is allowed. In a recent case, a California federal court accepted the challenge on cross-motions to compel arbitration and disqualified a party-appointed arbitrator for not being disinterested.

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Motion in Limine Granted Precluding Evidence of Reinsurance in Insurance Coverage Trial

Insurance coverage litigation often involves document production requests for reinsurance information and communications. Courts are mixed on granting motions to compel production of reinsurance information. But what happens to reinsurance-related evidence when it comes to trial? One court recently answered that question.

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What Does the First COVID-19 Appellate Decision Mean?

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?

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New York Federal Court Allows Final Arbitration Award to Remain Sealed

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?

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Court Refuses to Strike Allegations From Counterclaims in Reinsurance Dispute

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.

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Insured’s Claims Against Reinsurers Dismissed Where Reinsurance Contract Had No Cut-Through Clause

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.

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Understanding Reinsurance Terminology—Follow-the-Fortunes

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.

Reinsurer’s Claims Precluded By Prior Arbitration Award

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.

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Arbitrator Disclosure and Vacating Awards

Photo by Andrea Piacquadio on Pexels.com

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.

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