PROPOSALS TO INCREASE
EFFICIENCY OF REINSURANCE
DISPUTE RESOLUTION PROCESS
SUSAN E. GRONDINE
CAVELL USA
JOSEPH S. SANO
PRINCE LOBEL GLOVSKY & TYE LLP
PAUL E. WHITE
SUGARMAN, ROGERS BARSHAK &
COHEN, P.C.
ROBERT A. WHITNEY
WHITE & WILLIAMS LLP
Cost Effective Resolution of
Reinsurance Disputes
A Vignettes Approach
Northern (Cedent) v. SEPTA (Fac. R/I)
• Northern’s Policy With Barneys Big Top:
– $5 Mil: injuries by “any participants or
spectator of the show;”
– $500K: “the value of any animal” that was
“completely unable to perform” in the show
due to “incurable illness or death.”
Northern (Cedent) v.
SEPTA (Fac. R/I)
• Facultative Certificate: SEPTA will pay:
“50% of the risk retained” by Northern on
behalf of Barney’s.
Northern (Cedent) v.
SEPTA (Fac. R/I)
The Underlying Claim:
• Mandy, (the “J. R-T’d Lemur”™), knocks-over
spotlight, igniting the stage.
• Sara, (animal transport dept.) badly burned
before the flames were extinguished, and
• Mandy: “smoke inhalation” and “loss of fur.”
• Northern settled all liabilities with Barney’s for
$1.2 million.
Northern (Cedent) v.
SEPTA (Fac. R/I)
The R/I Claim:
• Northern submits a claim for 50%
($600,000) to SEPTA (Fac. R/I ).
• Northern submits the other 50% to its
treaty reinsurers and recovers all but
$100k from them.
Northern (Cedent) v.
SEPTA (Fac. R/I)
The R/I Dispute:
• SEPTA rejects Northern’s $600k claim, stating:
– Payment to Barneys gratuitous in view of W.C. bar;
– Sara not a “participant” or “spectator;”
– Mandy (the “J. R-T’d Lemur”™) not “completely unable to
perform” due to “incurable illness or death;”
– Mandy’s valuation ($100,000) is excessive and includes noncovered training (juggling lessons for new lemur) and
equipment;
– Coverage limited to “50% of the risk retained” by Cedent, less
amount recovered under treaty R/I retained loss (i.e. net of
treaty R/I recoveries).
Northern Demands Arbitration
Against SEPTA
Issues:
Underlying Coverage
– Submitting/defending Mt. for S.J. re: whether employee (animal
transporter) constitutes “participant;”
– Whether Mandy (the J. R.-T’d Lemur™) was disabled per policy and
proper amount and scope of replacement costs;
– Whether portion of settlement paid for general releases for Northern not
reimbursable under Northern’s Policy.
Fac. R/I Coverage
– Whether “follow the fortunes” provision requires payment
notwithstanding issues re underlying coverage determination
– Whether Northern’s Treaty R/I recoveries can be considered in
determining “50% of the risk retained” under SEPTA Fac. Cert.
(Positions could be supported by expert testimony on industry practice)
Cost Effective Resolution of
Reinsurance Disputes
Part I- Giving Outside Counsel
The Tools To Effectively Plan:
The Initial Substantive Call From Client
(Northern) to Northern’s Outside
Counsel
Part I- Tools To Effectively Plan
Topics For Initial Client/Counsel Call
•
•
•
•
Parties relationship: (disputed issues, other claims, contract and
globally);
Dispute’s nature/size/importance to Company;
Outcomes (desired/acceptable);
Anticipated evidence:
– Nature, source and location of documents, Electronically Stored
Information (“ESI”);
– Witnesses, experts (if any), rationale for calling, anticipated testimony,
and anticipated witness problems.
•
•
•
•
Discuss forum/arbitrator/umpire issues (e.g. ex parte
communication with party appointeds).
Principal to Principal communications during dispute.
Budgeting/billing requirements, anticipated payment cycles, and
any other financial matters necessary for effective planning.
Next steps.
Cost Effective Resolution of
Reinsurance Disputes
Part II- A Cost Effective Plan For
Resolving The Dispute
The Follow Up Call Between Client
(SEPTA) and SEPTA’s Outside Counsel
Part II- Developing A Cost
Effective Plan
THE VALUE EQUATION:
Dispute Plan +
Detailed Budget +
Approved Staffing
=
ACCOUNTABILITY
The Dispute Plan
• Conceive plan at inception, but
• Allow plan to change/develop.
Elements Of The
Dispute Plan
• Early dispute termination strategies – phasing/summary
adjudication, negotiation points/mediation;
• Detailed discovery plan, including issues requiring discovery;
• Evidentiary sources - witnesses, documents;
• Anticipated discovery disputes;
• Discovery cost-containment strategies - importance of
partnership;
• Staffing requirements (including levels/rates).
Hearing Plan
•
•
•
•
•
Location
Duration
Witnesses
Staffing
Briefing
Detailed Budget
• Prepare at outset - project through
conclusion;
• Consider budget for each phase;
• Anticipate budget revisions - duty of
counsel to proactively revise budget.
Approved Staffing
• Counsel should explain roles;
• Provide client the opportunity to discuss
and approve staffing;
• Counsel should commit to not charge for
file review of any replacement timekeeper
Agreeing On A Plan For The
Dispute Topics For Discussion
1. The Dispute Plan:
• Early Dispute Termination Strategies;
• Detailed Discovery Plan;
• Hearing Plan;
• Staffing Requirements:
Name/Levels/Tasks/Rates;
2. The Budget.
Cost Effective Resolution of
Reinsurance Disputes
Part III- Looking for Common Ground
On Controlling Arbitration Legal
Expenses and Costs:
Negotiating Cost Containment Strategies
Before The Organizational Meeting- The
Call Between Opposing Counsel
Part III- Looking for Common Ground
Negotiating Cost Containment Strategies Before The Organizational Meeting
A. Looking For Stipulations:
1. Consider where opponent’s documents are likely
to be kept, and production and review logistics
involving both parties and determine reasonable
stipulations;
2. Consider ESI challenges faced by both parties and
reasonable stipulations (e.g. No production of
“essentially” identical electronic and hard copy
document, all production of ESI in hardcopy or
agreed common electronic platform);
Negotiating Cost Containment Strategies
Before The Organizational Meeting
3.
Consider reasonable and mutual document production
stipulations (e.g. bates numbering, scanning, who pays
for copies, Deposition Exhibit numbering, maintenance
of original deposition exhibits, etc.);
4.
Consider reasonable and mutual deposition event
limitations (number of witnesses, interrogatories,
document requests, requests for admission) and
duration (one business day – 7 hours) for each dep,
without motion;
Negotiating Cost Containment Strategies
Before The Organizational Meeting (cont.)
5. Consider reasonable and/or mutual dates for
“anticipation of litigation” for privilege
purposes;
6. Consider reasonable and mutual privilege log
formats and stipulations (e.g. no need to log
post- dispute attorney/client documents not
involving third parties, one word “subject”
descriptions, affiliation/legal job key for
senders and recipients);
Negotiating Cost Containment Strategies
Before The Organizational Meeting (cont.)
7. Consider mutual methodology for privilege
challenges, if, when and by whom challenges
will be made, sensible limits for any necessary,
in camera review, third party in camera review
designee;
8. Consider reasonable discovery deadlines and
anticipate and plan for reasonable extension
requests in overall scheduling;
Negotiating Cost Containment Strategies
Before The Organizational Meeting (cont.)
9. Consider discovery dispute process and
stipulations that could be made;
10. Consider hearing/cost reduction issues (e.g.
sharing daily transcript costs, single court
reporting service for depositions, neutral
and/or free hearing locations, accommodations
for out of town travelers);
11. Consider need for and timing of any
anticipated mediation.
Cost Containment Strategies for
Conference with Opposing Counsel
1.
2.
3.
4.
Affirmatively commit to resolution before decision maker on
the merits rather than by obtaining strategic advantages;
Communicate cost containment as a client directive and a
goal, and seek similar validation from opposing counsel;
Address each potential stipulation you are proposing and
any proffered by opponent and be willing to reasonably
compromise to achieve cost containment without harming
substantive rights (incentives for issue/discovery
limitations);
Express willingness to consider other mutual stipulations
throughout the proceeding;
Stipulations should be in writing and available for the
decision maker in the event of dispute, and if in arbitration,
should be presented prior to or at organizational meeting
and should address as many points regarding discovery,
privilege and scheduling as possible.