Bad faith is the unreasonable failure of an insurance company to honor the terms of an insurance policy and deal with a policyholder in good faith. Insurance companies who are found to have acted in bad faith can be liable for punitive damages in addition to contract damages. Some states have bad faith statutes called "Unfair Insurance Claims Practices Acts."
Lloyd’s Sues ACE Unit in Arbitration Dispute
June 17th, 2013 - Lloyd’s of London is taking Century Indemnity Co. to court in a two-pronged effort to both stay certain arbitration proceedings between the two insurers and compel arbitration in other matters.
Certain Underwriters at London-based Lloyd’s had issued 11 separate reinsurance contracts to Insurance Co. of North America, a predecessor of Century, between 1961 and 1970. All of the contracts were tied to primary or excess general liability policies that Century had issued to insureds, including Caterpillar Tractor Co.
Numerous lawsuits were filed against Caterpillar by individuals who claimed injury due to exposure to asbestos used by the company. By May 17, 2012, asbestos-related claims were submitted to Lloyd’s under several of the policies.
The Underwriters paid portions of the claims under a reservation of rights but declined to pay others on the grounds that Century had incorrectly allocated losses to the underlying policies and reinsurance contracts. Audits were conducted and meetings were held but the matter remains unresolved.
Lloyd’s said that Century demanded arbitration of the dispute on March 15th, 2013. There are binding arbitration agreements between the two insurers, with New York designated as the site of some hearings and Philadelphia, where Century is based, being the site for the others.
Century has sought to consolidate the arbitration hearings. However, Lloyd’s contends there is nothing in the insurance agreements that permits or allows such a procedure, and the English firm said in its lawsuit that it has not consented to such an arrangement.
Lloyd’s asked the U.S. District Court in New York to stay a single arbitration of a reinsurance dispute that Century has attempted to commence. It also asked that the ACE Group unit be forced to pursue each arbitration separately, and that both sides be ordered to select umpires within 30 days.
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