Arbitration / Court Decisions

SIXTH CIRCUIT ANSWERS A QUESTION LEFT OPEN BY THE SUPREME COURT: CLASSWIDE ARBITRABILITY IS A GATEWAY QUESTION SUBJECT TO JUDICIAL DETERMINATION

December 10, 2013 by Carlton Fields

The threshold issue before the Sixth Circuit on an appeal from a dispute involving LexisNexis and one of its law firm customers was whether the question of classwide arbitrability is a gateway question to be determined by the court or a subsidiary question to be determined by an arbitrator, a question expressly left open by the Supreme Court in its most recent term. Following an analysis of recent Supreme Court jurisprudence, which seemed to lean toward deciding that classwide arbitrarily is a gateway question, the Sixth Circuit definitively stated that it is a gateway question reserved for judicial determination. The Court next analyzed the arbitration clause at issue in the dispute and held that it did not authorize class arbitration because it was silent on that issue and limited the scope of arbitration to the specific order between LexisNexis and the law firm, precluding the arbitration of other customers’ orders with LexisNexis. Reed Elsevier, Inc. v. Crockett, No. 12-3574 (6th Cir. Nov. 5, 2013).

This post written by Abigail Kortz.

See our disclaimer.

REINSURER OFF THE HOOK FOR LITIGATION DEFENSE COSTS

December 9, 2013 by Carlton Fields

Public Reimbursement Management of Florida (“PRM”) sued its reinsurer One Beacon Insurance Co. (“OneBeacon”) for reimbursement of defense costs PRM incurred while defending an insured involved in a construction contract dispute. The primary issue was whether the underlying construction contract dispute fell within PRM’s duty to defend and whether OneBeacon was obligated to reimburse PRM. The Florida district court granted OneBeacon’s motion to dismiss with prejudice, concluding that (1) PRM did not have a duty to defend because the construction dispute fell within an exclusion in the PRM insurance policy for intentional breaches of contract, and (2) the theory of equitable estoppel did not apply to create insurance coverage between OneBeacon and PRM because OneBeacon made it clear in its correspondence with PRM that it did not believe PRM had a duty to defend the construction contract dispute. Public Risk Management of Florida v. One Beacon Insurance Co., Case No. 13-1067 (M.D. Fla. Oct. 18, 2013).

This post written by Abigail Kortz.

See our disclaimer.

STATUTE OF LIMITATIONS: CONSENT-TO-SETTLEMENT PROVISIONS AND UNDERINSURANCE

December 5, 2013 by Carlton Fields

In a case involving an insurer’s attempt to avoid payment of a claim under an underinsured motorist policy after a car accident on statute of limitations grounds, the Eastern District of Pennsylvania resorted to the basics of contract law in denying the insurer’s motion for summary judgment and granting the policyowner’s petition to compel arbitration. Although the parties agreed that Pennsylvania has a four-year statute of limitations for contractual actions, they disagreed as to when the limitations period begins to run in an underinsurance case. Sitting in diversity, and absent any rulings on point by the state’s highest court, the court determined that, based on relevant state and Third Circuit precedent, the Pennsylvania Supreme Court likely would rule that the statute of limitations begins to run on an underinsurance claim when the insured actually settles with the underinsured driver. Thus, consistent with both the purpose of consent-to-settlement provisions, which give insurers an opportunity to exercise their subrogation rights prior to the formation of binding settlement agreements, and contract law, the statute of limitations began to run on the date the policyowner accepted the tortfeasor’s settlement offer by signing the release absolving the tortfeasor from further liability. Wilson v. Great American Insurance Group, Case No. 12-5700 (E.D. Pa. Oct. 25, 2013).

This post written by Kyle Whitehead.

See our disclaimer.

DISTRICT COURT DENIES MOTION TO COMPEL ARBITRATION

December 4, 2013 by Carlton Fields

A federal court in Missouri denied a defendant’s motion to compel arbitration. Two contracts were at issue. The first was a contract between the plaintiff, a pharmacy benefits manager, on the one hand, and a network of pharmacies – in which defendant, a chain of pharmacies in Oklahoma, participated – on the other. This contract governed the payment of pharmacy claims and did not include an arbitration provision. A separate contract directly between the plaintiff and defendant regarding claims audits contained an arbitration agreement. The plaintiff made claim for reimbursement for certain claims under the former agreement, and the defendant then initiated an arbitration in Missouri. The plaintiff resisted arbitration, and filed an action in court challenging arbitration on the grounds that the contract at issue contained no arbitration provision. The court agreed, noting that the evidence submitted made clear that the claims pertained only to the agreement with no arbitration agreement, and that therefore the claims could and should proceed in court. Express Scripts, Inc. v. The Apothecary Shoppe, Inc., No. 4:12-cv-01035 (USDC E.D. Mo. Sept. 30, 2013).

This post written by John Pitblado.

See our disclaimer.

“Buyer’s Remorse,” or Did the Nature of the Reinsurance Commissions Really Violate Florida Law?

December 3, 2013 by Carlton Fields

A Florida circuit court recently denied defendants’ motions for summary judgment in a suit filed by a Costa Rican insurer against two reinsurance brokers – one from the United States and one from England – alleging breach of contract and a host of claims involving negligence, breach of fiduciary duty, and misrepresentation. The crux of the plaintiff’s complaint is that the brokers’ commission earnings were unreasonable, excessive, and undisclosed because a less-than-$200,000 flat commission bid for the brokerage business during an initial bidding stage (which was allegedly terminated) grew to nearly $2 million in a subsequent bidding stage wherein the bid quoted only a total price of over $12 million, without separate premium and brokerage commission line items. The defendants’ motions asserted that Florida law does not impose limits on broker compensation, particularly in arms-length transactions between sophisticated parties, and does not mandate voluntary disclosure of brokers’ earnings, lest a contract requires it. In addition, the insurer chose to award its business as it did because the defendants presented the best price, terms, and other conditions of the reinsurance. Since the Order does not provide any analysis or reasons for the ruling, although it may have given some indication during argument, the Order does not indicate whether the Court denied the motion due to the presence of disputed issues of material fact or because of a disagreement with the legal arguments made by the movants. Instituto Nacional de Seguros v. Hemispheric Reinsurance Group, Case No. 10-33653 CA 04 (Fla. Cir. Ct. Oct. 7, 2013).

This post written by Kyle Whitehead.

See our disclaimer.