CALIFORNIA COURT DISMISSES TOLLING SUBCLASS CLAIMS WITH PREJUDICE, FINDING ISSUES BARRED BY LAW OF THE CASE DOCTRINE

We have previously reported on a case styled Munoz v. PHH Corp., one of similar suits alleging putative class actions under the Real Estate Settlement Procedures Act arising from purported “sham” reinsurance transfers covering private mortgage insurance. In this ruling, the court granted defendant’s partial motion to dismiss the plaintiff-intervenor’s amended complaint with prejudice and to strike certain allegations from the remaining pleading.

Previously, the court granted the plaintiff-intervenor leave to file an amended complaint to cure deficiencies identified in the court’s order for partial judgment on the pleadings against the plaintiff-intervenor for failure to plead sufficient facts. In that August 2014 order, the court found that PHH’s loan disclosure documents had adequately placed the tolling subclass on notice of their claims, and that no extraordinary circumstances justified the late filing. The court also found that the plaintiff-intervenor failed to sufficiently plead a claim of fraudulent concealment apart from the underlying RESPA claim.

The court found that the allegations in the amended complaint would involve the re-litigation of these previously resolved issues. It reasoned that the amended complaint’s equitable estoppel and tolling claims “merely cloak[ed] the same facts or irrelevant facts in new legal theory, one amenable to the same defenses that have already prevailed” and were therefore barred under the law of the case doctrine. The court dismissed with prejudice because its previous order granted the intervenor one opportunity to amend, and the intervenor failed to cure the complaint’s deficiencies. Because the court had dismissed the claims with prejudice, it struck certain pleadings filed after the date of the order permitting the filing of an amended complaint as immaterial. Munoz v. PHH Corp., Case No. 08-00759 (USDC E.D. Cal. May 21, 2015).

This post written by Brian Perryman.

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FOURTH CIRCUIT REJECTS CHARACTERIZATION OF MOTIONS “FOR RECONSIDERATION,” REMANDS TO DETERMINE WHETHER DISPUTE IS ARBITRABLE

The Court of Appeals for the Fourth Circuit recently remanded a case to the district court for full consideration of a request to compel arbitration, finding the lower court’s order “inconsistent with the emphatic federal policy in favor of” arbitration. The plaintiff, Dillon, sued several banks which were allegedly “complicit” in effectuating illegal payday loans by processing transfers on behalf of the lenders (tribal and out-of-state). The district court denied the banks’ initial motion to enforce arbitration clauses contained in the original loan agreements because the banks failed to provide authenticating evidence. When the banks renewed their motions to cure that deficiency by providing such evidence, the district court construed the motions as reconsideration motions, and denied them.

On appeal, the court analyzed the lower court’s perfunctory reasoning in construing the renewed motions as seeking reconsideration. The court rejected the idea that the banks only had one opportunity to invoke the Federal Arbitration Act’s enforcement mechanisms. Only when the party “is in default in proceeding with” arbitration does the Act foreclose the chance of obtaining a stay under its mechanisms. The court also distinguished the underlying issues presented by the initial and renewed motions to reject the notion that the law of the case doctrine justified denial. The district court’s ruling on the initial motions spoke to whether the pleadings established arbitrability did not, as law of the case, determine the renewed motions’ issue of whether Dillon consented to arbitration in the first place. The district court was instructed to, on remand, determine whether the claims are within the scope of the original loan agreement’s arbitration clause, and whether the banks forfeited those rights because they are “in default in proceeding” with arbitration. Dillon v. BMO Harris Bank, N.A., No. 14-1728 (4th Cir. May 29, 2015).

This post written by Brian Perryman.

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COURT DENIES AS MOOT INSURER’S MOTION TO REVIEW DISCOVERY

A district court in Kansas denied as moot defendant Liberty Mutual Fire Insurance Company’s motion to review a magistrate’s order granting plaintiff Great Plains Ventures, Inc.’s motion to compel reinsurance, reserves, and claims-related materials. The magistrate judge ruled in January that Liberty Mutual failed to establish why documents Great Plains had requested in a coverage dispute were irrelevant or privileged. Thus, the magistrate judge granted Great Plains’ motion to compel. Soon thereafter, Liberty Mutual requested that the magistrate judge stay his order in anticipation of its objection to the discovery order and its motion to review the order to compel. While the motion to review was pending, the magistrate judge denied the motion to stay and ordered Liberty Mutual to produce the documents. Liberty Mutual complied, and because it did so, the court ruled that its request for review was moot. Great Plains Ventures, Inc. v. Liberty Mutual Fire Insurance Co., No. 6:14-cv-01136 (USDC D. Kan. May 1, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields Jorden Burt in Washington, DC.

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U.K. COURT DENIES REINSURER’S SUIT TO AVOID REINSURANCE AGREEMENTS

The Commercial Court (a subdivision of the Queen’s Bench Division of the U.K.’s High Court of Justice), recently held that an underwriter could not avoid the reinsurance contracts it had underwritten because it failed to convince the court that it would not have underwritten those contracts. In a case involving nondisclosure of loss statistics, the court determined that plaintiff reinsurer, Axa, could not avoid two reinsurance agreements that it had entered into with defendant insured, Arab Insurance Group (ARIG). The court made this finding even though ARIG failed to disclose – and perhaps even misrepresented – the loss statistics associated with its existing book of internal risk that was subject to the reinsurance. The court agreed with Axa that the misrepresentation of ARIG’s loss statistics was a material fact that should have been disclosed. However, even if ARIG had disclosed this information prior to the completion of the underwriting process, Axa would still have entered into the reinsurance agreements. Axa failed to prove they were induced by ARIG’s misrepresentation into the reinsurance contracts; they were therefore bound to those contracts. Axa Versicherung AG v. Arab Insurance Group [2015] EWHC 1939 (Comm).

This post written by Whitney Fore, a law clerk at Carlton Fields Jorden Burt in Washington, DC.

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COURT LIMITS DISCOVERY OF INSURER’S POLICIES WITH OTHER INSUREDS, COMPELS PRODUCTION OF PRIOR ARBITRATION TESTIMONY

Utica Mutual Insurance Company (“Utica”) sued R&Q Reinsurance Company (“R&Q) in New York federal court for payment under reinsurance certificates R&Q issued to Utica covering umbrella policies Utica issued to its insured, Goulds Pumps, Inc. (“Goulds”) from 1979 to 1981. Some of the policies Utica issued to Goulds did not state the aggregate limits under the policies, but a settlement between Utica and Goulds in an earlier coverage dispute acknowledged that each of the primary policies at issue contained aggregate limits.

In connection with the reinsurance dispute, R&Q sought to compel the production of (1) documents concerning primary insurance policies issued by Utica to other insureds and correspondence reflecting the aggregate limits, and (2) deposition and hearing transcripts from a prior arbitration between Utica and R&Q.

The court declined to compel production of other insureds’ policies, noting that the aggregate limit issue had been litigated and resolved in prior litigation. However, it ordered that the transcripts be produced, but acknowledged that whether the testimony set forth in them would be admissible in the present Utica-R&Q dispute is a different issue. Utica Mut. Ins. Co. v. R & Q Reinsurance Co., Case No. 6:14-CV-00700 (USDC N.D.N.Y. June 2, 2015)

This post written by John A. Camp.

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CENTURY INDEMNITY ENTERS STIPULATED JUDGMENT PRESERVING RIGHT TO APPEAL DECLARATORY JUDGMENT IN FAVOR OF REINSURER

A New York federal court entered a stipulated judgment in favor of the plaintiff reinsurer that prevailed on its declaratory claim in a summary judgment previously ordered, which judgment capped its exposure to the dollar amount stated in the “Reinsurance Accepted” portion of the reinsurance contracts at issue.  The litigation had remained ongoing due to the cedant’s remaining counterclaims, but it agreed to forego pursuing those claims in favor of a strategy allowing it to pursue appeal of the prior summary judgment order.

Global Reinsurance Corporation of America v. Century Indemnity Company, No. 1:13-cv-6577, (USDC S.D.N.Y. June 3, 2015).

This post written by Zach Ludens.

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LOUISIANA AND NORTH DAKOTA ADOPT AMENDMENTS RELATED TO NONADMITTED AND REINSURANCE REFORM ACT OF 2010

Louisiana and North Dakota amended their surplus lines statutes in line with the Nonadmitted and Reinsurance Reform Act of 2010 (the “NRRA”), which was included in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“DFA”), signed into law in July 2010. Under the North Dakota amendment (HB 1146), definitions of “reciprocal state” were removed from the statute, and portions of the statute applying to taxes on out-of-state surplus lines insurance were removed. Under the Louisiana amendment (HB 259), portions of its statute were removed that dealt with collecting premiums based on risks located in Louisiana but insured by out of state surplus lines insurers.  The Louisiana bill repeals the authority for the Louisiana Insurance Commissioner to enter into NIMA, the Nonadmitted Insurance Multi-state Agreement compact, as to which we have posted, reducing the efficacy of the compact in achieving the premium tax provisions of the DFA.

This post written by Zach Ludens.

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PROCEDURAL ODDITIES RESULT FROM SIMULTANEOUSLY SEEKING VACATUR OF AN ARBITRATION AWARD AND RELIEF ON THE MERITS OF THE DISPUTE

The Second Circuit reversed the district court’s dismissal of a claim for vacatur without prejudice, which had been based on the panel’s finding that it lacked personal jurisdiction. The Second Circuit examined the merits of the vacatur claim and ruled that it should have been dismissed with prejudice. Based on that determination, the Second Circuit then affirmed the district court’s dismissal without prejudice of the second claim filed in the district court for relief on the merits of the dispute (a claim for breach of contract). The Second Circuit explained that dismissal of this claim without prejudice was appropriate due to the preclusive effect of the ruling in arbitration that personal jurisdiction was lacking. The court noted: “Although it may seem odd to deny the award preclusive effect over one claim and to grant it preclusive effect over another in the same suit, that is the logical result anytime a suit includes both a claim to vacate an award and other claims that might be precluded by a final award.” Global Gold Mining, LLC v. Ayvazian, Case No. 13-4759-cv (2d Cir. Apr. 27, 2015).

This post written by Michael Wolgin.

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MOTION TO COMPEL ARBITRATION GRANTED IN HURRICANE SANDY ROW

A New York district court granted Hudson Specialty Insurance Company’s (“Hudson”) petition to compel arbitration against New Jersey Transit Corporation (“N.J. Transit”) after determining that the parties had agreed to arbitrate pursuant to the Federal Arbitration Act. In late October 2012, Hurricane Sandy damaged N.J. Transit’s facilities and equipment triggering policies issued by Hudson and various other property casualty insurance companies. The original action was submitted to New Jersey state court to interpret “Flood Sublimit” and “Named Windstorm” provisions in the policies, the former of which limited Hudson’s flood damage liability to $100 million. Hudson sought to compel arbitration based on the arbitration provision within the policy. N.J. Transit argued that the arbitration agreement was unenforceable as it never assented to the provision, and furthermore, never saw the arbitration provision until the policy was issued. It alleged that they relied on a prior draft of the policy without such a provision.

The court rejected N.J. Transit’s arguments for a number of reasons. The arbitration provision was included in the policy quote accepted by Hudson’s insurance broker, which referenced arbitration. The court noted that N.J. Transit “cannot have it both ways.” Either N.J. Transit assented to the policy in 2012 or it did not. Instead, “N.J. Transit is clearly seeking to benefit from the Policy by demanding coverage for its losses after Hurricane Sandy and has thus manifested its assent.” The court also rejected N.J. Transit’s final effort to oppose arbitration alleging that the provision was unenforceable because it lacked certain key terms. Here, the arbitration provision was a complete form where the alleged missing terms had no bearing on the enforceability of the provision. Hudson Specialty Ins. Co. v. N.J. Transit Corp., No. 15-cv-89 (ER) (USDC S.D.N.Y. June 5, 2015).

This post written by Matthew Burrows, a law clerk at Carlton Fields Jorden Burt in Washington, DC.

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COURT REVERSES DISMISSAL OF INSURED’S CLAIM AGAINST REINSURER ASSERTING TORTIOUS INTERFERENCE WITH INSURANCE SETTLEMENT AGREEMENT

Gardner Denver, Inc. (“Gardner”), had entered into a settlement agreement with its liability insurer, National Union Fire Insurance Company of Pittsburgh, Pennsylvania (“NUF”) to resolve a dispute over Gardner’s coverage under various indemnity agreements. NUF honored the settlement agreement for several years, paying Gardner’s claims. However, once NUF entered into a “retroactive reinsurance” agreement with National Indemnity Company (“NICO”), in which NICO assumed NUF’s obligations and liabilities, NICO delegated the claims handling to another entity, which asserted a coverage defense and ceased paying Gardner’s claims under the settlement agreement. Gardner sued NICO and the claims administrator for tortious interference with a contract, and NICO countered with a motion to dismiss. NICO contended that the tortious interference claim failed because NICO had a qualified privilege as NUF’s agent (similar to the protection afforded to corporate officers under the “business judgment” rule) to handle claims on behalf of NUF. The trial court agreed with NICO and found that the complaint failed to overcome the privilege by sufficiently alleging that NICO acted without justification and with malice, and dismissed the case.

The appellate court, however, reversed the dismissal, holding that it was a factual question whether NICO’s actions were in fact unjustified or malicious, based on interpretation of the underlying insurance and settlement agreements and other evidence not before court, and thus it was not a decision for the court to resolve on a motion to dismiss. “Until the court answers whether NICO’s defense was frivolous, it could not determine whether NICO acted in good faith or, alternatively, acted without justification or malice, in its failure to pay claims pursuant to the settlement agreement.” Gardner Denver, Inc. v. National Indemnity Co., et al., Case No. 4-14-0713 (Ill. App. Ct. May 21, 2015).

This post written by Barry Weissman.

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