Reinsurance Focus

INA Reinsurance recently moved to dismiss or to stay an action initiated by Utica Mutual Insurance arising out of the alleged breach of three confidentiality agreements, including one entered as an order in the parties’ pending reinsurance arbitration. Utica alleged that INA breached the confidentiality agreement put in place in the reinsurance arbitration by improperly disclosing confidential information in a separate lawsuit against a third party. The federal district court denied INA’s motion to dismiss or to stay, finding that the Supreme Court’s Colorado River abstention doctrine inapplicable because the defendants in the two lawsuits were unrelated and the claims were significantly different. Further, the district court concluded that Utica was not required to pursue its claims for breach of the confidentiality agreements in the pending arbitration because there exists clear language in the confidentiality agreements authorizing Utica to pursue claims for breach in a judicial forum. Utica Mutual Insurance Co. v. INA Reinsurance Co., No. 12-cv-00194 (USDC N.D.N.Y. Apr. 24, 2012).

This post written by John Black.

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As a condition of his employment at Bison, Aldridge signed an arbitration agreement in which he agreed to resolve by arbitration any claims for work-related injuries. After Aldridge sustained an injury at work, Bison paid him approximately $80,000 in medical and wage replacement benefits in exchange for a release in which Aldridge gave up the right to take legal action. Aldridge later demanded arbitration. The arbitrator dismissed Aldridge’s claim with prejudice based on the terms of the release. Aldridge filed a petition to vacate; Bison moved to confirm.

The trial court vacated in part, holding that there were unresolved questions of fact regarding whether the release and waiver was enforceable. In particular, the court held that there were fact issues regarding whether Texas’s fair notice requirement had been met and, if not, whether both parties had actual knowledge of the terms of the waiver. Further, the court held that there was a question regarding whether the “ambiguous terms of the waiver” precluded arbitration. Bison appealed. The court of appeals held that the trial court’s order was interlocutory and thus not appealable. The Supreme Court affirmed, holding that the order was interlocutory and non- appealable because it left “significant factual and legal issues open for further determination.” The dissenting justices opined that mandamus review was warranted under Texas procedure because the FAA would permit an appeal from the trial court’s order, which the dissent argued calls for an “arbitration Mulligan.” Bison Bldg. Materials, Ltd. v. Aldridge, No. 06-1084 (Tex. Jan. 16, 2008).

This post written by Ben Seessel.

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A putative class action against HSBC and its affiliates asserting violations of the Real Estate Settlement Procedures Act of 1974 was stayed in part pending the outcome of First American Financial Corp. v. Edwards, a case expected to be resolved this term by the U.S. Supreme Court. The named plaintiff seeks to represent, among others, consumers whose residential mortgage loans were included within HSBC’s captive mortgage reinsurance arrangements. Among other things, plaintiff seeks classwide resolution of whether the captive reinsurance arrangements constituted unlawful kickbacks from the private mortgage insurer defendants. The district court issued a partial stay of the action pending the decision in First American, where the Supreme Court is expected to rule whether a private purchaser of real estate settlement services has standing under Article III of the Constitution to assert a RESPA claim absent a showing that the alleged violation affected the price, quality, or other characteristics of the settlement services provided. McCarn v. HSBC USA, Inc., Case No. 12-375 (USDC E.D. Cal. Apr. 12, 2012).

This post written by John Black.

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The Ninth Circuit recently issued an opinion on an issue of first impression — whether an order compelling enforcement of a contractual agreement to submit a dispute to a referee, and staying proceedings in the interim, is immediately appealable. The dispute at issue arose between Bagdasarian Productions and Twentieth Century Fox over the film “Alvin and the Chipmunks, The Squeakquel.” The Ninth Circuit dismissed the appeal on the basis that it lacked jurisdiction at this stage of the proceedings. Specifically, the court held that the stay was not a “final decision” or “judgment” because it did not put the plaintiffs “out of court.” No decision by the referee could possibly moot the action or be res judicata (as with a parallel proceeding). Indeed, after the referee’s decision, the losing party would have the option of moving for a new trial or any other post-judgment motions. Similarly, the court found that the order staying the proceedings was not immediately appealable under the collateral order doctrine because plaintiffs could ultimately seek relief on appeal to this court after the action before the referee and district court concludes. The Court noted that its ruling was consistent with treatment of orders denying or compelling arbitration under the Federal Arbitration Act. Bagdasarian Productions, LLC v. Twentieth Century Fox Film Corp., No. 10-56430 (9th Cir. Mar. 26, 2012).

This post written by John Black.

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School districts brought a case in state court against their insurers, alleging that the insurers’ withdrawal of funds from the federal Early Retiree Reinsurance Program (ERRP) on the school district’s behalf was improper under the ERRP’s scheme. Despite the plaintiffs’ assertion of only state common law claims for conversion, civil theft, unjust enrichment, and breach of fiduciary duty, the defendants removed the case to federal court as implicating a federal question. On plaintiffs’ motion to remand back to state court, the court analyzed plaintiffs’ allegations and determined that, notwithstanding that the legal claims were alleged under state law, meeting the elements of those claims required the court to interpret the ERRP and related federal regulations to determine whether the defendants’ withdrawals were proper. The court then determined that, because the case would entail a “substantial and disputed federal issue,” and because federal jurisdiction over the case would not create “a potentially enormous shift of traditionally state cases into federal court,” federal jurisdiction was proper. In reaching this conclusion, the court found that the lack of a right to a private right of action under the ERRP was a relevant factor, but did not require remand. Hartland Lakeside Joint No. 3 School District v. WEA Insurance Corp., Case No. 2:12-cv-00154 (USDC E.D. Wisc. Apr. 24, 2012).

This post written by Michael Wolgin.

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The Commonwealth Court of Pennsylvania issued an opinion vacating Pennsylvania’s Office of Open Records’ denial of a request for documents under the state’s Right-to-Know Law. Plaintiff sought records related to Reinsurance Offset Guidelines from the Pennsylvania Department of Insurance and Reliance Insurance Company, which has been in liquidation since 2001. The OOR denied the request on the basis that the documents were “internal, pre-decisional deliberations.” The court vacated the denial because the OOR did not have jurisdiction to hear this matter as Reliance’s Statutory Liquidator. The court further explained that the Pennsylvania Insurance Department, when aiding the Statutory Liquidator, and Reliance are acting pursuant to a judicial order and under the supervision of the Commonwealth Court. Because the court had appointed the state Insurance Commissioner as Statutory Liquidator, it retained general supervision over the Statutory Liquidator and the insolvent estate. Thus, all complaints regarding how the insolvency is being administered must be directed to the court, and any records can only be obtained through court order. Greenberger v. Pennsylvania Ins. Dept., No. 931 C.D. 2011 (Pa. Commw. Ct. Mar. 7, 2012).

This post written by John Black.

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A court vacated an order of the Pennsylvania Office of Open Records that denied a request for documents in the possession of the department of insurance related to the drafting of the reinsurance offset guidelines of a liquidating insurer. The OOR had found that the documents were exempt from disclosure as “internal predecisional deliberations” in the possession of the department, which was serving as the insurer’s statutory liquidator. On appeal, while the court tended to agree with the OOR’s reasoning, it found that the state disclosure law was “inapplicable to rehabilitation or liquidation proceedings because [the records] are solely within the control of the court under the Insurance Act.” As a result, the court held that it, and not the OOR, had jurisdiction over the documents relating to the drafting of the guidelines. Greenberger v. Pennsylvania Insurance Department, Case No. 931 C.D. 2011 (Pa. Commw. Ct. March 7, 2012).

This post written by Michael Wolgin.

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Manifest disregard

Bangor Gas Co., LLC v. H.Q. Energy Services (U.S.), Inc., No. 1:11-cv-457-NT (USDC D. Me. Mar. 1, 2012) (granting motion to confirm, no manifest disregard).

Total Landscaping Care, LLC v. Tower Cleaning Systems, Inc., No. 10-6542 (USDC E.D. Pa. Mar. 1, 2012) (denying vacatur, no manifest disregard).

Duferco S.A. v. Tube City IMS, LLC, No. 11-886 (2d Cir. Mar. 8, 2012) (affirming denial of vacatur, no manifest disregard).

Exceeding Scope

W & J Harlan Farms, Inc. v. Cargill, Inc., No. 1:09-CV-113-WTL-TAB (USDC S.D. Ind. Mar. 6, 2012) (granting motion to confirm, arbitrators did not exceed scope, no manifest disregard).

Primed, Inc. v. Dallas General Life Insurance Co., No. 8:11-cv-2002-T-33AEP (USDC M.D. Fla. Feb. 28, 2012) (denying vacatur, arbitrators did not exceed powers).

JPMorgan Chase Bank, N.A., No. 10-17562 (9th Cir. Feb. 29, 2012) (affirming denial of vacatur, arbitrators did not exceed scope)

Failure to hear pertinent and material evidence

LJL 33rd Street Associates, LLC v. Pitcairn Properties, Inc., No. 11-Civ-6399 (USDC S.D.N.Y. Feb. 15 2012) (denying vacatur, no failure to hear pertinent and material evidence)

Jurisdiction / Venue / Procedure

JDS Uniphase Corp. v. Finisar Corp., No. 11-1213 (USDC W.D. Pa. Mar. 5, 2012) (granting motion to dismiss, no independent subject matter jurisdiction conferred by FAA) (appeal docketed March 9, 2012).

Marlowe v. IDS Property Casualty Insurance Co., No. 2011AP2067 (Wis. Ct. App. Mar. 13, 2012) (reversing trial court, remanding to arbitrators for ruling on discovery issues).

Rain CII Carbon, LLC v. ConocoPhillips Co., No. 11-30669 (5th Cir. Mar. 9, 2012) (affirming ruling denying vacatur for lack of “reasoned award” attack on award issued without findings of fact and law).

Grynberg Production Corp. v. Susman Godfrey, LLP, No. 10-1248 (10th Cir. Feb. 16, 2012) (affirming denial of motion to compel re-arbitration of matters encompassed by original award).

Bridgepoint Ventures, LLC v. PanAm Management Group, Inc., No. 11-10021 (11th Cir. Mar. 2, 2012) (affirming proper subject matter jurisdiction of trial court that granted motion to confirm where complete diversity existed at time of filing).

Local 36 Sheet Metal Workers’ International Association AFL-CIO v. Whitney, No. 11-1781 (8th Cir. Mar. 6, 2012) (reversing denial of vacatur where non-appearing party in arbitration challenged jurisdiction for lack of contract between parties for first time in proceeding to enforce the award).

This post written by John Pitblado.

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Various BCBS healthcare plans and BCS Insurance Company became engaged in a coverage dispute pertaining to certain professional liability coverage issued by BCS to member plan administrators. As per applicable contracts containing arbitration provisions, the parties each named arbitrators. According to the contracts’ governing procedure, when those two arbitrators failed to reach agreement, some of the health plans brought an action in Illinois federal court seeking appointment of a neutral third arbitrator. In the course of that proceeding, BCS cross-moved for an order to compel individual arbitration, rather than class arbitration, which it styled as a motion to compel non-consolidated arbitration. The court ruled first on BCS’s cross-motion, finding that decision on that issue should be made by the arbitrator(s), not the court. BCS immediately appealed that decision. The court, finding BCS’s appeal an improper interlocutory appeal, thereafter appointed the neutral third arbitrator as requested by the plans and ordered the parties to continue the arbitration with the panel so constituted. BCS appealed that order as well, arguing that its previous interlocutory appeal deprived the district court of jurisdiction to enter its order. The Seventh Circuit held that the first appeal was an improper attempt to circumvent proper arbitration procedure under the FAA, and dismissed it as interlocutory. It then held that the dismissal of the first appeal mooted the basis for the second appeal, since the trial court had jurisdiction to enter its order appointing an arbitrator. Blue Cross Blue Shield of Massachusetts, Inc. v. BCS Ins. Co., Nos. 11-2343 & 11-2757 (7th Cir. Dec. 16, 2011)

This post written by John Pitblado.

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An action for breach of contract and declaratory relief arising from “fronting” insurance arrangements and reinsurance contracts (some dating to the late 1960s) between Employers’ Liability Assurance Corp. (“ELAC,” a predecessor of OneBeacon) and a series of “Moving Party” reinsurers has fallen by the wayside. The moving party reinsurers filed a motion to dismiss for lack of personal jurisdiction, or alternatively, under the doctrine of forum non conveniens. The court granted the motion, finding that the reinsurers – based in the UK – did not transact business in Massachusetts under the Commonwealth’s long-arm statute, nor did they have the requisite minimum contacts consistent with due process under the federal Constitution. The court found that a separate insurance broker and not the reinsurers had contacted ELAC regarding the contracts. The reinsurers were likewise not party to the contracts, and those agreements to which they were parties were negotiated and entered into in London. Further, no moving party reinsurer had any contact with any Massachusetts entity after 1993, thus failing the “continuous and systematic” contacts standard. OneBeacon America Insurance Co. v. Argonaut Insurance Co., No. 09-5085 (Mass. Super. Ct. Nov. 9, 2011).

This post written by John Black.

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