The Insurance and Reinsurance Report

Seaton Insurance Company Files Lawsuit Against Its Reinsurer

Seaton Ins. Co. v. Clearwater Ins. Co.

(D. R.I. October 26, 2009)

 

On October 26, 2009, Seaton Insurance Company and Stonewall Insurance Company filed a complaint in federal court against Clearwater Insurance Company to obtain sums allegedly owed under reinsurance contracts and for a declaration that defendant is required to indemnify the insurers for additional amounts that become due under the contracts.

 

Plaintiffs issued policies against several companies sued by individuals who claimed to have suffered bodily injury as a result of asbestos exposure, and companies sued for environmental contamination and remediation.  Clearwater Insurance Company insured plaintiffs against these risks.  Plaintiffs claim that to date, defendants have failed to pay over $535,000 in ceded losses, breaching its reinsurance contracts with plaintiffs. 

 

For a copy of the complaint click here

 

Toni Frain and Jeffrey Kingsley

 

http://www.goldbergsegalla.com/attorneys/Frain.html

http://www.goldbergsegalla.com/attorneys/Kingsley.html

CaseWatch: Insurance Cases for November 10, 2009 Edition

Download AmCal General Contractors, Inc. v. ACE USA Company 

Download Bituminous Casualty Corp. v. Buckley

Download Brigitte v. National Life Ins. Co.

Download Bryant v. Hopkins 

Download Century Indemnity Co. v. Certain Underwriters at Lloyd's London 

Download Chehardy v. Allstate Ins. Co. 

Download Colony Ins. Co. v. Peachtree Construction, Ltd. 

Download Corban v. U.S. Automobile Assoc. 

Download Esquivel v. Workers' Compensation Appeals Board and Corrections Corporation of America San Diego Detention 

Download Estate of Bozeman v. Muller 

Download Fortner v. Grange Mutual Ins. Co. 

Download Great American Ins. Co. v. The Superior Court of Los Angeles County 

Download Hall v. Harleysville Ins. Co. of N.J. 

Download Hamilton v. Safeway Ins. Co. 

Download Marsh v. American Family Mutual Ins. Co. 

Download Martin v. Pacific Specialty Ins. Co. 

Download Moses v. Halstead 

Download Plunkett v. State Farm Mutual Automobile Ins. Co. 

Download Sheppard v. Travelers Lloyds of Texas Ins. Co. 

Download State Farm Florida Ins. Co. v. Seville Place Condominium Assoc., Inc.

Eleventh Circuit Affirms Insurer’s Interpretation Of Policy Language In A Cancer And Special Disease Policy Regarding the Meaning Of “Actual Charges Incurred”

Philadelphia American Life Ins. Co. v. Buckles

(United States Court of Appeals, Eleventh Circuit, October 23, 2009)

 

This case involved the interpretation of a provision in a supplemental cancer and specified disease insurance policy.  The district court held that the term “actual charges incurred” is unambiguous and “means the actual amount accepted by a health care provider as full satisfaction of the policyholder’s obligations for treatment covered by the policy.”  The policyholder contended rather that “actual charges incurred” is synonymous with “actual charges.” The amount that the health care provider bills for services, which is generally higher than the amount than the health care provider will accept as full satisfaction of the liability.  Specifically, the policyholder purchased a Cancer and Specified Disease Policy which provided supplemental coverage paying benefits directly to the policyholder for certain treatments.  The policy paid benefits despite the fact that the policyholder’s primary health insurance provided for payment for his medical expenses and he was able to retain all benefits that he received from the supplemental policy which exceeded his medical expenses.  The circuit court held affirmed the district court’s holding that “actual charges incurred is unambiguous” and means the “amount the provider accepted from an insurer as full satisfaction of the policyholder’s liability.” This reasoning was based on the definition of “incurred” which, according to its plain meaning is the amount that “must have been actually paid” or that for which one liable.  In affirming the decision, the court noted that construing the contract in the manner advanced by the policyholder would afford him an unintended benefit based on a fictional amount and would lead to an “absurd result.”  As such, the district court correctly held that “actual charges incurred” is the “actual amount accepted by a health care provider as full satisfaction of the policyholder’s obligation for treatment.”

 

For a copy of the decision, click here

 

Paul Steck and Dan Gerber

 

http://www.goldbergsegalla.com/attorneys/Steck.html

http://www.goldbergsegalla.com/attorneys/Gerber.html

Second Circuit Won’t Rule on Constitutionality of NY Workers Comp Amendments

Liberty Mut. Ins. Co. v. Hurlbut

(2^nd Cir. (N.Y.) Nov. 4, 2009)

 

The Second Circuit refused to exercise federal jurisdiction over claims by Liberty Mutual that recent amendments to New York’s Workers Compensation Law are unconstitutional. Liberty’s claims stemmed from an amendment to the Workers Compensation Law that requires insurers to make deposits to an aggregate fund for all permanent partial disability cases. Another amendment bestows settlement authority for indemnity benefits on trustees of that aggregate fund. Liberty and its affiliates sued the commissioners of the New York State Insurance Fund and members of the New York State Workers Compensation Board, alleging that the amendments violated the Contracts, Takings, Due Process, and Equal Protection provisions of the United States Constitution.

 

The Second Circuit affirmed the district court’s dismissal of Liberty’s complaint, but on different grounds. The Second Circuit held that that the district court’s reliance on the abstention doctrine set out in Younger v. Harris, 401 U.S. 37 (1971) was misplaced because no State proceedings challenging the amendments are pending, a requirement of Younger abstention. Rather, the Second Circuit relied on the abstention doctrine set forth in Burford v. Sun Oil Co., 319 U.S. 315 (1943). The Burford court concluded that proper respect for independent state action commands abstention in certain circumstances. Accordingly, the Second Circuit held that “[f]ederal review of the 2007 amendments here would unduly disrupt the administration of the New York WCL, would interfere with matters of substantial public concern and would hamper resolution by the state of challenges similar to those made here.”

 

For a copy of the decision, click here

 

Carrie Appler and Richard Cohen

 

http://www.goldbergsegalla.com/attorneys/Appler.html

http://www.goldbergsegalla.com/attorneys/Cohen.html

New York Appellate Court Denies Plaintiff's Motion to Stay Arbitration on Arbitrability Grounds

Life Receivables Trust v. Goshawk Syndicate 102 at Lloyd’s

(New York Appellate Division, 1^st Dept., October 13, 2009)

 

A New York appellate court upheld a denial of plaintiff’s motion to stay or enjoin arbitration before the American Arbitration Association.  The agreement provides that all disputes be referred to arbitration under the AAA.  While arbitrability is often a judicial determination, the court held because the parties incorporated by referenced the AAA rules, which allows the tribunal to rule on its own jurisdiction, the arbitrators were permitted to determine arbitrability.    The plaintiff argued that the language included in the agreement giving the parties the right to challenge the arbitrator’s determination based on errors of law was an impermissible expansion of the scope of judicial review under the Federal Arbitration Act.  The court rejected plaintiff’s argument finding the issue is included in the arbitrability issues, which the tribunal is permitted to determine.  In addition, the court noted that policy favors arbitration as a means to conserve time and resources.

For a copy of the decision click here

Kim Whistler and Sharon Angelino

http://www.goldbergsegalla.com/attorneys/Whistler.html 

http://www.goldbergsegalla.com/attorneys/Angelino.html

District Court Judge Refuses To Dismiss Proposed Class Action Against PMI Group Inc.

In Re:  PMI Group Inc. Security Litigation (D.California, November 2, 2009)

Judge Susan Illston of the U.S. District Court for the Northern District of California on Monday, November 2, 2009, denied the insurer’s request to dismiss a proposed securities class action against mortgage insurer PMI Group Inc.  Judge Illston found that the investors’ amended complaint cured the deficiencies outlined in a previous order dismissing parts of the lawsuit. 

 

The lawsuit was filed in April 2008 and accused the insurer of concealing the company’s exposure to home loan defaults and failing to engage in proper underwriting practices.  Judge Illston had dismissed parts of the original complaint finding that plaintiffs failed to allege a strong inference of scienter.  However, the new complaint clarified the scienter element.  The proposed class would include shareholders who bought PMI stock.

 

A copy of the Order is available here. A copy of the complaint is available here.

 

By Sarah Fang and Joanna Roberto

 

http://www.goldbergsegalla.com/attorneys/Fang.html

http://www.goldbergsegalla.com/attorneys/Roberto.html

In a Reinsurance Dispute Involving Asbestos Contamination, Reinsurer Filed Counterclaims Against Insurer for Misrepresentation

Utica Insurance Co. v. Fireman's Fund Insurance Co. (Northern District of New York, November 2, 2009)

This action stems from several underlying actions regarding umbrella policies Utica issued between 1966 through 1972.  In order to reduce its risk, Utica purchased reinsurance from the Fireman's Fund among other reinsurers.  Utica's insured filed several asbestos-related claims under its umbrella policies which resulted in Utica paying close to 25 million dollars in settlements.  According to the pleadings, Utica provided the Fireman's Fund with all the expenses and billing information it needed to make the proper payment under its reinsurance policy it issued to Utica.

When the Fireman's Fund refused, Utica filed a declaratory judgment proceeding in the Northern District of New York.  Today, Fireman's Fund asserted several counterclaims alleging that Utica concealed relevant information to induce the Fireman's Fund to issue reinsurance certificates.  As a result, Fireman's Fund seeks a rescission of the policies due to this material misrepresentation.

A copy of the Fireman's Fund Answer with Counterclaims is available here

Jeffrey Kingsley

http://www.goldbergsegalla.com/attorneys/Kingsley.html

Goldberg Segalla's Reinsurance Review November 2009 Edition is Now Available

For a free copy, click here

To receive the Reinsurance Review directly via email, kindly contact Jeffrey Kingsley at jkingsley@goldbergsegalla.com

Cases Cited in Reinsurance Review November Edition

Download AXA.v.New.Hampshire.Insurance.Co.

Download Telenor.Mobile.v.Altimo

Download G-I Holdings.v.Reliance.Insurance.Co

Download Century.v.Certain.Underwriters

Download Everest.National.Insurance.Co.v.Sutton

Download Employers Insurance Co.v.Certain.Underwriters

Download Gulf.Insurance.Co. v. Transatlantic.Reinsurance.Co.

The Growing Authority of Arbitrators Under the Federal Arbitration Act

In the world of reinsurance, agreements, or Treaties, the inclusion of provisions mandating arbitration is a well-established industry standard. Despite the potential exposure inherent in reinsurance disputes, such Treaties and their corresponding arbitration provisions are not particularly expansive and, in fact, oftentimes rely upon “boiler plate” language.  Here is an article examining a series of recent cases in which a court has expanded an arbitration panel's authority.

 

For a copy this article click here

 

Sharon Angelino and Brian Biggie