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New reinsurance-related and arbitration developments from Carlton Fields

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Arbitration / Court Decisions

PRINCETON INSURANCE AND COVERIUM RE SETTLE

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In what may be the final development in the ongoing saga between Princeton Insurance and Coverium Reinsurance, the parties agreed to settle their lawsuit in its entirety. The court dismissed the action without prejudice to reopen if the settlement between the parties is not consummated. The dispute had centered on liability limit of an employers’ liability reinsurance agreement. Please see our prior posts on April 7, 2008, August 6, 2008, and September 21, 2009 for more detail. Princeton Insurance Company v. Coverium Reinsurance (NA), Inc., No. 06-599 (USDC D.N.J. Sept. 14, 2011).

This post written by John Black.

COURT CONSIDERS PRIVILEGE ASSERTIONS IN DISPUTE INVOLVING ASBESTOS TRUST, EXCESS LIABILITY INSURER, AND REINSURANCE

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In a suit between a bankruptcy trust established to resolve a defunct corporation’s asbestos-related personal injury liabilities and the corporation’s excess liability insurer that had denied coverage to the trust in connection with the asbestos claims, a court resolved various attorney client privilege and work product protection issues. The insurer had sought various documents related to the handling of the underlying asbestos claims by the trust, among others. Many of these documents included communications between counsel and the corporation or between counsel and the bankruptcy creditors’ committee. No privilege existed over documents addressing the handling of the underlying asbestos claims because (1) a common interest exists between the trust and the insurer related to the asbestos claims, and (2) the trust had a duty to cooperate with the insurer based on the primary policy. In contrast, the court held the privilege did exist for a number of documents related to the reinsurance procured by the insurer. Whereas the insurer’s discovery requests were related to the handling of the asbestos claims, the trust’s requests were for the purpose of learning the insurer’s “admissions regarding the matter in dispute.” The court also found a common interest existed between the insurer and its reinsurer regarding the trust’s claims, such that any communications with counsel that may have been shared by the insurer with its reinsurer would not be considered a waiver of privilege. ARTRA 524(g) Asbestos Trust v. Transport Insurance Co., Case No. 09-458 (N.D. Ill. Sept. 28, 2011).

This post written by Michael Wolgin.

COURT REFUSES TO COMPEL ARBITRATION ABSENT SUFFICIENT PROOF THAT PLAINTIFF WAS BOUND BY ARBITRATION CLAUSE

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Plaintiff brought a putative class action lawsuit alleging violations of the Telephone Consumer Protection Act of 1991. Plaintiff claimed that she received numerous debt collection calls to her cell phone, notwithstanding that she never owned a credit card issued by Citibank. Citibank moved to compel arbitration, arguing that plaintiff held a ConocoPhilips branded credit card it had issued and that plaintiff’s written card agreement contained a governing arbitration clause. The court denied Citibank’s motion to compel, holding that Citibank had produced only representative samples of card agreements in support of its motion, and insufficient information to link such a card agreement to an account held by plaintiff. Gonzalez v. Citigroup, Inc., Case No. 2:11-00795 (USDC E.D. Cal. Sept. 19, 2011).

This post written by Ben Seessel.

COURT ALLOWS DISCOVERY OF ARBITRATOR FOR VACATUR CLAIM BASED ON EVIDENT PARTIALITY

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Chartis insured Lasalle Bank under certain surplus lines policies covering Lasalle’s business trusts. The insurance policies contained mandatory arbitration agreements. After a dispute arose between the parties, Chartis initiated a tripartite arbitration through the AAA as per the agreement. The arbitration entailed more than sixty (60) days of evidentiary hearings, which concluded on September 22, 2010. During the pendency of the arbitration, Chartis discovered that Charles Ennis, one of the three agreed-upon arbitrators, had concealed a past adversarial relationship with Chartis affiliates, and requested his removal through the AAA. After reviewing supplemental disclosures by Ennis, the AAA rejected Chartis’ request and the arbitration was concluded. The panel thereafter issued an award, and the parties and arbitrators entered into a Confidentiality Order. Chartis immediately filed an action in court to vacate the award, based in part on Ennis’ purported “evident partiality.” Chartis moved to seal the award pursuant to the Confidentiality Order, and also moved for permission to seek limited discovery on Ennis’ prior adversarial relationship with the Chartis affiliates. The court denied the motion to seal, but allowed Chartis the opportunity to redact specified portions of the award. The Court granted Chartis’ motion for discovery of Ennis’s past adversarial relationship to Chartis affiliates. Chartis Specialty Ins. Co. v. Lasalle Bank, N.A., C.A. No. 6103-VCN (Del. Ch. July 29, 2011).

This post written by John Pitblado.

STATE COURT INTERVENES TO FACILITATE SELECTION OF NEUTRAL ARBITRATOR

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Arrowood Indemnity Co. filed suit in state court, complaining that Clearwater Insurance Co. failed to name three neutral umpire candidates in accordance with the parties’ arbitration agreement. Arrowood asked the court to issue orders facilitating the designation of a neutral arbitrator. Clearwater moved to dismiss, arguing that the court lacked subject matter jurisdiction because the FAA, which undisputedly governed, does not allow for pre-award challenges to an arbitration panel. The court denied Clearwater’s motion, holding that the FAA does not preclude state court involvement in procedural pre-arbitration matters and that it should intervene to facilitate the selection of a neutral arbitrator to protect the integrity of the arbitration process. To court directed the parties to schedule an evidentiary hearing where Clearwater could make challenges to a slate of neutral arbitrators proposed by Arrowood. Arrowood Indem. Co. v. Clearwater Ins. Co., Case No. 11-6018055-S (Conn. Super. Ct. July 26, 2011).

This post written by Ben Seessel.