We previously reported on reinsurance litigation in Connecticut federal court between Travelers Indemnity Co. and Excalibur Reinsurance Corp, which the parties settled in May 2014. See prior post dated July 31, 2014. A year later, in May 2015, another reinsurance dispute in Connecticut federal court was filed by Travelers’s subsidiary, Select Insurance Co., against Excalibur. Initially, Excalibur sought to enjoin the Connecticut litigation, arguing that without the injunction, Excalibur would need to post security, which would deplete its corporate assets and seriously affect its liquidity. The injunction was denied, however, because Excalibur would not be “irreparably harmed” by posting security. See prior post dated July 8, 2015.
Just as Excalibur feared, the Connecticut court has now granted Select Insurance Co.’s motion for pre-pleading security pursuant to Conn. Gen. Stat. section 38a-27(a). The court looked to virtually identical rulings previously made in the prior cases involving Travelers, and rejected Excalibur’s opposition to posting a security. The court held that: (1) the statute requires that unauthorized insurers post security; (2) the statute applies, notwithstanding that Select Insurance Co. was not a citizen of Connecticut; (3) the statute applies, notwithstanding that the reinsurance agreements selected New York law, because the statute is procedural in nature; (4) an order of supervision by the Pennsylvania Insurance Commissioner purporting to prohibit Excalibur’s posting of security did not preempt the Connecticut law; and (5) security was necessary because Excalibur was unauthorized at the time of the litigation, notwithstanding that Excalibur was previously, for a limited period of time, authorized in Connecticut. Accordingly, the court ruled that Excalibur was required to post security in an amount to be determined following a hearing. Select Insurance Co. v. Excalibur Reinsurance Corp., Case No. 3:15-cv-00715 (USDC D. Conn. Mar. 24, 2016).
