In a non-reinsurance matter involving commerce in Turkey, a District Court has vacated an arbitration award due to a failure by the panel chair to disclose that an affiliate of the chair's employer had an ongoing business relationship with the prospective purchaser of a party to the arbitration. This opinion is notable due to the high standard of disclosure imposed by the Court, which was based upon language in the agreement signed by the parties, the American Arbitration Association's Code of Ethics and the International Bar Association's Guidelines on Conflicts of Interest. The panel chair had contended that the total revenue involved in the relationship was an imperceptible fraction of this employer's revenue. Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., Case No. 05-10540 (U.S.N.Y. June 28, 2006).
Arbitration / Court Decisions
Motion to vacate arbitration award denied due to lack of record
The United States Court of Appeals for the Ninth Circuit, in an unpublished opinion involving a non-insurance matter, affirmed the denial of a motion to vacate an arbitration award, which contended that the arbitrators had exhibited evident partiality or corruption. However, the Court could not evaluate this claim on its merits because there was no transcript of the arbitration proceeding available. Henry v. Standard Automation & Control, 2006 WL 2233390, Case No. 04-16588 (9th Cir. August 24, 2006). Unless whatever is the subject of post-hearing motions is completely encompassed within written submissions to a panel, which will be an atypical occurrence, it is likely that there will be an inadequate record for judicial review if the arbitration hearing is not transcribed. Electing not to have a court reporter attend an arbitration hearing therefore will severely limit a party's post-hearing options, making an arbitration award effectively not subject to even the limited “judicial review” provided for in the Federal Arbitration Act.
Court of Appeal affirms summary judgment in favor of Lloyd’s against Name
The United States Court of Appeals for the District of Columbia Circuit has affirmed a summary judgment in favor of the Society of Lloyd's, enforcing an English judgment against a Lloyd's Name who refused to sign on with and pay reinsurance premium to Equitas. Society of Lloyd's v. Siemon-Netto, Case no. 04-7214 (D.C. Cir. August 8, 2006). At oral argument, the Names made it clear that “the underlying basis of their defense is their belief that the English courts have a 'bias and prejudice in favor of Lloyd's under circumstances which make it impossible for a Name to win.'” Under the Uniform Foreign Money Judgments Recognition Act, a foreign judgment may not be enforced if it was “rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” The Names did not go so far as to seek the application of this principle, but the Court noted that if they had attempted to do so, they would have failed. The only evidence of “bias and prejudice” was that other Names who had advanced the same position as Appellants had lost their cases, and the mere fact that they had lost did not establish improper partiality. Indeed, the Court noted that “the fact that Names have lost similar (albeit not identical) cases in eight United States Courts of Appeals … would require us to reach the same conclusion regarding American courts.” With that closing statement, the Court affirmed the District Court's ruling. Carlton Fields represented the Society of Lloyd's in this case.
Court of Appeal affirms summary judgment in favor of Lloyd's against Name
The United States Court of Appeals for the District of Columbia Circuit has affirmed a summary judgment in favor of the Society of Lloyd's, enforcing an English judgment against a Lloyd's Name who refused to sign on with and pay reinsurance premium to Equitas. Society of Lloyd's v. Siemon-Netto, Case no. 04-7214 (D.C. Cir. August 8, 2006). At oral argument, the Names made it clear that “the underlying basis of their defense is their belief that the English courts have a 'bias and prejudice in favor of Lloyd's under circumstances which make it impossible for a Name to win.'” Under the Uniform Foreign Money Judgments Recognition Act, a foreign judgment may not be enforced if it was “rendered under a system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” The Names did not go so far as to seek the application of this principle, but the Court noted that if they had attempted to do so, they would have failed. The only evidence of “bias and prejudice” was that other Names who had advanced the same position as Appellants had lost their cases, and the mere fact that they had lost did not establish improper partiality. Indeed, the Court noted that “the fact that Names have lost similar (albeit not identical) cases in eight United States Courts of Appeals … would require us to reach the same conclusion regarding American courts.” With that closing statement, the Court affirmed the District Court's ruling. Carlton Fields represented the Society of Lloyd's in this case.
Court applies the follow the settlements doctrine to business interruption claim
The follow the settlements doctrine has been applied to business interruption and property damage claims filed by the owner of Universal Studios theme park in Florida, arising out of Hurricane Floyd. The Court granted summary judgment to the reinsured, finding that the reinsurer had not proven that the claims were paid in bad faith or that the claims were not reasonably within the terms of the underlying policy. Houston Casualty Co. v. Lexington Insurance Co., Case No. 05-1804 (USDC SD Tex. June 15, 2006). Two facts were of particular interest: (1) the hurricane changed course, and did not actually hit the park, making actual physical damage attributable to the storm fairly minimal; and (2) although the park was only closed for a single day, the business interruption claim extended over several more days.