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New reinsurance-related and arbitration developments from Carlton Fields

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John Pitblado

SECOND CIRCUIT FINDS ARBITRATOR DID NOT EXCEED AUTHORITY BY ISSUING AWARD, CONTRARY TO EARLIER AWARD

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This appeal is from a judgment entered by a district court in New York, denying a petition of United Brotherhood of Carpenters and Joiners of America (“UBC”) to enforce a May 4, 2014 arbitration award (“May 4 Award”) and to vacate a subsequent award on May 13, 2014 (“May 13 Award”), and granting Tappan Zee Constructors, LLC’s cross petition, seeking enforcement of the May 13 Award. UBC appealed the district court’s conclusion that the May 4 Award was not final and that the arbitrator did not exceed his authority by issuing the May 13 Award.

The contract at issue provided that the arbitrator must “render a short-form decision within 5 days of the hearing based upon the evidence submitted at the hearing, with a written decision to follow within 30 days of the close of the hearing”. The Second Circuit, under the “heightened standard of deference” courts apply to arbitration awards, concluded that it must defer to the arbitrator’s interpretation of the contract as allowing him to alter the earlier short‐form decision when rendering his later written decision. The Court noted that the contract does not define the term “short‐form”, nor does it specifically require that the second decision echo the result of the first. Thus, the Court held that, absent any such definitions or provisions, the arbitrator had the authority to interpret the contract as allowing him to change or alter the first award in consideration of certain criteria under the National Plan for the Settlement of Jurisdictional Disputes in the Construction Industry, which governed the arbitration. Accordingly, the Court affirmed the district court’s ruling, confirming the May 13 Award and vacating the May 4 Award.

United Brotherhood of Carpenters and Joiners of America v. Tappan Zee Constructors, LLC, No. 15-1002 (2d Cir. Oct. 20, 2015).

This post written by Jeanne Kohler.

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GEORGIA ENACTS NEW INSURANCE REGULATIONS FOR CAPTIVE INSURANCE OVERSIGHT

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On July 1, 2015, Georgia’s House Bill 552 went into effect, marking a change in Georgia’s insurance laws that will make the state more attractive to business. That law lowers the state tax on captive insurance premiums and reduces the capital requirements for such companies. Then on August 24, 2015, Georgia’s Commissioner of Insurance issued an order adopting new insurance regulations that incorporate changes to Georgia’s insurance code from House Bill 552 and to implement additional best practices of the captive industry. The new regulations, among other things, create new reporting and auditing requirements, adds a licensure requirement for captive managers, and changes the way in which captive insurance companies pay into the fraud fund. The new regulations went into effect on October 11, 2015.

Ga Comp. R. & Regs. 120-2-45-.01 to .20; 120-2-72-.05.

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

See our disclaimer.

CONNECTICUT FEDERAL COURT GRANTS REINSURER’S MOTION FOR SUMMARY JUDGMENT, ENTITLING IT TO COMMISSION ADJUSTMENT PAYMENTS

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In a diversity action arising out of a series of reinsurance agreements, a reinsurer, Odyssey Reinsurance Company, alleged that it was owed sliding scale commission adjustment payments from Cal-Regent Insurance Services Corporation, and sought summary judgment on its breach of contract and declaratory judgment claims. On August 20, 2015, a district court in Connecticut denied Odyssey’s motion for summary judgment without prejudice, and allowed Cal-Regent to amend its answer to comply with the Federal Rules of Civil Procedure and to properly plead that Odyssey breached the reinsurance agreements (which we reported on September 21, 2015). Thereafter, Cal-Regent did not amend its answer, and Odyssey renewed its motion for summary judgment. On October 14, 2015, the Court held that there was no genuine issue of material fact, and that Odyssey is entitled as a matter of law to a declaratory judgment that Cal-Regent breached the reinsurance agreements, allowing Odyssey to recover over $2.7 million in the commission adjustment payments, plus prejudgment interest.

Odyssey Reinsurance Co. v. Cal-Regent Insurance Services Corp., No. 3:14-cv-00458 (USDC D.Conn. Oct. 14, 2015).

This post written by Jeanne Kohler.

See our disclaimer.

NEW YORK APPELLATE COURT AFFIRMS GRANTING OF REINSURER’S MOTION TO SEVER

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Munich Reinsurance America, Inc., (“Munich”) moved to sever its suit against cedent Utica Mutual Insurance Company (“Utica”) from Utica’s suit against Transatlantic Reinsurance Company. Utica sought enforcement of reinsurance policies issued to it by both reinsurers, and sued the reinsurers together to avoid removal of the claims against Munich to federal court, according to Munich. The trial court granted Munich’s motion to sever and Utica appealed.

New York’s appellate court affirmed the trial court’s order because it agreed with the trial court that the cases lacked commonality. The court noted that although the claims against both defendants related to insurance payments made by plaintiff to the same insured for asbestos-related losses, defendants had no relationship to one another, and the claims arose from different reinsurance contracts, were triggered by different underlying umbrella polices, and involved different time periods. Moreover, the court continued, defendants asserted different affirmative defenses, and a finding of liability against one defendant would not impact the liability of the other.

Utica Mutual Insurance Co. v. American Re-insurance Co., No CA 15-00408 (N.Y. App. Div., 4th Dep’t. Oct. 9, 2015).

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

See our disclaimer.

FIFTH CIRCUIT AGAIN REJECTS NLRB RULING THAT EMPLOYMENT AGREEMENTS REQUIRING INDIVIDUAL ARBITRATION ARE UNLAWFUL

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On December 16, 2014, we reported on the National Labor Relations Board’s ruling that Murphy Oil violated the National Labor Relations Act by requiring its employees to sign arbitration agreements which “requir[ed] . . . employees to resolve all employment-related claims through individual arbitration.” The NLRB’s decision reaffirmed its prior D.R. Horton ruling (which we reported on February 16, 2012), but which was reversed by the Fifth Circuit Court of Appeals (which we reported on December 19, 2013). On October 26, 2015, the Fifth Circuit, adhering to its previous decision in D.R. Horton, rejected the NLRB’s ruling in Murphy Oil, holding that the arbitration agreements are not unlawful and that Murphy Oil committed no unfair labor practice by requiring its employees to arbitrate claims on an individual basis, waiving their rights to pursue a class arbitration. The Court upheld the NLRB’s determination that Murphy Oil must take corrective action as to any employees subject to one of its arbitration agreements, which provided that “any and all disputes or claims [employees] may have . . . which relate in any manner . . . to . . . employment” must be resolved by individual arbitration, so that those employees understand that such language did not eliminate their right to pursue claims of unfair labor practices with the NLRB.

Murphy Oil USA, Inc. v. National Labor Relations Board, No. 14-60800 (5th Cir. Oct. 26, 2015).

This post written by Jeanne Kohler.

See our disclaimer.