Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ARBITRATION AWARD ROUNDUP

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Comity

Corporacion Mexicana de Mantenimieneto Integral v. Pemex-Exporacion y Produccion, Case No. 1:10-cv-00206 (USDC S.D.N.Y. Aug. 27, 2013) (confirming $400 million Mexican arbitration award; refusing to enforce Mexican judgment nullifying award; 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”)

Manifest Disregard/Exceeding Authority

Dewan v. Walia, Case No. 12-2175 (4th Cir. Oct. 28, 2013) (vacating judgment that confirmed award in favor of former employee and remanding to district court with instructions to vacate the award; award was “manifest disregard of the law; “neither linguistic gymnastics, nor a selective reading of Maryland contract law, could support [the arbitrator’s] conclusion that the Release was enforceable but that [employee’s] claims were arbitrable anyway”)

Wells Fargo Advisors, LLC v. Watts, Case No. 12-1464 (4th Cir. Oct. 1, 2013) (affirming order confirming award for unpaid balance on employee loan; reversing ruling vacating arbitration panel’s grant of attorney’s fees; no fraud or manifest disregard of the law; “a court must defer to arbitrators’ factual findings on attorneys’ fees even if the arbitrators do not explain a basis for the precise amount”)

Walter v. Mark Travel Corp., Case No. 6:09-cv-01019 (USDC D. Kan. Sept. 18, 2013) (confirming $1.1 million award; denying motion to vacate award; court properly compelled arbitration against assignee of signatory; request for court to revisit order compelling arbitration was untimely; arbitrators did not exceed powers, nor was there a manifest disregard of the law)

Neshgold LP v. New York Hotel & Motel Trades Council, Case No. 1:13-cv-02399 (USDC S.D.N.Y. Sept. 19, 2013) (denying motion to vacate; granting motion to confirm award; award finding liability against employer in labor dispute did not exceed arbitrator’s authority, nor violate public policy; award determining relief due to labor union did not reflect manifest disregard of the law)

Phoenix Bulk Carriers, Ltd. v. American Metals Trading, LLP, Case No. 1:10-cv-02963 (USDC S.D.N.Y. Oct. 31, 2013) (granting motion to confirm award in favor of carrier against iron supplier; denying motion to vacate award; panel did not act in manifest disregard of the law nor exceed its authority because award was based on panel’s interpretation of shipping contract and findings of fact)

Evident Partiality/Fraud

DuBois v. Macy’s Retail Holdings, Inc., Case No. 12-3980-cv (2d Cir. Oct. 4, 2013) (affirming judgment denying pro se motion to vacate award rejecting claim for employee discrimination; confirming the award and granting dismissal of complaint; appellant failed to present any evidence to support the claim that the award was obtained through corruption, fraud, or undue means, that arbitrator exhibited evident partiality, or that arbitrator exceeded his powers)

Stone v. Bear, Stearns & Co., Case No. 12-2827 (3d Cir. Oct. 29, 2013) (affirming order denying petition to vacate FINRA award that rejected claim for millions of dollars in losses under investment; granting cross-petition to confirm the award; no evidence of exceeding powers or evident partiality against appellant based on arbitrator’s undisclosed family relation to well-connected finance professor)

Venue

First State Insurance Co. v. National Casualty Co., Case No. 1:13-cv-00704 (USDC S.D.N.Y. Sept. 27, 2013) (transferring venue of petition to confirm the arbitration panel’s final order regarding interpretation of reinsurance contract; forum selection clause in arbitration agreement unambiguously selected venue; clause was “unambiguous and specifically excludes alternative venue for the petition to confirm the final order”)

This post written by Michael Wolgin.

See our disclaimer.

RESPA CLAIMS BARRED BY STATUTE OF LIMITATIONS IN PRIVATE MORTGAGE INSURANCE KICKBACK CASE

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In a case we have posted on before, plaintiffs lost the battle over whether their RESPA claims alleging a kickback scheme against private mortgage insurers and mortgage lenders’ captive insurers were equitably tolled. The court concluded, in a summary judgment setting, that plaintiffs did not diligently pursue their claims because they did not decide to engage in litigation until they were approached by attorneys who believed they had claims. Additionally, there was no reason plaintiffs could not have earlier discovered their claims because there were a number of cases alleging identical schemes filed years prior to plaintiffs’ closings. The court also concluded that defendants did not actively mislead plaintiffs because “[p]laintiffs’ argument – that the statute of limitations should be equitably tolled because Defendants failed to disclose they were violating RESPA – is unpersuasive” and “circular.” Riddle v. Bank of America Corporation, Case No. 12-1740 (E.D. Pa. Nov. 18, 2013).

This post written by Abigail Kortz.

See our disclaimer.

SIXTH CIRCUIT ANSWERS A QUESTION LEFT OPEN BY THE SUPREME COURT: CLASSWIDE ARBITRABILITY IS A GATEWAY QUESTION SUBJECT TO JUDICIAL DETERMINATION

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The threshold issue before the Sixth Circuit on an appeal from a dispute involving LexisNexis and one of its law firm customers was whether the question of classwide arbitrability is a gateway question to be determined by the court or a subsidiary question to be determined by an arbitrator, a question expressly left open by the Supreme Court in its most recent term. Following an analysis of recent Supreme Court jurisprudence, which seemed to lean toward deciding that classwide arbitrarily is a gateway question, the Sixth Circuit definitively stated that it is a gateway question reserved for judicial determination. The Court next analyzed the arbitration clause at issue in the dispute and held that it did not authorize class arbitration because it was silent on that issue and limited the scope of arbitration to the specific order between LexisNexis and the law firm, precluding the arbitration of other customers’ orders with LexisNexis. Reed Elsevier, Inc. v. Crockett, No. 12-3574 (6th Cir. Nov. 5, 2013).

This post written by Abigail Kortz.

See our disclaimer.

REINSURER OFF THE HOOK FOR LITIGATION DEFENSE COSTS

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Public Reimbursement Management of Florida (“PRM”) sued its reinsurer One Beacon Insurance Co. (“OneBeacon”) for reimbursement of defense costs PRM incurred while defending an insured involved in a construction contract dispute. The primary issue was whether the underlying construction contract dispute fell within PRM’s duty to defend and whether OneBeacon was obligated to reimburse PRM. The Florida district court granted OneBeacon’s motion to dismiss with prejudice, concluding that (1) PRM did not have a duty to defend because the construction dispute fell within an exclusion in the PRM insurance policy for intentional breaches of contract, and (2) the theory of equitable estoppel did not apply to create insurance coverage between OneBeacon and PRM because OneBeacon made it clear in its correspondence with PRM that it did not believe PRM had a duty to defend the construction contract dispute. Public Risk Management of Florida v. One Beacon Insurance Co., Case No. 13-1067 (M.D. Fla. Oct. 18, 2013).

This post written by Abigail Kortz.

See our disclaimer.

STATUTE OF LIMITATIONS: CONSENT-TO-SETTLEMENT PROVISIONS AND UNDERINSURANCE

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In a case involving an insurer’s attempt to avoid payment of a claim under an underinsured motorist policy after a car accident on statute of limitations grounds, the Eastern District of Pennsylvania resorted to the basics of contract law in denying the insurer’s motion for summary judgment and granting the policyowner’s petition to compel arbitration. Although the parties agreed that Pennsylvania has a four-year statute of limitations for contractual actions, they disagreed as to when the limitations period begins to run in an underinsurance case. Sitting in diversity, and absent any rulings on point by the state’s highest court, the court determined that, based on relevant state and Third Circuit precedent, the Pennsylvania Supreme Court likely would rule that the statute of limitations begins to run on an underinsurance claim when the insured actually settles with the underinsured driver. Thus, consistent with both the purpose of consent-to-settlement provisions, which give insurers an opportunity to exercise their subrogation rights prior to the formation of binding settlement agreements, and contract law, the statute of limitations began to run on the date the policyowner accepted the tortfeasor’s settlement offer by signing the release absolving the tortfeasor from further liability. Wilson v. Great American Insurance Group, Case No. 12-5700 (E.D. Pa. Oct. 25, 2013).

This post written by Kyle Whitehead.

See our disclaimer.