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New reinsurance-related and arbitration developments from Carlton Fields

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Week's Best Posts

ARBITRATION ROUND-UP

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Manifest Disregard:

Zimmerman Ag and Cattle Co. v. Agro National, LLC, No. CV-11-29 (USDC D. Mont. Nov. 7, 2011) (denying motion to vacate, finding “mere error of law” insufficient to satisfy manifest disregard standard).

Rite Aid New Jersey, Inc. v. United Food Commercial Workers Union, Local 1360, No. 10-3558 (3d Cir. Oct. 26, 2011) (affirming denial of motion to vacate award, no manifest disregard).

New York City Dist. Council of Carpenters Pension Fund v. Star Intercom & Construction, Inc., No. 11 Civ. 03015 (USDC S.D.N.Y. Oct. 27, 2011) (granting motion to confirm arbitrator decision of default judgment against respondent, where arbitrator did not “dispense his own brand of justice,” no basis for vacatur).

Activant Solutions, Inc. v. Notoco Industries, LLC, No. C-11-02436 (USDC N.D. Cal. Oct. 26, 2011) (granting petition to confirm, no manifest disregard for arbitrator’s refusal to modify award).

Conflict of Laws:

Southern Pioneer Life Insurance Co. v. Thomas, No. 11-426 (Ark. Nov. 17, 2011) (affirming denial of motion to compel arbitration, holding FAA preempted by McCarran-Ferguson Act vis-à-vis Arkansas statute precluding arbitration of claims under insurance contracts).

Evident Partiality:

In re Wal-Mart Wage and Hour Employment Practices Litigation, No. 2:06-CV-00225-PMP-PAL (USDC D. Nev. Oct. 11, 2011) (granting motion to confirm, finding no “evident partiality” where arbitrator raised ethical issues pertaining to respondent’s counsel).

Patrizzi & Co. Auctioneers SA v. SDG Corp., No. 11-C-3589 (USDC N.D. Ill. Oct. 25, 2011) (granting motion to confirm, no “evident partiality” in allowing one party to submit evidence not on pretrial list and not the other party).

Exceeding Arbitrator’s Authority:

Verve Communications Pvt Ltd. v. Software Int’l, Inc., No. 11-1280 (USDC D.N.J. Nov. 9, 2011) (denying motion to vacate, arbitrator did not exceed authority by closing discovery period over objection and making award).

Choice Hotels Int’l v. Savannah Shakti Corp., No. DKC-11-0438 (USDC D. Md. Oct. 25, 2011) (granting motion for default, arbitrator’s default award on contract claims did not exceed scope of submission).

Class Arbitration:

Southern Communications Services, Inc. v. Thomas, 1:10-CV-2975-AT (USDC N.D. Ga. Nov. 3, 2011) (denying motion to vacate award holding class arbitration allowable, and granting class certification).

Scope of Arbitration:

Shah v. Santander Consumer USA, Inc. d/b/a Drive Financial Services, LP, No. 3:11-CV-00096 (USDC D. Conn. Nov. 16, 2011) (motion to compel arbitration granted, finding statutory claims “collateral matters” that implicate rights created under the contract).

Stay Pending Appeal / Appellate Jurisdiction:

Weingarten Realty Investors v. Miller, No. 11-20676 (5th Cir. Nov. 1, 2011) (affirming district court ruling denying stay of proceedings during pendency of appeal of decision denying motion to compel arbitration).

TransAmerica Life Insurance Co. v. Rapid Settlements, Ltd., No. 01-11-00240-CV (Tex. Ct. App. Nov. 10, 2011) (dismissing appeal for lack of jurisdiction, trial court order regarding offset to previously entered judgment non-appealable).

This post written by John Pitblado.

ENGLISH COURT ORDERS SERVICE OF PROCESS AGAINST OUT-OF-JURISDICTION DEFENDANT IN INSURANCE DISPUTE

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The Queen’s Bench Division of the Commercial Court affirmed an order permitting Faraday Reinsurance Co. to serve process out of the jurisdiction against defendant Howden North America. Howden had argued that service should not be permitted and that the parties’ quarrel should be resolved in litigation pending in Pennsylvania federal court. The underlying dispute relates to coverage for asbestos liabilities under three excess layer policies. The case implicates potential differences between English and American law on loss triggers, i.e., whether exposure to a hazardous substance itself constitutes a loss, or whether loss occurs at the time of manifestation or at some other incremental stage between exposure and manifestation. This determination can be dispositive in cases involving asbestos coverage because mesothelioma, which is caused by asbestos exposure, typically does not manifest for decades. Earlier this year, we reported on a decision by the U.K. Court of Appeals holding that the insurer on the risk at the time of exposure, not manifestation, is responsible for the liability. Faraday Reinsurance Co. v. Howden North America, Inc. [2011] EWHC 2837 (Q.B. Comm. Ct. Nov. 1, 2011).

This post written by Ben Seessel.

HYPERLINKS AND BOILERPLATE LANGUAGE IN EMAILS HELD INSUFFICIENT TO CONFER NOTICE OF CONTRACT TERMS

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A court recently found in a pair of cases that an insurance agent’s receipt of emails containing hyperlinks and boilerplate footers referencing contractual terms, including a forum selection clause, did not provide adequate notice to qualify as a binding agreement. The underlying dispute was filed in federal court between two Lloyd’s syndicates and their insurance agent, Walnut Advisory Corporation, which, in turn, sought indemnification from Miller Insurance Services Limited, the insurance intermediary between Walnut and the syndicates. Miller responded by seeking dismissal on the basis that the business relationship between Walnut and Miller was governed solely by separate agreements providing for jurisdiction in English courts. The court denied Miller’s motions, finding an implied-in-fact contract governed the parties’ relationship and that the terms of the Miller agreements were not part of that contract. The court refused to apply the Miller agreements because (1) there was no evidence Walnut received mailed copies of the agreements; and (2) hyperlinks and email footer references to the agreements in electronic correspondence with Walnut were not “immediately visible” and therefore did not qualify as adequate notice to Walnut to constitute binding terms. The court also found that Miller’s client website, which referenced the Miller agreements in a manner that could qualify as “immediately visible,” was still insufficient notice because Walnut had access to the website only after the business relationship between it and Miller had been established. Liberty Syndicates at Lloyd’s v. Walnut Advisory Corp., Case No. 3:09-cv-01343 (USDC D.N.J. Nov. 16, 2011); Syndicate 1245 at Lloyd’s v. Walnut Advisory Corp., Case No. 3:09-cv-01697 (USDC D.N.J. Nov. 16, 2011).

This post written by Michael Wolgin.

IAIS PUBLISHES PAPER ANALYZING, IN PART, REINSURANCE INDUSTRY

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The International Association of Insurance Supervisors recently published its
2011 report on Insurance and Financial Stability. The paper presented a supervisory perspective on the insurance and reinsurance industry focusing on financial stability issues. Concerning reinsurance, the paper analyzed the nature of the industry itself, its connection to the insurance industry more generally, and the level of inter- and intra-connectedness among companies. Notably, the IAIS concludes that (1) evidence for global systemic risk to arise from reinsurance failures is small to non-existent; (2) the record and stress scenarios tested correspond to the results of a study commissioned by the Group of Thirty; and (3) reinsurers have reduced their exposure to non-insurance credit default swaps. The IAIS stated it will continue to monitor the industry in the future.

This post written by John Black.

COURT DISTINGUISHES CONCEPCION WHERE ARBITRATION OF INDIVIDUAL CLAIMS WAS “INFEASIBLE”

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A state court recently distinguished the U.S. Supreme Court’s Concepcion decision in upholding a prior order that found that arbitration agreements that precluded class arbitration were void as against public policy. A putative consumer class action was brought against Dell Inc. by plaintiffs who had agreed to arbitrate disputes only on an individual basis – and not as a class action. Dell initially prevailed in arbitration, but the appellate court subsequently reversed the award, holding that the agreement barring class arbitration violated state public policy and was unenforceable. After the appellate court issued its ruling, the U.S. Supreme Court decided the Concepcion case, which held the FAA preempts state laws that preclude class action waivers. Arguing that Concepcion rejected the appellate court’s decision in this case, Dell renewed its underlying motion to confirm the arbitration award. The court denied Dell’s motion, distinguishing Concepcion on its facts. Whereas the plaintiffs in Concepcion had sizable individual claims and a favorable procedure in place to arbitrate individual claims, the plaintiffs in this case had small individual claims and no favorable individual claim resolution procedure. State policy against a class waiver prevailed in this case because arbitration of individual claims was “infeasible as a matter of fact” leaving no “federal interest with which the state law might conflict.” Since this rationale arguably is similar to those underlying state law provisions vulnerable under Conception, it will be interesting to see whether this position prevails. Feeney v. Dell, Inc., Case No. MICV 2003-01158 (Mass. Super. Ct. Sept. 30, 2011).

This post written by Michael Wolgin.