Arbitration / Court Decisions

INSURANCE POLICIES CONTROL CALCULATION OF “LOSS” APPLICABLE TO “EXCESS OF LOSS” REINSURANCE

June 19, 2012 by Carlton Fields

In a case involving disputed claims made under “excess of loss” facultative reinsurance certificates, a court recently held that the reinsurer’s liability for “losses” should follow the meaning of “loss” and “expense” in the underlying insurance polices, rather than the meanings of those terms as used in the reinsurance certificates. The dispute surrounded whether the reinsurance covered litigation expenses, in addition to the indemnity paid under the underlying insurance policies. The court analyzed the certificates and determined that the liability of the reinsurer in this case should be determined by the scope of liability provided by the underlying insurance policies. Because the reinsurer “had copies of the underlying insurance polices, or at the very least had access to the underlying insurance policies” the reinsurer could be charged with knowledge of the policies’ terms. The court distinguished reinsurance expressly designated as “non-current,” or reinsurance that limits in the certificates coverage to only specific delineated risks. In that scenario, the court explained, “loss” and “expense” would be determined by the certificate, as opposed to the underlying policies. ACE Property & Casualty Insurance Co. v. R & Q Reinsurance Co., Case No. 11081920 (Pa. Ct. Comm. Pl. May 15, 2012).

This post written by Michael Wolgin.

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MOTION TO DISMISS CLAIM FOR BREACH OF CONFIDENTIALITY AGREEMENT IN REINSURANCE ARBITRATION DENIED

June 18, 2012 by Carlton Fields

INA Reinsurance recently moved to dismiss or to stay an action initiated by Utica Mutual Insurance arising out of the alleged breach of three confidentiality agreements, including one entered as an order in the parties’ pending reinsurance arbitration. Utica alleged that INA breached the confidentiality agreement put in place in the reinsurance arbitration by improperly disclosing confidential information in a separate lawsuit against a third party. The federal district court denied INA’s motion to dismiss or to stay, finding that the Supreme Court’s Colorado River abstention doctrine inapplicable because the defendants in the two lawsuits were unrelated and the claims were significantly different. Further, the district court concluded that Utica was not required to pursue its claims for breach of the confidentiality agreements in the pending arbitration because there exists clear language in the confidentiality agreements authorizing Utica to pursue claims for breach in a judicial forum. Utica Mutual Insurance Co. v. INA Reinsurance Co., No. 12-cv-00194 (USDC N.D.N.Y. Apr. 24, 2012).

This post written by John Black.

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COURT HOLDS HEZBOLLAH LIABLE TO INSURERS FOR $9 BILLION FOR CLAIMS PAID RESULTING FROM SEPTEMBER 11 TERRORIST ATTACKS

June 14, 2012 by Carlton Fields

A federal district court has held that Hezbollah is liable for over $9 billion in damages on subrogation claims brought by insurers under the “business or property” provisions of the Anti-Terrorism Act. The insurers’ action was brought to recoup payments made on claims for losses resulting from the September 11, 2001 terrorist attacks. As we previously reported, the court had entered judgment awarding in excess of $9 billion in damages against Al Qaeda based on the same claims. This order extends the judgment to Hezbollah. Hezbollah and Al Quaeda had been defaulted as to liability in April, 2006. In re Terrorist Attacks on September 11, 2001, Case No. 03 MDL 1570 (USDC S.D.N.Y. Mar. 27, 2012).

This post written by Ben Seessel.

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MISSOURI SUPREME COURT ENFORCES CONCEPCION ON UNCONSCIONABILITY

June 13, 2012 by Carlton Fields

Plaintiff Lavern Robinson brought a putative class action against Title Lenders, Inc. in Missouri state court. Title Lenders moved to stay and compel arbitration of the claims under the parties’ contract, which contained an agreement to arbitrate, as well as a class arbitration waiver. The trial court found the class arbitration waiver to be unconscionable, and therefore unenforceable under Missouri common law contract principles. The Missouri Supreme Court reversed, enforcing AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011), because the trial court’s decision was based specifically on the unconscionability of the class arbitration waiver, thereby distinguishing its companion ruling in Brewer v. Mo. Title Loans, Inc., — S.W.3d —- (Mo. March 6, 2012), which allowed for unconscionability review of other aspects of an agreement, even in light of Concepcion, so long as the agreement was not invalidated for containing a class arbitration waiver. Robinson v. Title Lenders, Inc., No. SC91728 (Mo. March 6, 2012).

This post written by John Pitblado.

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TEXAS SUPREME COURT HOLDS THAT ORDER VACATING ARBITRAL AWARD DUE TO UNRESOLVED QUESTIONS OF FACT IS NOT APPEALABLE

June 12, 2012 by Carlton Fields

As a condition of his employment at Bison, Aldridge signed an arbitration agreement in which he agreed to resolve by arbitration any claims for work-related injuries. After Aldridge sustained an injury at work, Bison paid him approximately $80,000 in medical and wage replacement benefits in exchange for a release in which Aldridge gave up the right to take legal action. Aldridge later demanded arbitration. The arbitrator dismissed Aldridge’s claim with prejudice based on the terms of the release. Aldridge filed a petition to vacate; Bison moved to confirm.

The trial court vacated in part, holding that there were unresolved questions of fact regarding whether the release and waiver was enforceable. In particular, the court held that there were fact issues regarding whether Texas’s fair notice requirement had been met and, if not, whether both parties had actual knowledge of the terms of the waiver. Further, the court held that there was a question regarding whether the “ambiguous terms of the waiver” precluded arbitration. Bison appealed. The court of appeals held that the trial court’s order was interlocutory and thus not appealable. The Supreme Court affirmed, holding that the order was interlocutory and non- appealable because it left “significant factual and legal issues open for further determination.” The dissenting justices opined that mandamus review was warranted under Texas procedure because the FAA would permit an appeal from the trial court’s order, which the dissent argued calls for an “arbitration Mulligan.” Bison Bldg. Materials, Ltd. v. Aldridge, No. 06-1084 (Tex. Jan. 16, 2008).

This post written by Ben Seessel.

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