Michael Wolgin

COURT AFFIRMS DISMISSAL OF CLAIM FOR COMMISSIONS FOR PLACEMENT OF PUERTO RICAN PUBLIC LIABILITY INSURANCE

November 23, 2017 by Michael Wolgin

Plaintiffs Berkley Risk Solutions LLC, an insurance and reinsurance management services provider, and Admiral Insurance Co., an excess and surplus lines insurer, sued Industrial Re-International Inc., a New York reinsurance intermediary, and its founder, concerning certain commissions for public liability insurance placed with municipalities in Puerto Rico through American Foreign Underwriters Corp. (AFU), a licensed general agency. The dispute began when AFU filed a lawsuit against Industrial Re and Plaintiffs in Puerto Rico alleging that Industrial Re had agreed to split the commissions on policies written for 2006-2007 equally with AFU. Industrial Re and AFU resolved their dispute and executed a settlement agreement in which they agreed that the commission on any future policies with the municipalities would be split 60 percent to Industrial Re and 40 percent to AFU. Industrial Re obtained a judgment against AFU for the payment of its portion of the commissions that AFU received on subsequent policies according to the settlement; however, Industrial Re’s attempts to collect against AFU were unsuccessful. Industrial Re then claimed that Plaintiffs owed it for the judgment obtained against AFU. Plaintiffs filed the lawsuit underlying this appeal, seeking a declaration that they were not obligated to Industrial Re for the 2008-2009 and 2009-2010 policy commissions. Industrial Re responded by asserting counterclaims based on promissory estoppel, unjust enrichment and tortious interference.

Plaintiffs prevailed in the trial court, and the appellate court has now affirmed the trial court’s ruling. Regarding promissory estoppel, the court held that Industrial Re did “not dispute that plaintiffs were not parties to the Settlement Agreement [with AFU] and have produced no evidence that plaintiffs agreed to be bound by the Settlement Agreement at any time.” Moreover, it found that “[a]lthough plaintiffs acknowledged in an August 2008 email they ‘were previously advised’ to distribute the commission in accordance with the Settlement Agreement, their willingness to do so […] was explicitly dependent upon receiving a written stipulation from both defendants and AFU to that effect,” which never occurred, and thus, never became binding. The court also affirmed the dismissal of Industrial Re’s claim based on the expiration of the statute of limitations of the State of New Jersey; New Jersey had a “substantial interest” in resolving disputes arising out of business dealings between two of its own corporations and no “exceptional circumstances” justified the application of the law of Puerto Rico. Berkley Risk Solutions LLC v. Indus. Re-Int’l Inc., Case No. A-2366-15T1 (N.J. Super. Ct. App. Div. Sept. 20, 2017).

This post written by Gail Jankowski.

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LONG-TIME REINSURANCE ATTORNEY RULED NOT QUALIFIED TO ARBITRATE 9/11 WORLD TRADE CENTER REINSURANCE DISPUTE

November 22, 2017 by Michael Wolgin

An attorney with “considerably more than ten years’ experience of insurance and reinsurance law” has been deemed unqualified to arbitrate a reinsurance dispute stemming from the September 11, 2001 terrorist attack on the World Trade Center. The arbitration agreement called for an arbitration tribunal consisting of “persons with not less than ten years’ experience of insurance or reinsurance.” The High Court of Justice, Business and Property Courts of England and Wales, determined that this language required appointment of an individual with more than ten years’ experience in the business of insurance or reinsurance, rather than the law of insurance or reinsurance.

The court’s determination was largely dictated by a 2000 decision in which the judge held that the parties to an arbitration agreement utilizing the same language intended a “trade arbitration” meaning “the tribunal was to consist of persons from the trade or business of insurance or reinsurance.” Although the court acknowledged the strength of the argument that the “ordinary and natural meaning” of “experience of insurance or reinsurance included experience acquired not only from working within the insurance and reinsurance industry but also from working with or on behalf of that industry,” the court nevertheless held that the previous decision was not so “obviously wrong” that the precedential decision (Company X v. Company Y date July 17, 2000), should be departed from.

The court relied in part on the fact that the 2000 decision was “mentioned in Butler & Merkin’s Reinsurance Law … at paragraph C-0729.” This was accepted as evidence that the decision was “fairly well known in the legal/reinsurance claims community.” Therefore, in light of “the importance of precedent,” if the parties had intended a different meaning than that adopted in the “fairly well known” prior case, they would have used different language. As such, the court ruled that legal insurance or reinsurance experience was not sufficient under the clause and the attorney could not be appointed as an arbitrator. Tonicstar Ltd. v. Allianz Ins. PLC, [2017] EWHC (Comm) 2753.

This post written by Benjamin E. Stearns.

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SECOND CIRCUIT AFFIRMS ARBITRATION AWARD FINDING NO DISREGARD OF MERGER AGREEMENT OR MANIFEST DISREGARD OF DELAWARE LAW

November 2, 2017 by Michael Wolgin

In a summary order, the Second Circuit affirmed a judgment confirming an arbitral award of damages for breach of a merger agreement between respondents Sirona Dental Systems, Inc. and Arges Imaging Inc. (“Sirona”) and petitioners, former shareholders of Arges Imaging Inc. On appeal, Sirona argued that the lower court should have vacated the award because the arbitrator (1) disregarded the plain terms of the agreement when it concluded that petitioners were entitled to recover a $3 million bonus based on the proven accuracy of their dental-imaging product and (2) manifestly disregarded Delaware’s prohibition on speculative damages in awarding petitioners approximately $4 million under a provision tied to the dental-imaging product’s expected revenues.

The Second Circuit found that the arbitrator did not disregard the plain terms of the agreement and similarly did not manifestly disregard Delaware law in its damages calculation. On the first issue, the Second Circuit found that “[w]hether or not we would ourselves construe the Agreement” as the arbitrator did was inapposite; “the arbitrator’s interpretation was supported by at least a ‘barely colorable justification,’ which suffices to confirm the award.” On the second issue, the Second Circuit rejected Sirona’s argument that the arbitrator ignored Delaware law, instead finding that the arbitrator cited Delaware precedent proscribing awards of “speculative” damages and concluding that petitioners’ damages calculations met Delaware’s requirement that “damages be shown with reasonable certainty.” Moreover, the Second Circuit found that the arbitrator did not disregard the general rule in Delaware prohibiting damages based on evidence of expected profits from a new business or technology. Bergheim v. Sirona Dental Systems Inc., Case No. 17-548-cv (2d Cir. Oct. 11, 2017).

This post written by Gail Jankowski.

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NATIONAL FLOOD INSURANCE PROGRAM REAUTHORIZED THROUGH DECEMBER 8, 2017

November 1, 2017 by Michael Wolgin

On September 8, 2017, Congress passed legislation extending the National Flood Insurance Program until December 8, 2017. The program was set to expire at the end of September. The extension was part of a continuing resolution raising the debt limit and funding the U.S. government. No changes to the flood insurance program were made, although reforms may be coming in the future. US HR 601 (Sept. 8, 2017).

This post written by Michael Wolgin.

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COURT CONFIRMS ARBITRATOR’S ENTRY OF INTERIM PRELIMINARY INJUNCTION, HOLDING THAT THE AWARD WAS SUFFICIENTLY “FINAL”

October 31, 2017 by Michael Wolgin

This case concerns a 10-year agreement by which plaintiff, an endodontist, contracted to perform consulting services for defendant Dentsply, a business that manufactured and sold endodontic products for the dental industry. The agreement prohibited plaintiff from disclosing any confidential information about Dentsply’s business affairs or from competing with Dentsply for three years after the termination of the agreement. But immediately prior to the end of the 10-year term of the agreement, plaintiff brought suit contending that the confidentially and non-compete provisions of the agreement were unenforceable, and seeking declaratory and injunctive relief. The case proceeded to arbitration during which the arbitrator sided with Dentsply and enjoined plaintiff from breaching the confidentiality and non-compete provisions. Dentsply then filed a motion to confirm the arbitrator’s preliminary injunction award.

Plaintiff opposed Dentsply’s motion, asserting a number of arguments based on the notion that the preliminary injunction was not sufficiently final to be confirmed by the court. The court rejected each of plaintiff’s arguments and then considered “whether, in the absence of binding Supreme Court or Tenth Circuit precedent, the Court should join the district and circuit courts that have considered interim arbitral awards final for the purposes of judicial review and confirm the Ruling.” The court decided to join those courts and confirmed the arbitrator’s preliminary injunction. The court reasoned that the interim arbitration ruling “finally and definitively enjoin[ed] plaintiff from breaching the 2007 agreement’s confidentiality and non-compete provisions during the pendency of the arbitration, and if the Ruling [was] not enforced, a subsequent award of injunctive relief to defendant may be rendered meaningless.” Moreover, the Court reasoned that the Ruling was “not a preliminary or procedural trifle, and expending the judicial resources to confirm it does not frustrate our arbitration system’s goal of expediency.” Instead, the Court found, “confirming the Ruling [gave] teeth to the arbitrator’s interim award of equitable relief, thereby promoting arbitration as an efficacious and reliable alternative to the litigation process.” Johnson v. Dentsply Sirona Inc., Case No. 16-CV-0520-CVE-PJC (USDC N.D. Okla. Sept. 27, 2017).

This post written by Gail Jankowski.

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