Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT HOLDS INSURED’S REQUESTS FOR RESERVE DOCUMENTS DISCOVERABLE

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A North Carolina magistrate judge recently denied an insurer’s motion for a protective order in a suit seeking a declaration that American Home Assurance (American Home) owes PCS Phosphate Co. Inc. (PCS) a duty to defend and a duty to indemnify in two underlying environmental contamination suits. In the coverage suit, the magistrate judge denied American Home’s protective order regarding American Home’s reserves because the request fell “within the scope of permissible discovery based upon claims asserted in this matter.” This fact was true, according to the magistrate judge, because PCS had asserted bad faith and breach of contract claims, while American Home asserted a late notice defense. In such an instance, reserve information is relevant and discoverable. Further, the magistrate held that requests regarding claims handling manuals, record retention, underwriting documents, and promotional materials are all relevant and discoverable.  PCS Phosphate Co., Inc. v. American Home Assurance Co., No. 5:14-CV-99-D (USDC E.D. N.C. Dec. 10, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.
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ELEVENTH CIRCUIT CONCLUDES IT LACKS JURISDICTION OVER APPEAL OF ORDER COMPELLING ARBITRATION BUT CONFIRMS ORDER CONFIRMING ARBITRATION AWARD

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This appeal is from two orders by a district court in Alabama. The first order in June 2012 compelled arbitration of a dispute between the parties, the Union and Wise Alloys.  The second order in December 2014 enforced the resulting arbitration award in the Union’s favor, but denied the Union’s request for attorneys’ fees.  Wise Alloys appealed both the June 2012 and December 2014 orders, and the Union appealed the aspect of the December 2014 which denied its motion for attorneys’ fees.  The procedural history and issues involved in the underlying case can be found here.

The Eleventh Circuit held that it lacked jurisdiction over the appeal of the June 2012 order which compelled arbitration because no notice of appeal was filed within 30 days of that order. The Court noted that the June 2012 order was a final decision and was appealable, and the fact that the order stayed the litigation (and did not dismiss it) did not impact the finality of the order compelling arbitration.  Thus, because Wise Alloys did not file its notice of appeal within 30 days of the order, the Court had no jurisdiction over that aspect of the appeal.

With respect to Wise Alloys’ appeal of the December 2014 order and its challenge to the arbitration award based on its view that the arbitrator exceeded his authority, the Eleventh Circuit noted that its judicial review of arbitration awards is limited and that it specifically reviews a labor arbitration award for “whether [it] is irrational, whether it fails to draw its essence from the collective bargaining agreement or whether it exceeds the scope of the arbitrator’s authority.” Thus, under this standard, the Eleventh Circuit agreed with the district court that the arbitrator’s interpretation of the agreement, even if incorrect, was not an impermissible amendment or change to the agreement.  It also held that the arbitrator was permitted to resort to extrinsic evidence to interpret an ambiguity he concluded was in the agreement.  Accordingly, the Court affirmed the district court’s December 2014 order, confirming the arbitration award.  In addition, it also confirmed the portion of the order denying the Union’s request for attorneys’ fees.  United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Int’l Union, et al. v. Wise Alloys, LLC, No. 14-15744 (11th Cir. Dec. 8, 2015).

This post written by Jeanne Kohler.
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COURT HOLDS THAT SERVICE-OF-SUIT CLAUSE WAIVES RIGHT TO SEEK REMOVAL

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The Northern District of Illinois recently granted a motion to remand filed by an insolvent insurer’s assignee because the removal contravened the forum-selection clauses of the reinsurance agreements at issue. Pine Top Receivables of Illinois LLC (PTRIL) sued Transfercom Ltd. (Transfercom) in Illinois state court for breach of contract and certain state law claims. Pine Top Insurance Company’s rights to certain accounts receivable due from reinsurers were assigned to PTRIL when the insurer became insolvent. Transfercom was one of the reinsurers that was indebted to Pine Top Insurance Company.

Transfercom removed the case to the U.S. District Court for the Northern District of Illinois, and PTRIL filed a motion to remand. PTRIL argued, and the court agreed, that the reinsurance agreements contained an agreed-upon clause to accept plaintiff’s choice of forum. The court noted that this clause meant that Transfercom agreed to “submit to the jurisdiction of any Court of competent jurisdiction within the United States.” Further, the court held that “[t]his clause’s ‘plain and ordinary meaning’ constitutes a ‘clear and unequivocal’ waiver of Transfercom’s removal rights.” As a freely negotiated forum selection clause, the court held, the parties must be bound by it.  Pine Top Receivables of Illinois, LLC. v. Transfercom, Ltd., No. 15-CV-8908 (USDC N.D. Ill. Dec. 14, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.
See our disclaimer.

COURT DENIES RECONSIDERATION OF ORDER STAYING ACTION TO COMPEL ARBITRATION

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A federal district court refused to reconsider its order staying Allstate’s action to compel arbitration against its insured, A.O. Smith. The case involved a Settlement/Coverage-in Place Agreement between A.O. Smith and Allstate regarding coverage for asbestos liability. Continental Casualty Company, another insurer for A.O. Smith, filed an action in Wisconsin state court against both A.O. Smith and Allstate arguing that the Agreement impermissibly limited its subrogation and contribution rights against Allstate. When Allstate and A.O. Smith asserted their defenses in the Wisconsin action, a dispute emerged between them as to the nature of the Agreement. Allstate attempted to compel arbitration against A.O. Smith in federal court and to stay the Wisconsin litigation pending the outcome of the arbitration. The federal court, however, refused to compel arbitration and instead stayed its own proceedings, in deference to the Wisconsin court’s determination of a pending motion for summary judgment that could impact arbitrability. In denying reconsideration of that ruling, the court explained that its stay was warranted because the Wisconsin litigation was further along, the Wisconsin court was “currently in a more informed position from which to address the issue of arbitrability, and a stay [was therefore] warranted on that basis.” Allstate Insurance Co. v. A.O. Smith Corp., Case No. 1:15-cv-06574 (USDC N.D. Ill. Dec. 11, 2015).

This post written by Barry Weissman.

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COURT CONFIRMS FINAL ARBITRATION AWARD IN REINSURANCE DISPUTE

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Certain Underwriters at Lloyd’s of London petitioned the U.S. District Court for the District of Massachusetts to confirm an award issued by a three-member panel in an arbitration against Transport Insurance Company. The arbitration involved aggregation and allocation disputes related to certain billings submitted by Transport to Underwriters under various excess of loss reinsurance treaties. In 2014, the panel issued an interim award that imposed prospective obligations on the parties. Thereafter, a dispute arose between them regarding a revised billing submitted by Transport, resulting in the issuance of a final award that incorporated the panel’s interim ruling by reference. Underwriters moved to confirm under Section 9 of the Federal Arbitration Act, and, specifically, Chapter 2 of that Act, 9 U.S.C. §§ 201-208, which provides for enforcement of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (and applied, as the arbitration involved UK syndicates). The District Court granted Underwriter’s motion and entered judgment consistent with the final award. Certain Underwriters at Lloyd’s, London v. Transport Insurance Co., No. 1:15-cv-12313 (USDC D. Mass. Nov. 20, 2015).

This post written by Rob DiUbaldo.

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