IRS Issues “Stranger Owned Life Insurance” Rules

The Internal Revenue Service (“IRS”) issued two Revenue Rulings on May 1, 2009, addressing certain tax aspects of sales and surrenders of life insurance policies: Rev. Rul. 2009-13 and Rev. Rul. 2009-14. These rulings resolve some longstanding questions regarding sales of life insurance policies and in many respects are consistent with life settlement industry expectations. www.irs.gov/pub/irs-drop/rr-09-13.pdf www.irs.gov/pub/irs-drop/rr-09-14.pdf By Daniel W. Gerber and Kimberly E. Whistler http://www.goldbergsegalla.com/attorneys/Gerber.html http://www.goldbergsegalla.com/attorneys/Whistler.html  
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Rectification of insurance policies

Dunlop Haywards (DHL) Ltd (2)  Erinaceous Commercial Property Services Ltd -v- Erinaceous Insurance Services Ltd and (1) Lockton Companies International Ltd (2) MSI Corporate Capital Ltd & Others, [2009] EWCA Civ 354.8 (April  28, 2009) The Court of Appeal considered the factual matters which may be taken into account by the courts in claims for rectification of insurance policies. The claimant insured alleged failure by the broker to arrange effective excess insurance coverage for the insured. An application was made by the defendant broker
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“Continuous Trigger” Theory Applies Separately to Each Policyholder

Franklin Mutual Ins. Co. v. Metropolitan Property & Casualty Ins. Co.. (N.J. App., April 17, 2009) A property insurer sought pro-rata reimbursement from a policyholder’s previous insurer following payment for environmental contamination from an underground heating oil tank.  The contamination occurred continuously during both policy’s effective periods as well as a period of ownership by previous owner.  The court held that, under New Jersey’s “continuous trigger” theory, the pro-rata formula is applied separately to each individual policyholder and not collectively
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Occurrence Determined by Cause of Injury, Rather Than Injury Itself

Budway Enterprises, Inc. v. Federal Ins. Co. (C.D. Cal., April 14, 2009) The plaintiff failed to allege facts showing there were two separate causes of theft resulting in loss of two aluminum shipments, with separate Bills of Lading and separate delivery numbers, loaded into two separate tractor-trailers.  Accordingly, the insurer did not breach the insurance contract by applying the $100,000 per occurrence policy limit.   By Richard J. Cohen and Carrie P. Appler   http://www.goldbergsegalla.com/attorneys/Cohen.html http://www.goldbergsegalla.com/attorneys/Appler.html      
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SOUTHERN DISTRICT OF NEW YORK ALLOWS CEDENT’S SUCCESSOR TO ASSERT NEW CAUSES OF ACTION INVOVLING DIFFERENT TRANSACTIONS AGAINST THE REINSURER

TIG INSURANCE CO. V. CENTURY INDEMNITY CO. (CIVIL ACTION NO.: 08-CV-7322, April 8, 2009) The cedent’s successor-in-interest filed this action against the reinsurer stating that the reinsurer breached the terms and conditions of several facultative reinsurance contracts. Specifically, the complaint alleges that the named reinsurance contracts specifically provided coverage to the cedent’s predecessor on a policy of excess liability insurance issued by the cedent’s predecessor to the insured. Upon settling the underlying action, cedent’s successor-in-interest is seeking coverage under the
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Bermuda Supreme Court Denies Validus’s Request – Clear Path to Closing of IPC Holdings/Max Capital Amalgamation

  IPC Holdings, Ltd. (Nasdaq:IPCR) (BSX:IPCR BH) issued the following statement regarding yesterday's decision by the Supreme Court of Bermuda Commercial Court not to grant Validus Holdings, Ltd.'s request for an expedited trial on the litigation brought by Validus against IPC and Max Capital Group Ltd. (Nasdaq:MXGL) (BSX:MXGL BH). "We are pleased with the Court's ruling. Despite Validus's efforts, the litigation, which we believe is without merit, will not be an impediment to closing our combination with Max and creating
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Carbon Monoxide Discharged from Furnance is “Pollutant” Released into Atmosphere

Nautilus Insurance Company v. Country Oaks Apartments, Ltd.  (Click on the Case Name for full decision) (5th Cir. ( Texas), April 22, 2009 The vent to a furnance was accidently blocked, causing the carbon monoxide that would otherwise have been discharged into the atmosphere to be dispersed into an apartment.  The carbon monoxide consistuted a “pollutant” within the meaning of the absolute pollution exclusion and its discharge from the furnance constituted discharge into the “atmosphere."   By Daniel W. Gerber
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Hiscox Announce Major Position Shift in US & London Markets

On April 20, 2009, Hiscox announced several group restructuring the United States and London markets. With respect to Hiscox USA, all business will be now run as a single operation with Richard Watson, former manager director of Hiscox’s Global Markets. Hiscox also announced that its London operation will focus exclusively in the London Market while Hiscox Global Markets division will now separate into the United States and London markets exclusively. By Jeffrey L. Kingsley http://www.goldbergsegalla.com/attorneys/Kingsley.html  
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AIG Appoints New Chairman and Chief Administrative Officer

AIG announced on April 27, 2009, that Matthew Winter, President and CFO of American General Life Companies, has been named Vice Chairman of AIG’s Transition Planning and Administration Division. Jeffrey Hurd has been named Chief Administrative Officer and will be responsible for AIG’s global operations. By Jeffrey L. Kingsley http://www.goldbergsegalla.com/attorneys/Kingsley.html  
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STAY DENIED PENDING ARBITRATION BECAUSE AGREEMENT DOES NOT CONTAIN AN ARBITRATION PROVISION

EASTERN DISTRICT OF ILLINOIS CONTINENTAL CAS. CO. V. COMMERCIAL RISK RE-INSURANCE CO. (CIVIL ACTION NO.: 07-C-6912, April 15, 2009)   Defendants filed an application for a pre-trial stay pending arbitration and application to appoint a referee regarding several reinsurance agreements and a separate "commutation agreement." Pursuant to the "commutation agreement," certain reinsurance agreements between the parties were terminated by consent. Under that agreement, it contained the provision that the parties would submit to the exclusive jurisdiction of the State of
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