Arbitration / Court Decisions

U.K. COURT DENIES REINSURER’S SUIT TO AVOID REINSURANCE AGREEMENTS

July 27, 2015 by Carlton Fields

The Commercial Court (a subdivision of the Queen’s Bench Division of the U.K.’s High Court of Justice), recently held that an underwriter could not avoid the reinsurance contracts it had underwritten because it failed to convince the court that it would not have underwritten those contracts. In a case involving nondisclosure of loss statistics, the court determined that plaintiff reinsurer, Axa, could not avoid two reinsurance agreements that it had entered into with defendant insured, Arab Insurance Group (ARIG). The court made this finding even though ARIG failed to disclose – and perhaps even misrepresented – the loss statistics associated with its existing book of internal risk that was subject to the reinsurance. The court agreed with Axa that the misrepresentation of ARIG’s loss statistics was a material fact that should have been disclosed. However, even if ARIG had disclosed this information prior to the completion of the underwriting process, Axa would still have entered into the reinsurance agreements. Axa failed to prove they were induced by ARIG’s misrepresentation into the reinsurance contracts; they were therefore bound to those contracts. Axa Versicherung AG v. Arab Insurance Group [2015] EWHC 1939 (Comm).

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

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COURT LIMITS DISCOVERY OF INSURER’S POLICIES WITH OTHER INSUREDS, COMPELS PRODUCTION OF PRIOR ARBITRATION TESTIMONY

July 24, 2015 by John Pitblado

Utica Mutual Insurance Company (“Utica”) sued R&Q Reinsurance Company (“R&Q) in New York federal court for payment under reinsurance certificates R&Q issued to Utica covering umbrella policies Utica issued to its insured, Goulds Pumps, Inc. (“Goulds”) from 1979 to 1981. Some of the policies Utica issued to Goulds did not state the aggregate limits under the policies, but a settlement between Utica and Goulds in an earlier coverage dispute acknowledged that each of the primary policies at issue contained aggregate limits.

In connection with the reinsurance dispute, R&Q sought to compel the production of (1) documents concerning primary insurance policies issued by Utica to other insureds and correspondence reflecting the aggregate limits, and (2) deposition and hearing transcripts from a prior arbitration between Utica and R&Q.

The court declined to compel production of other insureds’ policies, noting that the aggregate limit issue had been litigated and resolved in prior litigation. However, it ordered that the transcripts be produced, but acknowledged that whether the testimony set forth in them would be admissible in the present Utica-R&Q dispute is a different issue. Utica Mut. Ins. Co. v. R & Q Reinsurance Co., Case No. 6:14-CV-00700 (USDC N.D.N.Y. June 2, 2015)

This post written by John A. Camp.

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CENTURY INDEMNITY ENTERS STIPULATED JUDGMENT PRESERVING RIGHT TO APPEAL DECLARATORY JUDGMENT IN FAVOR OF REINSURER

July 21, 2015 by John Pitblado

A New York federal court entered a stipulated judgment in favor of the plaintiff reinsurer that prevailed on its declaratory claim in a summary judgment previously ordered, which judgment capped its exposure to the dollar amount stated in the “Reinsurance Accepted” portion of the reinsurance contracts at issue. The litigation had remained ongoing due to the cedant’s remaining counterclaims, but it agreed to forego pursuing those claims in favor of a strategy allowing it to pursue appeal of the prior summary judgment order.

Global Reinsurance Corporation of America v. Century Indemnity Company, No. 1:13-cv-6577, (USDC S.D.N.Y. June 3, 2015).

This post written by Zach Ludens.

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PROCEDURAL ODDITIES RESULT FROM SIMULTANEOUSLY SEEKING VACATUR OF AN ARBITRATION AWARD AND RELIEF ON THE MERITS OF THE DISPUTE

July 16, 2015 by Carlton Fields

The Second Circuit reversed the district court’s dismissal of a claim for vacatur without prejudice, which had been based on the panel’s finding that it lacked personal jurisdiction. The Second Circuit examined the merits of the vacatur claim and ruled that it should have been dismissed with prejudice. Based on that determination, the Second Circuit then affirmed the district court’s dismissal without prejudice of the second claim filed in the district court for relief on the merits of the dispute (a claim for breach of contract). The Second Circuit explained that dismissal of this claim without prejudice was appropriate due to the preclusive effect of the ruling in arbitration that personal jurisdiction was lacking. The court noted: “Although it may seem odd to deny the award preclusive effect over one claim and to grant it preclusive effect over another in the same suit, that is the logical result anytime a suit includes both a claim to vacate an award and other claims that might be precluded by a final award.” Global Gold Mining, LLC v. Ayvazian, Case No. 13-4759-cv (2d Cir. Apr. 27, 2015).

This post written by Michael Wolgin.

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MOTION TO COMPEL ARBITRATION GRANTED IN HURRICANE SANDY ROW

July 15, 2015 by Carlton Fields

A New York district court granted Hudson Specialty Insurance Company’s (“Hudson”) petition to compel arbitration against New Jersey Transit Corporation (“N.J. Transit”) after determining that the parties had agreed to arbitrate pursuant to the Federal Arbitration Act. In late October 2012, Hurricane Sandy damaged N.J. Transit’s facilities and equipment triggering policies issued by Hudson and various other property casualty insurance companies. The original action was submitted to New Jersey state court to interpret “Flood Sublimit” and “Named Windstorm” provisions in the policies, the former of which limited Hudson’s flood damage liability to $100 million. Hudson sought to compel arbitration based on the arbitration provision within the policy. N.J. Transit argued that the arbitration agreement was unenforceable as it never assented to the provision, and furthermore, never saw the arbitration provision until the policy was issued. It alleged that they relied on a prior draft of the policy without such a provision.

The court rejected N.J. Transit’s arguments for a number of reasons. The arbitration provision was included in the policy quote accepted by Hudson’s insurance broker, which referenced arbitration. The court noted that N.J. Transit “cannot have it both ways.” Either N.J. Transit assented to the policy in 2012 or it did not. Instead, “N.J. Transit is clearly seeking to benefit from the Policy by demanding coverage for its losses after Hurricane Sandy and has thus manifested its assent.” The court also rejected N.J. Transit’s final effort to oppose arbitration alleging that the provision was unenforceable because it lacked certain key terms. Here, the arbitration provision was a complete form where the alleged missing terms had no bearing on the enforceability of the provision. Hudson Specialty Ins. Co. v. N.J. Transit Corp., No. 15-cv-89 (ER) (USDC S.D.N.Y. June 5, 2015).

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

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