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Arbitration / Court Decisions

COURT ORDERS PLAINTIFF TO PRODUCE CLAIMS FILES AND REINSURANCE POLICIES

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Plaintiff Clarendon National Insurance Company (“Clarendon”) sued Atlantic Risk Management, Inc. (“Atlantic”), its third party claims administrator (“TPA”), based in part on its contention that it consistently relied on Atlantic’s coverage recommendations to its detriment. The trial court denied Atlantic’s motions to compel production of Clarendon’s claim files and copies of its reinsurance policies. The Appellate Division reversed, ordering Clarendon to produce all of its claims files for which Atlantic served as TPA, as well as copies of its reinsurance policies. The Court held that the claims files were relevant to plaintiff’s claims handling practices at issue, and that the reinsurance policies are required to be disclosed under New York’s procedural rule requiring production of all insurance policies which potentially cover the subject liability. Clarendon Nat’l Ins. Co. v. Atlantic Risk Mgmt. Inc., Nos. 5303N, 5303NA, 5303NB and 5303NC (N.Y. App. Div. Feb. 19, 2009).

This post written by John Pitblado.

APPELLATE COURT AFFIRMS DISMISSAL OF CEDENT’S LEGAL MALPRACTICE AND BREACH OF FIDUCIARY DUTY CLAIMS

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A California appellate court recently affirmed the dismissal of a cedent’s legal malpractice and breach of fiduciary duty claims pursuant to California's one-year statute of limitations. This dispute involved the legal representation of the cedent insurer with regard to the coverage of a claim tendered to the insurer by one of its insureds. In affirming the dismissal, the court found that the insurer sustained “actual injury” more than one year prior to bringing suit. The statute of limitations was not tolled because representation of the cedent ended more than one year prior to bringing the suit, and the claim for breach of fiduciary duty is also governed by the one-year statute of limitations. Norcal Mut. Ins. Co. v. Sedgwick, Detert, Moran & Arnold, Case No. B203357 (Cal. Ct. App. Mar. 19, 2009).

This post written by Daniel Crisp.

SECOND CIRCUIT’S FINDING THAT PLAINTIFF WAIVED THE RIGHT TO ARBITRATE IS BINDING ON THE DISTRICT COURT

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After Interdigital, Inc. (“Interdigital”) brought two suits against Nokia Corporation (“Nokia”) for patent infringement before the International Trade Commission and in the District of Delaware, Nokia petitioned the Southern District of New York for injunctive and declaratory relief and to compel arbitration pursuant to an arbitration clause contained in two contracts that allegedly licensed the patents to Nokia. The New York district court granted Nokia’s requested injunctive relief prohibiting Interdigital from proceeding against Nokia prior to the completion of arbitration proceedings and issued an order compelling arbitration, but the Second Circuit reversed the injunction and order compelling arbitration, concluding that Nokia waived its right to arbitrate its license claim through prior litigation and remanded the case to the district court. Upon remand, the district court stated that the Second Circuit’s finding that Nokia had waived its right to arbitrate is binding on the court and dismissed with prejudice the counts for injunctive relief and an order to compel arbitration. In regards to the requested declaratory relief that Nokia and its affiliates are licensed to the asserted patents, the court concluded that Nokia’s claim was a compulsory counterclaim and, thus, dismissed the third claim deferring to the earlier-filed action in the District of Delaware for the resolution of the claims. Nokia Corp. v. Interdigital, Inc., Case No. 08-1507 (USDC S.D.N.Y. Mar. 5, 2009).

This post written by Dan Crisp.

FEDERAL COURT STRIKES AIG’S DEFENSES AND DISMISSES SOME OF ITS THIRD PARTY CLAIMS IN ACTION BROUGHT BY NATIONAL WORKERS COMPENSATION REINSURANCE POOL

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As reported in our post on March 27, 2008, The National Council on Compensation Insurance, Inc. (“NCCI”), as attorney-in-fact for participating companies of the National Workers Compensation Reinsurance Pool (collectively “The Pool”) sued AIG and certain of its subsidiaries for allegedly engaging in a fraudulent scheme to avoid paying their proportionate share of the insurance costs in the residual market for workers compensation insurance.

AIG asserted a number of special defenses and counterclaims to NCCI’s complaint, and asserted third-party claims against certain members of the Pool. The defenses and claims were all generally based on the theory that various Pool members engaged in a premium accounting methodology similar to that utilized by AIG and found by the New York Attorney General to have been unlawful in various respects in its investigation of AIG. NCCI moved to strike the special defenses, and moved to dismiss the counterclaims. Affected members of the Pool moved to dismiss the third-party claims. The Court granted NCCI’s motion to strike each of the special defenses, but denied its motion to dismiss the counterclaims, finding that NCCI is itself a party, and not merely a representative of Pool members. The Court granted in part and denied in part the Pool members’ motion to dismiss, allowing AIG to maintain claims for breach of fiduciary duty, fraud, and unjust enrichment against specified Pool members. The Court held that New York law applies to these common law claims. National Council on Compensation Ins., Inc. v. American International Group, Inc., Case No. 07-2898 (USDC N.D.Ill. Feb. 23, 2009).

This post written by John Pitblado.

ARBITRATION AWARD WITHOUT A HEARING? COURT SAYS: FUNDAMENTALLY UNFAIR

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A labor arbitration award was recently vacated in an action involving a dispute between Murphy Oil and United Steelworkers AFL-CIO regarding post-Katrina restoration of an oil facility. Because a key Union witness was prevented from attending the hearing due to health concerns, the parties entered into an agreement that if the arbitrator ruled against Murphy’s, the arbitrator would convene an evidentiary hearing. Following the conference and briefing by both parties, the arbitrator issued an award in favor of the Union. Murphy sought to vacate the award, and the Union sought to enforce the award. Noting the extreme deference paid to arbitration rulings, the court determined that the arbitrator’s failure to convene an evidentiary hearing as per the parties’ agreement was fundamentally unfair, vacated the award and remanded the matter to the arbitrator. Murphy then filed a Motion to Amend asking the court to direct the parties to select a new arbitrator, as the original failed to retain and no longer had jurisdiction. The motion is pending. Murphy Oil USA, Inc. v. United Steel Workers AFL-CIO Local 8363, Case No. 08-3899, (USDC E.D. La. Mar. 4, 2009).

This post written by John Black.