Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ARBITRATION ROUND-UP

by

Manifest Disregard:

Amway Global v. Woodward, Case No. 09-12946 (USDC E.D. Mich. Sept. 30, 2010) (rejecting multiple manifest disregard of law challenges, including that arbitrator, in applying Michigan law, failed to follow Fifth Circuit ruling that plaintiff’s standard agreement was illusory and unenforceable under Texas law)

Church Insurance Co. v. Ace Property & Casualty Insurance Co., Case No. 10-00698 (USDC S.D.N.Y. Sept. 23, 2010) (granting unopposed petition to confirm award; court’s independent review found no evidence of manifest disregard)

Exceeding Arbitrators’ Authority:

Wachovia Securities, LLC v. Brand, Case No. 08-02349(USDC D.S.C. Aug. 26, 2010) (granting motion to confirm award; panel did not exceed authority to make award under South Carolina Frivolous Civil Proceedings Sanctions Act)

Ike America, LLC v. Kredit Karte, Inc., Case No. 10-03153 (USDC E.D. Pa. Sept. 1, 2010) (granting motion to confirm award; rejecting argument that award was improper because the award creditor’s sole shareholder was an Italian national whose immigration status did not allow him to collect income from the award, and argument that arbitrator exceeded authority because part of the award held the award debtor responsible for the actions of a non-party)

Octagon, Inc. v. Richards, Case No. 10-00652 (USDC E.D. Va. Oct. 5, 2010) (holding that because an arbitration agreement severable from an unlawful agreement covered the dispute, the matter was arbitrable, and because the dispute was of the type contemplated by both parties to be submitted to arbitration, the arbitrator did not exceed her powers)

Choice of Law:

Eyewonder, Inc. v. Abraham, Case No. 08-03579 (USDC S.D.N.Y. Sept. 3, 2010) (California rules governing unconscionability of employment agreement did not apply where sufficient contacts supported “a sufficiently reasonable relationship between New York and the transaction”)

Remand for Clarification:

Ernest v. Lockheed Martin Corp., Case No. 07-02038 (USDC D. Colo. Sept. 1, 2010) (denying motion to partially vacate arbitration award and motion to confirm arbitration award to allow remand to arbitrator for a mutual, final and definite award on the limited issue of back pay damages; observing that remand for clarification is necessary when there is more than one reasonable interpretation of the arbitration panel’s award)

Personal Jurisdiction:

NGC Network Asia, LLC v. Pac Pacific Group International, Inc., Case No. 09-08684 (USDC S.D.N.Y. Sept. 20, 2010) (denying motion to transfer, stay or dismiss petition; movant agreed to arbitrate in New York and thus also consented to personal jurisdiction and venue there)

Claim Preclusion:

Belmont Partners, LLC v. Mina Mar Group, Inc., Case No. 10-00005 (USDC W.D. Va. Oct. 1, 2010) (granting motion to confirm the arbitration award and denying motions to suspend and vacate the award; judgment by Canadian court had claim preclusive effect barring this court from deciding whether to modify or vacate the award)

Timeliness of Motion to Vacate:

R&Q Reinsurance Co. v. American Motorist Insurance Co., Case No. 10-02825 (USDC N.D. Ill. Oct. 14, 2010) (denying motion to vacate as untimely since it was filed one day after the “three month” deadline in Federal Arbitration Act section 12, declining to read “three months” to mean ninety days)

Arbitrator Bias:

CRC, Inc. v. Computer Sciences Corp., Case No. 10-04981 (USDC S.D.N.Y. Oct. 14, 2010) (rejecting motion for vacatur of a partial arbitration award and disqualification of the American Arbitration Association panel that issued it based on assertion of arbitrator bias due to professional connections between the arbitrator’s law firm and the law firm representing the respondent)

This post written by Brian Perryman.

TREATY TIP: THE IMPORTANCE OF SPECIFYING A NON-PAYMENT INTEREST RATE

by

How important is it to specify the rate at which unpaid amounts will accrue interest under a reinsurance agreement? In a Treaty Tip, Tony Cicchetti provides two examples from recent court opinions that illustrate the importance of covering this topic in a reinsurance contract.

This post written by Tony Cicchetti.

SWISS RE GETS DAMAGES BUT NOT ATTORNEYS’ FEES AND COSTS

by

Swiss Re, invoking a Indemnity Agreement SuperValu had entered into with the now defunct Amwest Surety, sought to recover attorneys fees and expenses from SuperValu based upon a reinsurance agreement it had entered into, as reinsurer, to guaranty the performance under an appeal bond. Because SuperValu refused to remit payment pursuant to the Indemnity Agreement (which Swiss Re acquired from Amwest by assignment), the District Court found that SuperValu’s refusal constituted a breach and that Swiss Re was entitled to recover damages incurred as a result. However, the District Court concluded that Swiss Re was not entitled to recover attorneys’ fees and costs incurred in defending, settling, and administering payment of the claim relative to the Bond underlying the action because the Indemnity Agreement did not contain any language supporting the recovery of fees and costs. Thus, the parties’ cross-motions for summary judgment were both granted in part and denied in part. Swiss Reinsurance Am. Co. v. SuperValu, Inc., Case No. 09-3083 (USDC D. Minn. Oct. 15, 2010).

This post written by John Black.

MUTUAL MARINE AND BRITISH LAW INSURANCE DISMISS CASE TO ALLOW FOR ARBITRATION

by

In May of 2010, insurer Mutual Marine Office Inc. commenced an action against one of its excess-of-loss reinsurers, British Law Insurance Co. (now known as Sun Alliance Insurance UK Ltd.), in New York County Supreme Court. Mutual Marine and British Law have now agreed to dismiss the case and go to arbitration. The dispute pertains to the application of a settlement into which Mutual Marine and British Law’s parent company had previously entered. The settlement permitted Mutual Marine to submit aggregated claims to British Law, which would be payable on a discounted basis, despite the fact that the governing reinsurance treaties did not contain an express aggregate extension clause. Mutual Marine Office, Inc. v. British Law Ins. Co., Case No. 10-cv-4306 (USDC SDNY, Sept. 15, 2010)

This post written by Michael Wolgin.

FIFTH CIRCUIT REVERSES DENIAL OF MOTION TO COMPEL ARBITRATION

by

The plaintiff made a claim under a disability policy issued to him in conjunction with his opening a deposit account with a bank. When the claim was denied, plaintiff brought suit against both the bank and the insurance company, alleging several causes of action, including breach of trust, fraud, misrepresentation, breach of contract and bad faith. Both the bank and insurer moved to compel arbitration based on the arbitration provision contained in the deposit account agreement. The district court denied the motions on the basis that arbitrability had been raised, and was an issue for the court to decide. The Fifth Circuit reversed, noting some limited circumstances in which arbitrability can be addressed by the court, but finding that the arbitration provision in question unambiguously provided that issues of arbitrability should be decided by the arbitrator and not the court, and that the language controlled. Allen v. Regions Bank, No. 09-60705 (5th Cir. August 11, 2010)

This post written by John Pitblado.