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Arbitration / Court Decisions

UK COURT INSISTS ON JURISDICTION OF CANADIAN MUNICIPAL REINSURANCE CONTRACT

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Recently, Ontario Municipal Insurance Exchange applied for an order from the UK Royal Court of Justice dismissing an action against it, arguing that England was not the proper forum for the action brought against it by Stonebridge Underwriting Limited (a Lloyd’s underwriter). The claim arose out of an alleged failure by Stonebridge to pay under a 2001-2002 reinsurance contract. The Judge denied Ontario’s request, finding that the concurrent proceedings initiated by Ontario against JTL Canada (on issues directly related to this case) in Canadian Court did not provide a decisive reason for the UK Court to decline jurisdiction. The Court was mindful of the fact that many of the witnesses and much of the evidence were present in Canada, but that these issues were outweighed by the factors in favor of English jurisdiction. The Court noted that a great deal of London reinsurance relates to risk around the globe, and that often, the UK is still the most appropriate jurisdiction. Stonebridge Underwriting Ltd. v. Ontario Mun. Ins. Exchange, [2010] EWHC 2279 (Queen’s Bench Oct. 9, 2010).

This post written by John Black.

SUPREME COURT DENIES CERTIORARI IN CASE ADDRESSING THE RELATIONSHIP BETWEEN THE MCCARRAN-FERGUSON ACT AND THE NEW YORK CONVENTION

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The United States Supreme Court denied certiorari in the Louisiana Safety Association case on October 5, 2010, leaving standing the en banc Fifth Circuit opinion described in our November 16, 2009 post. The issue was whether the laws of individual states that restrict or prevent the enforcement of an arbitration agreement in insurance agreements prevent the enforcement of such arbitration agreements that are subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”), because the New York Convention is “an Act of Congress” preempted by the McCarran-Ferguson Act. The Fifth Circuit answered the issue in the negative, finding that the New York Convention prevailed over state laws. The Court requested that the Solicitor General submit an amicus brief addressing whether certiorari should be granted. The government submitted an amicus brief which took the position that the opinion below was correct, and that the Supreme Court should deny certiorari. A conflict remains as to this issue with the Second Circuit’s decision in Stephens v. American International Ins. Co., 66 F.3d 41 (2nd Cir. 1995), although the government’s amicus brief took the position that there was an inter-panel conflict on the issue in the Second Circuit, rendering any conflict immature. La. Safety Assn. v. Certain Underwriters, et al., No. 09-945 (US Oct. 4, 2010) (see page 10).

NO MANIFEST DISREGARD OF LAW FOUND IN EMPLOYMENT ARBITRATION DISPUTE

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An order denying a petition to vacate arbitration awards arising out of an oral employment contract dispute, mentioned in our January 20, 2010 post, was affirmed on appeal to the Second Circuit. The arbitrator dismissed the claim as barred by the Statute of Frauds. The appellant-employee sought to establish that the arbitrator manifestly disregarded the law by failing to give any weight to the employer’s oral representations. The Second Circuit found no such manifest disregard, and affirmed the district court’s denial of vacatur. Matthew v. Papua New Guinea, No. 10-0074-CV (2d Cir. Sept. 30, 2010).

This post written by Brian Perryman.

REINSURANCE CLAIM BARRED BY AGREEMENT’S EXPRESS TIME LIMITATIONS

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A reinsured lost its case for reinsurance benefits because the reinsured’s settlement of an underlying claim fell outside the time limits imposed on the reinsurer’s potential liability. Arrowood Surplus Lines Insurance Company filed suit against Westport Insurance Company for amounts purportedly owed under a liability reinsurance agreement and arising from Arrowood’s settlement of a claim under an insurance policy it issued to Equity Residential. The trial court dismissed the complaint for failure to state a claim. Arrowood appealed to the Second Circuit. The appellate court held that, by its terms, the reinsurance agreement provided reinsurance coverage for policies that become effective after the agreement’s inception date of February 1, 1999 with respect to occurrences taking place before the agreement’s termination date of August 18, 2000. Insurance policies issued for multiple years “become effective” on the anniversary of their inception. An optional run-off provision provided further coverage for policies that became effective before the termination date through the anniversary of their inception. The Equity policy was issued on December 15, 1999, and Arrowood elected to maintain run-off coverage thereon through December 15, 2000. The Equity policy dispute involved coverage periods beyond December 15, 2000, so those periods were not covered by the agreement because they fell outside its time limitations. The Second Circuit declined to accept Arrowood’s argument that the agreement’s “follow the fortunes” provision expanded coverage beyond the agreement’s express time limitations. Arrowood Surplus Lines Insurance Co. v. Westport Insurance Co., No. 10-0397-CV (2d Cir. Oct. 8, 2010).

This post written by Brian Perryman.

NEW YORK APPELLATE COURT AFFIRMS ORDER COMPELLING NON-AAA ARBITRATION AND STAYING AAA ARBITRATION

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A New York State appellate court recently affirmed the lower court’s order compelling a non-American Arbitration Association (AAA) arbitration and staying a separate AAA arbitration that was later demanded by the respondent to the original non-AAA arbitration demand. The court based its decision on the fact that the respondent had demanded AAA arbitration nearly four months after service of the petitioner’s demand for the non-AAA arbitration, that the respondent had participated in the petitioner’s non-AAA arbitration by advancing a counterclaim and designating an arbitrator, and that the respondent did not seek a stay of the petitioner’s proceeding. The court agreed with the lower court that the respondent’s tactics were designed to delay the matter and effectively refuse to arbitrate pursuant to the petitioner’s demand. Nachmani v. By Design, LLC, No.04847 (N.Y. Ct. App. Aug. 25, 2010).

This post written by Michael Wolgin.