Reinsurance
Overview
Our broad litigation practice for insurance companies contributes to our capabilities in the reinsurance area, enabling Carlton Fields to provide services on a cost-effective basis. For example:
- Carlton Fields has experience litigating and arbitrating issues with respect to insurance company products, operations issues, actuarial issues, accounting practices, the acquisition of entire books of business, sales practices, bad faith, breach of contract, and other claims issues.
- We have experience as counsel of record in hundreds of class actions, which routinely present complex procedural, insurance, and evidentiary issues.
- We handle cases involving hundreds of thousands or even millions of pages of documents and electronic data, for which we have developed a range of in-house and vendor-assisted computerized litigation support. Each matter is unique, and requires a customized approach in order to provide high-quality, cost-effective services to our clients.
- Several of our lawyers have written articles on electronic discovery issues, and have moderated and lectured at continuing legal education programs addressing e-discovery issues.
- Because our lawyers have been at the forefront of the creation and regulation of many of the innovative insurance products on the market, we understand these products and how they work. Such knowledge makes it easier to understand how to reinsure those risks effectively and efficiently, and how to devise realistic strategies for resolving disputes relating to such products that will accomplish the business goals of our clients.
- The breadth of our practical experience permits us to structure reinsurance agreements or programs effectively, and to advise clients on the best alternatives for reinsuring risks, either through traditional reinsurance or through other facilities or structures. For example: one of our lawyers formerly served on the board of a Bermuda reinsurer; another is a former CPA with deep knowledge of regulatory accounting; others follow the NAIC’s activities relating to reinsurance and monitor legislative and regulatory activities.
- We are on the front lines of alternative risk transfer mechanisms, having represented a ceding insurer in the creation of an innovative catastrophe bond series.
- Our experience in handling high-stakes financial services litigation translates into cost-effective arbitration and litigation capabilities and results.
- Our reinsurance lawyers provide clients additional value through our award-winning reinsurance and arbitration blog, Reinsurance Focus. The blog provides updates on a broad range of reinsurance matters, including significant reinsurance and alternative risk transfer transactions, reinsurance legislation and regulations, trade associations, educational programs, and scholarly articles about reinsurance, as well as important court opinions addressing reinsurance issues and the arbitration process.
- Our lawyers have worked at major insurance companies and a trade association, and have served on the boards of directors of insurance companies.
- Carlton Fields monitors the activities of the NAIC, and our lawyers actively follow, among other matters, the activities of the NAIC’s Reinsurance Task Force. The firm’s lawyers have training and experience with generally accepted accounting principles (GAAP) and regulatory accounting principles (RAP).
Directors and Officers and Related Coverages – We provide analysis and dispute resolution, and litigate a variety of claims by insureds under directors and officers (D&O) liability policies and related coverages. Our lawyers regularly handle complex coverage issues on behalf of insurers under D&O, errors and omissions (E&O), employment practices liability (EPL), and other professional liability policies.
Bad Faith Litigation – We have considerable experience handling bad faith litigation. Our lawyers represent leading insurance companies in bad faith litigation (both individual and class action) in state and federal courts throughout the country, and we devise and help implement creative strategies for minimizing or eliminating exposure to extra-contractual liability.
General Liability – We assist clients with the construction and interpretation of commercial general liability (CGL) policies, counseling them and litigating on their behalf. In this capacity, we address issues related to the duties to defend and indemnify, the scope of occurrence-based coverage, long-tail exposures and allocation, lost policies, and bad faith.
First-Party Property – Our coverage lawyers have extensive experience with first-party property insurance claims that arise from all types of losses. In complex, first-party commercial property coverage litigation, we consult on coverage issues from early in the claim adjustment process through coverage litigation. This work includes examinations under oath, appraisals, mediations, arbitrations, trials, and appeals. We handle disputes involving catastrophic losses, property damage, business interruption and other economic losses, hurricane-related losses, floods, sinkholes, construction defects, breakdown or malfunction of boilers and other critical equipment, application of sublimits, trigger of coverage, number of occurrences, and bad faith.
Merger & Acquisition Representation and Warranty Insurance – We have a sophisticated practice representing issuers of insurance for the representations and warranties that accompany merger and acquisition transactions. By combining the coverage experience of our insurance practitioners with the detailed analysis and understanding of the deal developed by our corporate securities and merger and acquisition attorneys, we bring to each claim analysis the level of critical expertise needed to evaluate these complex claims.
Excess and Umbrella – Our lawyers handle litigation over the duties of excess and umbrella carriers. These cases involve issues including the insolvency of an underlying primary insurer, the interpretation of “other insurance” clauses, the effect of an insured’s settlement without consent, the insured’s reporting obligations, the significance of a self-insured retention, “follow form” provisions, choice-of-law issues, and apportionment issues.
Environmental – On behalf of insurers and their insureds, we handle claims for environmental spills and contamination under CGL policies and specialty environmental policies. These suits involve the interpretation of both the “sudden and accidental” and “absolute” pollution exclusions, reasonable and necessary costs of cleanup, the duty to defend CERCLA claims and other pre-litigation matters, and the myriad coverage issues that frequently arise in this type of claim.
We have extensive experience with the major underwriters of policies insuring against environmental contamination. We have represented insurers in complex declaratory judgment actions regarding coverage for environmental claims under both pollution legal liability policies and construction pollution liability policies as well as claims for coverage under policies insuring underground and aboveground storage tank systems.
Our combined environmental law and litigation experience enables us to handle environmental insurance claims with a full understanding of the issues surrounding complex environmental cleanups. We have extensive experience handling issues such as industrial and domestic wastewater; storage tank regulation; and landfill, used oil, and hazardous waste permitting and regulation. We also negotiate consent orders and remediation plans associated with the cleanup of hazardous waste, petroleum, chlorinated solvents and other contaminants with local, state, and federal environmental agencies. In addition, we have extensive environmental contamination litigation experience that includes handling claims for property damage, personal injuries, and medical monitoring stemming from alleged exposure to on- and off-site contaminants.
Fidelity, Commercial Crime, and Financial Institution and Broker Bonds – Our lawyers investigate claims, analyze coverage and salvage issues, work with financial and forensic consultants to quantify damages, and represent insurers in litigation under all insuring agreements of financial institution, broker, and other theft and fidelity bonds and crime policies. We have authored multiple chapters in publications about coverage under such policies.
Construction and Surety – In construction-related matters, we regularly counsel insurers on CGL, builder’s risk, and professional errors and omissions policies. We also represent sureties in various payment and performance bond claims. This work includes helping insurers and sureties draft policy and bond language. We also address regulatory issues regarding various insurance control programs. Our lawyers are experienced in all types of construction claims including those involving termination of contractors, payment claims, delay claim analysis, construction defects, differing site conditions, and design professional liability.
Data Security and Data Privacy – Our lawyers have extensive experience handling privacy and security issues for clients nationwide. We frequently speak and write on data privacy and security law, and our privacy and security law clients operate in various industries, including insurance. We are well-positioned to provide compliance assistance regarding the privacy and security of individually identifiable data. Our lawyers are knowledgeable regarding federal and state privacy laws (e.g., Gramm-Leach-Bliley, HIPAA, CPNI), and the privacy and security standards used in various industries. We help clients draft and implement policies and procedures that will protect their sensitive data while complying with the requirements of state and federal privacy and security laws. We also help clients respond to data and security breaches. This work includes the required reporting to state and federal agencies, dealing with the implications for customers, vendors, and employees; and handling potential, related litigation.
Cyber Coverage and Disputes – Carlton Fields’ coverage team has been at the forefront of counseling and litigating cyber coverage disputes for insurers since long before data breaches made news, or stand-alone cyber coverages were developed. Carlton Fields’ coverage lawyers have handled some of the most high-profile and high-dollar cyber coverage disputes. We have counseled insurers regarding coverage for data breaches, malware attacks, political hacktivism, social engineering/phishing/spoofing schemes, and misappropriation of intellectual property. We have analyzed cyber coverage issues under traditional coverages, including CGL and fidelity policies (and particularly the “computer systems fraud” rider), as well as newer cyber-specific package policies, that include first-party coverages, such as data restoration and replacement, business interruption, and breach response costs, as well as third-party liability coverages, including security and privacy liability, derivative vendor and contractual liability, and internet media liability.
Carlton Fields’ knowledge with respect to insurance company operations, actuarial and accounting principles, and insurance products contributes to our advice to clients on contractual and regulatory issues. Our representation of clients in litigation and arbitrations involving many of the kinds of issues that arise on the transactional side of our practice adds a valuable perspective to our transactional counseling. Carlton Fields’ reinsurance transactional experience includes engagements in the following areas:
Counseling – Our lawyers provide counseling with respect to purchases and sales of reinsurers, loss portfolio transfers, sales of reinsurance books of business, purchases and sales of reinsurance underwriting management companies, jumbo reinsurance issues, termination of reinsurance relationships, relationships with brokers, and the formation and operation of reinsurance auditing and runoff companies.
Contract Structuring, Drafting, Negotiation – We negotiate and draft reinsurance agreements and trusts for quota share, excess of loss, facultative and retrocessional arrangements, covering general lines (e.g., life, health, annuity, and property) and specialized lines (e.g., workers’ compensation, occupational accident, financial guaranty, and residual value). Our work with clients on matters involving intermediaries and other industry participants, such as managing general agency, reinsurance intermediary, and general underwriter agreements, rounds out our contractual counseling experience.
Alternative Risk Transfer Mechanisms – We have extensive experience in documenting and interpreting sidecars, traditional reinsurance, fully collateralized reinsurance and catastrophe bonds, in isolation and in combination as part of an integrated risk transfer program. We have represented a ceding insurer in the creation and issuance of three large fully collateralized catastrophe bonds, including two that were the largest in the history of the market when they were issued. We also have substantial experience in the formation and operation of offshore captive insurers
Assumption Reinsurance – Carlton Fields lawyers have handled numerous assumption transactions, including, for example, drafting agreements to position companies in advance of their sale. We have also drafted and obtained New York Insurance Department approval for an alien surplus lines insurer that transferred its business to a licensed insurer through assumption reinsurance to release its NAIC Surplus Lines Trust Fund.
Run-Offs and Commutations – Our lawyers have represented a number of reinsurers in runoff and have helped design programs to commute or otherwise minimize exposure to cedents while protecting retrocession recoverables in a number of different lines.
Reinsurance Company Insolvencies – Carlton Fields lawyers have counseled both reinsurers and liquidators with respect to their rights and obligations in the insolvency and pre-insolvency contexts.
Due Diligence – Our lawyers have performed due diligence on reinsurance matters in mergers and acquisitions of insurance companies.
We also routinely counsel insurance and reinsurance clients on regulatory matters and represent them before state insurance departments. We have been retained as special counsel to state insurance departments on various matters. For example, a Department of Insurance retained Carlton Fields in connection with the Department’s consideration of a controversial acquisition involving its largest domestic medical malpractice carrier.
Experience
We currently act or have acted as lead counsel in a number of significant life, long-term care and annuity reinsurance matters, on behalf of cedents, reinsurers, retrocedents and retrocessionaires, involving the following:
- Various engagements concerning a reinsurer’s ability to enforce rate change provisions in YRT reinsurance agreements, which has been an emerging issue in the reinsurance sector in recent years.
- A cedent’s duty to disclose issues pertaining to internal replacement life insurance policies, and a reinsurer’s facultative underwriting obligations with respect to the same.
- The application of errors and omissions clauses to the policy issuance and underwriting process, and impact on a reinsurer’s indemnity obligations.
- Represented a participant in hundreds of reinsurance treaties in the London Personal Accident reinsurance market involving a series of arbitrations in the U.K., and the defense of a major U.S. arbitration involving claims exceeding $100 million. Our representation included advising on a strategic plan for managing and defending multiple arbitrations and lawsuits in this market, and representing the client in the U.S. arbitration and a related lawsuit.
- The scope of a reinsurer’s indemnity obligations, and applicability of the follow-the-fortunes/settlements doctrine, to administrative errors in the policy issuance process.
- Agent/broker misconduct, follow-the-fortunes/settlements as it pertains to agent/broker misconduct/errors, and the interplay between E&O coverage and reinsurance cover;
- Fraud in the inducement (actuarial or underwriting misrepresentations).
- The duties of a cedent and reinsurer in the facultative submission process.
- Violations of treaty underwriting standards and guidelines.
- The rights of a reinsurer to contest claims ceded on an automatic basis.
- Recapture.
- The duty of utmost good faith.
- The scope of ECO/XPL provisions.
- Claims handling issues.
- Other contract interpretation issues or disputes concerning industry custom and practice in the life, LTC, and annuity reinsurance context.
Some representative matters in which our attorneys have recently acted in the property/casualty area include the following:
- Acted for cedents and retrocedents in numerous disputes with reinsurers and retrocessionaires regarding the collection of reinsurance recoverables.
- Represented a client in arbitration related to the aggregation of claims under the event wording of a catastrophe treaty.
- Secured a multimillion-dollar award for client with respect to asbestos billings, where the issues involved aggregation and follow-the-fortunes.
- Represented a client in an arbitration involving late notice and bad faith claims handling.
- Represented clients in arbitrations concerning the number of occurrences, allocation, annualization and aggregation issues related to clergy abuse, toxic tort, asbestos, pollution, and construction defect claims.
- Represented a cedent in an arbitration involving the scope of ECO and UNL provisions.
- Represented a major insurer of windstorm risks in resolving issues with its reinsurer.
- Represented cedents in disputes regarding the recoverability of commutation-related payments and follow-the-fortune/settlements implications.
- Represented a client in a dispute concerning the recovery of declaratory judgment and bankruptcy-related expenses.
- Represent insurer in dispute with their managing general agent concerning various underwriting violations.
- Represent an insurer in various disputes with its agents concerning contingent commissions.
- Represent clients in matters regarding salvage and/or subrogation recoveries, including one in which the panel granted summary judgment on behalf of our client.
- Represented various clients in matters relating to insolvencies.
- Represented a leading aviation insurance pool in litigations to secure increases in LOCs, necessitated by 9/11 and other large aviation losses.
- Represented clients in multiple arbitrations involving surety bond claims.
- Prevailed in matters for insurers in disputes with their managing general agents regarding a variety of issues, including profit commissions.
- Devising and implementing a strategy for a global insurer to resolve a major reinsurance dispute with the reinsurance market.
- Obtained summary judgment in an arbitration on behalf of a client, which was also awarded the fees and costs of the panel in addition to compensatory damages.
- Acted in matters involving disputes between captive insurers and their reinsurers, as well as a dispute between an insurer and a captive acting as its reinsurer.
In addition to litigating or arbitrating disputes, we are routinely engaged to assist cedents, reinsurers, retrocedents, and retrocessionaires in the pre-dispute process, whether by providing coverage opinions or counseling clients on contentious issues with their counterparties to resolve matters in advance of litigation or arbitration.
Drafting
Apart from contentious matters, we also represent or have represented clients in the drafting of reinsurance agreements, the review and preparation of treaty amendments, and the development or review of treaty wordings and guidelines.
Brokers and Agents
We have also handled many arbitrations and litigations between insurers and brokers and agents involving numerous issues, including underwriting violations, commissions, and agent misconduct.
Producer Owned Reinsurance Companies
We are also very familiar with the structure and operation of producer-owned reinsurance companies and other “captive” reinsurers, including tax issues relating to such entities, and have litigated various issues relating to such entities, including issues arising as a result of the bankruptcy of the owner of such entities. Some of these reinsurers have been domiciled in non-U.S. jurisdictions, such as Bermuda and the Turks and Caicos.
Reinsurance Transactional and Counseling Experience
- Counseling a reinsurer and its affiliates in complex cessions and retrocessions of life product risks involving entities operating in the United States, Asia, Europe, and Bermuda.
- Assisting in a loss portfolio transfer of medical malpractice risks from a group of medical facilities and providers to a major P&C insurer and reinsurer.
- Closing a commutation of a reinsurance treaty for a P&C insurer that sought to terminate its treaty with a large international reinsurer that had been downgraded by A.M. Best, and commuting a treaty with a group of Lloyd’s Syndicates covering long-tail liabilities of a casualty insurer.
- Representing ceding and assuming companies in the structuring and documentation of complex P&C and life and health reinsurance treaties of various types, including consideration of risk transfer and related regulatory compliance issues.
- Representing the ceding insurer in the creation of a billion-dollar reinsurance program, which includes traditional reinsurance, umbrella cover, and the largest catastrophe bond ever placed. The cat bond provided a fully collateralized two-year reinsurance cover at a fixed price, which was sold to capital market participants, some of which do not participate in the traditional reinsurance market.
