Arbitration / Court Decisions

APPEALS COURT AFFIRMS CONFIRMATION OF AWARD DETERMINING THAT UMBRELLA POLICY’S POLLUTION EXCLUSION APPLIES

June 28, 2012 by Carlton Fields

[National Union Fire Insurance Company of Pittsburgh issued an umbrella policy to Continental Carbon Company, a manufacturer of carbon-black used in tires and other rubber and plastic goods. Continental notified National Union of a federal lawsuit in which plaintiffs alleged that their property had been damaged by exposure to carbon-black dust pollution. Plaintiffs won a multi-million dollar judgment against Continental that was affirmed on appeal. National Union denied coverage under a pollution exclusion in the policy.

Continental commenced arbitration against National Union, arguing that the Products Completed Operations Hazard (“PCOH”) exception to the pollution exclusion in the policy applied. The arbitrators disagreed, determining that the carbon-black dust pollution at issue was not Continental’s “product” thereby taking it outside of the exception to the pollution exclusion. A Texas court confirmed the arbitration panel’s decision without reasoning. Continental appealed the decision. The appellate court affirmed, finding that Continental had failed to argue in its initial brief that its motion to vacate had been timely under the FAA. The court agreed with National Union that the FAA’s three-month limitations period was an independent ground supporting the judgment of the lower court and affirmed the confirmation of the award. Continental Carbon Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, No. 14-11-00162-CV (Tex. Ct. App. Apr. 17, 2012).

This post written by Ben Seessel.

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COURT DENIES DISMISSAL OF CLAIMS BY RISK MANAGEMENT ADMINISTRATOR AGAINST INSURER

June 27, 2012 by Carlton Fields

In 2006, the Plaintiff, Tethys Health Ventures, LLC (“Tethys”), an administrator of organ transplant risk management services, entered into an agreement with the defendant, Zurich, which provided that Zurich would pay Tethys commissions for producing insurance business. During the course of the agreement, Tethys earned commissions for its part in producing new excess insurance and reinsurance business for Zurich. In 2011, Zurich gave notice that it was terminating the agreement. Tethys sued, on a contract theory, as well as on an unjust enrichment theory. Zurich moved to dismiss the claims. The court denied Zurich’s motion, finding that the agreement was ambiguous as to the definition of “produce” and left unclear what the parties’ intent was with respect to the classification of Tethys’s producer commissions. For similar reasons, the court also declined to dismiss the unjust enrichment count. Tethys Health Ventures, LLC v. Zurich American Ins. Co., No. WDQ-11-2761 (USDC D. Md. May 31, 2012).

This post written by John Pitblado.

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CLASS ACTION HALTED AFTER CERTIFICATION GRANTED AND ORDERED TO INDIVIDUAL ARBITRATION IN LIGHT OF CONCEPCION

June 25, 2012 by Carlton Fields

The Plaintiff brought a putative class action against his employer, alleging various Labor Code violations, in California State Court. Citing the parties’ arbitration agreement and class arbitration waiver, the Defendant moved to compel individual arbitration, which the trial court granted. Plaintiff appealed. Shortly thereafter, in 2007, the California Supreme Court decided Gentry v. Superior Court, which held that class action waivers should not be enforced if class arbitration was a more effective way to vindicate the class members’ claims than individual arbitration. The Appellate Court thus reversed and remanded in light of Gentry. After the case proceeded and the trial court certified the class, the U.S. Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion. The defendant renewed its motion to compel arbitration in light of Concepcion. The trial court granted the motion, and the Appellate Court affirmed. Iskanian v. CLS Transportation Los Angeles, LLC, No. B23158 (Cal. App. Ct. June 4, 2012).

This post written by John Pitblado.

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REINSURER SEEKS UNDERLYING CLAIM FILES IN DISPUTE OVER SCOPE OF “LOSS,” NOTWITHSTANDING “FOLLOW THE FORTUNES” DOCTRINE

June 21, 2012 by Carlton Fields

On March 8, 2012, we reported on a settlement of Travelers’s claims against certain of its “excess of loss” reinsurers in a dispute over the extent to which Travelers could claim that its settlement of thousands of underlying asbestos insurance claims constituted one “loss” or occurrence for purposes of meeting the dollar amount threshold for entitlement to reinsurance coverage. Nationwide Mutual, a reinsurer still a defendant in the action, has sought discovery from Travelers, including Travelers’s files related to its settlement of the underlying insurance claims. Travelers has disputed Nationwide’s entitlement to these materials, contending that the “follow the fortunes” doctrine renders irrelevant the details of Travelers adjudication of the underlying claims. The court recently denied (on non-substantive grounds) Nationwide’s motion to compel the discovery, without prejudice for Nationwide to re-file a more detailed motion. Travelers Casualty & Surety Co. v. Nationwide Mutual Insurance Co., Case No. 2:11-cv-00063 (USDC S.D. Ohio May 10, 2012).

This post written by Michael Wolgin.

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COURT GRANTS DECLARATION IN FAVOR OF LEXINGTON INSURANCE; PARTIES SUBSEQUENTLY SETTLE

June 20, 2012 by Carlton Fields

Several important developments have occurred in a reinsurance dispute we last reported on in a September 27, 2011 post. The dispute is between Lexington Insurance and Tokio Marine & Nichido Fire Insurance. On March 28, the federal district court granted Lexington’s motion for judgment on the pleadings seeking a declaration that its obligations to provide excess insurance coverage to the Port Authority was not contingent upon exhaustion of the limits of the underlying primary insurance policy. The court, examining the agreement between the parties, found that nothing in the contract language contained any express or implied requirement that the underlying policy be exhausted in order to trigger Lexington’s obligation to pay its share of covered damages. Following this decision, the parties entered into settlement discussions. On May 31, the parties stipulated to the dismissal of the action with prejudice. Lexington Insurance Co. v. Tokio Marine & Nichido Fire Insurance Co. Ltd., No. 11-cv-00391 (USDC S.D.N.Y. May 31, 2012).

This post written by John Black.

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