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Interim or Preliminary Relief

COURT ORDERS UNSEALING OF CONFIDENTIAL REINSURANCE ARBITRATION INFORMATION

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A court recently unsealed certain record documents related to a reinsurance arbitration, at the request of interested nonparties. The documents were originally filed with the court in connection with a petition to confirm the arbitration award and a responsive motion to dismiss. The parties were permitted to file the documents under seal pursuant to an approved confidentiality agreement. In deciding to unseal, the court found that the documents were “judicial documents” relevant to the performance of the judicial function, and thus subject to a “presumption of access.” The weight of the presumption was “high,” in that the documents constituted the heart of the what the court was asked to act upon (notwithstanding that the case settled prior to the court’s consideration of the materials). Neither the existence of a confidentiality agreement, nor the fact that the movant nonparties were engaged in related reinsurance arbitration with one of the parties, could keep the documents protected from public access. Eagle Star Insurance Co. v. Arrowood Indemnity Co., Case No. 1:13-cv-03410 (USDC S.D.N.Y. Sept. 23, 2013).

This post written by Michael Wolgin.

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TEXAS APPEALS COURT DISMISSES INTERLOCUTORY APPEAL OF ORDER COMPELLING ARBITRATION OF INSURANCE DISPUTE

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In a dispute between two insurance companies regarding an underwriting agreement, the arbitrator selection process broke down when the arbitrators could not agree on appointment of the umpire. Each party raised concerns about the qualifications of the other party’s umpire nominees and reached such an impasse that they resorted to the courts for declaratory relief. The trial court entered a temporary injunction ordering the plaintiff to desist from arbitrating or litigating until the umpire selection dispute could be resolved and entered an order compelling arbitration and plaintiff’s participation in the umpire selection process as provided by the arbitration clause in the underwriting agreement. Plaintiff challenged both orders in an interlocutory appeal. The appellate court lacked jurisdiction to review the order to compel arbitration in an interlocutory appeal because the Federal Arbitration Act prohibits such review, but did affirm the temporary injunction. Drobny v. American National Insurance Co., Case No. 01-12-01034-CV (Tex. App. Aug. 29, 2013).

This post written by Abigail Kortz.

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UNAUTHORIZED FOREIGN OR ALIEN INSURERS NOT REQUIRED TO POST SECURITY PRIOR TO FILING A MOTION

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Section 5/123(5) of the Illinois Insurance Code requires unauthorized foreign and alien company’s to post security prior to filing a pleading in any action or arbitration proceeding. An explicit exception is made for the filing of a motion to quash process or set aside service. The Northern District of Illinois recently interpreted this section of the Insurance Code in coverage litigation between an insured and its insurer and determined that the “language does not suggest that the excepted motions are exclusive.” Based on that reasoning, the court denied plaintiff’s motion for an order requiring the defendant to post security prior to filing a motion. Baxter International, Inc. v. AXA Versicherung, Case No. 1:11-cv-09131 (USDC N.D. Ill. Jan. 11, 2013).

This post written by Abigail Kortz.

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IN HOT PURSUIT OF PREJUDGMENT SECURITY FROM A FOREIGN NATIONAL CONDUCTING REINSURANCE BUSINESS

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As previously reported, the Northern District of Illinois recently held that the prejudgment security required by the Illinois Insurance Code is an “attachment” within the meaning of the Foreign Sovereign Immunities Act and was therefore not required of the foreign defendant in that case. The court denied plaintiff’s motion to strike and the plaintiff subsequently moved to amend or correct the court’s order. The court stood by its decision in two additional orders: 1) denying plaintiff’s motion to amend the order because plaintiff failed to establish any misapprehension of the case law, and 2) granting defendant’s motion to dismiss plaintiff’s complaint for an order compelling arbitration for failure to state a claim. The court determined that the plaintiff could not compel arbitration because the assignment agreement that gave plaintiff limited rights to collect certain debts did not also assign the rights and duties under the reinsurance treaties with the defendants, which included the arbitration clauses. The plaintiff has appealed the December 13, 2012 Order concerning pre-hearing security and the February 5, 2013 Order denying the request to amend the December Order to the United States Court of Appeals for the Seventh Circuit. Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, Case No. 12-6357 (USDC N.D. Ill.)

This post written by Abigail Kortz.

See our disclaimer.

DECLARATORY RELIEF ACTION REJECTED AS A MEANS TO CHALLENGE INTERLOCUTORY ARBITRATION ORDERS FOR LACK OF “RIPENESS”

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In an arbitration related to an uninsured motorist insurance claim, the insured twice challenged the arbitrators’ discovery rulings by filing declaratory relief actions in state court. The first time, the appellate court affirmed the lower court’s dismissal of the action for failure to first challenge the subject order with the arbitrators. The second time, after the appellant unsuccessfully challenged the orders with the arbitrators, the lower court dismissed the suit for lack of subject matter jurisdiction over interlocutory arbitration orders. On appeal, the appellate court affirmed the result, but disagreed with the lower court’s reasoning. The court held that a declaratory relief action is indeed a “justiciable” matter under state law, notwithstanding that the underlying issue involved interlocutory arbitration orders. The court ultimately concluded, however, that based on the legislative history of the Uniform Arbitration Act, the action still should have been dismissed for lack of ripeness. The court explained, “The meaning of [the legislative history] could not be clearer: if there is a dispute about an issue that is subject to the arbitration agreement, then the courts cannot review the arbitrator’s ruling on that issue until after the arbitration process is complete.” Klehr v. Illinois Farmers Insurance Co., Case No. 1-12-1843 (Ill. Ct. App. Jan. 22, 2013).

This post written by Michael Wolgin.

See our disclaimer.