Archive for February, 2016

Setting the Standard: Ontario Court Enforces Hybrid Arbitration Agreement in Favour of Bermudian P&I Club

Wednesday, February 17th, 2016

In the recent decision of T. F. Warren Group Inc and Vanguard Shipping (Great Lakes) Ltd v The Standard Steamship Owners’ Protection and Indemnity Association (Bermuda) Limited [2015] ONSC 7778, the Ontario Superior Court of Justice granted a stay of court proceedings under Ontario’s International Commercial Arbitrations Act 1990, in order to enforce a hybrid London arbitration agreement between two insureds and The Standard Club, a Bermudian Protection & Indemnity Association (‘the P&I Club’).

The liability insurance claims asserted in the proceedings related to a maritime incident that occurred in 2011, when a ship collided with a railway bridge on the Maumee River in Ohio. As the Court noted in passing: “the bridge was very likely minding its own business.

Section 25 of the P&I Club’s Defence Rules imposed conditions that arguably could be read as giving the P&I Club unilateral discretion to delay the submission of any dispute to arbitration. In particular, section 25 provided that:

  1. The insured party had to submit the dispute to the P&I Club;
  2. No insured party was entitled to maintain any legal proceedings against the P&I Club unless and until the matter had been submitted to the P&I Club for decision;
  3. The parties then would engage in mandatory mediation (in London); and
  4. If the matter was not settled by mandatory mediation within 14 days, “the dispute shall be referred to and finally resolved by arbitration in London,” subject to the UK’s Arbitration Act 1996.

The Court noted that the P&I Club sat on the insured’s claim for a year.  The Court observed that, “the entire premise of granting a stay under the ICAA is that the party whose action is stayed is not denied access to justice but is gently but firmly directed to the correct door to obtain it.

To mitigate against the risk of further delays, the Court ordered an interim stay of the proceedings, which would then become a permanent stay if all conditions precedent to commencement of arbitration proceedings had been waived or completed within a reasonable period of time.

Although this decision should give comfort to the various P&I Clubs that are incorporated in Bermuda and in the UK that the Canadian Courts will enforce London and Bermuda arbitration agreements, it also illustrates the importance of careful drafting of such clauses, so that they can be easily understood, performed, and enforced.

New Jersey Supreme Court Affirms Viability of Late Notice Defense Under Claims-Made Policies

Friday, February 12th, 2016

In a decision released yesterday, the New Jersey Supreme Court held that an insurer could deny coverage under a claims-made directors and officers policy based on the insured’s late notice, without any evidence of prejudice to the insurer.

In Templo Fuente De Vida Corp., et al. v. National Union Fire Insurance Co., ___ A.3d ___, 2016 WL 529602 (N.J. Feb. 11, 2016), the underlying plaintiffs brought a number of claims against First Independent Financial Group. (“First Independent”) in the wake of a failed real estate deal for which First Independent had promised to provide funding, only to come up empty when the closing date rolled around.  First Financial’s D&O policy with National Union required it to provide notice of claims “as soon as practicable” and within the policy period.  Yet First Financial did not notify National Union of this claim until six months after it had been served, and after it had retained counsel and filed an answer.  National Union promptly disclaimed on grounds of late notice.  In the ensuing coverage litigation brought by the underlying plaintiffs, to whom First Financial assigned its insurance claim, the trial court granted National Union summary judgment on the basis of the late notice defense, brushing aside the plaintiffs’ arguments that National Union should be required to demonstrate prejudice arising from the late notice.  After an affirmance by the New Jersey Appellate Division, the issue arrived at the Supreme Court.

The New Jersey Supreme Court acknowledged that New Jersey does require insurers to show prejudice in order to make out a late notice defense, but noted that this principle applied only to occurrence policies.  The Court emphasized that it approached occurrence and claims-made policies differently due to its belief that the “vast majority” of policyholders with occurrence policies were unsophisticated consumers buying adhesion contracts, while claims-made policyholders, especially for D&O policyholders like First Independent, were sophisticated insureds advised by sophisticated brokers.  Given this background, the Court found that the National Union policy at issue, including its notice requirement, “sufficiently conformed to the objectively reasonable expectations of the insured, and, hence, did not violate the public policy of New Jersey.”  It therefore enforced the prompt notice requirement as written, without imposing a further “prejudice” requirement.

Staying Current on Emerging and Complex Insurance Claims

Friday, February 12th, 2016

In the ever changing legal environment, staying current on complex coverage issues is critical. The upcoming Emerging and Complex Insurance Claims Forum will provide in-house counsel, outside counsel, and policyholder professionals updates on the latest hot topics.

The topics to be covered include: legalized marijuana, drones, cyber liability, social media, product liability claims, additional insured’s, construction claims, SIRs, ADR and additional topics as they hit the news. This event also offers an extended session on allocation, run by the experts who live it every day. This is an opportunity to learn from leading coverage attorneys, litigators, mediators, technology experts, international business experts, and in-house professionals from insurance companies.

The Forum is sponsored by HB Litigation Conference and will be held in Los Angeles on February 25-26, 2016, at the Los Angeles Athletic Club. Laurie Kamaiko, a partner in the firm’s Cybersecurity & Privacy Group and a member of its Insurance Division, will be a panelist on “Cyber Liability Coverage: You say Yes, I Say No.”

HB Litigation Conferences is a premier provider of Insurance, Mass Torts, Construction, and Professional Development conferences, content and networking. Complete details for this insurance forum can be found at http://litigationconferences.com/insurance-allocation-complex-claims-2016/

HB has made this conference complimentary to in-house counsel. Others may save $200 using promotion code SEDGWICK.

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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