Carlton Fields

INSURANCE GUARANTY ASSOCIATION MUST PAY WORKERS’ COMPENSATION CLAIMS OF A FORMER, NON-MEMBER GROUP SELF-INSURER

February 2, 2015 by Carlton Fields

The North Carolina Court of Appeals has held that the state’s Insurance Guaranty Association is obligated to pay for workers’ compensation claims made or incurred against CompTrust, a former group self-insurer that issued workers’ compensation insurance policies to certain employer members. CompTrust was never an Association member, but had converted itself into the CAGC Insurance Company, a North Carolina licensed direct insurer, and CAGC joined the Association. Only CAGC survived the merger and members of CompTrust were converted into CAGC policyholders. CAGC had assumed liability for all claims previously held by CompTrust but was liquidated in January 2014. At issue were workers’ compensation claims that occurred when CompTrust was still in business and responsible for the relevant insurance policies. The Association argued that it should not be obligated for those claims because, in part, they did not arise under policies of direct insurance issued by CAGC and were therefore outside the scope of the Association’s statutory obligations.

The appellate court disagreed. All of CompTrust’s debts and obligations were transferred to CAGC “to the same extent as if said debts, liabilities, and duties had been incurred or contracted” by CAGC. The court found no difference between the merger agreement at issue and the assumption reinsurance agreement at issue in a prior North Carolina case whereby Reliance National Insurance assumed a self-insurer’s responsibilities and the Association was then obligated, upon Reliance’s insolvency, to workers’ compensation obligations that originated with the self-insurer. CAGC was a direct insurer placing it within the Association’s statutory obligations and, therefore, when CAGC became insolvent the covered claims became the Association’s responsibility. The appellate court reversed the trial court’s decision and remanded with directions to enter judgment that the Association was estopped from denying its obligations for any pre-merger workers’ compensation claims made or incurred against CompTrust. Goodwin v. CAGC Insurance Co., No. COA14-445 (N.C. Ct. App. Jan. 20, 2015).

This post written by Renee Schimkat.

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IN BATTLE OVER PATENTS, NON-SIGNATORY TIES TOO UNCERTAIN TO GRANT MOTION TO DISMISS

January 29, 2015 by Carlton Fields

The District Court of Colorado recently denied Defendant Garmin International’s motions to dismiss and to stay pending arbitration, concluding that Plaintiff MSPBO was not bound by an arbitration agreement to which it was not a signatory. In late 2006, PhatRat Technology, Inc., (“PhatRat”) entered into a settlement and arbitration agreement (“agreement”) with Garmin International to resolve a licensing dispute. The agreement stipulated that Garmin International would be released from all liability from PhatRat and its affiliates associated with the licensed patents. Seven years later, MSPBO sued Garmin International for patent infringement.

Garmin argued that the dispute as to whether MSPBO was an affiliate of PhatRat, and therefore subject to arbitration, should be covered by the agreement’s arbitration clause. The Court disagreed, holding that a non-signatory cannot be bound to arbitrate unless there is a “close relationship” between the parties and the claims relate to the underlying dispute. Garmin International alleged that MSPBO was merely a shell company, but the Court found no support for these allegations. The nature of the relationship between the parties is somewhat convoluted. MSPBO and PhatRat shared common ownership, but MSPBO was later sold to Deer Creek Capital, after which they acquired the disputed patent. The Court further found that “the agreement between PhatRat and Garmin contains no clause placing upon PhatRat’s affiliates equal rights and obligations under the agreement.” As such, Garmin International motions were denied and MSPBO would not be bound by the arbitration agreement to which it was not a signatory. MSPBO, LLC v. Garmin International, Inc., Case No. 13-cv-03388-PAB-KMT (USDC D. Colo Sept. 11, 2014).

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

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REINSURER OBTAINS AWARD OF ATTORNEY’S FEES AGAINST CEDENT THAT FAILED TO TIMELY PRODUCE ELECTRONICALLY STORED INFORMATION

January 28, 2015 by Carlton Fields

This case was brought by the cedent, Michigan Millers Mutual Insurance Co., seeking indemnity and expense payments arising from various underlying lawsuits, under a Casualty Excess Reinsurance Agreement. A discovery dispute arose when Michigan Millers failed to comply with its repeated promises to produce a substantial amount of electronically stored material. In an order awarding attorney’s fees to the defendant, reinsurer Westport Insurance Corp., the court found that Michigan Millers delayed for months, and then, “compliance was obtained only after Westport filed its motion to compel” on the eve of the scheduled hearing. Michigan Millers Mutual Insurance Co. v. Westport Insurance Corp., Case No. 1:14-cv-00151 (USDC W.D. Mich. Nov. 7, 2014).

This post written by Michael Wolgin.

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THE IMPORTANCE OF SELECTING AN AVAILABLE ARBITRATION FORUM

January 27, 2015 by Carlton Fields

The Eleventh Circuit affirmed a Florida district court’s denial of Cashcall’s motion to compel arbitration, as the forum selected in the parties’ loan agreement was not available. Appellee Abraham Inetianbor initially borrowed $2,600 from Western Sky Financial LLC. He subsequently repaid $3,252.65 to the servicer of the loan, CashCall, over twelve months. Mr. Inetianbor refused to pay a subsequent bill from Cashcall because he believed his financial obligations had been fulfilled. CashCall disagreed, and reported Mr. Inetianbor’s purported default to credit agencies. Mr. Inetianbor then sued, inter alia, for defamation and usury violations.

The loan agreement mandated any dispute be arbitrated by the Cheyenne River Sioux Tribal Nation (the “Tribe”). Despite attempts to comply with arbitration, the Tribe explained to Mr. Inetianbor and the district court on multiple occasions that the Tribe does not authorize arbitration. CashCall argued that the specified arbitral forum was not integral to the agreement, and therefore its unavailability should not cause the court to deny its motion to compel. The Court looked to “how important the term was to one or both of the parties at the time they entered into the agreement” – to determine whether the arbitration agreement is integral. In this case, the agreement made multiple references to the Tribe. In nine paragraphs regarding arbitration in the contract, the Tribe was specifically mentioned in five of them. The Court concluded that the contract’s use of “shall” and “is required to” was sufficient evidence of the intent to make the Tribal arbitral forum the exclusive forum. Since that arbitral forum was unavailable, Appellant’s motion to compel arbitration was denied. Inetianbor v. Cashcall, Inc., No. 13-cv-60066-JIC (11th Cir. 2014).

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

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FIO ISSUES REPORT ON GLOBAL REINSURANCE MARKET AND ITS IMPORTANCE TO THE U.S. INSURANCE INDUSTRY

January 26, 2015 by Carlton Fields

On December 31, 2014, the Federal Insurance Office (FIO) issued a report entitled “The Breadth and Scope of the Global Reinsurance Market and the Critical Role Such Market Plays in Supporting Insurance in the United States.” The report was prepared pursuant to the Dodd-Frank Act. It provides an overview of the history, forms, and purposes of reinsurance, the U.S. regulatory framework governing reinsurance, and the global reinsurance market. The report analyzes the important role that global reinsurers play to U.S. insurance industry generally. It does not, however, purport “to analyze the extent to which reinsurance or any particular reinsurer could be systemically important.”

The report discussed two roles of the federal government in the reinsurance market. First, it mentions that the Dodd-Frank Act contains several provisions relating to the oversight of reinsurance. It is noted that the approach of those provisions is “to enhance uniformity in the state-based insolvency regulation of insurers and reinsurers by increasing deference to the state in which the reinsurer is domiciled or licensed.”

Second, it discusses some of the history of credit for reinsurance collateral reform, and mentions that efforts by the NAIC to achieve uniformity with respect to this area through a Model Act have not been successful. The report states that the Treasury Department and the United States Trade Representative are considering exercising their authority to enter into an international agreement concerning this issue, which would preempt inconsistent state laws.

This post written by Michael Wolgin.

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