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Practice Note: Chapter 93A Claims in Reinsurance Claims

by ~ James S. Harrington (Email) (Web Site)

Almost a decade ago, the Supreme Judicial Court made clear in Drywall Systems v. ZVI Construction, 435 Mass. 664 (2002), that an agreement to arbitrate disputes arising out of or related to a contract �includes statutory claims under G. L. c. 93A￁ for unfair or deceptive acts or practices in trade or commerce. The SJC noted the many policy considerations in favor of allowing arbitrators to hear and decide Chapter 93A claims and, in appropriate cases, award multiple damages where a party has in the course of the claim at issue knowingly or willfully engaged in an unfair or deceptive act or practice to the detriment of the other party:

Allowing arbitrators to award the full range of relief under G. L. c. 93A, s. 11, encourages arbitration as an alternative means of efficient commercial dispute resolution without the delay and obstruction in the courts. Arbitration of multiple damages under s. 11 furthers the legislative objective of promoting forthright conduct in commercial dealings, and the clear benefits therefrom outweigh any detractions that may result from conflicts with other policy considerations.

Following Drywall Systems, Chapter 93A claims have become a common staple of commercial arbitrations in Massachusetts, particularly in cases like Drywall Systems where an aggrieved party complains that the adverse party has forced the aggrieved party to bring an arbitration to collect money clearly owed.

While Chapter 93A claims for multiple damages or attorney fees often may be asserted in reinsurance arbitrations, arbitrators vary in their willingness to actively consider them even in cases where the allegedly unfair claims conduct clearly occurred in Massachusetts. The Courts seem more enthusiastic, sometimes awarding substantial Chapter 93A damages in litigated reinsurance disputes where the Court sees one party�s delay, obstruction and shifting positions as intended to wear down the adverse party and force a compromise of the contract claim.

Given the context of a reinsurance dispute in which a cedent seeks payment from a reinsurer, the party claiming Chapter 93A damages is more often the cedent. For example, in Commercial Union Insurance v. Seven Provinces Insurance Ltd., 217 F3d 33, 43 (1st Cir. 2000), cert. den. 531 US 1146 (2001), cedent Commercial Union claimed that reinsurer Seven Provinces had delayed and shifted positions over time to delay the inevitable payment of a valid claim. The District Court agreed and awarded Chapter 93A damages. The First Circuit affirmed the award of Chapter 93A damages, finding that �Seven Provinces's conduct--raising multiple, shifting defenses . . . a lengthy pattern of foot-dragging and stringing Commercial Union along, with the intent . . . of pressuring Commercial Union to compromise its claim--had the extortionate quality that marks a 93A violation.￁

An even more recent reminder of the potentially powerful role of Chapter 93A damages in the reinsurance context came in Judge Gertner�s February 2011 decision in Trenwick America Reinsurance v. IRC, 2011 US DIST LEXIS 15276 (D.Mass. 2011). Finding that IRC and its related entities had engaged in a �moving target￁ strategy of delay, obstruction and shifting positions similar to what was found in the Seven Provinces case, the Court signaled that, in addition to $4.1 million on its reinsurance claim and $1.9 million in interest, Trenwick would recover at least another $4.1 million plus an award of attorney fees for IRC�s misconduct under Chapter 93A. When the damages decision issued several weeks later, Trenwick was ultimately awarded a total of $10.9 million in damages and fees under Chapter 93A.

Awards of attorney fees and additional damages under Chapter 93A help deter unjustified delays in paying reinsurance claims. For this reason, cedents with valid Chapter 93A claims have both selfish and altruistic reasons for wanting to maximize the likelihood of succeeding on these claims in appropriate cases. From the cedent�s perspective, how can these claims be maximized? From the reinsurer�s perspective, how can these claims and the specter of extra-contractual liability be minimized? Practitioners must now look to Trenwick for guidance and ask themselves several strategic questions.

Should a cedent claiming Chapter 93A damages try to position the matter for litigation assuming a Court may be more willing to make a substantial Chapter 93A award? Should a reinsurer with Chapter 93A exposure have a proactive strategy to keep all issues together to be arbitrated? If arbitration is necessary or preferred, how do the backgrounds of the party arbitrators and the umpire impact their willingness to apply Chapter 93A? Is there a role for expert witnesses on Chapter 93A misconduct? In the case of truly egregious delaying conduct, Trenwick reminds us that substantial Chapter 93A damages are possible and both cedent and reinsurer must have in mind a strategy to deal effectively with this reality. We are proud of bringing you the very best that the fashion world has to offer replica louis vuitton,replica watches,replica watches and omega replica watches at very affordable prices without compromising on quality and style.

James S. Harrington can be reached at
￁ 2011 Robins, Kaplan, Miller & Ciresi L.L.P. All rights reserved.

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