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FEDERAL COURT ISSUES SUBPOENAS FOR USE IN FOREIGN ARBITRATION

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A federal judge in New Jersey recently granted an ex parte application for issuance of subpoenas for use in a London arbitration. The court’s basis for the ruling was 28 U.S.C.A. § 1782, the federal statute titled “Assistance to Foreign and International Tribunals and to Litigants Before Such Tribunals.” Without discussion, the court concluded that a proceeding before the London Maritime Arbitrators Association constitutes a “foreign tribunal” for the statute’s purposes. The court found that all of the statutory factors had been met and that the discretionary factors weighed in favor of issuing the subpoenas. In re Application of Owl Shipping, LLC & Oriole Shipping, LLC, No. 14-5655, 2014 WL 5320192 (D.N.J. filed Oct. 17, 2014).

This post written by Catherine Acree.

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APPEAL DISMISSED IN INSTITUTO NACIONAL DE SEGUROS v. HEMISPHERIC REINSURANCE GROUP, L.L.C. ET AL.

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We have posted on this case filed against two reinsurance brokers several times.  Since our last posting regarding this case, which reported on the results of the trial, an appeal was filed in Florida’s Third District Court of Appeal.  The appeal has been dismissed pursuant to a joint stipulation. Instituto Nacional de Seguros v. Hemispheric Reinsurance Group, LLC, No. 3D14-1590 (Fla. Ct. App. Nov. 14, 2014).

This post written by Kelly A. Cruz-Brown.

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REINSURER’S LIABILITY CAPPED AT AMOUNT STATED IN LIABILITY CLAUSES

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In a case on which we previously reported on January 29, 2014, a federal court in New York recently ruled that a reinsurer was not required to pay amounts in excess of the sums stated in the Liability Clauses of two facultative certificates, even though the word “limit” was not used. Rather, the reinsurer’s liability was stated as a percentage share of the underlying policy limit. The reinsured argued that certain defense expenses must be reimbursed, even though they exceeded the agreed-upon percentage share, because the facultative certificates were silent on whether defense expenses count toward the amount reinsured. Applying Second Circuit and New York law, the court concluded that the contract was unambiguous and that the reinsurer’s overall liability for both indemnity and defense expenses was capped at the amount stated in the Liability Clauses of the facultative certificates. The Court ruled that a percentage share of an underlying policy limit is itself a limit on liability. The court also denied the reinsured’s request for discovery regarding the “custom and practice” related to limit-of-liability provisions in reinsurance contracts. Utica Mutual Insurance Co. v. Clearwater Insurance Co., Case No. 6:13-cv-01178 (USDC N.D.N.Y. Nov. 20, 2014).

This post written by Catherine Acree.

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COURT REVERSES DENIAL OF PETITION TO COMPEL ARBITRATION

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In Mahmud v. Ralph’s Grocery Company, No. B237636 CA 2/4 (Nov. 10, 2014), the California Second Appellate District reversed and remanded a trial court denying the petition of an employer (Ralph’s) to compel arbitration of a wage dispute with its former employee (Mahmud), which also includes certification of multiple classes of similarly situated Ralph’s employees. The California Second Appellate District relied upon the U.S. Supreme Court’s opinion in AT&T Mobility L.L.C. v. Concepcion, 563 U.S. ___,131 S.Ct. 1740 (2011), which effectively overruled Gentry v. Superior Court, 42 Cal.4th 443 (2007) and concluded that the National Labor Relations Act did not override the FAA. Furthermore, the Court determined that Mahmud would not prevail on demonstrating that Ralphs’ arbitration policy was unconscionable on both procedural or substantive grounds because she presented no evidence of the circumstances surrounding her application for employment or her decision to sign the arbitration agreement and failed to cite to any provisions of the arbitration policy to explain how the arbitration procedures set forth in the policy demonstrate unconscionability.

This post written by Kelly A. Cruz-Brown.

See our disclaimer.

COURT REJECTS CLAIMS OF ATTORNEY CLIENT AND WORK PRODUCT PRIVILEGE IN COMMUNICATIONS BETWEEN INSURER AND REINSURER

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An Iowa federal district court addressed the alleged privileged relationship between an insurer and its reinsurer in the context of two discovery requests involving communications between Progressive Casualty Insurance Company and its reinsurers. Progressive disputed coverage under a directors and officers policy issued to its insured, Vantus Bank, following a suit by the FDIC against Vantus Bank’s directors and officers.

The first discovery issue involved Progressive-redacted portions of pre-litigation communications with its reinsurers on the basis of attorney-client and work-product privileges in response to the FDIC’s discovery requests. Progressive argued the communications contained opinion work-product information pertaining specifically to anticipated, and ultimately filed, coverage litigation involving Vantus, its officers and directors, and the FDIC. The documents included litigation and mediation strategies and reserve information which had previously been held as protected from disclosure. In response, the FDIC claimed the documents were prepared in the ordinary course of business and therefore not protected. Both the court disagreed with Progressive, holding that the documents were not protected from discovery because were not prepared in anticipation of litigation nor did they contain the lawyer’s mental impressions. The court cited Progressive’s admission that the documents were prepared in the ordinary course of business; that the documents at issue were in the nature of business planning documents; that neither Progressive nor the reinsurers were involved in giving legal advice or in mapping litigation strategy; and the communications served numerous business functions. The court also held that the same rationale applied to specific portions of the documents which Progressive argued were protected even if the entire document was not.

The second discovery issue concerned the production of certain documents which Progressive asserted were protected by the attorney-client privilege but which Progressive had previously disclosed to its reinsurers and brokers. Progressive asserted it shared a common interest with its reinsurers such that its voluntary disclosure of those documents did not waive the privilege. The court again disagreed, holding that Progressive and its reinsurers did not hold a common legal interest. The relationship between them was a commercial and financial one – not legal. Moreover, the court rejected the argument that “if Progressive loses, so do its reinsurers,” concluding that the nature of the reinsurance business in and of itself did not give rise to a common legal interest. Progressive Casualty Insurance Co. v. FDIC, No. C12-4041-MWB (USDC N.D. Iowa Aug. 22, 2014).

This post written by Leonor Lagomasino.

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