The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) is the latest development in the ongoing saga of state versus federal regulation of insurance. Unlike other major industries, insurance is still primarily and almost exclusively regulated by the states – and the states have long been vigilant about keeping it that way. …
Read More The Dodd-Frank Act: The U.S. Government Turns its Attention to Insurance Regulation

In Fensterstock v. Education Finance Partners and Affiliated Computer Services, Inc., plaintiff Fensterstock commenced a class action lawsuit in the Southern District of New York against Education Finance Partners and Affiliated Computer Services for engaging in fraudulent and deceptive practices in connection with the issuance of student loans.  The defendant lenders moved to stay the action and compel individual arbitration in accordance with the loan agreement’s binding arbitration clause. …
Read More Second Circuit Finds that Class Arbitration Waiver Clause Is Unconscionable, Refuses to Compel Arbitration

In a recent decision by the Fourth Circuit Court of Appeals, MCI Constructors, LLC v. City of Greensboro, No. 09-1600 (4th Cir. July 1, 2010), the court held that the district court did not err in denying motions to vacate certain arbitration awards. …
Read More Fourth Circuit Rules that Panel Did Not Exceed the Scope of Its Powers and Declines to Opine Whether Manifest Disregard of the Law is Available After Hall Street

Defendants, certain ceding companies, appealed a judgment from the U.S. District Court for the Southern District of New York holding them liable for fraudulently inducing the plaintiff reinsurer to enter into two reinsurance facilities.  The defendants also appealed the portion of the judgment finding (a) that the cedents waived their right to arbitration by pursuing it in a summary judgment motion instead of at the outset of the dispute and (b) that the reinsurer’s claims sounded in fraud (as opposed to contract) and were thus not arbitrable under a provision in a facultative reinsurance agreement providing for arbitration of disputes “arising out of the interpretation of this agreement.” …
Read More Second Circuit Finds that Reinsurer’s Fraud Claims Are Not Arbitrable, but Reverses District Court’s Judgment and Holds that those Claims Are Time-Barred, Relieving Cedents of Liability

On August 19, 2010, the California Legislature passed two bills, AB 1708 and AB 1837, which if signed into law by Governor Arnold Schwarzenegger will have a significant impact on surplus lines insurers. …
Read More California Legislature Passes Significant Surplus Lines Reforms

A California Appeals Court recently held that a wrongful death action against a security guard who shot a man while on duty was excluded under an “assault and battery” exclusion, even if the security guard acted in self-defense.  Michael Krause, Sr., et al. v. Western Heritage Ins. Co., No. G041405 (Cal. App. 4th Dist. Aug. 2, 2010) (unpublished). …
Read More Court Finds Coverage Excluded For Shooting By Security Guard

Helene Tomasian, a non-party to an arbitration between Ware and C.D. Peacock, Inc., moved to quash an arbitrator’s subpoena compelling her attendance at a pre-hearing deposition.  See Ware v. C.D. Peacock, Inc., No. 10-cv-2587 (N.D. Ill. 2010).  The subpoena was issued at the request of Peacock after the arbitrator denied its motion for summary judgment based upon “in large part” the affidavit of Ms. Tomasian. …
Read More Federal District Court Finds that Arbitrator Lacks the Authority to Issue Pre-Hearing Deposition Subpoena to Non-Party Under the Federal Arbitration Act

Earlier this month, New Jersey Department of Bank and Insurance Commissioner Thomas Considine issued Bulletin No. 10-19 reminding surplus lines brokers that the $50 limitation remains in effect for fees charged by surplus lines brokers to originating brokers.  P.L. 2010, Chapter 42, which was enacted on July 6, 2010, amends N.J. Stat. Ann. § 17:22A-38b to allow for the Commissioner to set the fee limitation by regulation, however, it is not effective until October 1, 2010. …
Read More New Jersey Issues Reminder to Surplus Lines Brokers that the $50 Limitation for Fees Charged to Originating Brokers is Still in Effect

A Nevada federal judge has determined that an insurer did not breach its contract or act in bad faith when it terminated payment for chiropractic services for two policyholders injured in an automobile accident. The Court found that the plaintiff policyholders failed to counter medical testimony that they did not require additional chiropractic care because the “maximum medical improvement” had been reached. …
Read More Nevada Federal Judge Finds No Breach of Contract or Bad Faith Where Insurer Ceased Payment to Policyholders for Chiropractic Services Following Auto Accident

A New Jersey federal judge dismissed a bad-faith claim for underinsured-motorist benefits, finding that Plaintiff’s complaint lacked necessary factual support and did not rise above the level of “bare averment.”  The Court also dismissed Plaintiff’s claim for punitive damages, finding that Plaintiff failed to allege sufficient facts to show egregious circumstances or that the insurer’s conduct was wantonly reckless or malicious. …
Read More “Bare Averment” Insufficient to Maintain Bad Faith Claim in New Jersey for Underinsured-Motorist Benefits