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Arbitration / Court Decisions

COURT REFUSES TO COMPEL PRODUCTION OF RELEVANT BUT NON-RESPONSIVE REINSURANCE COMMUNICATIONS

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In a coverage dispute involving an insurance policy covering a limestone quarry, a court reviewed the insurer’s documents related to reinsurance coverage, and denied the insured’s motion to compel. While the court agreed with the insured that the insurer’s reinsurance coverage was “clearly relevant” to the dispute, the specific discovery requests sought only “information relating to communications and documents exchanged between [the insurer] and any reinsurer.” Because the documents that the insurer had withheld from production to the insured were “internal documents” between the insurer and its underwriter, and not materials “exchanged” with a reinsurer, the documents were “not responsive” and the court denied the motion to compel. Continental Material Corp. v. Affiliated FM Insurance Co., Case No. 10-cv-02900 (USDC D. Colo. July 30, 2012).

This post written by Michael Wolgin.

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SEEK REINSURANCE WITH CARE: THE REINSURED BEARS THE BURDEN OF PROVING COVERAGE

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Reiterating that Massachusetts law requires the insured to bear the burden of demonstrating that a claim falls within a policy’s affirmative grant of coverage, the First Circuit affirmed an award of summary judgment to a Canadian reinsurer in an action in diversity brought by an American insurer seeking indemnification of amounts incurred in defending its insured against asbestos-related claims. The court parsed through three years of insurance and reinsurance policies, endorsements thereto, as well as the flow of premium payments, to find corroborative of the parties’ intents both the plain language of the documents and extrinsic evidence, including premium payments and the existence of only an initial-year facultative certificate. The court held that the reinsurance arrangement that existed in the first policy year terminated at the end of that year. OneBeacon Am. Ins. Co. v. Commercial Union Assurance Co. of Canada, No. 11-2072 (1st Cir. July 11, 2012).

This post written by Brian Perryman.

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COURT CONFIRMS ARBITRATION AWARD DESPITE MANIFEST DISREGARD CLAIMS AND ARGUMENT THAT PANEL EXCEEDED ITS AUTHORITY

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This petition for vacatur followed the last of three arbitrations between American Centennial Insurance Company, a company with its principal place of business in Delaware, and Global International Reinsurance Company, a Barbados company, pursuant to a reinsurance agreement between the parties. While in runoff, ACIC changed its ownership structure through a series of reorganizations and acquisitions. In response, Global sought a reduction of its reinsurance obligations as provided for by their agreement. In the third arbitration, an award was issued in favor of Global. The losing party filed a petition to vacate the award, but the United States District Court for the Southern District of New York confirmed the arbitration panel’s order. Despite the losing party’s argument that the arbitrators had exceeded their authority and displayed manifest disregard for the law and the parties’ agreement (which had an honorable engagement clause and also required the panel to provide reasons for its order), the court held that the panel had acted within its “wide discretion.” Furthermore, the court found that, in discussing the terms of the agreement, the parties’ dispute, the findings of the earlier arbitration panels, and the rationale for awarding less than was sought, the panel went further than necessary in explaining its award since the agreement did not request detailed factual findings and conclusions of law. Thus, the petition to vacate the award was denied and the award was confirmed. American Centennial Insurance Co. v. Global International Reinsurance Co., Case No. 12 Civ. 1400 (USDC S.D.N.Y. July 9, 2012).

This post written by Brian Perryman.

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CALIFORNIA FEDERAL COURT FINDS ARBITRATION AGREEMENT NOT UNCONSCIONABLE

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Plaintiff Abreu filed a putative class action lawsuit against Slide, Inc., the developer of SuperPoke!, an online game in which users adopt, care for, and interact with virtual pets. Google acquired Slide in 2010 and, shortly thereafter, discontinued the game. Plaintiff asserted a number of common law and statutory causes of action against Slide and Google pertaining to the termination of the game, including alleged violations of California’s Unfair Competition Law (UCL). Google and Slide successfully moved to compel arbitration.

The federal district court held that the requirement of a $125 filing fee was not substantively unconscionable, particularly where the arbitration agreement provided that respondent would pay arbitration costs if the arbitrator determined costs to be excessive. It further rejected plaintiff’s argument that the arbitration provision was substantively unconscionable because the clause failed to provide that plaintiff could recover attorney’s fees if she was successful on her claims. The court held in abeyance the issue of whether the arbitration provision was unconscionable because it permitted only defendants to file an action for injunctive relief in court, finding that the one-way injunctive relief clause was severable so as to permit arbitration of all other issues. Abreu v. Slide, Inc., Case No. 12-00412 (USDC N.D. Cal. July 12, 2012)

This post written by Ben Seessel.

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CALIFORNIA APPELLATE COURT REJECTS UNCONSCIONABILITY ARGUMENT IN EMPLOYMENT CASE

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Lorena Nelsen brought a putative class action in California state court against her former employer, Legacy Partners Residential, Inc. (“LPR”), alleging violations of the California Labor Code. LPR moved to compel individual arbitration based on the parties’ arbitration agreement. The trial court rejected Nelsen’s contention that the arbitration clause was unconscionable and unenforceable. The Appellate Court affirmed, distancing itself from its previous holdings that have been called into question by the U.S. Supreme Court’s ruling in AT&T Mobility v. Concepcion, upon which the decision heavily relies. Nelsen v. Legacy Partners Residential, Inc., No. A132927 (Cal. App. July 18, 2012).

This post written by John Pitblado.

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