Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

COURT REJECTS MANIFEST DISREGARD OF LAW CLAIM

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A district court in Pennsylvania has denied a motion to vacate a prior arbitration award based on the arbitrator’s alleged manifest disregard of the law, and instead granted a motion to confirm the award in a case arising out of the termination of the claimant’s employment. The claimant, Mrs. Cartwright, contended that the arbitrators committed manifest disregard of the law when they dismissed her Title VII retaliation claim. The Court found that based on the evidence and testimony from the President and CEO the bank which had employed Mrs. Cartwright, Ms. Cartwright’s own efforts to hinder the company’s planned merger could well have been the reason for her firing. While the Court noted that evidence stood both for and against Ms. Cartwright’s claims, this fact did not mean “that particular claim was a ‘but for’ cause of her dismissal.”

Ms. Cartwright also contended that the arbitrators committed manifest disregard of the law when they awarded damages on her breach of contract claim but dismissed an additional fraud claim. The Court noted that fraud claims can be enmeshed with breach of contract claims. As both the fraud and breach of contract claims were based on the same set of facts, the arbitrators had a basis to bar the fraud claim. Cartwright v. Fidelity Bank, No. 2:12-cv-01502 (W.D.Pa. Sep. 24, 2014).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

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NLRB REAFFIRMS ITS D.R. HORTON DECISION, RULING THAT EMPLOYMENT AGREEMENTS REQUIRING INDIVIDUAL ARBITRATION ARE UNLAWFUL

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On February 16, 2012, we reported on the National Labor Relations Board’s D.R. Horton decision, which ruled that arbitration agreements that are signed as a condition of employment and preclude employees from bringing joint, class or collective claims over working conditions are unlawful. Subsequently, that opinion was rejected by the Fifth Circuit Court of Appeals, on which we reported on December 19, 2013, and disagreed with by other courts. Notwithstanding these adverse court decisions, on October 28, 2014, the NLRB reaffirmed D.R. Horton, ruling that the arbitration agreements of Murphy Oil USA Inc., which barred employees from pursuing class actions, were unlawful. The majority held that Murphy Oil violated the National Labor Relations Act by requiring employees to arbitrate employment claims on an individual basis, and by seeking to enforce its agreements in court after the employee filed a Fair Labor Standards Act suit. While the dissent accused the NLRB of ignoring “clear instructions” from the U.S. Supreme Court about the interpretation of the NLRA and the FAA, the majority disagreed, although it acknowledged that its opinion was likely not “the last word on the subject.” Murphy Oil USA, Inc., Case No. 10-CA-038804 (N.L.R.B. Oct. 28, 2014).

This post written by Michael Wolgin.

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INSURANCE CARRIER BATTLES REINSURER FOR EXPENSES IN ADDITION TO LOSSES

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On December 4, 2014, the Second Circuit addressed whether a facultative reinsurance certificate (“certificate”) covering an umbrella policy obligates a reinsurer to indemnify expense payments in addition to losses. The Court found the certificate ambiguous as to whether the reinsurer’s reimbursement liability included expense payments and consequently remanded and vacated the instant action back to the Northern District of New York.

Utica Mutual Insurance Company (“Utica”) issued an umbrella policy to Goulds Pumps Inc. (“Goulds”), exposing the carrier to significant payment obligations stemming from asbestos claims against Goulds. As reinsurer, Munich Reinsurance America, Inc. (“Munich”) paid out $5 million dollars, the limit under the certificate. Utica filed suit for additional unpaid and future expense payments associated with the Goulds’ policy. The trial court granted summary judgment for Munich reasoning that the certificate’s $5 million limit of liability applied to expenses and therefore Munich’s obligation for reimbursement had been met.

Distinguishing prior case law that found certificates “unambiguously expense-inclusive,” the Second Circuit found this certificate ambiguous as to expense-inclusion. They reasoned that Munich’s obligations to Utica for “losses or damages” to the liability limit on the certificate could be construed as specifically excluding expenses. The Court also noted that “settlement payments,” while not expressly included in the liability limit, were considered part of the calculation. The Court remanded the action to allow the trial court to interpret the certificate’s inclusion or exclusion of expenses. Utica Mut. Ins. Co. v. Munich Reins. Am. Inc., No. 13-4170-cv (2d Cir. Dec. 4, 2014).

This post written by Matthew Burrows, a law clerk at Carlton Fields in Washington, DC.

See our disclaimer.

FEDERAL COURT ISSUES SUBPOENAS FOR USE IN FOREIGN ARBITRATION

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A federal judge in New Jersey recently granted an ex parte application for issuance of subpoenas for use in a London arbitration. The court’s basis for the ruling was 28 U.S.C.A. § 1782, the federal statute titled “Assistance to Foreign and International Tribunals and to Litigants Before Such Tribunals.” Without discussion, the court concluded that a proceeding before the London Maritime Arbitrators Association constitutes a “foreign tribunal” for the statute’s purposes. The court found that all of the statutory factors had been met and that the discretionary factors weighed in favor of issuing the subpoenas. In re Application of Owl Shipping, LLC & Oriole Shipping, LLC, No. 14-5655, 2014 WL 5320192 (D.N.J. filed Oct. 17, 2014).

This post written by Catherine Acree.

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APPEAL DISMISSED IN INSTITUTO NACIONAL DE SEGUROS v. HEMISPHERIC REINSURANCE GROUP, L.L.C. ET AL.

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We have posted on this case filed against two reinsurance brokers several times.  Since our last posting regarding this case, which reported on the results of the trial, an appeal was filed in Florida’s Third District Court of Appeal.  The appeal has been dismissed pursuant to a joint stipulation. Instituto Nacional de Seguros v. Hemispheric Reinsurance Group, LLC, No. 3D14-1590 (Fla. Ct. App. Nov. 14, 2014).

This post written by Kelly A. Cruz-Brown.

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