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Arbitration / Court Decisions

ENGLISH COURT ORDERS SERVICE OF PROCESS AGAINST OUT-OF-JURISDICTION DEFENDANT IN INSURANCE DISPUTE

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The Queen’s Bench Division of the Commercial Court affirmed an order permitting Faraday Reinsurance Co. to serve process out of the jurisdiction against defendant Howden North America. Howden had argued that service should not be permitted and that the parties’ quarrel should be resolved in litigation pending in Pennsylvania federal court. The underlying dispute relates to coverage for asbestos liabilities under three excess layer policies. The case implicates potential differences between English and American law on loss triggers, i.e., whether exposure to a hazardous substance itself constitutes a loss, or whether loss occurs at the time of manifestation or at some other incremental stage between exposure and manifestation. This determination can be dispositive in cases involving asbestos coverage because mesothelioma, which is caused by asbestos exposure, typically does not manifest for decades. Earlier this year, we reported on a decision by the U.K. Court of Appeals holding that the insurer on the risk at the time of exposure, not manifestation, is responsible for the liability. Faraday Reinsurance Co. v. Howden North America, Inc. [2011] EWHC 2837 (Q.B. Comm. Ct. Nov. 1, 2011).

This post written by Ben Seessel.

ENGLISH COURT UPHOLDS ENFORCEMENT OF AUSTRALIAN JUDGMENT AGAINST INSOLVENT REINSURER

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An English appellate court permitted an Australian reinsurer in liquidation to enforce a judgment entered in Australian insolvency proceedings against a Lloyd’s syndicate, which had elected not to participate in the foreign proceedings. On appeal, the syndicate argued that England’s reciprocity act did not apply to foreign judgments made in insolvency proceedings, and that England’s insolvency act, which recognizes Australian courts, should be interpreted as strictly permitting only Australian choice of law, rather than the enforcement of Australian judgments. The court disagreed on both issues, relying on another English appellate decision (currently on appeal before the Supreme Court of the United Kingdom) that held that England would enforce a foreign insolvency judgment under the reciprocity act, and rejecting the syndicate’s narrow interpretation of the insolvency act. The court considered the respective laws’ legislative history, as well as the interplay between English common law, the reciprocity act, and the insolvent act’s jurisdictional provisions. In re New Cap Reinsurance Corp. Ltd. (In Liquidation), 2011 EWCA Civ 971 (Eng. Ct. App. August 9, 2011).

This post written by Michael Wolgin.

COURT DENIES IN PART, GRANTS IN PART CROSS-MOTIONS TO COMPEL DISCOVERY IN ASBESTOS REINSURANCE DISPUTE

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A federal court recently ruled on cross-motions to compel in the ongoing litigation between Travelers Casualty and Century Indemnity. The dispute arose from Century’s denial of certain payment claims (regarding asbestos losses) under a series of reinsurance contracts covering underwriting years 1969-1974. The court denied Century’s motion to compel coverage dispute documents, finding them irrelevant because the underlying coverage was undisputed. Travelers, however, must provide all non-privileged documentation concerning the evaluation of the reinsurance claims. The court also denied Century’s motion regarding Traveler’s communications with other insurers, finding these irrelevant. The court also ordered the parties to meet and confer in an attempt to reach an agreement regarding the discovery of information related to Century’s reinsurance of other companies that insured the underlying insureds for asbestos liability. Finally, Century was compelled to answer an interrogatory related to its allocation of asbestos losses under the reinsurance treaties. Travelers Casualty & Surety Co. v. Century Indemnity Co., No. 3:10-cv-00400 (USDC D. Conn. Nov. 16, 2011).

This post written by John Black.

HYPERLINKS AND BOILERPLATE LANGUAGE IN EMAILS HELD INSUFFICIENT TO CONFER NOTICE OF CONTRACT TERMS

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A court recently found in a pair of cases that an insurance agent’s receipt of emails containing hyperlinks and boilerplate footers referencing contractual terms, including a forum selection clause, did not provide adequate notice to qualify as a binding agreement. The underlying dispute was filed in federal court between two Lloyd’s syndicates and their insurance agent, Walnut Advisory Corporation, which, in turn, sought indemnification from Miller Insurance Services Limited, the insurance intermediary between Walnut and the syndicates. Miller responded by seeking dismissal on the basis that the business relationship between Walnut and Miller was governed solely by separate agreements providing for jurisdiction in English courts. The court denied Miller’s motions, finding an implied-in-fact contract governed the parties’ relationship and that the terms of the Miller agreements were not part of that contract. The court refused to apply the Miller agreements because (1) there was no evidence Walnut received mailed copies of the agreements; and (2) hyperlinks and email footer references to the agreements in electronic correspondence with Walnut were not “immediately visible” and therefore did not qualify as adequate notice to Walnut to constitute binding terms. The court also found that Miller’s client website, which referenced the Miller agreements in a manner that could qualify as “immediately visible,” was still insufficient notice because Walnut had access to the website only after the business relationship between it and Miller had been established. Liberty Syndicates at Lloyd’s v. Walnut Advisory Corp., Case No. 3:09-cv-01343 (USDC D.N.J. Nov. 16, 2011); Syndicate 1245 at Lloyd’s v. Walnut Advisory Corp., Case No. 3:09-cv-01697 (USDC D.N.J. Nov. 16, 2011).

This post written by Michael Wolgin.

NO APPELLATE JURISDICTION TO REVIEW DECISION VACATING ARBITRATION AWARD FOR EVIDENT PARTIALITY

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William Smythe invested funds with Morgan Keegan & Co, Inc. He brought a FINRA arbitration against Morgan Keegan alleging improper investments. Pursuant to FINRA rules, the parties named potential arbitrators, and Morgan Keegan objected to certain of them, two of whom were appointed to the panel over its objections. The panel found in favor of Smythe, and Morgan Keegan brought an action in Tennessee state court seeking to vacate the award based on the alleged “evident partiality” of two of the arbitrators. The trial court agreed with Morgan Keegan and vacated the award and remanded for a new FINRA arbitration. Smythe appealed. The appellate court lacked jurisdiction to hear the appeal, noting that while the Federal Arbitration Act specifically grants the right to appeal vacatur of an arbitration award, the comparable Tennessee arbitration statute allows for appellate review of vacatur only if unaccompanied by an order to remand for a new arbitration. Morgan Keegan & Co. v. Smythe, No. CH092353 (Tenn. Ct. App. Nov. 14, 2011)

This post written by John Pitblado.