Certain Underwriters at LLoyds, London v. Dryades YMCA

CourtDistrict Court, S.D. New York
DecidedNovember 21, 2024
Docket1:24-cv-06103
StatusUnknown

This text of Certain Underwriters at LLoyds, London v. Dryades YMCA (Certain Underwriters at LLoyds, London v. Dryades YMCA) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Certain Underwriters at LLoyds, London v. Dryades YMCA, (S.D.N.Y. 2024).

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -----------------------------------------------------------------X

CERTAIN UNDERWRITERS AT LLOYD’S, LONDON, et al.,

Petitioners, 24 Civ. 6103 (JPC) (GS) -against- REPORT & DRYADES YMCA, RECOMMENDATION

Respondent.

-----------------------------------------------------------------X GARY STEIN, United States Magistrate Judge:

Before the Court is Petitioners’ motion to appoint an umpire for an upcoming arbitration arising from an insurance coverage dispute between Petitioners and Respondent. (Dkt. No. 3). The parties agree that the Court should appoint an umpire, but they disagree over what type of umpire should be appointed and have proposed competing slates of candidates. The motion was referred to me by the Honorable John P. Cronan for a report and recommendation. (Dkt. No. 8).1 For the

1 The sole relief sought in this case is an order designating and appointing an umpire. (Dkt. No. 1). Once that order is entered, the case will be closed. See Certain Underwriters at Lloyd’s, London v. Falls of Inverrary Condominiums, Inc., No. 22 Civ. 8612 (VEC), 2023 WL 2784513, at *3 (S.D.N.Y. Apr. 5, 2023) (“As [the appointment of an umpire] is the only relief sought in this case, the Clerk of Court is respectfully directed to terminate the open motion at docket entry 3 and to CLOSE the case without prejudice to either party reopening the case within thirty days if [the designated umpire] is unable or unwilling to serve as umpire in this matter.”). I therefore treat the motion as dispositive and as requiring a report and recommendation under 28 U.S.C. § 636(b)(1) and Fed. R. Civ. P. 72(b). See L & M Auto Repair, LLC v. Fed. Mut. Ins. Co., No. 23-CV-1203-TC-TJJ, 2024 WL 2874588, at n.1 (D. Kan. May 10, 2024) (proceeding by report and recommendation because “a decision appointing an umpire would be dispositive”); Poling v. Chubb Lloyds Ins. Co. of Texas, A-05-CA-253 LY, 2005 WL 8155234, at *2 (W.D. Tex. Nov. 21, 2005) (issuing ruling on motion to appoint an umpire in the form of a report and recommendation “out of an abundance of caution,” while noting that such a motion “is not a classic example of a dispositive motion”). reasons set forth below, I respectfully recommend that Petitioners’ motion be GRANTED and that the Honorable Frank Maas (Ret.) be appointed to serve as umpire for the arbitration.

BACKGROUND On August 29, 2021, properties owned by Respondent Dryades YMCA (“Dryades”) were damaged when Hurricane Ida made landfall near New Orleans. (Dkt. No. 1 (“Petition”) ¶¶ 23-24). Dryades made a claim for the alleged property damage under a Commercial Property Insurance Policy (the “Policy”) issued by Petitioners Certain Underwriters of Lloyd’s, London; Indian Harbor Insurance

Company; QBE Specialty Insurance Company; Steadfast Insurance Company; United Specialty Insurance Company; Lexington Insurance Company; General Security Indemnity of Arizona; HDI Global Specialty SE; Old Republic Union Insurance Company; GeoVera Specialty Insurance Company; Safety Specialty Insurance Company; and Transverse Specialty Insurance Company (the “Insurers”). (Id. ¶¶ 1-11, 19, 24). A coverage dispute arose, and in July 2023, Dryades filed suit in Louisiana

state court, claiming the Insurers breached the Policy and acted in bad faith in failing to provide coverage. (Id. ¶ 25; see Dryades YMCA v. Certain Underwriters at Lloyds, London, Civ. Action No: 23-3411, 2024 WL 398429, at *1 (E.D. La. Jan. 31, 2024)). The Insurers removed the action to federal court and filed a motion to compel arbitration based on an arbitration clause in the Policy. (Petition ¶ 26). The arbitration clause requires that “[a]ll matters in difference between [Dryades and the Insurers] in relation to this insurance” be decided by arbitration in New York. (Dkt. No. 4-1 § VII.C (the “Arbitration Clause”)). In support of their motion, the Insurers argued that the Arbitration Clause

was enforceable under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) and the Federal Arbitration Act, 9 U.S.C. §§ 201-08 (the “FAA”). Dryades, 2024 WL 398429, at *1. Dryades countered that the Arbitration Clause was invalid under Louisiana Revised Statutes § 22:868, which prevents the enforcement of arbitration clauses in insurance contracts delivered in the state, and that the McCarran-Ferguson Act, 15 U.S.C. § 1012,

“reverse-preempts”2 the FAA in insurance cases, thereby allowing for Section 22:868 to control. Dryades, 2024 WL 398429, at *2. In a decision issued on January 31, 2024, the Honorable Jane Triche Milazzo of the Eastern District of Louisiana granted the Insurers’ motion to compel arbitration. Id. at *3. In rejecting Dryades’ position, Judge Milazzo relied on Fifth Circuit precedent holding that where, as here,3 a foreign insurer is a party to the insurance policy, the Convention supersedes state law and the McCarran-Ferguson

Act’s reverse-preemption provision, which is limited to Acts of Congress, is inapplicable. Id. at *2 (discussing Safety Nat’l Cas. Corp. v. Certain Underwriters at Lloyd’s, London, 587 F.3d 714, 732 (5th Cir. 2009)). Accordingly, Judge Milazzo

2 Reverse-preemption refers to legislatively created exceptions that preserve statutes from preemption that would otherwise be superseded by “the usual rules of preemption.” Stephens v. Am. Int’l Ins. Co., 66 F.3d 41, 43 (2d Cir. 1995). 3 It is undisputed that many of the members subscribing to the Policy through the Lloyd’s of London insurance market are U.K. entities and that Petitioner HDI Global Specialty is a German corporation. Id. at *2; see Petition ¶¶ 1, 8. concluded, “the Convention applies to [Dryades’] claims against [the Insurers], and it must arbitrate them.” Id. In accordance with the Arbitration Clause, the parties proceeded to pick one

arbitrator each to sit on the Arbitration Tribunal that will decide the dispute. (Petition ¶ 28; see Dkt. No. 4-1 § VII.C). Under the Arbitration Clause, the two arbitrators must then attempt to appoint, “by mutual agreement,” an “Umpire to whom the matter in difference shall be referred.” (Dkt. No. 4-1 § VII.C). To that end, each of the arbitrators proposed various candidates to serve as umpire. The Insurers’ arbitrator proposed four New York-based retired judges and two New

York insurance attorneys. (Id. ¶¶ 31, 34-35). Dryade’s arbitrator proposed four Louisiana-based retired judges and four other mediators and insurance attorneys based in Texas, Tennessee, and Florida, one of whom is a former Florida state court judge. (Id. ¶¶ 30, 33, 37-38). Over a four-month period, the two arbitrators tried to amicably select an umpire from these candidates, but ultimately failed to reach agreement. (Id. ¶¶ 29, 39). The Arbitration Clause provides a mechanism for choosing an umpire in that

situation: “If the Arbitrators cannot agree to an Umpire, either may request the selection be made by a judge of a New York court.” (Dkt. No. 4-1 § VII.C). Pursuant to the Arbitration Clause, the Insurers commenced this action on August 12, 2024 with the filing of the Petition and a motion seeking the appointment of an umpire. (Dkt. Nos. 1, 3). In support of their motion, the Insurers submitted a memorandum of law (Dkt. No. 5 (“Pet.

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