Continuing our series of reinsurance Treaty Tips, Rollie Goss writes about how to try to manage the risks of multiple disputes concerning one reinsurance contract or a reinsurance program in The Scourge of Multiple Dispute Proceedings.
Arbitration / Court Decisions
SILENCE ON EXPENSE LIABILITY IN CONTRACT FAVORS REINSURER
In one of the sister cases previously reported on involving Utica Mutual Insurance Company and one of its reinsurers Munich Reinsurance, a federal district court granted Munich’s motion for summary judgment. Utica sought reimbursement under the reinsurance contract for expenses incurred in litigation with an insured. At issue was whether the reinsurance contract subjected those expenses to Munich’s limit of liability or whether Munich was obligated to pay for those expenses in addition to its $5 million limit of liability. Based on Second Circuit and New York Court of Appeals precedent regarding limit-of-liability provisions in reinsurance contracts, the court held that the limit-of-liability provision applicable to Munich was unambiguously cost-inclusive and that Munich was obligated to Utica for no more than the $5 million. Utica Mutual Insurance Co. v. Munich Reinsurance America, Inc., Case No. 6:12-CV-0196 (N.D.N.Y. Sept. 30, 2013).
This post written by Abigail Kortz.
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ARBITRATION AWARD INTEREST WHEN THE AWARD IS PARTIALLY SILENT
In Lagstein v. Certain Underwriters at Lloyd’s of London, No. 03-01075 (9th Cir. June 10, 2010), a $900,000 insurance bad faith case, the Ninth Circuit reversed the vacatur of an arbitration award of over $6 million, including hefty punitive damages, holding that the award was not excessive and that the vacator was not supported by the Federal Arbitration Act. Recently revisiting the issue of the proper interest to be awarded, the Ninth Circuit held that an explicit award of interest on the award’s contract damages “d[id] not foreclose … awarding interest on the remaining portions of the arbitration award.” Applying state law for post-award, pre-judgment interest and federal law for post-judgment interest, the court then ordered Lloyd’s (1) to pay interest on all of the damage awards from award date until judgment satisfaction and (2) to pay interest on post-award, pre-judgment interest from the date of the court’s opinion until satisfaction. Lagstein v. Certain Underwriters at Lloyd’s of London, No. 2:03–01075 (9th Cir. Aug. 5, 2013).
This post written by Kyle Whitehead.
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ARBITRATION AWARD ROUND-UP
Arbitrator Exceeding Powers
Prime United Inc., v. Sears Holdings Management Corp., Case No. 12 C 5364 (N.D. Ill. July 16, 2013) (vacatur denied where arbitrator did not exceed powers in offsetting claimant’s damages by respondent’s counterclaim award)
Golden Temple of Oregon, LLC. v. Puri, Case No. 3:11-cv-01358 (D. Ore. Aug. 7, 2013) (vacatur granted, arbitrator exceeded powers or imperfectly executed them by failing to consider impact of license agreement in trademark dispute)
Manifest Disregard of Law
Physicians Insurance Capital, LLC v. Praesidium Alliance Group, LLC, Case No. 4:12-CV-1789 (N.D. Ohio July 18, 2013) (granting motion to confirm, denying vacatur, finding no manifest disregard of the law).
Arbitration Procedure
Bridgeport Ventures LLC v. PanAm Management Group, Inc., No. 11-13971 (11th Cir. July 30, 2013) (affirming decision confirming award, finding district court had diversity jurisdiction, and respondent’s petition to vacate untimely)
Pochat v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., Case No. 12-22397 (S.D. Fla. Aug. 23, 2013) (granting motion to confirm, but modifying award to allow offset for counterclaim amount)
Evident Partiality
Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, Kochav S.A.R.L., No. 12-3247 (2d Cir. Aug. 30, 2013) (affirming decision to confirm award where no evident partiality, no refusal to consider material or pertinent evidence).
This post written by John Pitblado.
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ELEVENTH CIRCUIT AFFIRMS ARBITRATOR DECISION TO CERTIFY ARBITRATION CLASS
The Eleventh Circuit heard an appeal from a district court’s decision denying vacatur of an arbitrator’s decision to certify an arbitration class against a telecommunications provider. The appellant, Southern Communications, was a respondent in an arbitration brought by a consumer who contested certain penalty fees. The arbitration agreement was silent as to class action arbitration. The consumer moved for certification of an arbitration class, and the arbitrator granted the motion, certifying a class. Southern Communications sought vacatur of the decision in federal court, but the court denied vacatur. Southern Communications appealed, but the Eleventh Circuit affirmed, pointing to the Supreme Court’s recent decision Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) – which resolved a circuit split as to whether class arbitration was allowable where the arbitration agreement was silent – and the difficult burden for establishing grounds for vacatur under the Federal Arbitration Act. Southern Communications Services, Inc. v. Thomas, No. 11-15587 (11th Cir. July 12, 2013)
This post written by John Pitblado.
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