United National Ins. Co. v. Aon, Ltd. (E.D.P.A., July 24, 2009)
A federal court judge in the Eastern District of Pennsylvania tacked on an additional $8.3 million in prejudgment interest against a broker in action brought as a result of recession of a reinsurance policy. In 1999, after claims exceed the income generated by the premiums, the reinsurer sought to rescind its policies reinsuring policies issued by the insured for building contractors. In an arbitration proceeding, the reinsurer argued the insurer and/or broker had mislead it entering into the reinsurance agreement. In 2003, the reinsurance policies were partially rescinded and the premiums were ordered to be returned.
The insurer subsequently commenced an action seeking indemnity or contribution against the broker alleging, as the agent, it provided the negligent misrepresentations to the reinsurer. The insurer further claimed it was only a passive tortfeasor. After a nine week trial, the jury awarded the insurer over $16 million in indemnification costs and $7 million in costs and attorney's fees related to the arbitration. The insurers then submitted a motion to amend the judgment to include prejudgment interest and damages. Applying a restitutionary theory under Pennsylvania law, the court allowed prejudgment interest at 6% on the full judgment.
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By Richard J. Cohen and Kimberly E. Whistler