The terms of a risk transfer contract may determine whether it is insurance or reinsurance. In a Treaty Tip, we discuss a recent case which had a somewhat surprising result.
This post written by Rollie Goss.
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FEDERAL COURT HAS SUBJECT-MATTER JURISDICTION TO DECIDE PETITION TO COMPEL; DETERMINES PARTY DID NOT WAIVE ARBITRATION BY AGREEING TO MEDIATION
Despite a pending motion to compel arbitration in state court, a party (MetLife) petitioned a Tennessee district court under the Federal Arbitration Act for the same relief. As that Act itself does not create federal-question jurisdiction, the court sua sponte looked to the citizenship of the parties and the amount in controversy. Finding both requirements met, and declining to invoke the doctrine of abstention as the respondent requested, the court determined the merits of the parties’ claims. Applying federal law, the court looked at the contract created by the parties’ exchange of emails while the issue of arbitrability was pending before the state court. The pertinent email from MetLife stated that it was agreeable to mediating within 90 days of the state court’s ruling on the arbitration issue. In the Sixth Circuit, a party waives a contractual right to arbitrate by “(1) taking actions that are completely inconsistent with any reliance on the arbitration agreement; and (2) delaying its assertion to such an extent that the opposing party incurs actual prejudice.” MetLife merely expressed its openness to mediation. The respondent also challenged the validity of the arbitration provisions themselves, characterizing them as unenforceable contracts of adhesion, which the court could determine under the Federal Arbitration Act. As the parties agreed that New York law governed the arbitration provisions, the court looked at the elements of adhesion and determined the account application the respondent signed contained enforceable and valid arbitration provisions. As to the account applications respondent directed her MetLife representative to sign, the court reserved a ruling on the issue of agency. Metlife Securities, Inc. v. Holt, Case No. 2:16-cv-32 (USDC E.D. Tenn. July 21, 2016).
This post written by Nora A. Valenza-Frost.
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FEDERAL COURT GRANTS CEDENTS’ REQUEST FOR EXPEDITED DISCOVERY IN REINSURANCE DISPUTE
A federal court in Georgia recently granted the plaintiffs-cedents’ motion for leave to conduct certain expedited discovery from their reinsurer, holding that the potential prejudice to the cedents if discovery is not allowed outweighs the prejudice to the reinsurer.
Canal Insurance Company and Canal Indemnity Company brought suit alleging that Golden Isles Reinsurance Company fraudulent transferred amounts due Canal under two reinsurance agreements. Golden Isle and certain individual defendants moved to dismiss in lieu of answering Canal’s complaint. While that motion was pending, Canal sought limited discovery from Golden Isles related to certain bank transfers it made to the various individual defendants. Defendants opposed on the grounds that such discovery was premature, given that their motion to dismiss was pending and no answer had been filed. Notwithstanding that, the United States District Court for the Northern District of Atlanta granted Canal’s motion for leave to conduct limited discovery, finding that their need for pre-answer discovery “outweighs the prejudice” to Golden Isles, warranting a deviation from the applicable local rules of procedure which conditioned discovery upon the filing of an answer. While the expedited discovery sought would not unduly burden or prejudice Golden Isles, the delay might impact Canal’s substantive claims. Canal Insurance Co. v. Golden Isles Reinsurance Co., Case No. 15-cv-3331 (USDC N.D. Ga. July 22, 2016).
This post written by Rob DiUbaldo.
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SECOND CIRCUIT UPHOLDS CONFIRMATION OF MEXICAN ARBITRATION AWARD AND DENIAL OF COMITY TO A CONTRARY MEXICAN JUDGMENT
On December 12, 2013, we reported on a United States District Court’s confirmation of a roughly $400 million Mexican arbitration award entered against an oil company affiliated with the Mexican government, notwithstanding that a Mexican court had subsequently nullified the award based on a subsequent change in Mexican law governing arbitration. The U.S. court had held that the Mexican judgment “violated basic notions of justice in that it applied a law that was not in existence at the time the parties contract was formed and left [the party in arbitration] without an apparent ability to litigate its claims.” The case was then appealed to the Second Circuit.
The Second Circuit has determined that the trial court did not violate the Panama Convention on enforcement of foreign judgments when the trial court refused to afford comity to the Mexican judgment. The Mexican judgment, the Second Circuit explained, amounted to a taking of property by the government without compensation and for the sole benefit of the government; i.e., if the action were to be enforced in the United States, it would be an unconstitutional taking. The Second Circuit, for these and other reasons, thus upheld the original confirmation of the arbitration award that pre-dated the change in Mexican law. The court concluded that “in the rare circumstances of this case,” the trial court “did not abuse its discretion by confirming the arbitral award at issue because to do otherwise would undermine public confidence in laws and diminish rights of personal liberty and property.” Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex‐Exploración Y Producción, Case No. 13-4022 (2d Cir. Aug. 2, 2016).
This post written by Joshua S. Wirth.
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FINAL JUDGMENT ENTERED AND NOTICE OF APPEAL FILED IN LONGSTANDING REINSURANCE DISPUTE
In the ongoing reinsurance dispute between cedent Utica Mutual Insurance Company and reinsurer Clearwater Insurance Company, about which we most recently posted on February 9, 2016, two developments occurred on July 14, 2016. First, the district court entered final judgment and resolved the dispute between the parties regarding the calculation of nearly $1 million in prejudgment interest on the multiple billings for reinsurance made by Utica to Clearwater. And second, the Utica filed a notice of appeal to the Second Circuit from various prior rulings to the extent those rulings imposed a cap on the amount that it is entitled to recover. Utica Mutual Insurance Co. v. Clearwater Insurance Co., Case No. 6:13-cv-01178 (USDC N.D.N.Y. July 14, 2016) (Summary Order & Notice of Appeal).
This post written by Michael Wolgin.
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