Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

FEDERAL COURTS DECIDE ARBITRATOR APPOINTMENT AND DISQUALIFICATION ISSUES

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In Adam Tech., the Court of Appeals for the Fifth Circuit affirmed the denial of a motion to appoint an arbitrator. The court held that there had been no “lapse in the naming of an arbitrator” under FAA Section 5, deciding rather that it was Adam’ Tech.’s failure to comply with the International Center for Dispute Resolution’s rules that prompted the ICDR to appoint an arbitrator against Adam Tech.’s objection. The court also held that the challenge to the ICDR’s rules was a procedural question left for the arbitrators to decide under the Supreme Court’s Howsam decision and that Adam Tech.’s challenge to the appointment was premature because it was filed before a final award had been rendered. Adam Tech. Int’l, S.A. v. Sutherland Global Servs., Inc., No. 12-10760 (5th Cir. Sept. 5, 2013).

Joyce Green had entered into an agreement in 2012 with U.S. Cash Advance Court requiring disputes to be resolved through arbitration under the Code of Procedure of the National Arbitration Forum. The NAF, however, has not been accepting new consumer cases since 2009, following a settlement with the Minnesota Attorney General. The district court refused to appoint an arbitrator under FAA Section 5, holding that the selection of NAF was “integral” to the agreement. The Court of Appeals for the Seventh Circuit disagreed. The appellate court first pointed out that the agreement did not require appointment of a NAF arbitrator but only the use of the NAF Code of Procedure. It further held that the identity of the arbitrator was not so important as to vitiate the whole contract and ordered the district court to appoint an arbitrator to adjudicate the dispute under the NAF Code of Procedure. A dissenting judge sharply disagreed, opining that the majority was re-writing the terms of the parties’ contract. Green v. U.S. Cash Advance Ill., LLC, No. 13-1262 (7th Cir. July 30, 2013).

In PK Time Group, LLC, a federal district court denied a petition to remove a panel of arbitrators. Petitioner PK Time sought removal of the arbitrators after liability had been decided in favor of the opposing party, Cinette Robert, but before the issue of damages had been decided. PK Time argued that the arbitrators had demonstrated bias and had committed misconduct by speaking at a conference at which Cinette Robert’s expert also spoke, and that was sponsored by the company that employed the expert, and by making improper discovery rulings. The court dismissed the petition as an improper pre-award challenge that also failed to demonstrate arbitrator bias. PK Time Group, LLC v. Cinette Robert, Case No. 1:12-cv-08200 (USDC S.D.N.Y. July 13 2013).

This post written by Ben Seessel.

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ROUND-UP OF DECISIONS ON MOTIONS TO COMPEL ARBITRATION

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Grosvenor v. Qwest Corp., No. 12-1095 (10th Cir. Aug. 14, 2013) (dismissing Qwest’s appeal of district court’s order granting partial summary judgment because Qwest did not seek to compel arbitration in its motion for summary judgment and therefore did not properly invoke appellate jurisdiction under the FAA).

PoolRe Insurance Corp. v. Organizational Strategies, Inc., No. H-13-1857 (S.D. Tex. Jul. 29, 2013) (denying plaintiff’s motion to compel first arbitration because same motion was pending in the Delaware federal district court; staying ongoing arbitration proceedings in a second arbitration between the same parties, having determined that the claims are clearly not arbitrable because they were carved out of the arbitration clause by a separate agreement).

Marsh & McLennan Cos. v. GIO Insurance Ltd., No. 11 Civ. 8391 (S.D.N.Y. Aug. 6, 2013) (staying action pending arbitration, rather than dismissing action, because dismissal is an appealable order that could further delay quick resolution through arbitration; denying defendant insurance company’s motion to release the $1.5 million security it was required to deposit with the court as an “unauthorized foreign insurer,” favoring New York’s public policy that a foreign insurer’s funds should be available in New York to satisfy any potential judgment).

Hirsch v. Amper Financial Services, Inc., No. 070751 (N.J. Aug. 7, 2013) (reversing Appellate Division’s affirmance of Law Divison’s grant of defendants’ motion to compel arbitration because intertwinement of claims and parties alone is insufficient to warrant application of equitable estoppel to compel arbitration).

McInnes v. LPL Financial, LLC, No. SJC-11356 (Mass. Aug. 12, 2013) (vacating order denying defendants’ motion to stay proceedings and compel arbitration and holding that claims alleging unfair and deceptive trade practices in violation of Gen. Law ch. 93A, § 9 must be referred to arbitration where the contract involves interstate commerce and the arbitration agreement is enforceable under the FAA).

Brown v. MHN Government Services, Inc., No. 87953-2 (Wash. Aug. 15, 2013) (affirming order denying appellant MHN’s motion to compel arbitration, applying California law according to choice of law provision in arbitration and agreement and finding provisions regarding arbitrator selection, statute of limitations, and fee shifting to be unconscionable, thereby rendering the entire arbitration agreement unenforceable).

This post written by Abigail Kortz.

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SERVICE OF SUIT CLAUSE PRESERVING INSURER’S RIGHT TO “SEEK A TRANSFER” DID NOT PERMIT INSURER’S REMOVAL TO FEDERAL COURT

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An insurer’s bid to remove a lawsuit to federal court was stymied. The case involved a “service of suit” paragraph in an insurance policy permitting the insured to select the venue and forum of a dispute under the policy. The court found that the insurer waived the right to remove an action from state to federal court, notwithstanding a provision purporting to preserve the insurer’s right to “seek a transfer” of the case. The court interpreted consecutively each sentence of the relevant paragraph “like the concentric rings of a target.” Among other things, the court considered whether the phrase “seek a transfer” contemplated seeking removal of the action to federal court. That phrase did not include seeking removal, notwithstanding caselaw that had reached a different result in the context of a different forum selection clause employing the word “transfer” in a grammatically and substantively different way. Hanover Insurance Group, Inc. v. Chartis Specialty Insurance Co., Case No. 4:12-cv-40156 (USDC D. Mass. Aug. 19, 2013).

This post written by Michael Wolgin.

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REVISIONS TO CONNECTICUT’S CREDIT FOR REINSURANCE LAW

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Effective August 6, 2013, Connecticut has adopted requirements in line with the November 6, 2011 amendments to the NAIC Credit for Reinsurance Model Law and Regulation that governs how a reinsurer may become certified in Connecticut for purposes of insurers taking a credit for amounts ceded to such reinsurer. As part of its new program, the Connecticut Insurance Department has created a Credit for Reinsurance webpage which contains all of the necessary applications, instructions and regulations in one location. Companies seeking to become certified must contact the Financial Regulation Division before submitting an application. State of Connecticut Insurance Department, Requirements to Become a Connecticut Certified Reinsurer – Updated, Bulletin No. FS-25-1 (Aug. 12, 2013).

This post written by Abigail Kortz.

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REINSURED’S TRIAL COUNSEL INVOLVED IN UNDERLYING DISPUTE DISQUALIFIED FROM TRYING THE CASE

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In a dispute involving tortious interference and conspiracy claims brought by Ford Motor Company against a reinsurer of Ford’s stop-loss insurance policies, a federal court disqualified Ford’s lead trial attorney under the “witness-advocate” rule. The reinsurer argued that, notwithstanding Ford’s stipulation not to call trial counsel as a witness, trial counsel’s involvement in the emails and other underlying communications surrounding the reinsurer’s disputed conduct would result in trial counsel being “free to argue the meaning of his own correspondence and refute the trial and deposition testimony of those with whom he interacted.” The reinsurer further contended that trial counsel would “have the ability, through cross-examination and argument, to explain away his communications … just as if he were testifying as a witness,” and that the reinsurer would be forced to call trial counsel as a witness to support its defenses and to rebut Ford’s theory of the case and evidence. The court agreed with the reinsurer, finding that the testimony the reinsurer intended on seeking from trial counsel and the communications in which trial counsel was involved, were relevant and necessary to the reinsurer’s defenses, and were potentially prejudicial to Ford. The court further found that no exceptions to the witness-advocate rule applied, including the exception of substantial hardship to Ford. Ford Motor Co. v. National Indemnity Co., Case No. 3:12-cv-839 (USDC E.D. Va. Aug. 21, 2013).

This post written by Michael Wolgin.

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