John Pitblado

OREGON FEDERAL COURT FINDS ARBITRATION AGREEMENT IN CGL POLICY INVALID

September 30, 2015 by John Pitblado

Plaintiff, Technical Security Integration, Inc., a Washington company, sold certain security and surveillance equipment and services. It hired Corey Tharp as a sales associate in Oregon, to tap his connections to that state’s gaming casinos, and later terminated him. After the casinos Tharp sold contracts to refused to renew their contracts with Plaintiff, and instead signed on with the company that later employed Tharp, Plaintiff brought suit against Tharp and his employer, alleging interference with contract and related claims. Tharp and his employer asserted counterclaims, and Plaintiff sought coverage from its CGL carrier, the defendant, Philadelphia Indemnity. Philadelphia declined coverage, citing the policy’s employment-related practices exclusion, and Plaintiff thereafter brought a coverage action in federal court. Philadelphia moved to compel arbitration, citing the policy’s arbitration endorsement. Plaintiff objected. The matter was heard by a Magistrate, who held that Washington law applied, and that, pursuant to Revised Code of Washington § 48.18.200(1)(b), which prohibits insurance contracts from “depriving the courts of this state of the jurisdiction of action against the insurer,” the arbitration agreement was invalid. The Magistrate therefore denied the motion to compel arbitration. Philadelphia sought de novo review by the District Judge, who approved and adopted the Magistrate’s recommended ruling. Technical Security Integration, Inc. v. Philadelphia Indemnity Ins. Co., No. 3:14-cv-01895-SB (USDC D. Ore. May 27, 2015) (Magistrate’s report and recommendation); Technical Security Integration, Inc. v. Philadelphia Indemnity Ins. Co., No. 3:14-cv-01895-SB (USDC D. Ore. July 30, 2015) (approving and adopting Magistrate’s report).

This post written by John Pitblado.

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OIL SUPPLIER APPEALS CONOCO’S RIGHT TO BUY STAKE IN REFINERY UNIT

September 29, 2015 by John Pitblado

In a long-standing dispute between Venezuelan state-owned Oil Company Petroleos de Venezuela SA (“Petroleos”) and ConocoPhillips, a New York district court judge upheld ConocoPhillips’ acquisition of a 50% stake in a Texas refinery. The two parties were former joint partners in an oil refining operation but disagreements between them led to the triggering of a contract provision that automatically dissolved the joint venture. Following the dissolution, the parties proceeded to arbitration.

The arbitration action concerned a range of disputes, one of which involved the parties’ Transfer Agreement, pursuant to which mandatory transfers of joint venture interests acted as a remedy for ConocoPhillips in the event of Petroleos’s breach. This was referred to as the “Call Option,” which Petroleos contended at arbitration acted as a penalty because it resulted in a purchase price of zero dollars for its share of the joint venture. The arbitration panel concluded that the Call Option was valid and enforceable under New York law and did not constitute an impermissible contractual penalty. Petroleos petitioned to vacate the portion of the award regarding the Call Option, but the district court denied the petition, and granted ConocoPhillips petition to confirm.

PDV Sweeny, Inc. v. ConocoPhillips Co., No. 14-cv-5183 (U.S.D.C. S.D.N.Y. Sept. 1, 2015).

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

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EIGHTH CIRCUIT HOLDS NJ LAW TOLLS ARBITRATION AGAINST BROKER

September 28, 2015 by John Pitblado

The Eighth Circuit Court of Appeals recently held that New Jersey state law fraud claims against Morgan Keegan, the brokerage firm now part of Raymond James & Associates, were tolled by the plaintiffs’ efforts to collect an arbitration award. The Eighth Circuit reasoned that, while the district court correctly held that certain federal and Arkansas state law claims were time-barred, the New Jersey claims were timely and erroneously dismissed.

Zaracor v. Morgan Keegan & Co., Inc., No. 13-3315 (8th Cir. Sept. 1, 2015).

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

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INSURER AND REINSURER LOCKED IN DISCOVERY ROW

September 17, 2015 by John Pitblado

In a row between Granite State Insurance Company (“Granite”) and R & Q Reinsurance Company (“R & Q”), a New York trial court denied R & Q’s attempt to (1) vacate a prior court order, (2) appoint a special referee, and (3) dismiss counts in the complaint.

By way of history, the court previously found that certain discovery documents were protected under attorney-client privilege. Looking for reconsideration of this order, the court construed R & Q’s motion to vacate as a motion to renew and/or reargue. The court denied R & Q’s motion to renew as it failed to present a change in law or present new facts that would necessitate an alteration of the prior discovery order. The court also denied R& Q’s motion to reargue finding the “common interest” exception to attorney-client privilege inapplicable between an insurer and reinsurer. Without a relevant exception, the court held that R & Q “failed to demonstrate that [the court] overlooked or misapprehended the relevant facts.”

The court also denied R & Q’s attempt to appoint a special referee because an appointment would only extend an already prolonged discovery process without “special circumstances.” Finally, the court noted that Granite and R & Q engaged in a considerable “meet and confer” process in an effort to narrow the scope of discovery, and thus instead of dismissing claims for which discovery had not yet been provided, the court directed R & Q to re-serve its discovery requests directed to those claims, as appropriately revised based on the parties’ “meet and confer” process.

Granite State Ins. Co. v. R & Q Reinsurance Co., No. 654494/2013 (Sup. Ct. July 22, 2015)

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

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SENATE BILL 900 AMENDS OPERATIONS OF TEXAS STATE BACKED INSURER

September 16, 2015 by John Pitblado

On September 1, 2015, Texas Senate Bill 900 went into effect after passing both the Texas House and Senate this past summer. The bill amends the operation of the Texas Windstorm Insurance Association (“TWIA”), a state backed insurer of last resort. The TWIA was created in 1971 to fill in coverage gaps for windstorm and hail protection when private insurance became too expensive or when private insurance simply failed to provide coverage. The goal of the TWIA is to make coverage affordable for residential and commercial properties in areas prone to claims, most notably in certain coastal counties.

Senate Bill 900 makes a few important changes to the association. The insurer’s board of directors will now encompass three members from the insurance industry, three members from coastal Texas counties, and three members from inland Texas. It requires that the insurer maintain “available loss funding” to cover a once in a 100 year storm disaster. It also clarifies the purchasing requirements of reinsurance and alternative risk financing, both used in order to limit payout risk. Finally, Senate Bill 900 allows for the appointment of an administrator to run the insurer.

Texas Senate Bill 900 (2015)

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

See our disclaimer.