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Alabama Municipal Insurance Corp. v. Munich Reinsurance America, Inc.

United States District Court, M.D. Alabama, Northern Division

September 7, 2017

ALABAMA MUNICIPAL INSURANCE CORPORATION, a non-profit corporation, Plaintiff,
v.
MUNICH REINSURANCE AMERICA, INC., a foreign corporation, Defendant.

          MEMORANDUM OPINION AND ORDER I. INTRODUCTION

          W. HAROLD ALBRITTON SENIOR UNITED STATES DISTRICT JUDGE

         This cause is before the court on a Motion to Stay Pending Arbitration filed by the Plaintiff Alabama Municipal Insurance Corporation (“AMIC”) (Doc. # 20). AMIC filed a Complaint on December 7, 2016, bringing a claim against Munich Reinsurance America, Inc. (“Munich”) for breach of a reinsurance contract, Casualty Excess of Loss Reinsurance Agreement No. 1236-0018. On April 18, 2017, AMIC filed an Amended Complaint which again asserted one claim for breach of contract, but this time identifying the breached contract as Casualty Excess of Loss Reinsurance Agreement No. 1236-0013, which was endorsed by Endorsement No. 1236-0009-E003 (Doc. # 18).

         On May 17, 2017, AMIC filed a Motion to Stay Pending Arbitration, which the court has construed as a motion to compel arbitration. (Doc. # 20). Munich opposes arbitration. For the reasons that follow, the court concludes AMIC's claim in its Amended Complaint is due to be compelled to arbitration.

         II. STANDARD FOR A MOTION TO COMPEL ARBITRATION

         Pursuant to the Federal Arbitration Act (“FAA”), a written arbitration “provision in any . . . contract evidencing a transaction involving commerce . . . [is] valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. When a party to an enforceable arbitration agreement fails to arbitrate a dispute that falls within the scope of an agreement containing an arbitration clause, the aggrieved party may petition the court “for an order directing that such arbitration proceed.” 9 U.S.C. § 4. If the court is “satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, ” the court is required to “make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” Id. If, however, “the making of the arbitration agreement” is a disputed issue, the court must first adjudicate whether the agreement is enforceable against the parties. See Bess v. Check Express, 294 F.3d 1298, 1304 (11th Cir. 2002).

         III. FACTS

         AMIC is a non-profit entity with its principal place of business in Montgomery, Alabama. AMIC continuously insured the City of Gulf Shores, Alabama from May 1, 2002 to October 31, 2015. During that time, AMIC was reinsured by Munich, a New Jersey corporation. Over the course of that thirteen (13) year period, the parties entered into a series of reinsurance agreements; one per year, except for the first agreement, which covered the first two years; which sought to reinsure AMIC for a variety of lines of business liabilities.

         The first two reinsurance agreements between Munich and AMIC, including Agreements No. 1236-0009 and No. 1236-0013, covered claims made to AMIC for occurrences happening between May 2002 and May 2005. Agreement No. 1236-0013 covered claims between May 2004 and May 2005 for only the Law Enforcement Liability (LEL), Public Officials Liability (POL), and Employees' Benefits Liability (EBL) lines of business. Endorsement Agreement No. 1236- 0009-E003, which operated between May 2004 and May 2005, covered additional lines of business.

         In addition, the first two agreements, Agreements No. 1236-0009 and No. 1236-0013, contained an arbitration clause, stating, in relevant part:

As a condition precedent to any right to action hereunder, any dispute arising out of this Agreement shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire, meeting in Montgomery, Alabama unless otherwise agreed.

(Doc. # 20-1, p. 17).

         The City of Gulf Shores was sued by a group of fifty-five (55) plaintiffs due to “continued and repeated exposure” to flooding caused by Gulf Shores's undersized drain pipes. (Doc. # 18, p. 3, ¶ 9). AMIC settled all fifty-five (55) suits for $981, 250 with expenses amounting to $306, 670.79, totaling $1, 287, 920.79.

         AMIC paid the City of Gulf Shores on its policy for the first $350, 000 and, pursuant to its reinsurance agreements, submitted a claim for the remainder $937, 920.79 to Munich. Munich, however, only paid $587, 920.79 of the total $937, 920.79 request. Therefore, AMIC filed a complaint in this court asserting a claim for breach of Agreement No. 1236-0018 against Munich for the remaining $350, 000 balance. (Doc. # 18).

         Munich answered on January 2, 2017 (Doc. # 5), denying liability under Agreement No. 1236-0018 and stating that Agreement No. 1236-0009, endorsed by Agreement ...


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