Transit Cas. Co. in Receivership v. Certain Underwriters at Lloyd's of London

• Citation: 963 S.W.2d 392
• Decision Date: 20 January 1998
• Docket Number: A,No. 553,No. WD,553,WD
• Parties: TRANSIT CASUALTY COMPANY IN RECEIVERSHIP, Respondent, v. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, who are members of Syndicate, as Subscribers to Contracts of Reinsurance with Transit Casualty Company and C.J. Warrilow, an Underwriter at Lloyd's of London, Individually, and on behalf of Certain Underwriters at Lloyd's of London who are Members of Syndicate, Appellants. 53230.
• Court: Court of Appeal of Missouri (US)

Page 392

963 S.W.2d 392

TRANSIT CASUALTY COMPANY IN RECEIVERSHIP, Respondent, v. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, who are members

of Syndicate No. 553, as Subscribers to Contracts of

Reinsurance with Transit Casualty Company and C.J. Warrilow,

an Underwriter at Lloyd's of London, Individually, and on

behalf of Certain Underwriters at Lloyd's of London who are

Members of Syndicate No. 553, Appellants.

No. WD 53230.

Missouri Court of Appeals,

Western District.

Jan. 20, 1998.

Motion for Rehearing and/or Transfer to

Supreme Court Denied March 3, 1998.

Application to Transfer Denied

April 21, 1998.

Donald C. Otto, Jr., Hendren & Andrae, Jefferson City, Robert A. Knuti, Lord, Bissell & Brook, Chicago, Illinois, William E. Quirk, Shughart Thomson & Kilroy, Kansas City, for appellants.

James C. Owen--Paula M. Young Chesterfield, for respondent.

Before EDWIN H. SMITH, P.J., and BERREY and ELLIS, JJ.

ELLIS, Judge.

Transit Casualty Company, a Missouri Corporation headquartered in Los Angeles, California, was declared insolvent by the Circuit Court of Cole County, Missouri in 1985 and placed in liquidation pursuant to the provisions of the Missouri Insurers Supervision, Rehabilitation and Liquidation Act, §§ 375.1150-375.1246, RSMo 1984 (the "Liquidation Act"). The trial court appointed a statutory Receiver of Transit in that proceeding. Prior to its insolvency, Transit entered into a series of reinsurance agreements with certain underwriters at Lloyd's of London, who were members of Lloyd's Syndicate 553. At the time these contracts were created, C.J. Warrilow was the Syndicate member with the principal responsibility for underwriting risks for Syndicate 553. These underwriters are hereinafter referred to as the Reinsurers.

In December, 1995, Transit ¹ commenced an action against the Reinsurers in the court below charging that they had failed to make payments due to Transit under these reinsurance agreements. The Reinsurers subsequently filed a motion in the trial court seeking an order of the court compelling arbitration of the Receiver's claims. The trial court denied the motion and the Reinsurers bring this appeal.

Prior to its insolvency, Transit engaged in worldwide insurance and reinsurance business for many years. It did business in all 50 states and ceded business to some 900 reinsurers located in 30 or so foreign nations. Although the reinsurance contracts at issue in the instant appeal covered the years between 1978 and 1984, the Reinsurers' obligation thereunder followed the liabilities occurring under Transit's insurance policies. These liabilities include "long-tail" claims, meaning claims for injuries and damages which occurred during the policy years 1978 through 1984, but which are still ongoing. Asbestos exposure, breast implants, and environmental or toxic tort claims are among the types of long-tail claims for which liabilities still exist. Transit brought the instant action for its present "paid" claims, those on which Transit claims a present payment obligation, but because the claims continue to accrue, additional claims by Transit against Lloyd's will continue for many years until Transit's obligation under its policies are all finally concluded.

Transit filed the instant action in December, 1995, and styled it a petition and motion for order to show cause. The petition was amended in February, 1996, and asserted three counts. Each of the three counts was predicated on obligations allegedly owed Transit under the reinsurance agreements. The first count claimed that the Reinsurers were withholding monies due under the agreements in violation of statute and orders of court. The second count claimed damages for Reinsurers' breach of the reinsurance agreements in the amounts allegedly due under them. The third count repeated the allegation of the first two counts as a claim for amounts due and unpaid on an open and current account. The Reinsurers moved to dismiss the amended petition on the ground that the parties' agreements required the dispute to be arbitrated. The Reinsurers then removed the case to the United States District Court for the Western District of Missouri, where they sought an order compelling arbitration under Federal Arbitration Statutes, 9 U.S.C. §§ 1-16 and §§ 201-208, as well as Missouri's Uniform Arbitration Act, §§ 435.350-435.470, RSMo (1994). On June 11, 1996, the Federal District Court granted a motion by the Receiver to remand the action to the Circuit Court of Cole County. The Federal Court listed two reasons for its decision. First, the court construed "the service of suit" clause in the reinsurance agreements as a waiver of the Reinsurers' right of removal. Secondly, the court found that the Reinsurers' rights under the Federal Arbitration Laws were superseded by a provision in the Missouri Uniform Arbitration Act that excluded arbitration agreements in "contracts of insurance" from the enforcement provisions of the Act. The Reinsurers appealed the District Court's decision to the 8th Circuit Court of Appeals. The Federal appeal was pending at the time the instant appeal was orally argued and submitted to this court. However, we take judicial notice of the fact that the United States Court of Appeals for the 8th Circuit handed down its opinion in No. 96-2532 on July 10, 1997, and dismissed the appeal pursuant to 28 U.S.C. § 1447(d) for lack of jurisdiction. Thus, the District Court's remand to the Circuit Court is a final disposition.

Meanwhile, the Circuit Court of Cole County allowed Transit to file a second amended petition and motion for order to show cause against Reinsurers based on the same reinsurance agreements. It is that petition which is the subject of this appeal. The second amended petition alleges, in separate counts, that the Reinsurers owe Transit nearly a million dollars under the reinsurance agreements and the liquidation order; that the Reinsurers breached the reinsurance agreements to Transit's damage; that the Receiver has made demand on the claims against the Reinsurers on an open account over periods covered by the reinsurance agreements and the Reinsurers have refused to pay; that the Reinsurers have breached a contractual duty of good faith and fair dealings; that the Reinsurers are guilty of "vexatious delay" in making payment under the agreements; that Transit is entitled to statutory punitive damages for wrongful refusal to pay amounts due under the agreements; that Transit is entitled to specific performance of a contract provision allegedly requiring the posting of a letter of credit for over 5.9 million dollars; and that Transit is entitled to specific performance of a contract provision to compel a final settlement of all future liabilities under the agreements. The petition also characterized the Reinsurers' alleged failure to discharge their obligations under the reinsurance agreements as a refusal to surrender assets belonging to Transit in violation of an order entered by the trial court at the outset of the Transit liquidation proceeding and sought to have the Reinsurers held in contempt of court for doing so.

Each of the reinsurance agreements contained an arbitration clause. The 1978 agreement is typical, and Art. XXII of that agreement provides, in pertinent part:

All disputes or differences arising out of this disagreement shall be submitted to the decision of two arbitrators, one to be chosen by each party, and in the event of the arbitrators failing to agree, to the decision of an umpire to be chosen by the arbitrators.

The agreements also contain a "service of suit" clause, pursuant to which the Reinsurers agree to submit to the jurisdiction of the courts of any state in which Transit is admitted to do business. Art. XVII of the 1978 agreement, in relevant part, provides:

In the event of the failure of the reinsurer to pay any amount claimed to be due hereunder, the reinsurer will, at the request of the reinsured, submit to the jurisdiction of any competent jurisdiction within the United States and will comply with all requirements necessary to give such court jurisdiction and all matters arising hereunder shall be determined in a court with the law and practice of such court.

In its order denying the motion to compel arbitration, the court found that the clear and specific language of the "service of suit" clauses of the reinsurance agreements control over the arbitration provisions of those agreements and permitted Transit to litigate the claim of a failure to pay in court. The court likewise found that § 375.1188 controls over any other state or Federal law and prohibits the motion to compel arbitration.

We first take up our jurisdiction to decide the appeal. Transit filed a motion to dismiss the appeal, asserting the trial court's order did not dispose of all parties before the court because C.J. Warrilow did not join in the motion to compel arbitration. This court denied Transit's motion by order entered October 7, 1996. However, Transit renews its motion to dismiss the appeal in its brief and at oral argument. Transit relies on Abrams v. Four Seasons Lakesites/Chase Resorts, Inc., 904 S.W.2d 37 (Mo.App. S.D.1995). In Abrams, the plaintiff brought suit against the named defendants as well as one Peter Brown. Subsequently, plaintiff filed a motion to compel arbitration as to the claims against Four Seasons Lakesites/Chase Resorts, Inc., but did not make demand for or move to compel arbitration with respect to the claims against Peter Brown. The trial court denied the motion to compel arbitration, and the plaintiff appealed. The Southern District of this court dismissed the appeal, finding that although orders denying an application to compel arbitration made pursuant to § 435.355 are appealable pursuant to § 435.440.1(1), ² they are only appealable "in the manner and to the same extent as [appeals] from orders or judgments in a civil case." Id. at 39 (quoting § 435.440(2)). Thus, since the...