Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ARBITRATION AWARD IN FAVOR OF PROGRESSIVE AFFIRMED

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Recently, the Minnesota Court of Appeals affirmed the entry of an arbitration award against North Star Taxi. North Star and Progressive were parties to a voluntary arbitration agreement for all property damage and business-interruption-loss claims through intercompany arbitration before Arbitration Forums, Inc. After a dispute arose regarding an auto accident between one of Progressive’s insureds and one of North Star’s bailee-independent contractors, an arbitrator ruled that each of the two drivers were 50% responsible for the accident and reduced North Star’s undisputed damages by 50% based upon that negligence. North Star moved to vacate the award, and the Minnesota state district court ruled that North Star had waived its right to seek vacation of the award by entering into the arbitration award. North Star appealed (now also seeking attorneys’ fees), and the Court of Appeals concluded that under the Minnesota Uniform Arbitration Act, North Star had contractually waived its right to judicial review of the award. Accordingly, the award was confirmed and North Star’s motions were denied. North Star Taxi v. Progressive American Insurance Co., No. 11-757 (Minn. Ct. App. Jan. 30, 2012).

This post written by John Black.

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COURT COMPELS ARBITRATION OF MULTIPLE PLAINTIFFS NOTWITHSTANDING “NARROW” ARBITRATION AGREEMENT

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A court compelled arbitration of a dispute between an insurer and an affiliated group of multinational companies, despite the fact that the agreement to arbitrate was “narrow,” signed by only one of the plaintiff companies, and subject to a statute of limitations defense that state law permitted to be addressed in court. The contract governed certain obligations under separate insurance agreements, including premium obligations and reimbursement of specified expenses incurred in settling claims. The contract contained an arbitration agreement, which provided for arbitration of “[a]ll disputes or differences arising out of [the contract’s] interpretation.” When a dispute arose regarding the insureds’ failure to reimburse the insurer for certain expenses, the insurer demanded arbitration and the insureds sued for a declaration that the claims were not arbitrable, and were barred by state statute of limitations.

Plaintiffs argued that the arbitration agreement was “narrow” and did not apply to the parties’ dispute, which they alleged related to matters collateral to the contract’s terms. While the court agreed that the agreement was narrow and that some record evidence supported their description of the dispute, the court found that there was sufficient evidence to find that the dispute “might” involve interpretation of the contract’s reimbursement calculation terms. The court also rejected plaintiffs’ argument that the non-signatories were not bound, holding that the non-signatories were estopped from excluding themselves because they effectively conceded receiving a “direct benefit” from the contract. Regarding the plaintiffs’ statute of limitations argument, the court held that despite the fact that the parties agreed to a choice of state law that provides for a limitations defense to arbitration to be made in court, the limitations issue was for the arbitration panel. Alfa Luval U.S. Treasury Inc. v. National Union Fire Insurance Co. of Pittsburgh, PA, Case No. 1:11-cv-01872 (USDC S.D.N.Y. Jan. 26, 2012).

This post written by Michael Wolgin.

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WHITE MOUNTAIN RE VOLUNTARILY DISMISSES ASBESTOS REINSURANCE ACTION AGAINST TRAVELERS CASUALTY

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We last posted on a reinsurance dispute between White Mountains Re and Travelers Casualty on May 18, 2011. Since then, White Mountain Re agreed to voluntarily dismiss its claims with prejudice. The dispute arose out of several reinsurance agreements between the parties, notably regarding a series of blanket excess of loss reinsurance contracts entered into in the 1980s covering asbestos installations. White Mountains Re alleged claims for declaratory relief and breach of contract in New York state court. Travelers successfully removed the claims to federal court prior to the voluntary dismissal. White Mountains Reinsurance Co. of America v. Travelers Casualty and Surety Co., Case No. 11-390 (USDC S.D.N.Y. Jan. 3, 2012).

This post written by John Black.

See our disclaimer.

COURT AFFIRMS DENIAL OF “CONTINGENT” ASBESTOS CLAIMS AGAINST LIQUIDATION ESTATE OF EXCESS INSURER

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A court affirmed the denial of W.R. Grace & Co.’s asbestos insurance claims against the liquidation estate of Grace’s insolvent excess-of-loss insurer, on the ground that Grace failed to submit timely “absolute” claims under New Jersey’s version of the Uniform Insurers Liquidation Act. Grace, which has been undergoing bankruptcy restructuring, had established a plan with a creditor’s committee to create a trust to pay asbestos claims. The plan, however, was not approved by the bankruptcy court prior to the deadline to submit excess of loss claims to the liquidation estate of Grace’s excess insurer. When Grace submitted a proof of claim to the estate, the liquidator denied the claim, relying on provisions of the Uniform Insurers Liquidation Act that permit payment of only “absolute” claims, as opposed to “contingent” claims.

Grace ultimately appealed to the state court, which affirmed. The court agreed the claims were “contingent” as “the value of the claims at issue had not been fixed by actual payment, settlement, final judgment or a claims resolution procedure approved by the federal bankruptcy court,” notwithstanding estimates provided by Grace’s expert witness. Because the estimates did not “stand on their own,” the claims could not be considered “absolute” under state precedent. The court also rejected Grace’s argument that even if the claims were contingent, they should be paid to prevent a “windfall.” The court distinguished state law, and held that, under the McCarran-Ferguson Act, federal bankruptcy law “plays no part” where the state Uniform Insurers Liquidation Act provided “a comprehensive mechanism” for the liquidation and payment of claims. Commissioner of Insurance of the State of New Jersey v. Integrity Insurance Co./W.R. Grace & Co., Case No. A-2505-10T4 (N.J. Super. Ct. App. Div. Jan. 11, 2012).

This post written by Michael Wolgin.

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NLRB FINDS THAT PROHIBITING CLASS ACTIONS IN EMPLOYMENT CONTRACTS VIOLATES FEDERAL LABOR LAW

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The National Labor Relations Board (“NLRB”) affirmed an administrative law judge’s decision that an employer violated the National Labor Relations Act (“NLRA”) by requiring covered employees, as a condition of employment, to sign an agreement precluding them from filing class actions addressing their wages, hours or other working conditions in any forum, arbitral and judicial. The NLRB found that such a prohibition unlawfully restricts employees’ NLRA Section 7 rights to engage in concerted action for mutual aid or protection. The NLRB stated that its holding does not conflict with the FAA or undermine the policy underlying the FAA and distinguished the Supreme Court’s recent Stolt-Nielson and Concepcion decisions. D.R. Horton, Inc., Case No.12-CA-25764 (N.L.R.B. Jan. 2, 2012).

This post written by Ben Seessel.

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