John Pitblado

Fourth Circuit Finds Employer Cannot Compel Arbitration of Former Employee’s Discrimination Claims

May 1, 2018 by John Pitblado

The U.S. Court of Appeals for the Fourth Circuit recently ruled that two employment-related arbitration clauses did not “clearly and unmistakably” govern a former employee’s discrimination claims, and that the arbitrability of those claims is rightfully decided by the court, rather than an arbitrator.

Plaintiff signed two arbitration agreements with Rent-A-Center (RAC), his former employer, one when he was initially hired in 2002, and a second when he applied for a new position in 2012. Plaintiff was ultimately hired for a different position in 2013, but did not sign a new arbitration agreement with RAC at that time. Plaintiff later filed this action against RAC for discrimination arising out of his 2013 employment. RAC moved for summary judgment and to compel arbitration, arguing Plaintiff’s claims were subject to the 2002 and 2012 arbitration agreements. The district court denied the motion, however, and the Fourth Circuit affirmed.

Citing seminal arbitrability decisions by the U.S. Supreme Court, including one involving RAC, the Fourth Circuit found the parties did not “clearly and unmistakably” intend to arbitrate claims relating to Plaintiff’s 2013 employment. To the contrary, the court found a reasonable juror could conclude from the parties’ actions that they agreed to modify the arbitration agreements to exclude any disputes relating to Plaintiff’s 2013 employment. Given this uncertainty, the court held that the district court, not an arbitrator, had the authority to decide questions of arbitrability (i.e., whether Plaintiff’s claims were subject to arbitration pursuant to the 2002 and 2012 arbitration agreements). For the same reason, the court also affirmed the district court’s denial of summary judgment, finding a genuine issue material fact as to the parties’ intent to arbitrate these particular claims.

Kabba v. Rent-A-Center, Inc., No. 17-1595 (4th Cir. April 13, 2018)

This post written by Alex Silverman.

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New York Federal Court Largely Denies Motions for Summary Judgment on Issues in Breach of Facultative Reinsurance Certificate Dispute But Grants Dismissal of Quasi-Contract Claims

April 30, 2018 by John Pitblado

Defendant, Munich Re, moved for summary judgment relating to defense costs and allocation and Plaintiff, Utica, moved for summary judgment as to Munich Re’s claim for reimbursement. The Court denied the motions with the exception of Utica’s motion for summary judgment with respect to Munich Re’s quasi contract claims.

Munich Re argued Utica’s breach of contract claim should be dismissed because Utica allegedly never notified Munich Re it had added a defense endorsement to an umbrella policy issued to Goulds Pumps Inc. Utica asserted that the follow-the-fortunes doctrine prohibited Munich Re’s argument, and that even if it didn’t, notice would not have been required because issuance of the defense endorsement was an immaterial change that did not prejudice Munich Re. Finding no follow-the-fortunes clause in the reinsurance certificate, the Court looked at the parties’ contract modification argument, finding there to be a question of fact as to whether Munich Re reinsured the defense endorsement.

Munich Re moved for summary judgment regarding defense costs, arguing it had no duty to indemnify Utica for defense costs Utica paid in addition to the umbrella’s limits. Utica opposed the motion and moved for summary judgment on the allocation of defense expenses, arguing that Munich Re had “no valid defense to payment as a matter of law.” The Court found that questions of material fact precluded summary judgment, ruling that the insurance certificates language concerning the payment of expenses and their connection to the umbrella policies was “sufficient to render the Certificate ambiguous.”

Utica argued that, even assuming that reinsurance is unavailable unless the umbrellas themselves provide for defense costs in addition to the limits, Utica was still entitled to summary judgment on the defense costs because the umbrellas provide such coverage and follow-the-fortunes would require Munich Re to pay its share. Munich Re opposed, stating the certificates did not contain a follow-the-fortunes provision and even if they did, “Utica would not be entitled to defense under follow the fortunes because its payment of defense costs in addition to the limits was clearly beyond the scope of the Umbrellas and not in good faith.” After much discussion on the law on follow the fortunes/follow the settlements, the Court declined to imply such a clause into the reinsurance certificates at issue and denied the requests for summary judgment.

Utica also moved for summary judgment dismissing Munich Re’s quasi-contract claims. Munich Re argued there was a basis for finding that the reinsurance certificate did not encompass the events at issue because they did not have any provision providing for reimbursement. The Court disagreed, finding that the claims at issue, including Munich Re’s obligation to pay defense expenses, are governed by the terms of the reinsurance certificate, dismissing Munich Re’ quasi-contract claims.

Additional arguments on various issues raised in the summary judgment motions can be read in the Court’s order.

Utica Mut. Ins. Co. v. Munich Reinsurance Am., Inc., 6:13-cv-00743 (NDNY Mar. 20, 2018)

This post written by Nora A. Valenza-Frost.

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California Federal Court Remands Fraud Claims in Workers’ Compensation Reinsurance Action To State Court

April 12, 2018 by John Pitblado

In a March 15, 2018 order, noting that only state law claims remained in the case, a California federal court remanded to state court a lawsuit against an insurance company and its affiliates, which alleged that they fraudulently marketed and sold a workers’ compensation program.

This case involves a matter that plaintiff BSA Framing Inc. (“BSA”) filed against defendants Applied Underwriters, Inc. (“AUW”), Applied Underwriters Captive Risk Assurance Company, Inc. (“AUCRA”), California Insurance Company (“CIC”), and Applied Risk Services, Inc. (“ARS”) (collectively, the “Applied Defendants”). BSA entered into the Applied Defendants’ EquityComp workers’ compensation package, which consists of three consecutive one-year workers’ compensation policies issued by defendant CIC, an affiliate of AUW, and a “Reinsurance Participation Agreement” with defendant AUCRA (the “RPA”). According to the complaint, over the course of its three-year participation in the EquityComp program, BSA paid the Applied Defendants a total of $2,133,345 in premiums and defendants paid $352,623 in BSA-related workers’ compensation claims pursuant to the terms of the workers compensation policies and the RPA. BSA also alleges that defendants made misrepresentations or omissions that led it to believe that its participation in the EquityComp program would be more financially favorable to BSA than it was. Specifically, BSA alleges that it expected to pay “at least $868,583” less than it actually paid in premiums over the course of its participation in the EquityComp program. BSA also alleges that the RPA was “purposefully written to be as vague as possible and to obfuscate and hide the manner in which an insured’s payment obligations are to be determined.”

BSA first filed its suit against the Applied Defendants in California state court, asserting several California state law claims and federal RICO claims. The Applied Defendants removed the case, invoking the district court’s federal-question jurisdiction on the basis of BSA’s RICO claims. In a November 28, 2017 order, the California district court granted the Applied Defendants’ motion to dismiss the RICO claims, but allowed BSA to file an amended complaint. BSA then filed an amended complaint, in which it again asserted RICO claims against the Applied Defendants, which again moved to dismiss the RICO claims. On February 27, 2018, the California district court granted the Applied Defendants’ motion without leave to amend and also ordered the Applied Defendants to show cause why the action, which now involves only state claims, should not be remanded to state court. The Applied Defendants did not file a response, and thus, the California district court remanded the case to state court.

BSA Framing, Inc. v. Applied Underwriters, Inc. et al., No. CV-17-1836 (USDC C.D. Cal. Feb. 27 and Mar. 15, 2018)

This post written by Jeanne Kohler.
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Minnesota Court of Appeals Affirms Dismissal of Claims Against Reinsurer Under Filed-Rate Doctrine

April 11, 2018 by John Pitblado

The filed-rate doctrine precluded recovery of deficiency assessments the Workers’ Compensation Reinsurance Association (WCRA) levied against employers which were alleged to have been wrongfully collected in 2013 and 2014 when the WCRA no longer had a deficit.

The employers argued that the filed-rate doctrine “does not apply to deficient-premiums assessments and deficiency assessments, and that the doctrine does not bar their claims because they seek only to enforce the WCRA statutes and the commissioner’s orders imposing those assessments.” A Minnesota trial court disagreed, and its dismissal of the claims was affirmed by Minnesota’s Court of Appeals, which noted:

the separation-of-powers concerns favor application of the filed-rate doctrine as the challenged assessments were recommended by a legislatively created nonprofit entity;
justiciability concerns favor application of the filed-rate doctrine because “a court order requiring WCRA to refund millions of assessments dollars would substantially reduce the funding base that WCRA uses to pay claims” potentially triggering the need for future assessments and the “courts are ill-equipped to fashion relief that appropriately contextualizes deficient-premiums assessments and deficiency assessments within this complex and evolving scheme; and
non-discrimination concerns favor application of the filed-rate doctrine, because a “retroactive judicial damages award that effectively adjusts a rate for some ratepayers but not others would create discrimination in the rate schedule.”

Ambassador Press, Inc., et al. v. Trifac Workers’ Compensation Fund, et al., 62-CV-16-1713 (Minn. Ct. App. Dec. 11, 2017).

This post written by Nora A. Valenza-Frost.
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U.K. Court Of Appeal Finds Experienced “Insurance Or Reinsurance” Lawyers Are Eligible For Appointment To Arbitration Panel Under Arbitration Clause In Reinsurance Treaty

April 10, 2018 by John Pitblado

The U.K. Court of Appeal has held that an arbitration clause commonly found in London market excess of loss reinsurance treaties does not prohibit the appointment of insurance or reinsurance lawyers to an arbitration panel. The clause at issue provides that, “[u]nless the parties otherwise agree, the arbitration tribunal shall consist of persons with not less than ten years’ experience of insurance or reinsurance.” The Court reversed an order of the U.K.’s High Court of Justice, Commercial Court, which held that a lawyer who had over ten years of experience in insurance and reinsurance disputes did not qualify for appointment to the panel under the clause because he did not have experience in the insurance or reinsurance “industry.” On appeal, the Court held that nothing in the clause itself restricted the pool of candidates to “trade arbitrators,” and that the clause need not be interpreted as such simply because it was drafted by a “trade body.” The Court instead emphasized that the “practical and legal aspects of insurance and reinsurance are so intertwined that both market professionals and lawyers who have specialised in the field for many years are commonly appointed as arbitrators” in matters involving such disputes. Thus, unless the parties have some special reason for excluding lawyers as eligible candidates—in which case they can expressly state as such in the contract—the Court held that lawyers experienced in the field of insurance or reinsurance are naturally qualified to serve as an arbitrator under the clause.

Allianz Ins. PLC v. Tonicstar Limited, [2018] EWCA Civ. 434 (Commercial Court).

This post written by Alex Silverman.
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