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Arbitration / Court Decisions

COURT ORDERS ‘UNSEALING’ OF DOCUMENTS DESPITE POSSIBLE CONFIDENTIALITY AGREEMENT IN UNDERLYING ARBITRATION

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This action arose out of an arbitration proceeding between petitioner, Nationwide Mutual Insurance Company (“Nationwide”), and Respondent R&Q Reinsurance Company (“R&Q”). The arbitration was resolved in Nationwide’s favor and Nationwide filed a petition to enforce the arbitration award. Shortly afterwards, R&Q filed a motion for leave to file a motion for summary judgment under seal. Nationwide objected to the filing of the motion under seal on the grounds that a confidentiality order was never in effect during the arbitration, and in the alternative, R&Q waived compliance with the order by filing documents in the court given the presumption that all documents filed in court will be open to the public.

The court found the latter argument dispositive, concluding that “the public interest in access to court records outweighs any prejudice to R&Q from unsealing its filing.” This decision illustrates the importance of properly documenting and implementing any desired confidentiality restriction. Nationwide Mutual Ins. Co. v. Randall & Quilter Reinsurance Co., Case No. 2:07-cv-0120 (S.D. Ohio Aug. 10, 2007).

CONTINGENT COMMISSION PUTATIVE CLASS ACTION FILED AGAINST LLOYD’S SYNDICATES AND BROKERS

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A putative class action case has been filed in United States District Court in Miami against a number of Lloyd's syndicates, three Marsh entities, two Aon entities and two Willis entities, alleging wrongful conduct in the payment of undisclosed contingent commissions and undisclosed conflicts of interest in the placement of insurance. The Complaint alleges federal and state antitrust, federal RICO, fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, civil conspiracy, and unjust enrichment claims. The case was filed by a group of law firms, some of which have significant experience as class counsel in insurance sales practice cases. Although reinsurance is not specifically mentioned, and the coverages at issue are direct writings, this may be of interest since it challenges practices in placements with Lloyd's syndicates. Lincoln Adventures, LLC v. Those Certain Underwriters at Lloyd's, London, Case No. 07-60991 (USDC S.D. Fla. July 13, 2007).

CONTINGENT COMMISSION PUTATIVE CLASS ACTION FILED AGAINST LLOYD'S SYNDICATES AND BROKERS

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A putative class action case has been filed in United States District Court in Miami against a number of Lloyd's syndicates, three Marsh entities, two Aon entities and two Willis entities, alleging wrongful conduct in the payment of undisclosed contingent commissions and undisclosed conflicts of interest in the placement of insurance. The Complaint alleges federal and state antitrust, federal RICO, fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, civil conspiracy, and unjust enrichment claims. The case was filed by a group of law firms, some of which have significant experience as class counsel in insurance sales practice cases. Although reinsurance is not specifically mentioned, and the coverages at issue are direct writings, this may be of interest since it challenges practices in placements with Lloyd's syndicates. Lincoln Adventures, LLC v. Those Certain Underwriters at Lloyd's, London, Case No. 07-60991 (USDC S.D. Fla. July 13, 2007).

RIGHT TO ARBITRATION SURVIVES TERMINATION OF UNDERLYING AGREEMENT

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In 1997, DDT Trucking of North America (“DDT NA”) entered into a distributorship agreement with DDT Holding’s predecessor. That agreement contained an arbitration agreement and stated that if DDT Holdings was sold, it should simultaneously terminate the distributorship agreement and compensate DDT NA. In 1999, the parties terminated the agreement. A dispute arose as to whether this nullified the agreement, such that DDT Holdings did not have to provide any compensation to DDT NA and as to whether this nullified the agreement to arbitrate. Relying on Section 7 of the Arbitration Act of 1996 as well as English precedent, Justice Cooke concluded that the right to compensation and arbitration does not end when the underlying contract is terminated. DDT Trucks of North America Ltd. and DDT Holdings Ltd., [2007] EWHC 1542 [Comm], Eng. Comm., QBD (June 29, 2007).

CREDITOR’S BREACH OF CONTRACT CLAIM BARRED BY FAILURE TO FILE CLAIM IN SEPARATE LIQUIDATION PROCEEDING

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Plaintiff, Propak Loigistics, insured workers' compensation risks with Clarendon National Insurance Company, which reinsured the risks with Defendant, Foundation Insurance Company. Foundation entered into a risk sharing agreement directly with Propak, which was essentially an experience rating agreement. Foundation was placed in liquidation. Clarendon filed a timely claim in the liquidation estate, but Propak did not. The liquidation court entered an order distributing the remaining assets of Foundation to Clarendon. Because Propak failed to file notice of its claims under the Liquidation Order, the court held that it was barred from obtaining relief, noting that under South Carolina law, “the failure of a potential creditor to submit a claim in the liquidation estate, or have an ancillary estate opened in a reciprocal state, is conclusive as to that creditor’s rights.” Propak Logistics v. Foundation Ins. Co., No. 04-2178 (W.D.Ark., August 8, 2007).