Arbitration / Court Decisions

JUDGE GRANTS MOTION FOR LEAVE TO AMEND COMPLAINT TO INCLUDE ADDITIONAL CLAIMS ARISING OUT OF REINSURANCE CONTRACTS

May 20, 2009 by Carlton Fields

Before a United States Magistrate Judge, TIG Insurance Company (“TIG”) moved for leave to amend its complaint for a second time to include breach of contract claims arising out of two additional reinsurance contracts. The defendants opposed the motion and argued that the two new claims were unrelated to the existing claims and that discovery would be substantially increased. However, the Magistrate Judge granted TIG’s motion, reasoning that courts regularly allow amendments of pleadings to join additional claims under Rule 18(a), even when those claims arise out of different transactions, and that the need for additional discovery is a consequence of almost every amendment of the pleadings, which, by itself, does not constitute sufficient prejudice to preclude the amendment. TIG Ins. Co. v. Century Indemnity Co., Case No. 08-7322 (USDC S.D.N.Y. Apr. 8, 2009).

This post written by Dan Crisp.

NINTH CIRCUIT FINDS THAT THE DISTRICT COURT LACKED JURISDICTION TO CONFIRM ARBITRATION AWARD AGAINST THE UNITED STATES

May 19, 2009 by Carlton Fields

In a proceeding in which the United States declined to participate, an arbitration panel awarded over $93 million to Park Place Associates, Ltd. (“Park Place”) on a breach of contract claim against the United States, which subsequently filed a motion to vacate in district court, which denied the motion to vacate and granted Park Place’s motion to confirm the award. On appeal, the Ninth Circuit first affirmed the denial of the motion to vacate, finding jurisdiction sufficient, since the United States had commenced civil proceedings in the district court by filing a complaint and a motion to vacate, and rejecting United States’ manifest disregard of the law arguments. Next, the court vacated the grant of the motion to confirm, concluding that, in this case where the action is to confirm a contract-based claim against the United States, the Tucker Act, which conditions its waiver on jurisdiction to the Court of Federal Claims, is the only means by which the United States can be said to have waived sovereign immunity, and, thus, the district court lacked jurisdiction to confirm the award. The court then remanded the case to the district court with instructions to dismiss the confirmation action as barred by sovereign immunity. United States v. Park Place Assocs., Ltd., No. 05-56235, No. 05-56312 (9th Cir. Apr. 22, 2009).

This post written by Dan Crisp.

COMMUTATION’S TANGLED WEB UNWOVEN BY APPELLATE COURT

May 18, 2009 by Carlton Fields

An appellate court in Illinois recently concluded that a decades-old commutation agreement between Old Republic Insurance Company and Central National Insurance Company (predecessor in interest to the defendant), was, in fact, not ambiguous, rendering superfluous the trial at which various extrinsic evidence was introduced in support of the parties’ competing interpretations, after the trial court denied summary judgment based on triable ambiguity.

The parties entered into the agreement in 1990, in an effort to mitigate the effects of Central National’s financial difficulties, which had caused it to be placed in rehabilitation by the State of Nebraska. The parties had come to reinsure one another under various reinsurance agreements. However, Central National argued that the commutation agreement was ambiguous, and was not intended to extinguish certain of Old Republic’s obligations to Central National. The appellate court disagreed, finding the language mutually releasing “all liabilities and obligations of the parties to each other under the reinsurance agreements” to mean just that – that all liabilities and obligations flowing both ways were equally extinguished. Old Republic Ins. Co. v. Ace Property & Casualty Ins. Co., 1-07-2668 (Ill. App. Ct. March 24, 2009).

This post written by John Pitblado.

COURT DENIES MOTION TO DISMISS FINDING ALTERNATIVE AVENUE FOR RECOVERY

May 14, 2009 by Carlton Fields

In an action arising out of an alleged failure to honor a reinsurance agreement, defendant reinsurer Carnforth Limited filed a third-party complaint against Mosaic Global Holdings asserting two breach of contract claims and a declaratory judgment claim. According to the third party complaint, Mosaic breached an Intercorporate Agreement and a 2007 Settlement Agreement by “refusing to honor its defense and indemnity obligations to Carnforth for the TIG Reinsurance Claims.” Mosaic subsequently moved to dismiss the third party complaint and to strike Carnforth’s claims for attorneys’ fees. The district court denied the motion to dismiss, citing that under the facts pled by Carnforth, Mosaic may be obligated to indemnify Carnforth for the costs it incurs in the defense of plaintiff TIG’s complaint. Thus, even if Mosaic was not found liable with respect to TIG’s complaint, Carnforth’s third-party complaint still provides an avenue of recovery against Mosaic. Finally, the court denied Mosaic’s motion to strike attorneys’ fees noting that the language of the parties’ Intercorporate Agreement requires Mosaic to indemnify Carnforth “for all sums expended in the defense, settlement and satisfaction of the TIG reinsurance.” Carnforth Ltd. v. Mosaic Global Holdings, Inc., Case No. 08-3618 (USDC N.D. Ill. April 22, 2009).

This post written by John Black.

EFFORTS TO COMPEL ARBITRATION OF COMMUTATION AGREEMENT FAIL

May 13, 2009 by Carlton Fields

A group of reinsurers recently lost both their application for a partial stay of litigation pending arbitration and application to appoint an umpire pursuant to the Federal Arbitration Act. The underlying dispute between the parties concerned a disagreement regarding whether the parties’ commutation agreement covered certain reinsurance contracts purchased from various non-party insurance companies. The plaintiff (CNA) filed an action for a declaratory judgment, alleging that the commutation agreement did not apply to the non-party reinsurance contracts. The reinsurers (collectively, SCOR) argued that the commutation settled and terminated those reinsurance contracts, and that the dispute over one of the reinsurance contracts was already the subject of pending arbitration between the parties. The court declined to order a stay in the case since CNA’s claim – a request for a declaration of rights under the commutation agreement – did not fall within any enforceable agreement to arbitrate. The commutation itself did not include an agreement to arbitrate. The court also declined to appoint an umpire since both the existence of an enforceable arbitration agreement between SCOR and CNA as well as the commutation of one of the reinsurance contracts was disputed. The court observed that appointing an umpire before determining whether the parties are required to arbitrate would be premature. Continental Casualty Co. v. Commercial Risk Re-Ins. Co., Case No. 07-6912 (USDC N.D. Ill. Apr. 16, 2009).

Prior to this ruling, the court had also denied the defendant's Motion to Stay Discovery pending its ruling on the afore-mentioned matters.

This post written by Brian Perryman.