Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

TENTH CIRCUIT HOLDS POST-JUDGMENT INTEREST RATE IN “BROAD” ARBITRATION PROVISION TRUMPS STATUTORY RATE

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On November 17, 2008, we reported on a Colorado district court’s decision in a reinsurance dispute to alter the post-judgment interest rate provided in the arbitration panel’s final award and replace it with a statutory rate.

Earlier this month, however, the Tenth Circuit reversed the district court, holding that the post-judgment interest entitlement and rate decided by the arbitration panel should govern. The court reasoned that parties are permitted to set their own rate of post-judgment interest through contract, and the arbitration provision at issue in this case was a “broad” provision. The court further held that “the parties’ intent is a quintessential fact question, and we see no reason why an arbitration panel with authority to decide a contractual dispute cannot also determine whether the contract in question includes language clearly, unambiguously, and unequivocally stating the parties’ intent to bypass § 1961[, the post-judgment interest statute].” Newmont USA LTD v. Ins. Co. of N. Am., Nos. 08-1347 & 08-1370 (10th Cir. Aug. 11, 2010).

This post written by Michael Wolgin.

LLOYD’S UNDERWRITERS MUST REVEAL “NAMES” TO ESTABLISH JURISDICTION

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Certain Underwriters at Lloyd’s, London brought suit in Florida federal court to seek adjudication of the binding effect of a purported settlement agreement it had entered with insureds pertaining to coverage for an underlying all terrain vehicle accident. Lloyd’s and the insureds had been approaching a tentative agreement on a settlement, but the parties’ stories diverged from there, with Lloyd’s asserting settlement had been in fact been reached in principle, and the insureds asserting that no final agreement had been reached. Lloyd’s brought suit in federal court to resolve the dispute, and the trial court rejected the insureds’ challenge to jurisdiction, by way of motion to dismiss, asserting that Lloyd’s had to specifically allege the residence of each of the “names” actually sponsoring the insurance, and for whom liability attaches severally under pertinent British statutory laws governing Lloyd’s. The Eleventh Circuit Court reversed that decision, detailing the history of Lloyd’s, its nature as an unincorporated association of “names” who sign on to particular risks, which are administered by “syndicates,” and the manner in which liability attaches to the “names,” akin to the members of a partnership. The Court held that Lloyd’s must allege each of the actual “names” bringing suit for purposes of establishing diversity jurisdiction. Underwriters at Lloyd’s, London v. Osting-Schwinn, No. 08-15809 (11th Cir. August 5, 2010).

This post written by John Pitblado.

11TH CIRCUIT UPHOLDS CONFIRMATION OF ARBITRATION AWARD PURSUANT TO LIQUIDATED DAMAGES CLAUSE

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Following the district court’s confirmation of an arbitration award of damages to Seaborne Virgin Islands, National Aerotech Aviation appealed to the 11th Circuit Court of Appeals arguing that the district court “improperly and erroneously weighed the material facts” in determining whether the arbitrator acted in manifest disregard of the law. The 11th Circuit affirmed the district court’s decision, concluding that Aerotech had offered no evidence to suggest that the arbitrator deliberately ignored the law, and further holding that Georgia law explicitly allows parties to a contract to agree to liquidated damages. Thus, the district court did not err in granting summary judgment in favor of Seaborne. Aviation’s final argument – that the district court should have allowed discovery to proceed – was quickly dismissed by the Court, noting that district courts are granted wide discretion in ruling on discovery motions. National Aerotech Aviation, Inc. v. Seaborne Virgin Islands, Inc., Case No. 09-3252 (11th Cir. July 19, 2010).

This post written by John Black.

TEXAS SUPREME COURT GRANTS MANDAMUS RELIEF TO STAY LITIGATION PENDING ARBITRATION

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The Texas high court has held that a trial court abused its discretion by refusing to stay the litigation related to one corporation, MetroPCS Communications, Inc. (Communications), until the identical claims of its corporate affiliate, MetroPCS Wireless, Inc. (Wireless), were decided by arbitration or until Wireless became a member of a certified class action. The petitioner moved the trial court to compel arbitration and requested a stay of all litigation. The trial court denied the motion to compel arbitration because of a clause excluding arbitration where a signatory was a class member, but stayed Wireless’s claims until a class certification decision was rendered in a consolidated class action against the petitioner, of which Wireless was a putative member. The trial court declined to stay the related Communications litigation, which involved claims identical to the Wireless litigation. Directing that the Communications litigation also be stayed, the Supreme Court stated that the class action exclusion clause does not provide “a signatory with sanctuary from arbitration while a non-signatory affiliate simultaneously conducts discovery and chips away at the same issues in litigation.” In re Merrill Lynch & Co., Case No. 09-0161 (Tex. June 25, 2010).

This post written by Brian Perryman.