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Arbitration Provision Enforceable in Insurance Issued by Risk Retention Group, While Arbitration and Choice-of-Law Provisions Unenforceable in Reinsurance Contract

Two recent decisions addressed the application of a Washington statute, RCW 48.18.200, which prohibits arbitration agreements and foreign choice-of-law provisions in insurance issued to Washington insureds. First, the Ninth Circuit held that the Washington statute did not prohibit an arbitration clause in an insurance policy issued to a Washington insured by a risk retention group chartered in Arizona. Allied Professionals Ins. Co. v. Anglesey, 2020 WL 1179772 (9th Cir. Mar. 12, 2020). The Ninth Circuit explained that the arbitration provision was enforceable because the Washington statute was preempted by the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq. Second, a Washington federal district court held that the Washington statute voided arbitration and New York choice-of-law provisions in a reinsurance contract issued to a Washington risk pool. Washington Cities Ins. Auth. v. Ironshore Indem. Co., 2020 WL 1083715 (W.D. Wash. Mar. 6, 2020). In reaching this result, the court rejected the contention that reinsurance was not insurance subject to the statute.

Please note that any opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.

Insurer Not Entitled to Contribution Where Its Insured Did Not Assume Contingent Liabilities

Allianz Global Risks v. ACE Property & Casualty Ins. Co., 297 Or App 434 (2019) involved a contribution action brought by the plaintiff insurers against several defendant insurers. The defendant insurers had issued insurance to the same insured, Con-way, prior to 1981. These policies included Con-way’s subsidiary as an insured. In 1981, Con-way sold the subsidiary to Daimler, which was insured by plaintiffs. After defending and indemnifying Daimler, as successor to the subsidiary, in three Superfund claims and more than 1,500 asbestos personal injury claims, the plaintiffs sued the defendant insurers seeking contribution. The Oregon Court of Appeals addressed whether the plaintiffs’ insured, Daimler, had assumed the subsidiary’s contingent liabilities with the 1981 sale. It found that a letter written at the time of the sale clarified that Daimler had not assumed the contingent liabilities: “The letter states explicitly that its purpose is to clarify the terms of the [sale] agreement. It is signed by the parties and unequivocally and unambiguously states that [the subsidiary] has not transferred, and Daimler has not assumed, [the subsidiary’s] contingent liabilities.” Id. at 444. Because Daimler had not assumed the continent liabilities, the court held that the plaintiffs could not seek contribution from the defendant insurers. Soha & Lang, P.S., represented one of the insurer defendants in the action.

Disclaimer: The opinions expressed in in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.

Risk Pool Had Authority to Assess Former Member for Capitalization Assessment

On October 17, 2018, the Oregon Court of Appeals held that a risk pool had the authority for its assessment of a former member.  In Capital Credit & Collection Serv., Inc. v. Kerr Contractors, Inc., 294 Or App 486 (2018), a workers’ compensation risk pool assessed current and former members in response to the state raising capitalization requirements.  A former member (the “Member”) refused to pay the assessment, contending that the risk pool did not have the authority on two grounds.  First, the Member contended that, under the terms of the pooling agreement, the risk pool’s authority to assess former members was limited to two situations, neither of which was involved:  payments to injured workers; and payments to the Workers’ Compensation Division.  The Oregon Court of Appeal rejected the contention, finding that the assessment authority was broader.  Second, the pooling agreement permitted assessments for former members as follows:  “You are assessable while this agreement is in effect and for three years following its termination.”   (Emphasis added).  Focusing on the word “termination,” the Member contended that it was not subject to the assessment because its participation had been “cancelled” rather than “terminated.”  The court rejected the argument, finding that the pooling agreement used the two words interchangeably.

 

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.

Ongoing Operations Exclusion j.(5) Bars Coverage

In two related cases, Unigard Ins. Co. v. Metro Metals Nw., Inc., 17-CV-05743-RBL (W.D. Wash. Oct. 11, 2018) and Alaska Nat’l Ins. Co. v. Metro Metals Nw., Inc., 1:17-CV-05765-RBL (W.D. Wash. Oct. 11, 2018), the federal district court held that the insurance companies’ policies did not provide coverage for the underlying claims against their mutual insureds.

 

The insureds had entered into an agreement with a port to use a dock for loading scrap metal onto ships. The dock was damaged, and the port demanded reimbursement for repairs, consistent with their agreement.  The port subsequently sued the insureds.  In separate opinions, the federal district court held that there was no coverage for the port’s underlying claims against the insureds.  It reasoned that Exclusion j.(5), the Ongoing Operations Exclusion, applied to the claims.  This exclusion bars coverage for property damage to “[t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations[.]”  Soha & Lang, P.S., represented one of the insurance companies.

 

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.

Insureds Failed to State a Claim for the Wrongful Withholding of Money or Property from Vulnerable Persons

In Bates v. Bankers Life and Cas. Co., 362 Or 337 (2018), the Oregon Supreme Court addressed the certified question involving ORS 124.110(1)(b), which addresses financial abuse of vulnerable persons.  The certified question was:  “Does a plaintiff state a claim under Oregon Revised Statutes 124.110(1)(b) for wrongful withholding of money or property where it is alleged that an insurance company has in bad faith delayed the processing of claims and refused to pay benefits owed under an insurance contract?”  The plaintiffs were elderly persons who had purchased long-term care insurance policies from the defendant insurance company.  The plaintiffs claimed that the insurer developed onerous procedures to delay and deny insurance claims.  The court held that plaintiffs had failed to state a claim under the statute:  “[W]e answer in the negative:  Allegations that an insurance company, in bad faith, delayed the processing of claims and refused to pay benefits owed to vulnerable persons under an insurance contract do not state a claim under ORS 124.110(1)(b) for wrongful withholding of ‘money or property.’”  The court reasoned that Section (1)(b) of the statute applies where a vulnerable person entrusts his or her money or property to another, who in bad faith refuses to return that money or property.  This requirement was not satisfied because the plaintiffs were not seeking the return of the money that they had transferred to the insurer but were seeking contractual benefits under the insurance policies.

 

Disclaimer: The opinions expressed in in this blog are those of the authors and do not necessarily reflect those of Soha and Lang, P.S. or its clients