• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

  • About
    • Events
  • Articles
    • Treaty Tips
    • Special Focus
    • Market
  • Contact
  • Exclusive Content
    • Blog Staff Picks
    • Cat Risks
    • Regulatory Modernization
    • Webinars
  • Subscribe
You are here: Home / Archives for Week's Best Posts

Week's Best Posts

Tenth and Eleventh Circuits Buck Other Circuits Requiring Higher Showing of Intent to Delegate Class Arbitrability to Arbitrator

September 17, 2018 by Rob DiUbaldo

Within one week of each other, United States Courts of Appeals in two circuits have issued opinions holding that arbitration agreements incorporating the American Arbitration Association (AAA)’s arbitration rules itself demonstrates “clear and unmistakable” evidence of the parties’ intent to delegate the question of arbitrability to the arbitrator, even when the arbitration involves class claims.

In Spirit Airlines, Inc. v. Maizes, No. 17-14415 (11th Cir. Aug. 15, 2018), the Eleventh Circuit applied a prior case to mandate an arbitrator decide the arbitrability of a putative class dispute between members of Spirit Airlines’ so-called “$9 Fare Club” and the airline relating to allegedly broken promises related to the club membership. When the class representatives filed a class arbitration claim against Spirit, the airline sued the class representatives in federal court seeking a declaration that the agreement’s arbitration clause does not permit class arbitration claims. The Eleventh Circuit affirmed the district court’s dismissal for lack of jurisdiction. The decision relied heavily upon a prior circuit decision—Terminix Int’l Co. v. Palmer Ranch Ltd. P’ship—which held that parties’ choice of AAA Commercial Arbitration Rules constituted “clear and unmistakable” evidence they intended to submit the question of arbitrability to the arbitrator. Applying that reasoning to the present dispute, the court held the parties’ choice of AAA rules, including the Supplementary Rules for Class Arbitrations, demonstrated “clear and unmistakable” intent to delegate arbitrability.

In doing so the court rejected Spirit’s request for a higher burden where class arbitrability is concerned, as required in the Third, Fourth, Sixth, and Eighth Circuits. The court found those decisions did not align with its reading of Supreme Court precedent, distinguishing questions of whether an agreement allows class arbitration at all as separate and apart from the issue of who decides that question. Additionally, the court declined to read the arbitration clause’s reference to Florida law as creating ambiguity in the agreement, instead reading the clause to mean that Florida law governs the parties’ substantive rights while AAA rules govern arbitration procedures.

In DISH Network L.L.C. v. Ray, No. 17-1013 (10th Cir. Aug. 21, 2018), the Tenth Circuit applied circuit and Colorado law to conclude the question of class arbitrability rested with the arbitrator in a dispute between DISH Network and a former employee over alleged violations of federal and state employment laws and breach of contract. Originally filed as a putative class action in federal court, the former employee voluntarily dismissed his suit and re-filed the same claims in arbitration as a class action. The Tenth Circuit read the broad language in the parties’ arbitration agreement and the inclusion of AAA rules on employment disputes to display clear and unmistakable intent to arbitrate arbitrability. Like the Eleventh Circuit in Spirit Airlines, the court refused to follow other circuits and require more specific language delegating arbitrability when class arbitration is at issue. Because the court concluded that the parties “clearly and unmistakably” evinced intent to delegate the question of arbitrability to the arbitrator, it was able to sidestep the distinction of whether the arbitration clause permits class-wide arbitration is a gateway issue for courts to decide or a procedural issue for the arbitrator to decide.

The Tenth Circuit also rejected DISH’s petition to vacate based on its contention that the arbitrator manifestly disregarded the law in concluding he was authorized to conduct class arbitration. It noted that the arbitrator conducted an in-depth analysis of the arbitration contract and the court’s review is extremely limited even where it may disagree with the arbitrator’s ultimate conclusion.

This post written by Thaddeus Ewald .

See our disclaimer.

Filed Under: Arbitration Process Issues, Week's Best Posts

Delaware Bankruptcy Court Confirms Restructuring Plan Involving Scottish Re

September 11, 2018 by Michael Wolgin

A Chapter 11 restructuring plan involving various affiliates of Scottish Re, each of which separately declared bankruptcy in different jurisdictions, was recently approved by a bankruptcy court in Delaware. The finalization of the plan depended on coordination among: (1) Scottish Holdings Inc. (“SHI”), (2) Scottish Re: Group, LTD., SHI’s parent company, (3) Scottish Annuity & Life Insurance Co. Ltd. (“SALIC”), an indirect debtor subsidiary, and (4) Scottish Financial Luxembourg (“SFL”), a financing entity. Prior to the approval of the plan, the receiver for SFL, which asserted an unsecured, nonpriority claim against SALIC in the amount of $63,536,041.32 for a debenture assigned from Scottish Re, stipulated with SHI that any potential claims against certain current or former members of the board of managers for SFL would be preserved. The stipulation and the restructuring plan was then approved. In re Scottish Holdings Inc. et al., Case No. 18- 10160 (U.S. Bankr. Ct. Del. Aug. 22, 2018).

This post written by Gail Jankowski.

See our disclaimer.

Filed Under: Reorganization and Liquidation, Week's Best Posts

Eleventh Circuit Reverses Sanction Imposed Against Party That Defaulted in Arbitration to Determine Whether Party Acted in Bad Faith

September 10, 2018 by Michael Wolgin

The Eleventh Circuit reversed a lower court’s entry of a default judgment against Acosta Tractors, Inc., that was based solely on Acosta’s default in the underlying arbitration. Julio Hernandez had filed a claim for unpaid wages against Acosta under the Fair Labor Standards Act, and Acosta compelled arbitration. However, the arbitration did not “proceed as planned,” as the arbitrator refused to consolidate Mr. Hernandez’s case with two similar actions and allowed “extensive discovery,” including 29 depositions, across the three separate arbitrations. Arbitration fees quickly added up to over $100,000, far exceeding the amount of the plaintiffs’ claims. Acosta refused to pay the arbitration fees and sought to return to the trial court. Instead, the trial court entered a default judgment against Acosta, based on its admission that it had refused to pay the costs of the arbitration and the lack of evidence establishing its inability to do so.

On appeal, the Eleventh Circuit vacated the trial court’s ruling. The Eleventh Circuit noted that it was within the lower court’s inherent power to enter a default judgment against Acosta, but held that it was error to do so “solely because a party defaulted in the underlying arbitration.” In order to impose a sanction against a party pursuant to its inherent power, the court “must make a finding that the sanctioned party acted with subjective bad faith.” The case was remanded to the District Court to determine whether the requisite bad faith existed. Hernandez v. Acosta Tractors, Inc., Case Nos. 17-13057; 17-13673 (11th Cir. August 8, 2018).

This post written by Benjamin E. Stearns.

See our disclaimer.

Filed Under: Arbitration Process Issues, Week's Best Posts

Federal Court in Puerto Rico Voids Marine Insurance Policy Based Upon Misrepresentation in Insurance Application

September 5, 2018 by John Pitblado

QBE Seguros brought a successful action declaring a marine insurance policy was void ab initio under the doctrine of uberrimae fidei and the breach of the warranty of truthfulness in the application for insurance.

In Morales’ application for insurance, he did not include the fact that he had previously grounded a 40’ yacht and listed only two of the seven vessels that he had owned and operated when asked. Following an endorsement, Morales held hull insurance for a vessel named Making Waves, which sustained damage as a result of a fire. Thereafter, QBE rescinded the policy.

The Court first looked at uberrimae fidei, or the duty of utmost good faith, which requires the insurer to show that the insured misrepresented a material fact. Having determined Morales misrepresented his prior boating history and prior loss history on his application, the Court looked at whether such misrepresentation was material. “A fact is material if it can possibly influence the mind of a prudent and intelligent insurer in determining whether it will accept the risk.” QBE testified that prior loss history is an important factor to take into consideration when evaluating the risk posed by issuing a particular policy. The Court determined this information was material: “it is entirely logical that an insured’s loss history would affect their premiums and whether an insurance company would want to accept the risk of issuing them a policy.”

The Court then looked at whether the contract between the parties included a warranty of truthfulness, and if so, the insured’s misrepresentation of fact in that contract will also excuse the insurer from the policy contract. The insurance application stated the information provided therein is warranted by the applicant “to be true and correct in all respects.” The Court found the “warranty of truthfulness was material to the risk assumed by QBE in issuing the policy.” The Court rejected Morales’ affirmative defenses, finding that “Morales breached the warranty of truthfulness in the QBE Application and policy by failing to disclose his prior loss history and his prior boating experiences. His breach gives QBE the right to void the policy.”

The Court denied Morales’ counterclaims for breach of contract and consequential damages due to QBE’s bad-faith adjustment.

QBE Seguros v. Morales-Vázquez, No. 15-2091 (USDC D.P.R. Aug 7, 2018)

This post written by Nora A. Valenza-Frost.

See our disclaimer.

Filed Under: Contract Interpretation, Reinsurance Avoidance, Week's Best Posts

Special Focus: Follow the Fortunes Doctrine

September 4, 2018 by John Pitblado

The follow the fortunes (or follow the settlements) doctrine has been an important part of many reinsurance relationships. This Special Focus article focuses on divergent case law as to whether the doctrine is purely a matter of contract, or whether it should be implied into every reinsurance contract, whether or not the contract refers to the doctrine.

This post written by Rollie Goss.
See our disclaimer.

Filed Under: Contract Interpretation, Follow the Fortunes Doctrine, Reinsurance Claims, Special Focus, Week's Best Posts

  • « Go to Previous Page
  • Page 1
  • Interim pages omitted …
  • Page 8
  • Page 9
  • Page 10
  • Page 11
  • Page 12
  • Interim pages omitted …
  • Page 269
  • Go to Next Page »

Primary Sidebar

Carlton Fields Logo

A blog focused on reinsurance and arbitration law and practice by the attorneys of Carlton Fields.

Focused Topics

Hot Topics

Read the results of Artemis’ latest survey of reinsurance market professionals concerning the state of the market and their intentions for 2019.

Recent Updates

Market (1/27/2019)
Articles (1/2/2019)

See our advanced search tips.

Subscribe

If you would like to receive updates to Reinsurance Focus® by email, visit our Subscription page.
© 2008–2025 Carlton Fields, P.A. · Carlton Fields practices law in California as Carlton Fields, LLP · Disclaimers and Conditions of Use

Reinsurance Focus® is a registered service mark of Carlton Fields. All Rights Reserved.

Please send comments and questions to the Reinsurance Focus Administrators

Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please contact us. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites. This site may be considered attorney advertising in some jurisdictions.