Arbitration / Court Decisions

APPELLATE COURTS ADDRESS JURISDICTION TO HEAR DISPUTES CONCERNING ARBITRATION

June 18, 2014 by Carlton Fields

Establishing that a federal court has jurisdiction to hear an arbitration dispute is not always easy. The Fourth Circuit recently affirmed the dismissal of an action seeking to vacate an arbitration award based upon lack of subject matter jurisdiction. Plaintiff attempted to show that the nexus between her claims and “commerce” fell within the realm of the FAA, and therefore there was a federal question under §1331. However, she failed to raise that argument below, so it was not properly before the court of appeal, and the Court found it to be unavailing in any event. Ball v. Stylecraft Homes, LLC, No. 13-1946 (4th Cir. Mar. 26, 2014)

The Eleventh Circuit affirmed the denial of a motion to remand for lack of jurisdiction. The issue was whether diversity jurisdiction was defeated because the action was a direct action against an insurer, defeating diversity jurisdiction under 28 U.S.C. §1332(c). The Court held that it was not a direct action, and affirmed the district court’s order compelling arbitration. Kong v. Allied Professional Insurance Company, No. 13-12305 (11th Cir. May 9, 2014)

This post written by Rollie Goss.

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COURT CONSTRUES DISPUTED INSURANCE POLICY LANGUAGE AND REQUIRES REINSURER TO FOLLOW THE SETTLEMENTS

June 17, 2014 by Carlton Fields

The case involved two facultative reinsurance contracts, each of which covered excess liability for similar umbrella liability insurance policies, and each of which contained a “follow the settlements” provision. After the insurer agreed to pay a percentage of the insured’s asbestos injury claims and defense expenses, the insurer began billing the reinsurer, but the reinsurer disputed liability. The reinsurer contended that it was not required to pay defense expenses in the same fashion as indemnity for one of the reinsurance certificates, arguing that the underlying insurance policy covered by that certificate lacked a reference to “defense expense” in the policy limit provision.

The court, however, rejected the reinsurer’s argument and entered summary judgment in favor of the insurer, finding that the reinsurer failed to demonstrate that the cedent was seeking coverage beyond the scope of the agreements. “It may be,” the court explained, “that defendant believes that defense expenses should not be included in the settlement because [the policy] does not use the phrase ‘defense expenses’ when defining the total limits of liability. However, … the provision does not affect the type of expenses that are covered, only the amount.” The court also considered two issues raised in later briefing: (1) whether the cedent proved the extent to which it exceeded the retention amounts; and (2) whether the cedent calculated prejudgment interest correctly, but reserved ruling on those issues, pending supplemental briefing. Employers Insurance Co. of Wausau v. R & Q Reinsurance Co., No. 13-cv-709 (USDC W.D. Wisc. May 16, 2014).

This post written by Michael Wolgin.

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ARBITRATION ROUND-UP – EXISTENCE OR VALIDITY OF AGREEMENT TO ARBITRATE

June 12, 2014 by Carlton Fields

The following recent cases analyzed whether the parties entered into a valid agreement to arbitrate and under what circumstances a court may consider that issue.

Dasher v. RBC Bank (U.S.A.), No. 13-10257 (11th Cir. Feb. 10, 2014) (affirming denial of motion to compel arbitration, finding absence of arbitration provision in agreement which superseded prior agreement, which included an arbitration provision, provided no evidence of the parties’ intent to arbitrate)

JP Morgan Chase Bank N.A. v. Bluegrass Powerboats, No. 2011-SC-000668-DG (Ky. Mar. 20, 2014) (affirming trial court’s order setting aside order compelling arbitration after the arbitrator had rendered a dispositive order, finding that because the arbitrator’s decision was not final, and because the evidence did not support the existence of an agreement to arbitrate, the trial court had the power to correct its prior erroneous ruling)

The Flowserve Corp. v. United States Fire Insurance Co., Case No. 2:14-cv-00676 (USDC D. N.J. May 7, 2014) (granting defendant’s motion to compel arbitration, finding that parties’ side agreement, which did not include an arbitration clause and which modified certain terms of the underlying settlement agreement which did include an arbitration clause, evidenced the parties’ agreement to arbitrate where side agreement provided that, except to the extent it modified the terms of the settlement agreement, all terms of the settlement agreement remained binding upon the parties)

Lakah v. UBS A.G., Case No. 1:07-cv-02799-MGC (USDC S.D.N.Y. March 20, 2014) (denying “what amounts to a summary judgment motion” that plaintiffs should be compelled to arbitrate on the basis of veil piercing and estoppels theories because there were issues of fact as to the making of the agreement for arbitration)

Bank of the Ozarks, Inc. v. Walker, 201 Ark. 223 (2014) (vacating appellate court’s reversal of trial court’s order denying motion to compel arbitration, and remanding matter to trial court, finding that trial court, which ruled that arbitration clause was unconscionable, must first determine whether a valid arbitration agreement existed and, if so, whether the dispute fell within the scope of the agreement)

This post written by Leonor Lagomasino.

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COURT AWARDS $5.6 MILLION IN DAMAGES FOR COVERED CLAIMS UNDER RETROCESSION AGREEMENTS

June 9, 2014 by Carlton Fields

A federal district court has awarded Munich Re $5.6 million in damages in its breach of contract action against American National Insurance Company for ANICO’s nonpayment of certain claims the court previously determined were covered by the parties’ retrocession agreements. In previous opinions, reported here on March 10 and May 29, 2014, the court concluded that ANICO breached its payment obligations to Munich Re for claims properly and timely ceded to ANICO under those agreements. In awarding damages, the court determined that Munich Re was entitled to a sum certain based on all claims previously identified and billed by Munich Re at the time of trial, along with the appropriate amount of prejudgment interest. The court also determined that ANICO was entitled to (1) offset some damages claimed by Munich Re by the amount of outstanding premium ANICO was owed and (2) “particulars and estimates” under the reporting obligations of the retrocession agreements which obligate Munich Re, when reporting claims, to provide information sufficient for ANICO to determine that the claims fall within the scope of its obligations. The court denied ANICO’s request that the court to take judicial notice of certain alleged admissions Munich Re made in prior litigation. Munich Reinsurance America, Inc. v. American National Insurance Co., Case No. 09-6435 (USDC D.N.J. May 27, 2014).

This post written by Renee Schimkat.

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JURY AWARDS STONEBRIDGE CASUALTY $5.8 MILLION ON REINSURANCE CLAIM

June 5, 2014 by Carlton Fields

A final judgment was recently entered on a jury verdict awarding $5.8 million to Stonebridge Casualty Insurance Company. The case involved a reinsurer’s failure to pay reinsurance claims arising out of an automobile tire loyalty rewards program insured by Stonebridge. The reinsurer was a motor club that had entered into a contractual arrangement with certain Lloyd’s syndicates under which the motor club agreed to be financially responsible for reinsurance claims.

Under the insured program, automobile dealerships offered their customers a reward certificate entitling the customer to two free sets of tires if they returned to the dealership for all of the manufacturer’s recommended service. Stonebridge insured the program and obtained reinsurance coverage in the event that claims exceeded $46 per certificate. After the reinsurance threshold was exceeded and Stonebridge filed reinsurance claims, the motor club and Lloyd’s contended that the tire claims were invalid and sued Stonebridge for a declaration that they were not liable. Stonebridge counterclaimed, and after seven days of trial, the jury returned a verdict in favor of Stonebridge, awarding the full amount of damages sought in the amount of $5.8 million. Stonebridge has also filed a motion seeking additional prejudgment interest of $813,226. Stonebridge Casualty Ins. Co. v. Nation Motor Club, Inc., Case No. 9:10 cv 81157 KLR (USDC S.D. Fla. Mar. 24, 2014).

This post written by Michael Wolgin.

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