Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

PRE-ARBITRATION SUBPOENAS ISSUED TO HELP IDENTIFY PROPER PARTIES TO CONTEMPLATED ARBITRATION

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A court granted a petition for pre-arbitration issuance of judicial subpoenas to enable the petitioners to learn the names of potential parties against whom they may have a claim in their contemplated arbitration. Although the contemplated arbitration was to be governed by the Financial Industry Regulatory Authority’s Code of Arbitration Procedure, those rules were silent as to pre-arbitration discovery. However, a New York civil procedure statute specifically permitted pre-action discovery “to aid in arbitration.” That statute had been invoked where application was made to discover the identity of potential parties against whom an action may exist, so the petition was held proper. Petition of VTrader Pro LLC, Index No. 102334/09 (N.Y. Sup. Ct. Apr. 21, 2009).

This post written by Brian Perryman.

PETITION TO VACATE ARBITRATION AWARD FILED IN WRONG COURT

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Following an unfavorable decision by an arbitrator, the Pacific Northwest Regional Council of Carpenters (“PNRCC”) filed suit in the Western District of Washington to vacate the arbitrator’s award to the Laborers’ International Union of North America (“LIUNA”). LIUNA filed a motion to transfer PNRCC’s action to D.C. federal court, arguing that PNRCC was bound to consent to D.C. jurisdiction by the collective bargaining agreement. Finding that the action could clearly have been brought in D.C., the district court focused on the “convenience of the parties” and “interests of justice” requirements for a §1404(a) transfer. The court noted that both LIUNA and PRNCC’s parent union were headquartered in Washington, D.C. and that all relevant records were in D.C. where all of the operative facts of the case occurred. For these reasons, the court held that D.C. was the more convenient forum.

The court also held that the interests of justice supported the transfer. LIUNA had filed a suit seeking enforcement of the arbitration award in D.C. and the court noted that it would be inefficient and duplicative to examine the same issues in separate cases. Ultimately, the court granted the motion to transfer, explaining that whether the agreement properly bound PNRCC was irrelevant in the §1404(a) analysis. LIUNA had met their burden by showing that D.C. was the most appropriate forum to decide all issues based on the traditional §1404(a) considerations. Pacific Northwest Reg'l Council of Carpenters v. Laborers Int'l Union of N. Am., Case No. C09-420 (W.D. Wash. June 5, 2009).

This post written by John Black.

ORDER ALLOWING DISCOVERY OF ARBITRATION AWARD’S VALIDITY LACKED FINALITY TO CONFER APPELLATE JURISDICTION

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In an unpublished opinion, the Third Circuit Court of Appeals declined to exercise jurisdiction over an appeal of an order allowing discovery in connection with a motion to vacate an arbitration award. The Federal Arbitration Act provides for appeals from orders “modifying, correcting, or vacating an [arbitration] award.” The trial court’s decision to permit discovery into whether the award should be vacated might be a prelude to a final order vacating or modifying the award, but it is not a final order for purposes of the Act. Guyden v. Prudential Life Ins. Co. of Am., No. 08-3108 (3d Cir. June 5, 2009).

This post written by Brian Perryman.

ADR UMPIRE HAS AUTHORITY TO DETERMINE ENFORCEABILITY OF SETTLEMENT AGREEMENT

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Constructamax, Inc. (“CMAX”), joined by Arch Insurance Company and Arch Reinsurance Company, filed a motion in federal district court to enforce a purported settlement agreement reached with Whitlock Mills LP (“Whitlock”) prior to the commencement of an Alternative Dispute Resolution (“ADR”) proceeding . Whitlock acknowledged the settlement discussion, but denied the existence of an enforceable settlement agreement. The district court ultimately denied CMAX’s motion, ruling that pursuant to the plain language of The New Jersey Alternative Procedure for Dispute Resolution Act, the ADR umpire had full jurisdiction to decide the enforceability of the purported settlement agreement. Deluxe Building Sys., Inc. v. Constructamax, Inc., Case No. 06-2996 (USDC D.N.J. June 2, 2009).

This post written by Dan Crisp.

SUMMARY JUDGMENT GRANTED FOR VIOLATION OF CONSENT TO SETTLE PROVISION

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Ace American Insurance Company (“Ace”) made claim for coverage from its reinsurer, Continental Casualty Company (“Continental”), for an $11.68 million settlement it entered into with its underlying insured in a first party coverage case which included bad faith claims against Ace. Continental declined coverage and instituted a declaratory action seeking a determination that it owed no coverage because (1) Ace settled the case without Continental’s approval as required under the consent to settle provision, and (2) given Ace’s $10m deductible, uninsured losses would have reduced the claim to less than the deductible.

The Court agreed with Continental, finding that an oral agreement to settle in principal, even though not consummated, was entered into by Ace prior to any attempt to obtain Continental’s consent thereto. The Court found this breach of the consent-to-settle provision dispositive, but also noted its agreement with Continental’s other claim that certain of the losses pertained to Ace’s exposure to non-covered punitive damages, which losses would have reduced the claim to less than the amount of Ace’s deductible. Continental Cas. Co. v. Ace American Ins. Co., Case No. 07-958 (USDC S.D.N.Y. May 31, 2009)

This post written by John Pitblado.