Arch Reinsurance of Nebraska et al v. International Risk Insurance Co.
(SoUthern District of Texas, July 29, 2009)
On July 29, 2009, several reinsurers commenced a civil action in the U.S. District Court, Southern District of Texas, seeking to compel arbitration or, in the alternative, obtain a declaration of rights and liabilities between the parties. The facts in the complaint allege that the insured, in anticipation of Hurricane Rita, began to shutdown ethylene furnaces. A premature shutdown by a refinery caused a loss of steam which caused damage to some of the insured’s furnaces. A day and a half later, Hurricane Rita made landfall causing additional damage to the insured’s facilities. Then, several months later, additional boilers at the refinery failed, causing the insured to sustain additional financial losses.
The insured, allegedly acting through an alter ego, made claims to the reinsurers for the losses, whose coverage extended up to $75 million. The reinsurers, through an appointed adjuster, sought additional information to substantiate the claims, arguing that the three events constituted three separate occurrences, subject to three deductibles and waiting periods. As a result of the dispute, the reinsurers seek to enforce the dispute resolution provision in the Reinsurers’ Facultative Reinsurance Certificates. In the alternative, they seek a declaration that there were three occurrences, each subject to a $10 million deductible and each with its own 60 day waiting period. Should the reinsurers prevail, coverage would be excluded, except for the damages suffered as a result of Hurricane Rita.
For a copy of the complaint click here
Kimberly E. Whistler and Joanna M. Roberto