Mont. Ass’n of Ctys. Prop. & Cas. Trust v. Certain Underwriters at Lloyds
Issue Discussed: Arbitrability and Service of Suit Clauses
Submitted by Michael Carolan
Date Promulgated: October 22, 2020
Case: Mont. Ass’n of Ctys. Prop. & Cas. Trust v. Certain Underwriters at Lloyds, CV 19-196-M-DLC, 2020 WL 6202673 (D. Mont. Oct. 22, 2020).
Issue Discussed: Arbitrability and Service of Suit Clauses
Court: U.S. District Court for the District of Montana, Missoula Division
Date Decided: October 22, 2020
Issues Decided: (1) Whether a service-of-suit clause creates an exception to arbitration; and (2) whether the scope of an arbitration clause includes claims for payment and bad faith claims.
Submitted by: Michael T. Carolan (Partner) and Chris Verdugo (Associate), Troutman Pepper LLP
Montana Association of Counties Property and Casualty Trust (“MACPCT”) purchased excess of loss reinsurance from Lloyd’s of London (“Underwriters”) to cover policies for members of MACPCT’s joint risk pool. Following settlement of a claim brought against several of its members, MACPCT demanded reimbursement from Underwriters. After Underwriters’ refusal, MACPCT filed suit against Underwriters alleging breach of contract under the Policy’s terms and violations of the Montana Unfair Trade Practices Act (“MUPTA”). Underwriters filed a motion to compel arbitration and stay the proceedings, citing the Policy’s arbitration clause, which stated: “Any dispute arising out of or relating to the interpretation, performance or breach of this Agreement, as well as the formation and/or validity thereof, will be submitted for decision to a panel of three arbitrators.”
MACPCT disputed that the claims were subject to arbitration, arguing that the “service-of-suit” clause in the Policy created “an exception” to the arbitration clause for the pending breach of contract and MUPTA claims. The service-of-suit clause stated: “It is agreed that in the event of the failure of Underwriters to pay any amount claimed to be due hereunder, the Underwriters… will submit to the jurisdiction of a Court of competent jurisdiction within the United States.”
The court agreed with Underwriters and granted the motion to compel arbitration. As an initial matter, the court held that the language in the service-of-suit clause must be read “in concert-not in conflict-with the arbitration provision.” Otherwise, the service-of-suit clause would “swallow the arbitration clause.” Thus, the court explained, a “more reasonable interpretation of the Policy language… is that the service-of-suit clause provides a judicial avenue to compel arbitration or enforce an arbitration award.”
The court further held that all three of MACPCT’s claims fell within the scope of the arbitration clause. MACPCT’s claim for unpaid amounts due from the settlement related to the “performance or breach of this Agreement.” Likewise, Underwriters’ refusal to participate in the settlement agreement did not constitute a claim for “amounts due” and, instead, was a dispute regarding an alleged “breach” of the Policy. Lastly, MACPCT’s claims under MUPTA related to the “interpretation, performance, and breach of the Policy,” and were subject to arbitration.
