UNITED REFINING COMPANY v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
2:13-cv-00909
E.D. Pa.Dec 13, 2013Background
- United Refining purchased an "all-risk" quota-share insurance policy (2009–2010) from several insurers covering contingent business income and contingent extra expense.
- In July 2010 an Enbridge pipeline rupture drastically reduced United Refining’s crude shipments; United claimed ~$20.6M (after waiting-period deductible) in contingent losses and extra expenses.
- Insurer adjusters (Crawford and Chartis) investigated and, after negotiations, denied coverage in October 2011 based on the policy’s waiting-period/deductible application.
- United sued in state court in January 2013; defendants removed to federal court and moved to dismiss or compel arbitration of the amended complaint (Counts: breach of contract, two intentional-interference claims, and bad faith).
- The policy contained an express "Arbitration Clause" providing appointment of arbitrators and an umpire for disputes over "the liability of the Insured or on the amount of loss or damage."
- The Court granted dismissal/compelled arbitration for Counts I (breach), II (interference against insurer(s)), and IV (bad faith); denied dismissal as to Count III (interference against non-signatory adjusters) but stayed proceedings pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of arbitration clause: whether it covers insurer liability disputes | Clause only refers to "liability of the Insured," so applies to insured's liability, not insurer coverage disputes | Clause is intended to resolve coverage/liability disputes involving insurer; FAA favors arbitration | Clause covers insurer liability/coverage disputes; arbitration compelled |
| Whether clause is appraisal (value-only) or arbitration (coverage and value) | Clause is actually an appraisal provision limited to valuation, not coverage | Clause is titled and worded as arbitration; includes "liability" and "amount," so covers coverage and valuation issues | Clause is arbitration, not mere appraisal; covers coverage disputes |
| Arbitrability of tort claims (intentional-interference) against insurer signatories | Tort claims are separate and not governed by the contract's arbitration clause | Claims arise from same facts as breach and fall within arbitration; focus on factual nexus | Interference claim against insurer(s) (Count II) is arbitrable and dismissed for arbitration; tort theory does not avoid clause |
| Arbitrability of interference claim against non-signatory adjusters (Chartis, Crawford) | All related claims should be arbitrated | Non-signatories did not sign arbitration agreement; estoppel/integration doctrines inapplicable here | Claim against non-signatory adjusters (Count III) is not compelled to arbitration; court denied dismissal but stayed the claim pending arbitration outcome |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (U.S. 1985) (federal policy favors enforcement of arbitration agreements)
- Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (doubts about arbitrability resolved in favor of arbitration)
- Century Indem. Co. v. Certain Underwriters at Lloyd’s, 584 F.3d 513 (3d Cir. 2009) (FAA compels arbitration; courts determine existence and scope of arbitration agreement)
- E.I. DuPont de Nemours & Co. v. Rhone-Poulenc Fiber & Resin Intermediaries, S.A.S., 269 F.3d 187 (3d Cir. 2001) (non-signatory may be bound when it knowingly exploits agreement containing arbitration clause)
- Sloan & Co. v. Liberty Mut. Ins. Co., 653 F.3d 175 (3d Cir. 2011) (contracts should be interpreted to avoid rendering provisions superfluous)