Arbitration / Court Decisions

COURT GRANTS PETITION TO CONFIRM FOREIGN ARBITRAL AWARDS, DENIES MOTION TO SEAL

October 16, 2012 by Carlton Fields

Century Indemnity Company brought a petition to confirm three foreign arbitral awards it secured against AXA Belgium. AXA cross-petitioned to vacate the awards. Both parties filed motions to seal certain documents submitted to the court in light of a confidentiality agreement covering the arbitrations. The parties’ dispute centered on claimed underpayments by AXA, and alleged offsets AXA claimed it was entitled to, which it claimed negated amounts owed to Century under certain reinsurance treaties. Century initiated multiple arbitrations arising throughout the history of the parties’ payment disputes, which arbitrations were ultimately consolidated. The consolidated arbitration hearing took place in 2011. In February 2012, the panel rendered a decision favorable to Century, including a bad faith finding against AXA which resulted in an order of $250,000, or the amount of Century’s fees and costs, whichever was lesser. AXA challenged the award under the FAA, but the Court held that it failed to demonstrate the panel exceeded its authority under the submission, or that its decision was in manifest disregard of the law. The Court also addressed both parties’ motion to seal the record, finding neither demonstrated sufficient bases to seal, given the strong presumption in favor of public access to court files. Century Indemnity Co. v. AXA Belgium, No. 11 Civ. 7263 (USDC S.D.N.Y. Sept. 24, 2012).

This post written by John Pitblado.

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RETROCESSIONAIRE’S RESCISSION COUNTERCLAIM THAT REINSURER FAILED TO ACT IN UTMOST GOOD FAITH SURVIVES SUMMARY JUDGMENT

October 15, 2012 by Carlton Fields

Munich Re sued retrocessionaire ANICO based on ANICO’s refusal to pay over $4 million allegedly due under excess loss policies issued to Munich Re to provide retrocessional cover on Munich Re’s reinsurance of Everest National’s workers compensation program. After discovery closed, ANICO counterclaimed for rescission, alleging that facts revealed in discovery demonstrated that Munich Re failed to abide by its duty of utmost good faith or uberrimae fidei by failing to disclose its own internal loss calculations that ANICO claimed would have been material to ANICO’s decision to issue the retrocessional policies. The parties cross-moved for summary judgment on ANICO’s counterclaim for rescission and Munich Re moved for summary judgment on aspects of its breach of contract and declaratory judgment claims.

The federal district court denied the parties’ cross-motion on ANICO’s rescission counterclaim, holding that there were issues of fact regarding whether ANICO reasonably would have considered Munich Re’s internal loss calculations material and, further, whether Munich Re should have known that ANICO would have deemed this information material. With respect to Munich Re’s breach of contract claim, the court rejected ANICO’s argument that Munich Re’s alleged failure to provide timely notice precluded recovery, finding that timely notice was not required under the parties’ agreements and, further, that ANICO could show no prejudice. The court granted Munich Re summary judgment with respect to its interpretation of the agreements’ retention provisions. As none of these decisions entirely disposed of the case, it remains pending in federal district court. Munich Reinsurance America, Inc. v. American National Insurance Co., Case No. 09-6435 (USDC D.N.J. Sept, 28, 2012).

This post written by Ben Seessel.

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PETITION TO COMPEL REINSURANCE ARBITRATION DISMISSED AFTER UMPIRES SELECTED

October 10, 2012 by Carlton Fields

A court recently dismissed a case brought to compel arbitration in a asbestos reinsurance coverage dispute between Century Indemnity Company and Everest Reinsurance Company, after the parties reported to the court that they had finally installed umpires in multiple arbitrations related to the dispute. The parties had previously agreed to an ARIAS neutral selection process in November 2011 as part of a global agreement involving the arbitrations, but a report filed by the parties in January 2012 reflected that no agreement as to the umpires could then be reached. Everest Reinsurance Co. v. Century Indemnity Co., Case No. 11-5893 (USDC S.D.N.Y. June 29, 2012).

This post written by Michael Wolgin.

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COURT APPOINTED UMPIRE GETS THROWN OUT BEFORE ARBITRATION BEGINS

October 9, 2012 by Carlton Fields

An Alabama court claimed authority under Section 5 of the Federal Arbitration Act to appoint an umpire in an arbitration upon complaint by the plaintiff that “a lapse in the naming of an arbitrator . . . or umpire” had occurred in the arbitration selection process. 9 U.S.C. § 5. The arbitration provision at issue required each party to nominate one non-impartial arbitrator and required the two chosen arbitrators to select a neutral umpire within thirty days of the second arbitrator’s appointment. The Supreme Court of Alabama reversed the circuit court’s appointment, holding that 1) defendants’ delay in providing a list of potential umpires by six days beyond the prescribed thirty days was so minimal it did not warrant judicial intervention, and 2) defendants did not act in bad faith by proposing two potential umpires plaintiffs contend were biased because there was no showing that the potential umpires would not disclose facts relevant to their ability to be fair if selected and defendants offered to propose an additional umpire when plaintiffs complained of bias. Lexington Insurance Co. v. Southern Energy Homes, Inc., No. 1091617 (Ala. Aug. 17, 2012).

This post written by Abigail Kortz.

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TWO APPELLATE COURTS REJECT ARGUMENT THAT ARBITRATION PROVISIONS PROHIBITING CLASS ARBITRATION OF SMALL CLAIMS ARE UNCONSCIONABLE

October 8, 2012 by Carlton Fields

In opinions issued the same week, the 11th and 3rd Circuits affirmed district court orders granting defendants’ motions to compel arbitration on an individual, rather than on a class-wide, basis over plaintiffs’ objections that class-arbitration waiver clauses in their credit card and wireless telephone service agreements were unconscionable and unenforceable. The circuit courts followed Supreme Court precedent from AT&T Mobility LLC v. Concepcion, which held that Section 2 of the Federal Arbitration Act, which provides that arbitration agreements are “valid, irrevocable, and enforceable,” preempts state laws that hold class-arbitration waivers to be unconscionable and unenforceable. Consistent with the Supreme Court’s reasoning, the circuit courts found that preemption trumps the public policy argument, accepted by some other courts, that when arbitration is mandated, “class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system.” Homa v. American Express Co., No. 11-3600 (3rd Cir. Aug. 22, 2012); Pendergast v. Sprint Nextel Corp., No. 09-10612 (11th Cir. Aug. 20, 2012).

This post written by Abigail Kortz.

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