monte carlo edition reinsurance review - goldberg segalla

Monte Carlo Edition

Reinsurance ReviewAn international reinsurance publication | September 2013

Well-DrafteD Warranties WorkReinsurers not liable in catastrophe at sea in Cebu Philippines p 7

ProPer aCCoUntinG is CritiCal in reinsUranCe BillinGsCedentrsquos overbilling nets reinsurer $51 million judgment p 2

Spotlight

reinsUranCe anD sanCtionsBy Clive OrsquoConnell Gary M Phillips and Aaron J Aisen p 10

Monte Carlo EditionReinsurance Review

1

eDitorsDaniel W GerberJeffrey L KingsleyClive OrsquoConnellPatrick B Omillian

Goldberg Segallarsquos Reinsurance Review provides timely summaries of and access to the latest reinsurance law developments worldwide and is published monthly Cases are organized by court and date In addition we provide the latest information regarding news in the insurance and rein-surance industries If you or others in your organization are interested in receiving the publication please visit lsquoResourcesrsquo at wwwGoldbergSegallacom or scan the code below

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Attorney Advertising Prior results do not guarantee a similar outcome

SOUThERN diSTRiCT OF NEW YORK

p 1Late Notice May Doom Cedentrsquos Claim if Notice Was Late Due to Cedentrsquos Bad Faith

p 2Cedentrsquos Overbilling Arising Out of 911 Losses Nets Reinsurer $51 Million Judgment

Action to Enforce Guarantee of Reinsurance Agreements Need Not Await Arbitration of Underlying Dispute

EASTERN diSTRiCT OF PENNSYLvANiA

p 3 Reinsurer Relieved of Liability for $44 Million Billing Due to Cedentrsquos Four-Year Delay in Suing Reinsurer

NORThERN diSTRiCT OF iLLiNOiS

p 3You Do Not Have the Right to Arbitrate mdash Court Denies Arbitration Where Cedentrsquos Successor Did Not Obtain Cedentrsquos Right to Arbitrate Disputes

EASTERN diSTRiCT OF CALiFORNiA

p 4Court Approves Class Action Alleging Illegal Kickback Scheme Between Lender and Its Captive Reinsurer

diSTRiCT OF MASSAChUSETTS

p 5Leave It to the Panel mdash Court Refuses to Resolve Disputes Relating to Arbitrability of Claim and Selection of Arbitration Panel

SUPREME COURT OF NEW YORK NEW YORK COUNTY

p 6Ongoing Settlement Negotiations Do Not Toll Statute of Limitations mdash Cedent Forfeited Breach of Contract Claim Against Reinsurer for Unpaid Bill

SOUThERN diSTRiCT OF MiSSiSSiPPi

p 7Fraud Contract and Alter Ego Claims Against Insurers and Reinsurers Go Up in Smoke mdash Lawsuit Dismissed Entirely

QUEENrsquoS BENCh diviSiON COMMERCiAL COURT (UK)

p 7Good News Well-Drafted Warranties Do Work

ThE SUPREME COURT iN ENGLANd

p 8The English Supreme Court Confirms the Correct Way an Insurance Tower Should Exhaust

SPOTLiGhT

p 10Reinsurance and Sanctions

NEWS ANd NOTESp 11

in this eDition

For educational purposes only copy 2013 Goldberg Segalla All rights reserved


1

soUthern DistriCt of neW York

Late Notice May doom Cedentrsquos Claim if Notice Was Late due to Cedentrsquos Bad Faith

InS Co of the State of PennSylvanIa v aRgonaut InS Co(No 12 Civ 6494 (DLC) August 6 2013)

The Insurance Company of the State of Pennsylvania (ICSOP) sued its reinsurer Argonaut Insurance Company (Argonaut) to enforce a reinsurance contract In the contract Argonaut agreed to reinsure a portion of an excess insurance policy written by ICSOP Argonaut denied coverage because of late notice Both parties moved for summary judgment on Argonautrsquos late notice defense The court ruled in favor of Argonaut but left for trial the questions of whether Argonaut had been prejudiced and whether ICSOP provided late notice in bad faith

From 1980-2009 a series of disputes and negotiations arose regarding asbestos claims against the underlying insured It was not until 2009 through an ldquoinitial loss advicerdquo that ICSOP first provided notice to Argonaut under their facultative reinsurance certificate Later ICSOP sent a ldquoreinsurance notice of lossrdquo to Argonaut but did not mention any of the previous court actions or settlement negotiations that had taken place In December 2009 Argonaut sent ICSOP a letter reserving its right to deny coverage based on late notice ICSOP then filed suit

Although the court predominantly applied California law it acknowledged that New Yorkrsquos and Californiarsquos reinsurance laws are nearly identical In its decision the court used New York law to clarify unsettled questions of California law Under California law notice can be either actual or constructive Under both statesrsquo

laws to deny a claim based on late notice a reinsurer must show (1) the cedentrsquos notice was untimely and (2) as a result the reinsurer was prejudiced

Argonaut argued that ICSOP should have provided notice in 1989 or no later than 2000 The court stated that ICSOPrsquos obligation to give notice arose at the latest in 2002 While ICSOP conceded that it did not give actual notice until 2009 it argued that it gave constructive notice as early as 2000 and again in 2002 California law recognizes that notice to a co-insurer constructively satisfies the obligation of notice ICSOP contended that it provided Argonaut notice under a different reinsurance agreement between the companies covering the same policy The court disagreed and stated that ICSOP did not establish that it had provided proper notice to Argonaut

In addition to late notice to sustain a late notice defense both states require the reinsurer to establish prejudice Ordinarily courts assume that the interests of reinsurers and reinsureds are aligned But in this case that was not true There was undisputed evidence that ICSOP remained neutral on issues in prior disputes over the contract due to conflicting interests of its multiple clients Therefore Argonaut may have been able to show prejudice by being denied the opportunity to encourage an earlier settlement Yet the court noted that showing prejudice would be difficult for Argonaut to prove

The court went on to say that Argonaut may be relieved from showing prejudice if it could show ICSOP acted in bad faith in failing to provide notice This New York exception arises given the nature of reinsurance relationships California and New York refer to this relationship as one of the ldquoutmost good faithrdquo A reinsurer relies on the insurer to be its eyes and ears While California courts have not addressed the bad faith exception to showing prejudice the New York court said ldquoit is possible to predict how

lsquo[Californiarsquos] highest court would rule on the issuersquordquo

The court gave two reasons for this prediction and discredited ICSOPrsquos argument against the rule First both states recognize that the cedent-reinsurer relations is one of the utmost respect and requires all information related to risk to be communicated to the reinsurer Second when cedents are themselves insurance companies they are familiar with the practice of giving and receiving notice ICSOP argued that California would not adopt the bad faith exception based on a key difference between the statesrsquo laws in the direct insurance context California requires insurers to show prejudice when relying upon late notice New York follows a no-prejudice rule The court did not find this difference to be compelling The court explained that other states such as New Hampshire have a bad faith exception in the reinsurance context but differ from New York in the direct insurance context

Ultimately the court predicted that California would recognize the bad faith exception to the late notice rule in the reinsurance context However because discovery in the case had been limited to late notice the court allowed additional discovery on the issue of ICSOPrsquos bad faith before proceeding to trial on that issue and whether Argonaut had been prejudiced

iMPACT The issue of whether late notice provides a viable defense to a cedentrsquos claim is frequently disputed Although a reinsurer often must show that it was prejudiced by late notice this case illustrates that prejudice need not be established where a reinsurer can show that a cedent provided late notice in bad faith


2

Cedentrsquos Overbilling Arising Out of 911 Losses Nets Reinsurer $51 Million Judgment

aIoI nISSay Dowa InS Co v PRoSIght SPeCIalty MgMt Co(11 Civ 1330 June 20 2013)

A New York Federal court found that the aviation insurer Prosight Specialty Management Co (Prosight) had substantially overbilled its Japanese reinsurer Aioi Nissay Dowa Insurance Co (Aioi) in the wake of the September 11 2001 terrorist attacks and entered judgment in favor of the reinsurer in the amount of $51 million The United States District Court for the Southern District of New York concluded that the insurer charged the reinsurer $35 million more than it should have for reinsurance premiums that the reinsurer agreed to cover after the insurer suffered losses The court added prejudgment interest to those damages

The court determined that the insurer should have taken commutation agreements that it made with other reinsurers into account when billing Aioi for the premiums Pursuant to the commutation agreements Prosight took a lump sum in exchange for annulling its reinsurance contracts with the other reinsurers However the lump sum amounts were actually much higher than the amount Prosight would have collected from the other reinsurers had the commutation agreements not existed

Under a set of agreements Aioi had promised to cover premiums that Prosight had to pay to reinstate the value of its reinsurance contracts following heavy losses it suffered in 2000 and 2001 The reinstatement premiums were intended to return Prosightrsquos coverage back to pre-loss levels and protect the aviation insurer from future losses Aioi argued that Prosightrsquos commutation agreements with the other reinsurers impacted Aioirsquos responsibility

to cover the reinstatement premiums However because the commutation agreements annulled Prosightrsquos other reinsurance contracts Prosight never had to pay the reinstatement premiums it would otherwise have owed

On these facts the court concluded that Aioi was only obligated to cover a percentage of the premiums that Prosight actually paid to reinstate the value of its reinsurance contracts Aioi did not have to pay the percentage of the reinstatement premiums Prosight would have owed if the other reinsurers had never entered the commutation agreements Prosight erred by continuing to bill Aioi as if it had not entered into commutation agreements with the other reinsurers

iMPACT Commutation agreements are frequent between cedents and insurers This case illustrates the need for cedents to properly account for the economic benefits realized through commutation agreements when billing reinsurers

Action to Enforce Guarantee of Reinsurance Agreements Need Not Await Arbitration of Underlying dispute

gReenlIght ReInSuRanCe v aPPalaChIan unDeRwRIteRS(Case No 12 Civ 8544 July 25 2013)

The dispute arises from three sets of overlapping contracts between various parties Reinsurance Agreements Retrocession Agreements and Guarantees Greenlight the plaintiff in the suit was the reinsurer on the Reinsurance Agreements Greenlight entered into Retrocession Agreements with Appalachian Reinsurance a Bermudian Affiliate of AUI and ISG Because Appalachian Reinsurance was not a Cayman Islands or US entity Greenlight demanded and received Guarantees from ISG and AUI

The Reinsurance and Retrocession Agreements included mandatory arbitration provisions but the Guarantees did not After a dispute arose over payments owing to Greenlight on the underlying agreements Greenlight sued on the Guarantees and sought a declaratory judgment with respect to its rights under the Guarantees

The defendants moved to dismiss the suit arguing first that because the amounts due under the Reinsurance and Retrocession Agreements has yet to be determined in arbitration the claims on the Guarantees are not yet ripe The court disagreed and allowed the suit on the Guarantees to proceed The court held that a ldquodirect and immediate dilemmardquo existed where Greenlight claimed that defendants failed to guarantee the Reinsurance and Retrocession Agreements The court further held that the claims under the guarantees were not subject to dismissal due to the ongoing arbitration of the Reinsurance and Retrocession Agreements as the Guarantees themselves did not contain an arbitration clause

Additionally the court found that the specific language of the Guarantees obligated defendants as guarantors of payment or ldquoprimary obligorsrdquo rather than collection or ldquosecondary obligorsrdquo As such Greenlight is not obligated to exhaust all efforts to collect from the principal obligor before bringing a case against the guarantor

Defendants also moved to dismissed Greenlightrsquos claim for an accounting claiming that Greenlight did not even allege that it has not been given access to defendantsrsquo books and records The Guarantees gave Greenlight the right to inspect defendantsrsquo books and records The court dismiss Greenlightrsquos claim for an accounting but allowed Greenlight leave to replead its accounting claim with greater specificity iMPACT Arbitration is the norm for reinsurance disputes yet in this case a


3

Guarantee Agreement relating to underlying reinsurance agreements did not include an arbitration clause This case illustrates the importance of including arbitration clauses in all agreements relating to a reinsurance agreement in order to preserve arbitration as the mandatory dispute resolution mechanism

eastern DistriCt of PennsYlvania

Reinsurer Relieved of Liability for $44 Million Billing due to Cedentrsquos Four-Year delay in Suing Reinsurer

oneBeaCon InSuRanCe CoMPany v avIva InSuRanCe lIMIteD(Civil Action No 10-7498 May 17 2013)

On December 27 2010 OneBeacon Insurance Company (OneBeacon) sued Aviva Insurance Limited (Aviva) for wrongfully refusing to pay claims under a reinsurance contract OneBeacon the cedent provided insurance coverage to various US policyholders Aviva reinsured those liabilities After Aviva refused to indemnify OneBeacon for different reasons OneBeacon filed suit Predecessors of both companies agreed that Aviva would reinsure 100 percent of the liabilities for the global risk accounts of OneBeacon The agreement was unwritten but the companies agreed that it included standard provisions of a reinsurance contract including a ldquofollow-the-fortunesrdquo provision and an errors and omission provision

Until 2001 Aviva only required bordereaux before OneBeacon would be paid on claims it submitted to Aviva Normally though in addition to the bordereaux OneBeacon would provide other documentation and information Then in 2002 a company affiliated with Aviva began to require additional information OneBeacon did not

expressly agree to the request but did occasionally provide some of the requested documents

In the lawsuit the companies disputed what documentation was required for OneBeacon to make a claim The claim requirements are important because they affect when the statute of limitations begins to run OneBeacon contended the submission of the bordereaux was the only requirement and the statute of limitations began to run when Aviva denied the claim Aviva argued that the statute of limitations began when the loss was suffered by OneBeacon The fact that there was no contract limited the courtrsquos analysis Both parties agreed however the only documentation required by the predecessor was the bordereaux Therefore the court held that at least a bordereaux was required and the statute of limitations began to run when a bordereaux was submitted The companies also argued whether the contract was modified to include the new documentation that was being requested but the judge determined that the question of whether additional documentation was required under the partiesrsquo agreement would require a trial

Additionally the two companies shared an accounting system to make payments until 2001 After some mergers and restructuring OneBeacon began manually billing Aviva OneBeacon asserted that after the 1998 merger some bills were not fully conveyed to Aviva and contended that the error was not discovered until 2005 Aviva argued that OneBeacon knew of the billing problems as early as 1998 but did not investigate the issue OneBeacon billed Aviva for $23 million in May 2005 and nearly $18 million in June of that year Again in 2006 OneBeacon notified Aviva that it had more unbilled claims to submit totaling $44 million that claim was submitted in October 2006

In August 2006 the parties negotiated a standstill agreement that would toll the

statute of limitation for the two 2005 billings The agreement could be terminated by either side with 30 days notice In November 2010 OneBeacon notified Aviva of a termination effective December 24 2010

The court determined that whether the late 2005 claims were made within a reasonable time of discovery will require a trial As to the 2006 claim the judge agreed with Aviva that the standstill agreement did not apply Because the statute of limitation had run on that claim in October 2010 at the latest the suit filed in December 2010 for that claim was untimely Therefore Aviva was not required to pay that $44 million claim

iMPACT Payment disputes between cedents and their reinsurers are subject to laws relating to contracts generally Statutes of limitations must be complied with or else as this case exemplifies large claims can go unreimbursed

northern DistriCt of illinois

You do Not have the Right to Arbitrate mdash Court denies Arbitration Where Cedentrsquos Successor did Not Obtain Cedentrsquos Right to Arbitrate disputes

PIne toP ReCeIvaBleS of Ill llC v BanCo De SeguRoS Del eStaDo(Case No 12 C 6357 June 11 2013)

Pine Top Insurance Company (Pine) was an Illinois-based insurance company Between 1977 and 1986 the company entered into reinsurance treaties with Banco De Seguros Del Estado (Banco) Those treaties included standard provisions for payments between the companies Banco would pay a share of Pinersquos insurance contract liabilities in exchange for premium payments and other recoveries The treaties also included a mandatory arbitration clause


4

In 1986 Pine was placed in liquidation Banco was provided with a final account and a demand for payment of the net amount due under the treaties Banco never paid the amount due In 2010 Pine Top Receivables of Illinois (PTR) agreed to purchase ldquoall rights title benefit and interest in debts [owed by Banco to Pine]rdquo The purchase agreement specified that the agreement was not to be construed as a replacement or assignment of the treaties After the purchase PTR demanded that Banco arbitrate the outstanding debt Banco refused PTR then filed a lawsuit seeking to compel arbitration and prevent Banco from opposing arbitration or alternatively for damages from the breach of contract

Banco filed a motion to dismiss the claims to compel arbitration and prevent it from opposing arbitration PTR argued that the purchase agreement included the arbitration clause of the treaties However the court disagreed and dismissed the claims

The court explained that the purchase agreement clearly defined PTRrsquos rights Arbitration of the debt was not included in those rights The judge pointed out that the purchase agreement split PTRrsquos right into two parts the right to obtain information and the right to collect debt The agreement granted PTR all of Pinersquos rights to obtain information about debts However PTR was only authorized to ldquodemand sue for compromise and recover all amountsrdquo due at the time of the agreement or that become due later

By highlighting that the purchase agreement identified four specific actions PTR could take to recover debt the court stated arbitration was not authorized in the contract The court explained that if the parties intended to transfer all the rights Pine had the purchase agreement would not have divided the rights in two

Finally the court denied PTRrsquos attempt to prohibit Banco from opposing arbitration PTR argued that it would be unfair for Banco to oppose arbitration It based this on Bancorsquos use of the underlying treaties for defense but refusal to follow its arbitration clause The judge disagreed Although Banco could not pursue PTR for claims against Pine it was required to use the treaties to prove the amount and validity of the debts owed to PTR Therefore it should not be compelled to arbitrate

iMPACT This case recognizes a distinction between ordinary reinsurance debts and liquidated reinsurance debts Arbitration is generally preferred for reinsurance debts However when the reinsurance debt is purchased the court may choose litigation This case also highlights the importance of clear contractual drafting While courts generally prefer arbitration for reinsurance debts a written contract will be enforced even if it precludes arbitration

eastern DistriCt of California

Court Approves Class Action Alleging illegal Kickback Scheme Between Lender and its Captive Reinsurer

MunoZ v Phh CoRP(Case No 108-cv-0759-AWI-BAM May 14 2013)

A group of homeowners were granted class action status in a lawsuit against PHH Corporation (PHH) and its affiliated captive reinsurance company Atrium Insurance Corporation (Atrium) The case filed in 2008 alleges that the lender and reinsurer acted together to violate sections of the Real Estate Settlement Procedures Act (RESPA) The homeowners state that the companies violated RESPA by entering into captive reinsurance arrangements for the purpose of receiving kickbacks

referral payments and unearned fee splits The homeowners are hoping to recover ldquothree times the amount hellip paid for PHHrsquos settlement servicesrdquo as permitted by RESPA

Typically in the real estate industry individuals who purchase a home with less than 20 percent down payment must purchase insurance to protect the lender from a possible default These insurance premiums are included in the monthly mortgage payment and then disbursed by the lender to the insurer The insurance companies are usually unaffiliated with the lender but the lender normally chooses which company will provide insurance Some of these insurers then obtain reinsurance coverage for the risk The reinsurance companies receive the typical ceded premium in exchange for covering the risk

Some lenders like PHH have set up their own captive reinsurance companies to provide coverage for their own loans The lender creates a ldquocaptive reinsurance agreementrdquo with an insurance company Under these agreements the lender refers homeownersborrowers to the insurance company and the insurance company obtains reinsurance coverage provided by the lenderrsquos captive reinsurer

PHH is a residential mortgage lender Atrium is a captive reinsurer and a wholly-owned subsidiary of PHH Atrium has different reinsurance agreements with multiple insurance companies The terms of each agreement vary however all the agreements are ldquoexcess of lossrdquo or ldquoband of lossrdquo agreement All the premium cedes from the primary insurers were pooled into trust accounts Those accounts were used to satisfy the reinsurance obligations

The homeowners allege that the premium cedes were actually kickbacks They state that Atrium never assumed any real reinsurance risk The homeowners argue


5

no risk was transferred because the trusts were funded by the ceded premiums and not Atriumrsquos own capital They further argued that the ldquobands of lossrdquo limited Atriumrsquos potential exposure to risk

PHH and Atrium argue that they are a bona fide reinsurance service and that the captive reinsurance agreements are lawful The question for trial will revolve around the issue of whether Atrium actually provided reinsurance services

The California federal court granted class action status to only some of the parties involved To receive class action status there are a number of requirements that must be shown These include requirements such as a common question of law or fact and a large number of people affected The court agreed with the homeowners on most of the requirements

Due to statute of limitations issues however the court disagreed with the homeowners about who could be included in the class A person may only bring a claim under RESPA within one year The homeowners argued that the class should include people with Atrium reinsured loans back to 2004 The judge ruled that the class would only include those people that received Atrium reinsured loans within a year before the 2008 case filing

iMPACT Suits against lenders and captive reinsurers under RESPA have become a common occurrence This case provides guidance for companies in and beyond the mortgage loan context for creating viable and legitimate captive reinsurance arrangements

DistriCt of MassaChUsetts

Leave it to the Panel mdash Court Refuses to Resolve disputes Relating to Arbitrability of Claim and Selection of Arbitration Panel

natIonal CaSualty Co v oneBeaCon aMeRICan InS Co(Civil Action No 12-11487-DJC July 1 2013)

OneBeacon American Insurance Company (OneBeacon) entered into annual reinsurance contracts with various reinsurers National Casualty Company (National) Employers Insurance Company of Wausau (Wausau) and Swiss Re America Corporation (Swiss Re) all participated as reinsurers in at least one reinsurance contract with OneBeacon from 1971 to 1985 The contracts contained identical language including the definition of an occurrence

In 2007 OneBeacon arbitrated a claim with Swiss Re for losses relating to asbestos and silica The arbitrator ruled in favor of Swiss Re stating that the reinsurer was not obligated to pay those claims That ruling was confirmed as a final judgment by the court

In 2012 OneBeacon demanded arbitration of the losses with National and Wausau (the reinsurers) According to the reinsurers some of the claims against Wausau were identical to those against Swiss Re

OneBeacon and the reinsurers agreed to arbitrate the claims in one combined proceeding As part of that agreement the companies set out a procedure for selecting an arbitration panel of two arbitrators and an umpire In the event that the arbitrators could not select a neutral umpire each arbitrator was to select three potential umpires The other side would then ldquostrikerdquo

or eliminate two of those umpires The remaining two would be assigned an odd or even number Then the value of closing number of the Dow Jones Industrial Average of a later date would determine who would be the umpire

The umpire selection came down to the Dow Jones method According to OneBeacon two people selected by the reinsurers were ineligible OneBeacon asserted that the senior vice president and senior legal counsel for Swiss Re at the time OneBeacon arbitrated with Swiss Re Mr Brodnan was ineligible OneBeacon asserted another potential umpire Mr Wigmore was ineligible because he ldquolacked impartialityrdquo OneBeacon emailed both candidates asking them to withdraw The reinsurers then emailed both candidates and told them to refuse to withdraw because OneBeacon violated the agreement by contacting the candidates directly Mr Wigmore decided to withdraw Mr Brodnan did not withdraw and stated that he did not have knowledge of the Swiss Re arbitration The reinsurers informed OneBeacon that they considered its communication with and the subsequent withdrawal by Mr Wigmore to be a ldquostrikerdquo for the umpire selection process

In October 2012 the reinsurers filed the lawsuit seeking a judgment preventing OneBeacon from litigating or arbitrating the asbestossilica claims Additionally the reinsurers sought a judgment stating that the communication and withdrawal counted as a ldquostrikerdquo and they sought to have the court enforce the umpire selection portion of the agreement

The court dismissed the attempt to prevent litigation and arbitration of the claims The reinsurers argued that the claims were identical to those in the Swiss Re arbitration They contend that since the court affirmed the Swiss Re arbitration decision by final judgment OneBeacon was precluded from arbitrating those claims again OneBeacon argued that while previous arbitrations


6

can be preclusive such decision is the arbitratorrsquos to make To determine whether the arbitration was precluded there would have to be a finding that the claims were identical The judge agreed with OneBeacon ruling that whether the arbitration was precluded would ldquorequire the Court to take inappropriate steps of visiting the merits of the claimsrdquo an action that can only be determined by an arbitral panel

The court also ruled that the withdrawal of Mr Wigmore did not constitute a ldquostrikerdquo The reinsurers argued that OneBeaconrsquos direct contact with Mr Wigmore challenging his impartiality was a breach of the arbitration agreement OneBeacon contended that direct contact was not prohibited by the agreement and that Mr Wigmorersquos withdrawal was voluntary The court agreed with OneBeacon and ruled that it was not a ldquostrikerdquo

Finally the court addressed arguments about the ability of Mr Brodnan to serve as an umpire OneBeacon argued that his role as senior vice president and senior legal counsel for Swiss Re at the time OneBeacon arbitrated with Swiss Re disqualified him from consideration As such OneBeacon requested that the court order that he be replaced

The court refused to do so because it lacked the authority to do so The court stated that it may only intervene to designate or appoint an umpire in limited circumstances where the arbitration agreements are ineffective in accomplishing the task Also courts generally do not have the power to remove a panel member until after the ldquoissuance of an arbitral awardrdquo Since there was not even a selected arbitration panel member let alone an arbitral award it was premature to render such a decision It was still possible that Mr Brodnan would not even be on the final arbitration panel

iMPACT This court addressed a number of issues relating to arbitration and as

is typical refused to inject itself into the arbitration process The case supports the widely accepted rule that courts refuse to get involved in issues relating to the conduct of an arbitration and instead broadly defer to arbitration panels to resolve disputes relating to an arbitration

sUPreMe CoUrt of neW York neW York CoUntY

Ongoing Settlement Negotiations do Not Toll Statute of Limitations mdash Cedent Forfeited Breach of Contract Claim Against Reinsurer for Unpaid Bill

SuPeRIntenDent of fInanCIal SeRvICeS of the State of new yoRk v guaRantee InSuRanCe CoMPany(Case No 45002313 June 10 2013)

The New York Liquidation Bureau (the Bureau) the liquidator of National Insurance Company sued Guarantee Insurance Company (Guarantee) for breach of a reinsurance contract The 1981 reinsurance contract stated that Guarantee would pay 375 percent of any loss incurred by certain policies issued during the contract The agreement lasted until it was cancelled in 1982 In 1988 Whiting went into liquidation by the Bureau

In 1994 and again in 2001 the Bureau sent Guarantee bills for losses relating to those policies Guarantee audited the claims made by the Bureau in both bills Guarantee offered to settle all current and future liability of the contract about nine months after each bill Both offers were rejected After the second rejection the two companies continued to negotiate but never settled and Guarantee never made a payment on either bill

In 2009 the Bureau sent Guarantee a $2 million bill for all losses during the post-

liquidation period Guarantee denied all liability and the Bureau filed suit in 2013 Guarantee argued the claims were barred by the statute of limitations because the bills were presented in 1994 and 2001 beyond the six-year statute of limitations Accordingly the reinsurer filed a motion to dismiss

The Bureau argued that Guaranteersquos settlement offers were not rejections of either of its bills Instead the Bureau claimed that Guarantee never denied liability and the settlements were not its final position Additionally the Bureau argued that because the parties were negotiating a settlement the statute of limitations was not running during that time

The court agreed with Guarantee that the statute of limitations had expired and denied the majority of the Bureaursquos claims The court stated that an express rejection of payment is not the only action that triggers accrual of a claim Failure to pay on time also triggers accrual of a breach of contract claim against a reinsurer Also the court stated that the partiesrsquo attempts to negotiate a settlement did not toll the statute of limitations Although it dismissed most of the Bureaursquos claim the court allowed portions of the 2009 billing to survive because the Bureau did not previously submit a portion of the claims in that bill to Guarantee

iMPACT Delay in initiating a breach of contract action against a reinsurer for an alleged breach in failing to pay a billing may yield the drastic result that multi-million dollar claims are uncollectible This case also illustrates the benefit of a tolling agreement while settlement negotiations are ongoing


7

soUthern DistriCt of MississiPPi

Fraud Contract and Alter Ego Claims Against insurers and Reinsurers Go Up in Smoke mdash Lawsuit dismissed Entirely

lee v aBIlIty InSuRanCe Co(Case No 212-CV-17 June 10 2013)

On June 10 a Mississippi Federal judge dismissed claims asserted by Ms Wilma Lee (Lee) against five related insurance and reinsurance companies Ms Lee was covered by a long-term care policy of a predecessor corporation Ability Insurance Company (AIC) After Lee drew benefits for four years Ability terminated her benefits Lee sued for breach of contract bad faith and fraud claims against the five related companies She argued that the companies were all liable because they were ldquoalter-egosrdquo of one another or ldquooperating as a unitrdquo

Leersquos claims were dismissed on three different grounds First the judge stated that the court did not have jurisdiction over Ability Holdings Inc Ability Reinsurance Limited (Bermuda) and Ability Reinsurance Holdings Limited all foreign companies Under Mississippi law for a court to have jurisdiction over an out of state company the company must contract with a resident commit a tort in the state or do business in the state Lee did not present evidence to satisfy any of the three bases of jurisdiction

Lee agreed that none of the three companies satisfied those requirements on their own but she argued as ldquoalter-egosrdquo of AIC they did The judge highlighted that Mississippi law is strict as to when a parent or subsidiary company may be sued as an alter-ego Alter-ego claims require strong evidence of ldquoextraordinary factual circumstancesrdquo Lee did not show sufficient evidence of an extraordinary circumstance

Thus her claims against the foreign companies were dismissed

After failing to produce sufficient evidence Lee asked for a limited investigation into facts that could prove the companies were subject to the courtrsquos jurisdiction The court denied her request The judge explained that her assertions were ldquotoo vaguerdquo The investigation she requested would serve little purpose but to ldquomerely increase the cost of litigation for all partiesrdquo

The court also dismissed the breach of contract and bad faith claims against Ability Resources Inc Ability Resources made was not the party who had contracted with Lee For Lee to collect from Ability Resources she had to prove that the company was an alter-ego of AIC The court stated that Lee failed to provided sufficient evidence to prove Ability Resources was an alter-ego of AIC Accordingly the court dismissed the claims

Finally the court addressed fraud claims against all the companies including AIC To succeed on a fraud claim the Federal Rules of Civil Procedure require the initial filing with the court to contain particularized allegations about the nature of the alleged fraud Plaintiffs are required to identify specific statements speakers and dates as well as an explain why the statement was allegedly fraudulent Leersquos allegations lacked the specificity required in pleading a fraud claim Consequently her fraud claim was dismissed

iMPACT The formation of separate corporate entities insulates different segments of a business from the otherrsquos liability This case illustrates the importance of maintaining separation and distinctness between inter-related entities to avoid ldquoalter egordquo type actions which attempt to hold one entity liable for the actions of an affiliate

QUeenrsquos BenCh Division CoMMerCial CoUrt (UniteD kinGDoM)

Good News Well-drafted Warranties do Work

aMlIn CoRPoRate MeMBeR lIMIteD anD otheRS v oRIental aSSuRanCe CoRPoRatIon [2013] EWHC 2380 (Comm)

Warranties are powerful tools available to UK insurers and reinsurers who wish to protect themselves from liability arising from a specific situation A warranty is a contractual term by which the (re)insured undertakes to do or not to do some particular thing or that a particular condition will be fulfilled or that a particular state of facts exists It must be complied with exactly regardless of whether such compliance is material to the risk A breach of warranty will result in the (re)insurer being discharged from all liability under the contract even if the breach has no bearing on the risk

In this case the Commercial Court analyzed a typhoon warranty in a reinsurance contract which provided cover for loss of or damage to cargo on scheduled vessels

A dispute between London reinsurers and their Philippine reinsured arose from the sinking of a ferry the Princess of the Stars in the Philippines on June 21 2008 The loss occurred because the master of the ship sailed into the midst of typhoon ldquoFrankrdquo despite public storm warnings issued by the Philippine authorities the previous day It seemed that the master of the ship had intended to take a different route had the weather worsened However it turned out that he decided to follow the usual route to Cebu The catastrophe caused the loss of more than 500 lives

Numerous proceedings were commenced in the Philippines by cargo owners and elatives against the vesselrsquos shipowner


8

Sulpicio Lines Inc (Sulpicio) and Sulpiciorsquos cargo liability insurers Oriental Assurance Corporation (Oriental) Oriental was reinsured under a facultative reinsurance agreement by London reinsurers in respect of the policy covering Sulpicio (the Original Policy)

The Original Policy covered Sulpicio for the period from December 31 2007 to December 31 2008 Oriental was reinsured for the same period and the reinsurance which was subject to English law and jurisdiction contained a Typhoon Warranty clause which read

Notwithstanding anything contained in this policy or clauses attached hereto it is expressly warranted that the carrying vessel shall not sail or put out of Sheltered Port when there is a typhoon or storm warning at that port nor when her destination or intended route may be within the possible path of the typhoon or storm announced at the port of sailing port of destination or intervening point Violation of this warranty shall render this policy void

The Original Policy also contained a warranty on similar terms to that of the reinsurance

The reinsurers commenced proceedings in England against Oriental on November 22 2010 seeking declarations that the reinsurers were not liable because there was a breach of the Typhoon Warranty in the reinsurance contract Oriental sought to stay these proceedings pending the outcome of the proceedings in the Philippines because among other things the proceedings in England were putting Oriental in an invidious position Indeed the London reinsurers were in essence forcing Oriental to put forward a case publicly in London which was the exact opposite of what Oriental was pleading in the Philippines (To succeed in London Oriental needed to argue that the master did not breach the Typhoon Warranty in

order to be covered by the reinsurance however their case in the Philippines was that Sulpicio did indeed breach the warranty) Oriental lost on appeal (see our article in the Reinsurance Review issue of November 2012 and related blog) and the Commercial Court was asked to rule on whether the Typhoon Warranty had been breached by Oriental

The court held that the Typhoon Warranty consisted of two limbs mdash limb 1 contemplated a scheduled vessel sailing out of a sheltered port when there was a typhoon or storm warning at that port and limb 2 contemplated a scheduled vessel sailing out of a sheltered point when her destination or intended route might have been within the possible path of the typhoon or storm announced at the port of sailing port of destination or any intervening point

The court stated that the words of the warranty must be given their ordinary and natural meaning unless the background indicated that such meaning was not the intended meaning Further it was up to the underwriters in whose favor the warranty has been included to ensure that the protection they wanted was expressed in clear terms In addition where the language used had more than one potential meaning a court would be entitled to prefer the construction which was consistent with business common sense and to reject the other However where the parties have used unambiguous language the court must apply it however improbable the result

In light of the above and taking into account the facts of the case the court sided with the reinsurers and declared that the Typhoon Warranty was clearly and simply drafted It was undisputed that on June 20 2008 the Princess of the Stars sailed out of Manila bound for Cebu at a time when there was a Public Storm Warning Signal at Manila Therefore limb 1 of the Typhoon Warranty had clearly been breached Because limb 1

had been breached there was no point in considering whether limb 2 had also been breached Nevertheless the court held that in the circumstances a route intended to be taken subject only to the possibility of a change of course if the weather was going to be bad was the intended route for the purposes of limb 2 As such limb 2 of the Typhoon Warranty was also breached Therefore reinsurers were entitled to their declarations

iMPACT This case shows that English courts will usually uphold unambiguous and clearly drafted warranties Warranties as this matter confirms can be efficient tools to protect (re)insurers from liabilities arising from certain circumstances in this case the liability arising from typhoons Having said that the reforms proposed by the UK Law Commission are seeking to alter the effects of warranties and are scheduled to come into place sometime in late 2013 or early 2014 Reinsurers ought to prepare for the new regime

the sUPreMe CoUrt in enGlanD

The English Supreme Court Confirms the Correct Way an insurance Tower Should Exhaust

teal aSSuRanCe CoMPany lIMIteD v w R BeRkley InSuRanCe (euRoPe) lIMIteD anD anotheR [2013] UKSC 57

The Supreme Court in England looked at how a ldquotop and droprdquo insurance tower which sat above primary and excess layers should be exhausted The court concluded that a tower of liability was exhausted in the order in which the insuredrsquos liability is ascertained by agreement judgment or arbitration award


9

Teal Assurance Company Limited (Teal) was the captive of Black amp Veatch (BV) a US engineering company Teal provided professional liability cover for BV The professional liability insurance programme for the year commencing November 1 2007 consisted of a primary layer insured by Lexington followed by three successive excess layers insured by Teal and then topped by a ldquotop and droprdquo policy also insured by Teal but reinsured by WR Berkley Insurance (Europe) Limited (Berkley) and Aspen Insurance UK Ltd

Although the various layers in the programme provided worldwide cover the ldquotop and droprdquo policy excluded claims emanating from the US and Canada The programme was on a claims-made basis and as such BV received a number of claims while the programme was in place and notified the same to its insurers Some of these claims came from the US and Canada

As BV andor Teal were looking to maximise their insurance cover a question arose as to the order in which the various layers ought to exhaust Tealrsquos argument was that they were entitled to choose which claim to meet from the primary andor excess layers so as to ensure that those remaining were not US and Canadian claims and could be met by the ldquotop and droprdquo policy insurers and ultimately Berkley To back up there argument Teal relied on a clause in the excess layers and ldquotop and droprdquo policies which according to Teal meant that no liability arose unless and until underlying insurers have paid or have admitted liability or have been held liable to pay the full amount of their indemnity inclusive of costs and expenses Therefore it was only when a claim was met by an insurer that the layers began to exhaust

Berkley on the other hand submitted that the various layers exhausted as and when each claim against the insured was ascertained

The Supreme Court rejected Tealrsquos argument and relied on established authority on the nature of liability under third party liability insurances As such it was the ascertainment by agreement judgment or award of the insuredrsquos liability that gave rise to the claim under the insurance which then exhausted the insurance either entirely or partially Tealrsquos approach according to the court made no sense because such approach would lead to an insured having causes of actions or recoverable claims which together could exceed the limit of cover when an insurer was only liable up to the limit in the policy

Further the court held that an insured could forbear notifying or could withdraw or abandon a claim under an insurance in respect of expenses or third party liability The insurance would not then be exhausted by that claim and the next claim would be recoverable in the ordinary course under the insurance However what Teal were proposing was not the withholding or withdrawal of a claim it was its continued pursuit coupled with adjustment of its priority as against the insurance or program of insurances

As a result the correct operation of the insurance programme mean that as and when expenses or third party liability are incurred and ascertained they are to be taken into account against the Lexington policy first with the self-insured retention and deductible to be used up before hitting the policy limit Once that limit is used up the next layer is engaged and so on up the PI tower of excess layer policies until the ldquotop and droprdquo policy itself is engaged

iMPACT This matter shows that English courts are not ready to alter established principles concerning the exhaustion of insurance towers As such an insured or insurer should not adapt the way claims are ascertained with a view to maximise recovery especially if the contract wording is clear on these operations


10

Reinsurance and Sanctions

By Clive OrsquoConnell (pictured above) Gary M Phillips and Aaron J Aisen

Reinsurance has made an infrequent and unwelcome incursion into the non-trade press recently following reports that the New York Department of Financial Services (NYDFS) has written to some 20 non-US reinsurers questioning the procedures that they have in place to avoid contravention of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCPA) It is suggested that some reinsurers may have assisted violation of sanctions against Iran by providing cover to those trading with Iranian interests In addition to other repercussions violators of IFCPA may be prohibited from engaging in business in the United States

The regulation of reinsurance has proved to be a useful tool in the enforcement of sanctions around the world While those that seek to profit by ignoring or avoiding sanctions and their insurers may not be subject to US or European jurisdiction their reinsurers as global enterprises will almost inevitably be A refusal to provide reinsurance impacts upon the provision of insurance and therefore upon the activities themselves

The problem for reinsurers is that they are removed from the underlying activity They are reliant upon their reinsureds making full and truthful disclosure of material circumstances and upon the underlying

insureds making similar disclosure to the reinsureds In treaty reinsurance cover is given for risks which may be written during the course of the year and which may not be known at the time of underwriting

To avoid contravening sanctions legislation without the actual or economic ability to perform due diligence before underwriting every risk reinsurers have devised mechanisms that allow them to underwrite reinsurance risks while not giving cover to sanctions violations

The International Underwriting Association (IUA) based in London has recommended a clause for insertion into all reinsurance contracts which might possibly involve sanctions violations

If performance of the whole or any part of this [Response] breaches an embargo or sanctions programme arising from any law or regulation applicable to the Reinsurer then as a consequence thereof the Reinsurer concerned shall not fulfil its obligations under this [Response] to the extent that such would be in breach of the relevant law or regulation

Similarly Die Deutschen Versicherer (GDV) or German Insurance Association recommends

Notwithstanding other provisions of the insurance contract cover shall be granted only insofar as and as long

as not in contradiction to economic trade or financial sanctions or embargoes enacted by the European Union or the Federal Republic of Germany that are directly applicable to the contracting parties This shall also apply to economic trade or financial sanctions or embargoes enacted by the United States of America with regard of the Islamic Republic of Iran insofar as those are not in contradiction to European or German legislative provisions

Through use of these mechanisms reinsurers are ensuring that whatever they underwrite they are not providing any cover to any illegal sanction busting activities While it is impossible for those reinsurers to ascertain at the time of underwriting whether the underlying insured may be seeking to act illegally they can investigate at the time of claim and ensure that no payments are made which infringe sanctions

With the prospect of no reinsurance recoveries insurers must themselves insert similar clauses into their insurance policies and faced with no insurance protection it is to be hoped insureds will avoid illegal activity

Regulators and governments can play a role by providing information to reinsurers to assist in the claims management process to help ensure that no improper payments are made and that evidence exists to support a refusal to pay

sPotliGht


11

neWs anD notes

infusion of Capital Puts Reinsurers on the defensive

Over the past year an influx of more than $50 billion into the reinsurance marketplace has driven traditional reinsurers to take ldquorobust defensive measuresrdquo to protect market share indicates Willis Re Reinsurers are offering price reductions broadening coverage and taking other measures in response to the infusion of capital a significant portion of which derives from non-traditional sources such as hedge funds and pension funds Click here to read the article

2013 Brings 34 New insurers to Bermuda

In the first six months of 2013 Bermuda registered 34 new insurers an increase from 24 registered in the first six months of 2012 reports the Bermuda Monetary Authority The new insurers consist of commercial carriers long-term life insurance operations and captives including 10 new captives and for commercial insurers encompassing Class 3Q 3B and Long-term C productsClick here to read the article

Bermuda a haven for Reinsurers But Tax Laws May Be Changing

Bermuda remains a cornerstone for companies seeking to take advantage of favorable US tax laws favoring offshore reinsurers Tax laws may be changing to reduce or eliminate a tax break favorable to foreign insurers Two new bills designed at ending the tax break were recently introduced in the US Congress A similar proposal is included in President Obamarsquos proposed 2014 federal budget The Bermuda reinsurance industry is lobbying hard against the proposals which it says will make it extremely difficult

for insurers to diversify and spread risk Click here to read the article

New iran Sanctions Law impacts Reinsurers and insurers

A new US law will impose sanctions on insurance and reinsurance companies that do business with Iran One section of the Iran Freedom and Counter-Proliferation Act of 2012 signed into law by President Obama on January 2 2013 specifically targets insurers and reinsurers Section 1246 of the law imposes sanctions on insurers that deal with energy shipbuilding and shipping sectors The US Treasury Departmentrsquos Office of Foreign Assets Control has issued guidance to assist insurers and reinsurers to comply with the new law Click here to read the article

Familiarity is Key to Compliance With New iran Sanctions

The sanctions potentially imposed on insurers and reinsurers by the newly-enacted Iran Freedom and Counter-Proliferation Act are part of a broader effort to impose an economic stranglehold on Iranrsquos nuclear ambitions While previous laws generally did not apply to foreign reinsurers the new law imposes sanctions on foreign reinsurers who knowingly provide underwriting services and reinsurer Iranian risks Sanctions may include fines of up to $1 million or imprisonment and may include blocking the violatorrsquos assets and limiting access to US banking The new law includes an exception that allows non-intentional violators who perform due diligence to avoid sanctionsClick here to read the article

Reinsurers Post highest Net Premiums in the Past decade

A group of 27 reinsurers tracked by the Reinsurance Association of America recorded a level of net premiums in 2012 not seen for a decade Net premiums written by the group in 2012 was roughly $316 billion its highest level since 2003rsquos $33 billion up from $28 billion in 2011 The group of 27 recovered from a catastrophe-ridden 2011 which saw losses of $22 billion to post an underwriting profit of $9739 million in 2012 Click here to read the article

Reinsurers Refuse to Cede Long-Standing Markets to insurance-Linked Securities

As the supply of capital in alternatives to traditional insurance such as insurance-linked securities has been increasing of late US property and casualty reinsurers are taken actions to maintain their share of the market A July 1 report by Willis Re indicates reinsurers are reducing rates and taking other actions such as offering multi-year agreements extended hours clauses and additional reinstatements Capacity for aggregate cover is also more widely available the report indicates Click here to read the article

Rapid Growth Sends Reinsurers to China india indonesia

Financial growth and eased restrictions in formerly difficult markets are combining to lure US and European reinsurers to China and other Asian Pacific countries Munich Re projects that China India and Indonesia would top the premium growth countries in this emerging area which remains underinsured until 2020 Although profits have yet to materialize in this region reinsurers are staying firm to their investments to take advantage of the regionrsquos growth potential Click here to read the article


12

Lockton Re Creates Cloud insurance Platform

Lockton Re has brokered a partnership with CloundInsure and Liberty Insurance Underwriters to create a new insurance platform covering data privacy and technology errors and omissions risks in the cloud environment The platform is supported by CouldInsurersquos underwriting models and analytics LIU is the first major insurer to cover data privacy and technology errors and omissions risks in the cloud environment Click here to read the article

Swiss Re Arranges $370 Million of French Windstorm Cat Bonds

Swiss Re Capital Markets has arranged the largest ever European wind catastrophe bond deal totaling $370 million The bonds cover French windstorm losses for three-and-a-half years The bonds are the first issuance from the newly formed Green Fields II Capital shelf program an Irish special purpose company established with limited liability Green Fields will sell the bonds on behalf of Groupama SA Click here to read the article

Munich Re Forms Catastrophe Bond for US Named Storms and Australia Cyclones

Munich Re formed a $75 million catastrophe bond for named storm exposure in the US and cyclones in Australia The cat bond Queen Street Re VIII Ltd is the eighth Queen Street cat bond to benefit Munich Re and the seventh overall cat bond issuing since 2011 to benefit Munich Re Click here to read the article

Recent insured Flood Losses in Germany Reach $26 Billion

Flooding in Central and Eastern Europe during May and June 2013 resulted in an estimated $26 billion in insured losses according to a German insurer association The flooding led to about 180000 insurance claims Click here to read the article

RSA Canada Estimates Alberta Flood Claims May Top $75 MillionRecent flooding in Alberta Canada will result in an estimated $75 million (Canadian) in net claims to RSA Canada a Canadian operation of London-based RSA PLC The insurer expects that claims will be above its reinsurance retention of $75 million Click here to read the article

Chairs

Partners

Special Counsel

Associates

Jeffrey L KingsleyClive OrsquoConnellSharon AngelinoPeter J BigingChristopher Bopst Dennis J BradySarah J DelaneyJennifer H FeldscherBrendan T Fitzpatrick

Helen A FranzeseMichael T GlascottAnthony J Golowski IIEleni IacovidesMichael P KandlerJonathan M KullerTanguy Le Gouellec de SchwarzMatthew S LernerPaul D McCormick

Brian W McElhennyColleen M MurphyJoseph A OlivaJoanna M RobertoMichael S SaltzmanJoseph J Welter James J Wrynn Jonathan S Ziss

Brian R BiggieMarc W Brown

Edward K KittSandara Snaden Kuwaye

Kenneth R LangeMary OrsquoKeefe Massey

Patrick B OmilianRichard J AhnAaron J Aisen Carrie P Appler Troy A Bataille

Matthew D CabralFallyn B CavalieriJason L EdererMarissa T JonesGary M Phillips

Bryan D Richmond

Joanne J RomeroPaul C SteckJensen VargheseClayton D Waterman

Goldberg Segalla is a Best Practices law firm with offices in New York London Philadelphia Princeton Hartford Buffalo Rochester Syracuse Albany White Plains and Garden City The Global Insurance Services Practice Group routinely handles matters of national and international importance for both domestic and foreign insurers cedents and reinsurers This includes comprehensive audits policy reviews regulatory advice positioning dispute for resolution at the business level (either through interim funding or non-waiver agreements) negotiations among counsel mediation or fully-involved arbitration or litigation For more information on Goldberg Segallarsquos Global Insurance Services Group please contact either Daniel W Gerber or Richard J Cohen

Daniel W Gerber dgerbergoldbergsegallacom

Richard J Cohen rcohengoldbergsegallacom

Thomas F Segallatsegallagoldbergsegallacom

oUr GloBal insUranCe serviCes teaM

To learn more and view biographies please go to wwwGoldbergSegallacom

_GoBack


1

eDitorsDaniel W GerberJeffrey L KingsleyClive OrsquoConnellPatrick B Omillian

Goldberg Segallarsquos Reinsurance Review provides timely summaries of and access to the latest reinsurance law developments worldwide and is published monthly Cases are organized by court and date In addition we provide the latest information regarding news in the insurance and rein-surance industries If you or others in your organization are interested in receiving the publication please visit lsquoResourcesrsquo at wwwGoldbergSegallacom or scan the code below

offiCes780 Third Avenue | Suite 3100 NEW YORK NY 10017

No 1 Cornhill LONdON EC3V 3ND

1700 Market Street | Suite 1418 PhiLAdELPhiA PA 19103-3907

902 Carnegie Center | Suite 100PRiNCETON NJ 08540-6530

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100 Garden City Plaza | Suite 225GARdEN CiTY NY 11530-3203

The London office of Goldberg Segalla is operated by Goldberg Segalla Global LLP a limited liability partnership registered in England and Wales under number OC373080

Attorney Advertising Prior results do not guarantee a similar outcome

SOUThERN diSTRiCT OF NEW YORK

p 1Late Notice May Doom Cedentrsquos Claim if Notice Was Late Due to Cedentrsquos Bad Faith

p 2Cedentrsquos Overbilling Arising Out of 911 Losses Nets Reinsurer $51 Million Judgment

Action to Enforce Guarantee of Reinsurance Agreements Need Not Await Arbitration of Underlying Dispute

EASTERN diSTRiCT OF PENNSYLvANiA

p 3 Reinsurer Relieved of Liability for $44 Million Billing Due to Cedentrsquos Four-Year Delay in Suing Reinsurer

NORThERN diSTRiCT OF iLLiNOiS

p 3You Do Not Have the Right to Arbitrate mdash Court Denies Arbitration Where Cedentrsquos Successor Did Not Obtain Cedentrsquos Right to Arbitrate Disputes

EASTERN diSTRiCT OF CALiFORNiA

p 4Court Approves Class Action Alleging Illegal Kickback Scheme Between Lender and Its Captive Reinsurer

diSTRiCT OF MASSAChUSETTS

p 5Leave It to the Panel mdash Court Refuses to Resolve Disputes Relating to Arbitrability of Claim and Selection of Arbitration Panel

SUPREME COURT OF NEW YORK NEW YORK COUNTY

p 6Ongoing Settlement Negotiations Do Not Toll Statute of Limitations mdash Cedent Forfeited Breach of Contract Claim Against Reinsurer for Unpaid Bill

SOUThERN diSTRiCT OF MiSSiSSiPPi

p 7Fraud Contract and Alter Ego Claims Against Insurers and Reinsurers Go Up in Smoke mdash Lawsuit Dismissed Entirely

QUEENrsquoS BENCh diviSiON COMMERCiAL COURT (UK)

p 7Good News Well-Drafted Warranties Do Work

ThE SUPREME COURT iN ENGLANd

p 8The English Supreme Court Confirms the Correct Way an Insurance Tower Should Exhaust

SPOTLiGhT

p 10Reinsurance and Sanctions

NEWS ANd NOTESp 11

in this eDition

For educational purposes only copy 2013 Goldberg Segalla All rights reserved


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monte carlo edition reinsurance review - goldberg segalla

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