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You are here: Home / Archives for Michael Wolgin

Michael Wolgin

COURT DECLINES TO QUASH SUBPOENA ISSUED TO SOUTH CAROLINA DEPARTMENT OF INSURANCE IN COMPANION PROPERTY CASE

June 26, 2017 by Michael Wolgin

We previously reported on this case on January 5, 2016, June 28, 2016, July 20, 2016, and December 14, 2016. The case concerns Companion Property and Casualty Insurance Company’s participation in a fronted insurance program with two reinsurers. Reinsurance collateral trusts were established for Companion’s benefit and maintained by defendant U.S. Bank as trustee. In 2015, Companion filed a complaint against U.S. Bank, alleging that, it, as trustee, negligently permitted the reinsurers to replace $180 million in assets held in trust accounts with worthless and defective assets. Companion asserted that U.S. Bank was liable for these substitutions because certain assets in the trust accounts violated the terms of the Trust Agreements. U.S. Bank then made claims against several third-parties, some of which have since been dismissed from the case.

Recently, Companion moved to quash U.S. Bank’s subpoena to the South Carolina Department of Insurance requesting production of “all documents and communications” related to information about Companion’s finances that it reported to the SC DOI. Companion argued that the subpoena sought confidential information protected as privileged by the South Carolina Insurance Holding Company Regulatory Act (the “Act”), as well as the production of documents and materials that were overly broad and previously produced. The court declined to quash the subpoena, but did modify its terms. The court found it significant that both parties stipulated that the Act did not protect as privileged a number of requested documents. The court also found that the South Carolina Department’s promise to review the documents prior to production and ensure that privileged documents were not produced was insufficient to adequately address Companion’s concerns. The Court accorded Companion reasonable time to review the documents that the Department identified as responsive to the subpoena and raise document-specific objections to the production of documents that it determined were privileged under the Act. Companion Prop. & Cas. Ins. Co. v. U.S. Bank Nat’l Ass’n, No. 3:15-cv-01300 (USDC D.S.C. Apr. 10, 2017).

This post written by Gail Jankowski.

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Filed Under: Discovery, Week's Best Posts

COURT COMPELS ARBITRATION, REJECTING CLAIM THAT CONTRACT IS VOID FOR LACK OF MUTUAL ASSENT

June 8, 2017 by Michael Wolgin

A New York court compelled the arbitration of a claim under a reinsurance agreement, rejecting the plaintiff reinsurer’s claim that the reinsurance policy is void because the reinsured issued an underlying insurance policy which did not comply with the requirements stated in the reinsurance contract. In doing so, the court held that the plaintiff raised an issue of the interpretation of the reinsurance contract, rather than the formation of the contract.

The plaintiff reinsurer and the defendant reinsured agreed to a reinsurance policy which contained a following form provision which provided that the reinsurance covered risks written by the ceding insurer on a specifically named policy form, “Form LEX CM PL 7.” Despite the defendant’s representation that it issued Form LEX CM PL 7, it turned out not to be the case. Instead, the defendant had issued an insurance policy called “2002 Sound Transit Policy” which provided broader coverage than the form referenced in the reinsurance contract. The ceding insurer settled and paid a claim which allegedly was not within the scope of coverage of the form specified in the reinsurance contract. A dispute arose and the ceding insurer demanded arbitration. The reinsurer filed suit, asking the court to stay the arbitration and declare the reinsurance policy void, and the ceding insurer moved to compel arbitration. The court rejected the reinsurer’s motions and granted the ceding insurer’s motion to compel arbitration.

The reinsurer argued that the case calls for the court’s determination on the existence of the reinsurance policy because the ceding insurer’s use of the wrong insurance policy form constituted a lack of mutual assent. The court rejected that position, noting that it is undisputed that the two parties signed and agreed to the reinsurance contract. The court stated that, instead, the issue is whether the loss reported by the ceding insurer is covered by the terms of the reinsurance contract. Because the reinsurance contract included a valid arbitration clause, the question was reserved for an arbitrator. While acknowledging the limited exception to the requirement of arbitration where a party questions whether a contract was ever made, the court held that the reinsurance contract at issue was clearly entered into and there remains no question as to its “formation.” HDI Global SE v. Lexington Ins. Co., Case No. 16-07241 (USDC S.D.N.Y. Feb. 7, 2017)

This post written by Rollie Goss.

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Filed Under: Arbitration Process Issues

NLRB ORDERS DISH NETWORK TO RESCIND OR REVISE ITS ARBITRATION AGREEMENT WITH EMPLOYEES

June 7, 2017 by Michael Wolgin

Recently, the National Labor Relations Board (NLRB) ordered Dish Network, LLC to rescind or revise its arbitration agreement, finding that provisions in the agreement violated the National Labor Relations Act (NLRA).

Beginning in October 2013, Dish required all applicants for employment to sign an arbitration agreement, which required that any claim, controversy or dispute arising out of the employee’s application for employment, employment, or termination of employment shall be resolved by arbitration (the “Arbitration Agreement”). The Arbitration Agreement also required that the arbitration shall be kept confidential. There was no procedure in the Arbitration Agreement for the employee to opt out. In this particular case, the charging party, employee Brett Denney, signed the Arbitration Agreement. He was later suspended for an alleged violation of a workplace policy. Denney was directed to not discuss his suspension with his coworkers. Denney then filed a complaint with the NLRB, alleging a violation by Dish of Section 8(a)(1) of the NLRA by prohibiting him from discussing the suspension with coworkers and for maintaining and enforcing the Arbitration Agreement.

In addressing the Arbitration Agreement, the NLRB noted that an employer violates Section 8(a)(1) of the NLRA if it maintains an arbitration policy that employees would reasonably believe interferes with their ability to file a charge with the NLRB or access the NLRB’s processes. The NLRB found that Dish’s Arbitration Agreement violated Section 8(a)(1) because the employees would reasonably construe it from prohibiting them from filing NLRB charges or accessing the NLRB’s processes. The NLRB noted that the Arbitration Agreement was very broad in that it applied to “any claim, controversy, and/or dispute between them, arising out of and/or in any way related” to the employee’s application, employment or termination. Further, the NLRB found that the confidentiality requirement of the Arbitration Agreement independently violated Section 8(a)(1) because a workplace rule that prohibits discussion of terms and conditions of employment is unlawfully broad. As to Dish’s instruction to Denney to not discuss the suspension with his coworkers, the NLRB also found that the instruction violated Section 8(a)(1) of the NLRA.

Under the NLRB’s order, Dish must cease and desist from using the Arbitration Agreement and must take affirmative actions to effectuate the policies of the NLRA. It also required that Dish rescind the Arbitration Agreement or revise it, making clear that it does not restrict the employee’s right to file NLRB charges or access NLRB’s processes and that it does not require confidentiality of arbitration proceedings. The NLRB also ordered Dish to notify current and former employees of the action, and post and distribute electronically notices at certain Dish locations of the action and order. Dish Network LLC and Brett Denney, No. 27-CA-158916 (NLRB April 13, 2017).

This post written by Jeanne Kohler.

See our disclaimer.

Filed Under: Arbitration Process Issues

COURT VACATES ARBITRATION AWARD FOR ARBITRATOR’S EVIDENT PARTIALITY

June 6, 2017 by Michael Wolgin

A New York Court vacated an arbitration award, finding that a party appointed arbitrator’s undisclosed relationships with the appointing party amounted to a relatively infrequent instance in which such nondisclosure demonstrated evident partiality by clear and convincing evidence. In doing so, the court confirmed that “evident partiality” standard applies in tripartite arbitration involving party appointed arbitrators.

The arbitration at issue arose from a dispute where the reinsurers denied coverage for two workers’ compensation claims by the reinsured. Pursuant to the reinsurance treaties’ arbitration clause, each side appointed an arbitrator and the party appointed arbitrators then selected an umpire. The arbitration resulted in an award for the reinsured and the reinsurers brought this action against the reinsured to vacate the award. The plaintiffs argued that the arbitrator appointed by the defendant (“arbitrator”) failed to disclose his significant business relationships with numerous executives of the defendant, which demonstrated such “evident partiality” as to warrant vacatur of the arbitration award. The court granted plaintiff’s motion to vacate the arbitration award.

In finding “evident partiality,” the court considered the arbitrator’s nondisclosure of his relationships with the defendant’s numerous principals. Those principals were involved in the arbitrator’s own business in their capacity as the Chief Financial Officer, Managing General Agent, National Claims Manager, and counsel. The court found particularly relevant the arbitrator’s nondisclosure of his relationship with a director of the defendant whom the arbitrator hired as the Chief Financial Officer of the arbitrator’s own company just months before the arbitration hearing. The court held that a reasonable person would conclude that an arbitrator who failed to disclose such material relationships was partial to one side. Also, in response to defendant’s argument that evident partiality standard applies “with reduced force, or not at all” in tripartite industry arbitration involving party appointed arbitrators, the court cited a Second Circuit case where the court applied the evident partiality standard to an arbitration panel with the same arrangement. Certain Underwriting Members at Lloyd’s of London v. Ins. Co. of the Americas, Case No. 16-00374 (USDC S.D.N.Y. Mar. 31, 2017)

This post written by Rollie Goss.

See our disclaimer.

Filed Under: Confirmation / Vacation of Arbitration Awards, Week's Best Posts

FIFTH CIRCUIT VACATES TEXAS FEDERAL COURT’S ORDER WHICH WITHDREW ITS PRIOR ORDER COMPELLING ARBITRATION

June 5, 2017 by Michael Wolgin

Plaintiff Gaspar Salas, a former employee of defendant GE Oil & Gas, brought suit in 2014 in Texas federal court against GE for discrimination and retaliation. The court granted GE’s motion to compel arbitration, and the case was dismissed in December 2014. The parties did not move forward with arbitration, and in February 2016, plaintiff filed a motion to compel arbitration in the same court. After a teleconference on the motion, the court issued an order, reopening the suit and withdrawing its prior order compelling arbitration. GE moved for reconsideration, which was denied and GE then appealed.

On appeal, GE argued that the district court lacked subject matter jurisdiction to reopen the case, since it had previously dismissed the suit. Thus, according to GE, the court could exercise jurisdiction only to the extent of enforcing an arbitration award. That the district court fully dismissed the case, explained the Fifth Circuit, is not necessarily fatal to the court’s exercise of jurisdiction. Under the Federal Arbitration Act, however, district courts may not intervene in the arbitral process “beyond the determination as to whether an agreement to arbitrate exists and enforcement of that agreement.” Here, the Fifth Circuit noted that the district court did not determine whether the parties’ agreement to arbitrate was valid nor did it enforce that arbitration agreement. Instead, the district court had found “that the parties had ‘failed’ to arbitrate and withdrew its prior order compelling arbitration.” Thus, the Fifth Circuit remanded the case for further proceedings, but limited the district court’s jurisdiction to determining only whether an agreement to arbitrate still exists and enforcement of that agreement. Gaspar Salas v. GE Oil & Gas, No. 16-20379 (5th Cir. May 12, 2017).

This post written by Jeanne Kohler.

See our disclaimer.

Filed Under: Arbitration Process Issues, Jurisdiction Issues, Week's Best Posts

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