Arbitration / Court Decisions

SETTLEMENT REACHED IN DISPUTE OVER REINSURANCE ALLEGEDLY OWED TO LIQUIDATING INSURER

June 6, 2012 by Carlton Fields

The New Hampshire Insurance Commissioner, as liquidator for The Home Insurance Company, recently settled a breach of contract suit to collect reinsurance payment from reinsurer, Repwest Insurance Company. The commissioner had alleged that Repwest waived any defenses to payment by failing to timely object to the commissioner’s notice of claim made in liquidation under a reinsured Home insurance policy. In its answer, Repwest had denied that it had received proper notice, and had asserted, among other defenses, that Repwest was entitled to setoff certain claims it had against another reinsurer against its obligations to Home. Sevigny v. Repwest Insurance Co., Case No. 1:11-cv-00405 (USDC D.N.H. Apr. 23, 2012).

This post written by Michael Wolgin.

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MOTION TO SET ASIDE DISCOVERY ORDER ON LOSS RESERVES DENIED

June 5, 2012 by Carlton Fields

In the latest development in the ongoing litigation between Granite State Insurance Company and Clearwater Insurance Company, Granite unsuccessfully moved to set aside a magistrate judge’s discovery order. As we reported in July 2011, Granite was ordered to produce certain asbestos loss reserve documents in response to Clearwater’s request for production of documents. The motion objecting to that order was denied, the district judge concluding that, first, the magistrate judge’s order was not contrary to law as the crucial issue was not merely, as Granite suggested, whether a ceding insurer has any practices in place regarding providing notice and, second, the order was not “clearly erroneous” because the notice procedures were relevant to the ultimate issue in dispute. The district judge explained that Granite’s arguments were largely tied to the merits of its defenses rather than to the permissibility of the discovery sought. Granite State Insurance Co. v. Clearwater Insurance Co., Case No. 09-10607 (USDC S.D.N.Y. Apr. 20, 2012).

This post written by John Black.

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APPELLATE COURT AFFIRMS DENIAL OF MOTION TO COMPEL ARBITRATION

June 1, 2012 by Carlton Fields

A California appellate court upheld denial of a motion to compel arbitration of an underlying labor employment dispute. Martha Hoover brought a wrongful termination class action against American Home Life Insurance Company, arising from its termination of her agent contract, which American Home characterized as creating an independent contractor relationship with Hoover. Her claims were brought under state labor laws, relying on her assertion that she and other similarly situated agents should be treated as statutory employees, and that American Home violated the class members’ statutory employment rights. American Home moved to compel arbitration of the dispute pursuant to the Collective Bargaining Agreement that incorporated Hoover’s agency contract, and which contained an arbitration clause. Nevertheless, the trial court denied the motion to compel, finding that, (1) the agreement did not apply to Hoover’s claims, to the extent she was a statutory employee, and so was not in dispute; and (2) even if it did, American Home waived its right to arbitration by waiting a year to invoke its right to arbitrate. Hoover v. American Income Life Ins. Co., No. E052864 (Cal. App. May 16, 2012).

This post written by John Pitblado.

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NO RES JUDICATA EFFECT FOR UNCONFIRMED ARBITRATION AWARD

May 31, 2012 by Carlton Fields

The Greers entered into a contract with Town Construction for construction of their home. After a dispute arose regarding costs, workmanship, and other issues, Town Construction filed an arbitration demand with AAA for unpaid balances. The Greers counterclaimed for damages for repairs and diminution in home value due to construction defects, specifically alleging that their home had cracks in the walls due to Town Construction’s faulty workmanship. The arbitrator awarded damages on Town Construction’s claims and the Greers’ counterclaims. There was no evidence in the record, however, that the award had been confirmed by a court.

Three years later, the Greers discovered more cracks in the walls and filed a lawsuit in state court for damages. The trial court dismissed the claims as barred by res judicata because the Greers’ claims had already been litigated in the AAA arbitration proceeding. The Court of Appeal reversed. The court held that, under Louisiana Supreme Court precedent, an unconfirmed arbitration award is not a “valid final judgment” because it was not “rendered by [a] court” and thus has no res judicata effect. Greer v. Town Constr. Co., No. 2011 CA 1360 (La. Ct. App. Mar. 23, 2012).

This post written by Ben Seessel.

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LLOYDS’ DISQUALIFICATION ACTION AGAINST OPPOSING COUNSEL DISMISSED

May 29, 2012 by Carlton Fields

Certain Underwriters at Lloyds, London (“Underwriters”) brought an action in Massachusetts Superior Court against Liberty Mutual and its counsel, Sidley Austin LLP, seeking to disqualify Sidley from representing Liberty Mutual in a coverage action involving a Lloyds reinsurance treaty, where Liberty Mutual was adverse to Lloyds. Sidley had also been retained by Resolute Management, Inc.. (f/k/a Equitas), which is Lloyds’ long-tail asbestos reinsurance claims management arm, to represent it in connection with a federal appeal. Sidley claimed that there was no conflict in its representation in the two actions, but that if there was a conflict, it was nevertheless disclosed to Lloyds, and implicitly waived thereby. The Court agreed with Sidley, finding the two representations did not involve substantially similar issues, and that Lloyds had been appropriately apprised of Sidley’s representation of Liberty Mutual when it retained Sidley in the federal appeal. The Court denied the motion for disqualification, and dismissed Lloyds’ action seeking declaratory and injunctive relief. Apparently, Lloyds was not upset enough about Sidley’s dual role to fire it from representing Equitas in the appeal. Certain Underwriters at Lloyds, London v. Sidley Austin LLP, No. SUCV2010-04663 (Mass. Super. Ct. March 5, 2012).

This post written by John Pitblado.

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