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Infrassure, Ltd. v. First Mutual Transportation Assurance Company

Issue Discussed: Arbitration/Application of the Titles Clause

Submitted by Ann E. Halden

Date Promulgated: November 16, 2016

 

Infrassure, Ltd. v. First Mutual Transportation Assurance Company, 842 F.3d 174 (2d Cir. 2016)

Court: U.S. Court of Appeals for the Second Circuit

Issues Decided: (1) Whether the arbitration clause contained in an endorsement supplanted the arbitration clause in the certificate and (2) the operation and purpose of a “Titles Clause.”

Submitted by:  Ann E. Halden[1]

On November 16, 2016 the Second Circuit affirmed the District Court’s ruling that the arbitration clause in the body of the facultative certificate was not displaced by an endorsement which the court held was expressly limited to UK and Bermuda insurers.  In reaching this conclusion, the court for the first time interpreted the Titles Clause of a facultative reinsurance certificate.

The arbitration clause of the facultative certificate provided that “any dispute arising out of the interpretation, performance or breach of this Certificate” be submitted to arbitration in which “[a]ll arbitrators will be disinterested active or former officers of insurance or reinsurance companies.”  The ceding company, First Mutual Transportation Assurance Company (“First Mutual”), however, sought to compel its reinsurer, Infrassure, Ltd., to submit to arbitration pursuant to the arbitration clause contained in an endorsement to the certificate, which did not limit the arbitrators to current or former insurance executives.  Similar to the arbitration clause in the body of the certificate, the endorsement stated that it applied to “[a]ny dispute, controversy or claim arising out of or relating to this agreement or the breach, termination or invalidity thereof.”  The endorsement was headed “LONDON ARBITRATION AND GOVERNING LAW (UK AND BERMUDA INSURERS ONLY).”  Infrassure, a Swiss company, argued that because it was not a UK or Bermuda insurer, the endorsement did not apply to the dispute.

First Mutual argued that pursuant to the “Titles Clause” the parenthetical in the endorsement purportedly limiting the endorsement to UK and Bermuda insurers did not apply to limit the application of the endorsement.  The “Titles Clause” in the certificate provided that “[t]he several titles of the various paragraphs of this Certificate (and endorsements . . . attached hereto) are inserted solely for convenience or reference and will not be deemed in any way to limit or affect the provisions to which they relate.”

The court concluded that the arbitration clause in the body of the certificate controlled, calling the contract “unambiguous.”    The court found that the parenthetical was not part of the title itself and therefore fact expressly limited the application of the endorsement to UK and Bermuda insurers.  In so ruling, the court noted that “[t]he purpose of the Titles Clause is not to strip away an express indication as to the context in which a particular provision is operative, but to ensure that the text of a provision is not discounted or altered by the words of its heading.”  The court therefore affirmed the District Court’s ruling in favor of Infrassure, which held that the form’s arbitration procedures governed.

[1] Ann E. Halden is Special Counsel at Mound Cotton Wollan & Greengrass focusing on reinsurance litigation and arbitration.