Arbitration / Court Decisions

COURT AGREES TO STAY REINSURANCE DISPUTE PENDING OUTCOME OF APPEAL IN UNDERLYING COVERAGE CASE

August 6, 2009 by Carlton Fields

A federal district court in Missouri granted the parties’ joint motion to stay their reinsurance dispute, pending the outcome of an appeal taken in an underlying coverage action in which the reinsured, Continental Casualty Company (“CCC”), suffered a $23,072,979 jury verdict against it. The underlying plaintiff, Black & Veatch Construction Company, suffered a loss in the construction of a power plant in Missouri. It sought coverage from its insurer, CCC, in connection with the loss. CCC declined coverage and Black & Veatch sued. CCC has appealed the judgment. The collateral reinsurance dispute between CCC and its alleged Global Builders Risk Facility reinsurance treaty was brought in Missouri federal court by CCC. The parties also moved to stay an identical action filed in the U.K. Commercial Court by the defendant reinsurers. Both joint motions were based on the fact that, if CCC were successful in reversing the underlying judgment against it, it would make much of the remaining dispute between the parties moot. The Court granted the motion on June 8, 2009. Continental Cas. Co. v. AXA Global Risks (UK) Ltd., No. 09-00335 (USDC W.D. Missouri, June 8, 2009).

This post written by John Pitblado.

PLAINTIFFS WITHDRAW APPEAL IN KATRINA-RELATED REINSURANCE DISPUTE

August 5, 2009 by Carlton Fields

The parties in Association Cas. Ins. Co. v. Allstate Ins. Co., have stipulated to dismissal of the plaintiffs’ appeal in a Katrina-related reinsurance dispute. The plaintiffs had appealed the trial court’s order granting the defendants’ motion for directed verdict after eleven days of testimony was heard before a jury. The Plaintiffs, members of a condominium association, brought claims against the condominium board for failing to purchase adequate reinsurance to cover damage to areas of common property. Plaintiffs sustained losses after Hurricane Katrina. The defendants sought a directed verdict, arguing that the plaintiffs did not have standing to sue the board in their individual capacities, since their claims were based on damage to areas of common property in which plaintiffs only had a partial interest. The Court granted the motion. Aegis Security Ins. Co. v. Allstate Ins. Co., No. 2:09-cv-24 (USDC S.D. Miss. March 18, 2009). Plaintiffs appealed shortly thereafter, and the parties have now stipulated to a withdrawal of the appeal. Association Cas. Ins. Co. v. Allstate Ins. Co., No. 09-60299 (5th. Cir., June 5, 2009).

This post written by John Pitblado.

VARIOUS DECISIONS WITH RESPECT TO ARBITRATION AWARDS

August 4, 2009 by Carlton Fields

Arbitration Awards Confirmed:
Dauphin Precision Tool v. United Steelworkers of Am., No. 08-2598 (3d Cir. July 15, 2009) (affirming award, finding that the Appellant had neither made a clear showing of bias nor established a manifest disregard of the law);
Verizon v. Commc’ns Workers of Am., No. 08-7092 (D.D.C. July 10, 2009) (reversing district court order granting summary judgment; upholding the award, concluding that the award draws its essence from the collective bargaining agreement);
Vitarroz Corp. v. G. Willi Food Int’l Ltd, Case No. 05-5363 (USDC D. N.J. June 26, 2009) (confirming the award, finding that the panel did not manifestly disregard the law) (an Amended Order and Final Judgment was later entered in favor of the plaintiffs);
Teamsters Local 945 v. Waste Mgmt., Inc., Case No. 08-3471 (USDC D. N.J. June 18, 2009) (confirming the award as the award draws its essence from the collective bargaining agreement);
Nat’l Union Fire Ins. Co. v. Excel Staffing Servs. Inc., Case No. 08-7249 (USDC S.D.N.Y. June 17, 2009) (confirming an arbitration award);
Franko v. Ameriprise Fin. Servs., Inc., Case No. 09-09 (USDC E.D. Pa. June 11, 2009) (confirming the award; Petitioners failed to establish that the Panel manifestly disregarded the law on several theories);

Award Vacated:
Augusta Capital, LLC v. Reich & Binstock LLP, Case No. 09-0103 (M.D. Tenn. July 10, 2009) (vacating the award, finding that the panel exceeded its powers);

Order Vacated:
Certain Interested Underwriters at Lloyds v. Pinehurst Accident Reins. Group, Case No. 08-2950 (USDC D. N.J. May 20, 2009) (vacating prior order confirming award and remanding award to the arbitrator for clarification as the award was ambiguous) (on a motion for reconsideration, questions were certified to the panel);

Lack Of Jurisdiction:
Azteck Commc’ns v. UPI Commc’ns, Inc., Case No. 09-0690 (USDC S.D. Tex. June 15, 2009) (dismissing the case under Rule 12(b)(1) because no basis for federal subject-matter jurisdiction was identified).

This post written by Dan Crisp.

ARBITRATOR REAPPOINTED TO PANEL AFTER RECOVERING FROM ILLNESS

August 3, 2009 by Carlton Fields

Six months after the Petitioners’ party-appointed arbitrator resigned from the three-person panel due to a cancer diagnosis requiring immediate and intensive treatment, the district court issued an Opinion and Order (the “Order”) applying the Second Circuit’s general rule that, when an arbitrator dies in the middle of a proceeding, the arbitration must commence anew. Unknown to the court and the Respondent, one month prior the Order, the arbitrator attended an arbitration conference, which the Petitioners’ legal counsel also attended. One month after the Order, the Respondent learned that the arbitrator’s health improved and that the arbitrator actively sought employment as an arbitrator. The Respondent subsequently moved for relief from the Order pursuant to Rule 60(b)(2). The district court granted the motion for relief, holding that the Respondent met each of the preconditions to relief from the Order on the basis of the newly discovered evidence of the arbitrator’s recovery. The court then reappointed the arbitrator to the panel, reasoning that the court was permitted to do so because the arbitration agreement was silent as to the procedure to fill a panel vacancy created by the death or resignation of an arbitrator. Ins. Co. of N. Am. v. Pub. Serv. Mut. Ins. Co., Case No. 08-7003 (USDC S.D.N.Y. June 29, 2009).

This post written by Dan Crisp.

UK COURT DENIES REINSTATEMENT COVERAGE FOR SAME CLAIM

July 30, 2009 by Carlton Fields

The UK Commercial Court recently considered the ambit and extent of insurance coverage between Flexsys America LP and XL International Corp. In particular, the court was left to interpret whether a reinstatement provision (which are sometimes found in reinsurance agreements) in the master insurance policy should be made to provide additional coverage for a claim governed by a local policy extended to Flexsys by a company related to XL. In 2006, a Korean company (KKPC) filed a complaint alleging improper and illegal conduct by Flexsys. Flexsys claimed indemnity under a provision in the local policy. Flexsys settled the claim and incurred legal costs of over $2 million. The local policy carriers (who expressly denied liability) settled with Flexsys for the policy limit of $1 million. Flexsys sought recovery of the balance from the master policy insurers (the Defendants) alleging that the “Drop Down Clause” included in the master policy provided “umbrella” coverage that would provide a higher limit of indemnity.

The judge, Lord Tomlinson, rejected Flexsys’ argument, and interpreted the language of the Drop Down Clause to provide for a reinstatement of the local policy for “subsequent claims” and not, as Flexsys asserted, for the same claim. Further, the judge rejected Flexsys’ position that such a low level of coverage ($1M) was commercially unreasonable. The court could not address this question without dramatically altering the scope of the lawsuit to determine the range of commercial considerations necessary for such a decision. Finally, Lord Tomlinson concluded that Flexsys would not be reimbursed for additional legal expenses under the local policy because the claim at issue by the Korean company (product disparagement) was subject to an exclusion under the local policy. Flexsys Am. L.P. v. XL Ins. Co. Ltd., [2009] EWHC 1115 (Comm. Ct. May 20, 2009).

This post written by John Black.