Archive for January, 2016

Privy Council Enforces Arbitration Agreement: When “May” Means “Must”

Friday, January 29th, 2016

The Privy Council has handed down its judgment in Anzen Limited v Hermes One Limited [2016] UKPC 1, a case concerning enforcement of an arbitration agreement. The judgment can be found at http://www.bailii.org/uk/cases/UKPC/2016/1.html. The appeal came from the Eastern Caribbean (BVI) Courts, but the decision is of significance for all arbitration-friendly offshore jurisdictions whose final right of appeal lies with the Privy Council, including Bermuda and the Cayman Islands.

The main issue on the appeal was the proper interpretation of an arbitration clause in a BVI company’s shareholders’ agreement which provided that, in the event of an unresolved dispute, “any party may submit the dispute to binding arbitration.” The arbitration agreement was subject to English law, and any arbitration was intended to be subject to ICC arbitration rules and the English Court’s supervisory jurisdiction.

It was concluded both at first instance and in the BVI Court of Appeal that the use of the word “may” effectively resulted in the arbitration clause being non-exclusive, permissive and optional, rather than mandatory; and that, unless and until a party actually had exercised its arbitration option by commencing an ICC arbitration with respect to a dispute, there was no basis for the BVI Court to stay any Court proceedings.

The Privy Council disagreed. Although it did not accept that the arbitration clause was mandatory in all circumstances, it concluded that it was mandatory in the event that either party unequivocally insisted on there being an arbitration of any unresolved disputes (even if that party was not minded to commence arbitration itself, but simply waited until the other party did so).

The decision is to be welcomed as yet another example of the Court’s willingness to uphold and enforce arbitration agreements in arbitration-friendly jurisdictions such as Bermuda, the BVI, and the Cayman Islands.

However, the decision also illustrates, quite starkly, the importance of careful drafting of any arbitration agreement or jurisdiction agreement. Had the parties and their lawyers clearly used the word “shall” rather than the word “may” in the arbitration clause, they might have avoided the time and costs associated with over two years of litigation and two appeals.

Washington Supreme Court Broadly Interprets “Arising Out Of” for Purposes of UIM Claims

Monday, January 25th, 2016

On January 14, 2016, the Washington State Supreme Court rendered an important decision on when an injury “arises out of” the use of a vehicle for the purpose of uninsured motorist (“UIM”) coverage.

In Kroeber v. GEICO Insurance Co., a woman was shot outside a bar by the driver of an uninsured vehicle, and sought UIM coverage from her automobile insurer. The woman’s insurer, GEICO, provided coverage for damages that the insured was legally entitled to recover from the owner or operator of an uninsured motor vehicle due to bodily injury sustained and caused by an accident, provided that the liability of the owner or operator of an uninsured motor vehicle arises out of the ownership, maintenance or use of the uninsured motor vehicle. GEICO denied the claim because the woman’s injuries did not arise out of the use of the uninsured motorist’s truck, and she sued for coverage.

Prior Washington courts had found that the phrase “arising out of” in a UIM policy does not mean proximate cause, but indicates a lesser standard of causation having some relationship to or connection with the use, maintenance or ownership of the uninsured vehicle. The Kroeber court concluded that existing case law did not establish that the vehicle or an attachment to it need be the direct cause of the injury, but that the injury must have a causal relationship to the condition of the vehicle, a permanent attachment thereto, or some aspect of its operation. Thus, the court found, the phrase “arising out of” should be broadly construed to mean a mere causal connection between the injury and the use of the vehicle. The court distinguished situations where the vehicle serves as the “mere situs” of the accident, and noted that the distinction and determination for when the use of a vehicle causes the injury versus when it is the mere situs of the injury is a factual determination to be made by the trial court.

Kroeber is significant because it opens the potential for UIM coverage for injuries that are not directly caused by the vehicle, but are the independent actions of the operator of the vehicle at the time of the incident.

Sedgwick Supports ACCEC Insurance Law Symposium

Friday, January 8th, 2016

The American College of Coverage and Extracontractual Counsel (ACCEC) is hosting an Insurance Law Symposium on January 22, 2016, at Boston College Law School, in Newton, Massachusetts. Our partner Bruce Celebrezze is Secretary-Treasurer of the ACCEC.

The symposium is designed to enhance and further the dialogue on the issues facing today’s insurance industry by bringing together insurance professionals and regulatory authorities to share insights.  Topics range from intellectual property disputes and D&O liability to cybersecurity and data breach claims. The Hon. Herbert Wilkins (ALI Council member and former Chief Justice, Supreme Judicial Court of Massachusetts) will speak on A Chief Justice’s Perspective on Restatements and the Law.

Established in 2012, the ACCEC brings together pre-eminent lawyers representing the interests of both insurers and policyholders to improve the quality of the practice of insurance law and to increase civility and professionalism in its field. Its mission includes educating all sectors involved in insurance disputes — including the judiciary, legal and insurance professionals, and businesses — on critical topics such as best practices in policy formation and claims handling, developing trends in insurance law, and bad faith. Through its Board of Regents and its working committees, the College engages in a wide variety of activities designed to promote those goals, in addition to improving the civility and the quality of the practice of insurance law.

The registration deadline is Friday, January 15. Space is limited and available on a first-come, first-served basis. For more details, click here.

Sedgwick Attorneys
Sedgwick’s insurance attorneys regularly present to clients and other industry professionals on a wide range of topics. For a complete list of our attorneys, click here.
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