Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

OHIO JOINS CAPTIVE INSURANCE MARKET

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Governor John Kasich signed Ohio House Bill 117 into law on June 17, 2014, becoming the 31st state to join the captive market. The legislation allows Ohio-domiciled companies to form their own “captive” insurance companies, which operate for the most part like other insurers, but which serve only the parent or affiliated companies. The legislation allows companies to insure and reinsure risks “in house”, subject to certain reserve requirements and other regulations governing insurers generally.

This post written by John Pitblado.

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ELEVENTH CIRCUIT ENFORCES CLASS ARBITRATION WAIVER

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The Eleventh Circuit affirmed a ruling compelling arbitration of an employment dispute. Plaintiff employees brought a putative collective action suit against the defendant, a windshield repair company, pursuant to the Fair Labor Standards Act (“FLSA”), alleging wage violations. The employer moved to compel individual arbitration pursuant to the terms of the parties’ individual arbitration agreements. The district court granted the motion and plaintiffs appealed, arguing that the FLSA’s statutory right to bring a collective action is substantive and cannot be abrogated by agreement or superseded by the Federal Arbitration Act (“FAA”). The Eleventh Circuit disagreed, finding that, absent explicit congressional intent otherwise in the terms of the FLSA, the FAA requires enforcement of arbitration provisions, and allows for parties to waive their right to class or collective action. Walthour v. Chipio Windshield Repair, LLC, No. 13-11309 (11th Cir. March 21, 2014).

This post written by John Pitblado.

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ARBITRATION PROCEDURE UNCONSCIONABILITY ROUNDUP

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Basulto v. Hialeah Automotive, Case No. SC09-2358 (Fla. March 20, 2014) (reversing intermediate appellate court’s ruling compelling arbitration on monetary relief claims; intermediate court failed to limit its review to whether a valid arbitration agreement existed; no valid agreement due to substantive and procedural unconscionability);

Crawford Professional Drugs, Inc. v. CVS Caremark Corp., Case No. 12-60922 (5th Cir. April 4, 2014) (affirming order compelling arbitration, notwithstanding argument by non-signatories that they were not subject to the arbitration clause; state law may allow an arbitration contract to be enforced by or against nonparties to the contract through state-contract-law theories, including equitable estoppel);

Sanchez v. Carmax Auto Superstores California, LLC, Case No. B244772 (Cal. Ct. App. Feb. 6, 2014) (reversing order denying motion to compel arbitration; arbitration agreement was not illusory, nor unenforceable for procedural unconscionability merely because it was an adhesion contract; arbitration agreement was not substantively unconscionable in that it had bi-lateral application, it did not overly limit discovery, and arbitration rules and procedures were not unfair);

Caplin Enterprises, Inc. v. Arrington, Case No. 2011-CT-01332-SCT (Miss. May 8, 2014) (reversing intermediate appellate court’s ruling that certain arbitration agreements were enforceable; all agreements were contracts of adhesion and so one-sided in their terms as to meet the standard for substantive unconscionability);

Tiri v. Lucky Chances, Inc., Case No. A136675 (Cal. Ct. App. May 15, 2014) (reversing denial of petition to compel arbitration based on trial court’s finding of unconscionability; trial court lacked authority to rule on enforceability of the arbitration agreement where the parties delegated such authority to the arbitrator).

This post written by Michael Wolgin.

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SIGNATORIES AND NON-SIGNATORIES DENIED MOTIONS TO COMPEL ARBITRATION

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The Tenth Circuit Court of Appeals and a federal district court in Michigan have each issued opinions on motions to compel arbitration. In the Michigan opinion, the court granted a motion for summary judgment, in favor of the defendant, Consolidated Insurance Company, and denied the plaintiff’s motion to compel arbitration. The plaintiff, the representative of the decedent’s estate, sought to recover uninsured motorist benefits under a commercial vehicle policy issued to decedent’s employer. Prior negotiations between the parties resulted in a written agreement to arbitrate the matter. Before arbitration commenced, the defendants canceled the process, arguing that the issue was not arbitral. The defendant’s cancellation was deemed valid based on intervening caselaw holding that coverage did not extend to individuals injured while outside a vehicle. Since the decedent was outside of his truck at the time he was killed, the issue of coverage could not be arbitrated. Johnston v. Indiana Insurance Co., Case No. 13-10797 (USDC E.D. Mich. Feb 11, 2014).

The Tenth Circuit Court of Appeals affirmed a district court’s denial to compel arbitration, finding that since none of the defendant board members signed an agreement with an arbitration clause, they could not be compelled to arbitrate. The court further held that the plaintiff’s alternative legal theories to compel arbitration were forfeited or waived. Genberg v. Porter, No. 13-1140 (10th Cir. May 12, 2014).

This post written by Rollie Goss.

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