Reinsurance Focus

On August 29, 2014, the United States Court of Appeals for the Eleventh Circuit, in reversing the district court on interlocutory appeal, found that an indemnification agreement, performance bonds, and a subcontract between different parties formed a single transaction, therefore allowing indemnitors to compel arbitration.

The University of Alabama hired Brice Building Company (“Brice”), a general contractor, to develop a student housing complex. Brice then entered into a subcontract and arbitration agreement with Atlantis Drywall and Framing (“Atlantis”). Atlantis secured performance bonds through Hanover Insurance Company (“Hanover”), a condition necessary to work on the project. The subcontract contained an arbitration provision, but the bond did not. However, the bond incorporated the subcontract by reference. When Atlantis defaulted on its work, Hanover sought indemnification.

At issue before the district court was whether the arbitration clause in the subcontract between Brice and Atlantis required a signatory to arbitrate with a non-signatory in a related dispute. The circuit court found that the agreements entered into were all part of the same subject matter despite being signed by different parties. For that reason, the court noted that these documents should be viewed as a single transaction. The court further reasoned that, contrary to Hanover’s assertion, the bond does relate to the subcontract since it incorporated the subcontract between Brice and Atlantis. The district court therefore erred when it declined to read the three documents as a single transaction, denying arbitration. Hanover Ins. Co. V. Atlantis Drywall & Framing LLC, No. 13-14482 (11th Cir. Aug. 29 2014).

This post written by Matthew Burrows.

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