Arbitration / Court Decisions

NEW YORK COURT REAFFIRMS THAT REINSURER’S STATUTE OF LIMITATIONS DEFENSE DETERMINED BY ARBITRATORS, NOT COURT

May 28, 2015 by Carlton Fields

Because a reinsurer participated in the arbitrator selection process, the reinsurer was precluded from seeking a stay on statute of limitations grounds pursuant to New York law, a New York appellate court ruled. As discussed in a previous post, the arbitration agreement stated that the parties’ arbitration would be governed by the “arbitration laws of New York State.” New York’s arbitration laws state that a party may raise statute of limitations defense as a threshold issue in the courts. By contrast, the Federal Arbitration Act states that the limitations defense is presumed to be reserved to the arbitrator, rather than the court, except where the parties agree to leave that issue to the court. In its most recent ruling, the court held that although the reinsurer had waived its ability to have the courts determine the statute of limitations issue, that issue may be determined by the arbitrators. In re ROM Reinsurance Management Co. v. Continental Insurance Co., No. 11809 654480/12 (N.Y. App. Div. May 21, 2014).

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

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MOTION FOR RECONSIDERATION OF PARTIAL SUMMARY JUDGMENT DENIED CONCERNING LIABILITY CAP ON REINSURANCE CERTIFICATES

May 27, 2015 by Carlton Fields

A district court in New York denied an insurer’s motion for reconsideration of a partial summary judgment order in favor of the reinsurer that concluded that the reinsurance limits set forth nine certificates of reinsurance at issue in the case were inclusive of costs and expenses, and created an overall cap of liability on the certificates. The insured moved for reconsideration of the district court’s opinion based on the Second Circuit’s intervening unpublished opinion, not to be cited as precedent, in Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc., 594 F. App’x 700 (2d Cir. 2014). The district court denied the motion for reconsideration because the insurer conceded that the Utica decision represented an important clarification of existing law and was not in of itself an intervening change in law. Thus, the insurer failed to point to any change in controlling law or any new evidence that might reasonably be expected to alter the conclusion reached by the Court in granting the reinsurer’s partial summary motion. Global Reinsurance Corp. v. Century Indemnity Co., Case No. 13 Civ. 06577 (USDC S.D.N.Y. April 15, 2015).

This post written by Kelly A. Cruz-Brown.

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REINSURERS’ MOTION TO VACATE ARBITRATION AWARD HELD TIME-BARRED

May 26, 2015 by Carlton Fields

A federal judge in New York has denied reinsurers’ motions for relief from a prior judgment. The reinsurers, Equitas Insurance Limited and Certain Underwriters at Lloyd’s of London, argued that they were entitled to judicial relief because the insured, Arrowood Indemnity Company, procured an arbitration award later confirmed by the Southern District through fraud. Arrowood entered into a casualty reinsurance agreement with the underwriters. To recover under this agreement, claims needed to fall within one of three types of coverage. The underwriters denied a series of Arrowood’s asbestos claims under the “Common Cause Coverage” because it believed that the asbestos claims needed to be noticed during the original contract period. The parties submitted the matter to arbitration, where the panel agreed that Arrowood’s interpretation of the contract: that Common Cause Coverage was intended only to prevent recovery on known losses whose “common cause” occurred before the term of the original contract. The court confirmed the award.

Months later, the underwriters obtained a letter produced by Arrowood in a separate action that revealed Arrowood interpreted the Common Cause Coverage clause in the same way the underwriters had posited in the previous arbitration. The underwriters filed a motion seeking to relieve it from the judgment because of fraud. While relief on this basis under the Federal Rules of Civil Procedure is not time-limited, similar relief under the Federal Arbitration Act imposes a time limit – a motion to vacate an arbitration award must be served upon the adverse party within three months after the award is filed or delivered. Because the Act trumps civil rules when those rules conflict, the underwriters were time-barred. Arrowood Indemnity Co. v. Equitas Insurance Ltd., Case No. 13 Civ. 7680 (USDC S.D.N.Y. May 14, 2015).

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

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U.S. SUPREME COURT TO HEAR APPEAL ON ENFORCEABILITY OF ARBITRATION AGREEMENTS IN CALIFORNIA

May 18, 2015 by John Pitblado

The United States Supreme Court has granted DIRECTV’s petition for Writ of Certiorari and will hear the following question presented: Whether the California Court of Appeal erred by holding, in direct conflict with the Ninth Circuit, that a reference to state law in an arbitration agreement governed by the Federal Arbitration Act requires the application of state law preempted by the Federal Arbitration Act.

As reported here previously, DIRECTV had moved to dismiss or stay a class action litigation filed against it and to compel individual arbitration pursuant to the arbitration clause contained in DIRECTV’s customer agreements in California, which specifically prohibit class actions. The trial court denied the motion and the California Court of Appeal affirmed. The Court of Appeal focused on the arbitration clause’s non-severability provision and its reference to “state” law to hold that the class-action waiver in the arbitration clause was invalid under California law and the entire arbitration agreement was therefore unenforceable. In its petition, DIRECTV argued that the Court of Appeal did precisely what the Supreme Court’s Concepcion decision prohibits: “It applies state law to invalidate an arbitration agreement solely because that agreement includes a class-action waiver.” DIRECTV further argued that because the decision is in direct conflict with a recent Ninth Circuit decision, creates an acknowledged conflict between state and federal courts on a matter of federal law, and “evinces the very hostility to arbitration that led to the enactment of the FAA in the first place,” the Supreme Court’s review was warranted. Petitioner’s brief on the merits is to be filed with the Court by May 29, 2015, and Respondents’ brief is to be filed by July 17, 2015. The Court is scheduled to hear the case during its October 2015 term. DIRECTV, Inc. v. Imburgia, et al., Case No. 14-462.

This post written by Renee Schimkat.

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SUMMARY JUDGMENT OVERTURNED IN COVERAGE DISPUTE

May 14, 2015 by Carlton Fields

In late April, the Indiana Supreme Court held that Continental Casualty Company (“CNA”) must provide insurable relief for Anthem Insurance Companies, Inc. (“Anthem”), reversing a lower court decision. Anthem’s expenditures were covered under their excess reinsurance policy.

Anthem, which later merged with co-defendant WellPoint Inc., was originally subject to multiple lawsuits in Florida and Connecticut for failing to pay claims in a timely manner, breach of state and federal statutes, breach of good faith and fair dealing, unjust enrichment, negligent misrepresentation, and violations of Racketeer Influenced and Corrupt Organizations Act. Anthem later settled, without admitting wrongdoing or liability, a multi-district litigation that consolidated the various state actions. Anthem then sought indemnification from their reinsurers.

Anthem self-insured E&O liability coverage and also purchased additional reinsurance coverage. CNA and other implicated excess reinsurers denied coverage for Anthem’s underlying litigation expenses. The trial court granted summary judgment in favor of CNA. Twin City Fire Insurance Company (“Twin City”) later joined that verdict. A court of appeals affirmed that decision.

CNA argued that (1) Anthem’s alleged conduct was not solely in performance of “Professional Services,” a requirement under their reinsurance agreement; (2) that Anthem’s coverage relief was barred under Indiana public policy; and (3) Anthem’s alleged conduct was barred under the reinsurance agreements “dishonest or fraudulent act or omission” exception. The court found that Anthem’s coverage extended to “loss of the insured resulting from any claim or claims…for any Wrongful Act of the Insured…but only if such Wrongful Act…occurs solely in the rendering of or failure to render Professional services.” The court found that Anthem’s alleged conduct fit under this guidance, as the conduct was a part of Anthems handling of health claims. The court also noted a strong presumption for the enforceability of contracts, especially between CNA and Anthem, both sophisticated parties. For these and other reasons, the court reversed the trial court and granted in large part, summary judgment for Anthem.

WellPoint, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, No. 49S05-1404-PL-244 (Ind. Apr. 22, 2015).

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

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