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CLMS Management Services Limited Partnership v. Amwins Brokerage of Georgia LLC

United States District Court, W.D. Washington, Tacoma

December 26, 2019

CLMS MANAGEMENT SERVICES LIMITED PARTNERSHIP; ROUNDHILL I, L.P., Plaintiffs,
v.
AMWINS BROKERAGE OF GEORGIA, LLC; AMRISC, LLC; C.J.W. & ASSOCIATES, INC.; CERTAIN UNDERWRITERS AT LLOYD'S, Defendants.

          ORDER ON DEFENDANTS CERTAIN UNDERWRITERS AT LLOYD'S AND CJW & ASSOCIATES, INC.'S MOTION TO COMPEL ARIBTRATION AND STAY PROCEEDINGS DKT. # 22

          Ronald B. Leighton United States District Judge.

         INTRODUCTION

         THIS MATTER is before the Court on Defendants Certain Underwriters at Lloyd's and CJW & Associates, Inc.'s Motion to Compel Arbitration and Stay Proceedings. Dkt. # 22. This case is an insurance dispute concerning coverage for flood damage to a residential development in Houston, TX, that is owned by Roundhill I, L.P., and managed by CLMS Management Services, L.P. Complaint, Dkt. # 1, at 3. Defendants move to enforce the Policy's mandatory arbitration clause, which requires all disputes be resolved in New York. Policy, Dkt. # 23, Ex. 1, at 37 (26 of 48). However, enforcement of the arbitration clause turns on a clash between two sources of law: RCW 48.18.200, which bars mandatory arbitration clauses in insurance contracts, and the Convention on the Recognition of Foreign Arbitral Award, Art. II, Sec. 3, which requires U.S. courts to enforce arbitration clauses upon request. At the fulcrum of these two is the McCarran-Ferguson Act, which provides that state insurance law preempts conflicting federal law. The question is whether the Convention-an international treaty implemented by a congressional statute-is preempted by RCW 48.18.200.

         For the following reasons, the Court holds that the Convention is not preempted and GRANTS Defendants' Motion to Compel Arbitration and Stay Proceedings.

         BACKGROUND

         Plaintiffs' Houston residential development, Roundhill Townhomes, allegedly sustained $5, 660, 000 worth of damage as a result of Hurricane Harvey in August of 2017. Dkt. # 1, at 3. The property was insured through August 30, 2017 under Commercial Insurance Policy No. AMR-39768-02 with the Lloyd's Underwriters. Id.; Policy, Dkt. # 23, Ex. 1, at 5. This Policy constitutes one coverage part of a larger insurance agreement between CLMS and Defendant Amrisc, LLC, which acts as the “program manager for the companies” providing coverage. Policy, Dkt. # 23, Ex. 1, at 5. The agreement with Amrisc effectively creates “a separate contract between the [CLMS] and each of the Underwriters.” Id. at 8 (1 of 4). CJW, a Florida company, is the third-party claims administrator for the Lloyd's Underwriters. Id. at 39 (28 of 48); Dkt. # 1 at 3.

         The citizenship of the Lloyd's Underwriters, meanwhile, is a bit more complicated. Plaintiffs allege simply that the Lloyd's Underwriters are “a British business entity with its principle place of business in London, England.” Dkt. # 1, at 2. However, as the Eleventh Circuit explained in Underwriters at Lloyd's, London v. Osting-Schwinn:

The Society of Lloyd's, London, is not an insurance company, but rather a British organization that provides infrastructure for the international insurance market. Originating in Edward Lloyd's coffee house in the late seventeenth century, where individuals gathered to discuss insurance, the modern market structure was formalized pursuant to the Lloyd's Acts of 1871 and 1982. . . . Lloyd's itself does not insure any risk. Individual underwriters, known as “Names” or “members, ” assume the risk of the insurance loss. Names can be people or corporations; they sign up for certain percentages of various risks across several policies. . . .
Names underwrite insurance through administrative entities called syndicates, which cumulatively assume the risk of a particular policy. . . . The syndicates are not incorporated, but are generally organized by Managing Agents, which may or may not be corporations. The Managing Agents determine the underwriting policy for the syndicate and accept risks on its behalf, retaining a fiduciary duty toward the underwriting Names. . . .

613 F.3d 1079, 1083 (11th Cir. 2010).

         After their property was damaged, Plaintiffs submitted a claim under the Policy. Dkt. # 1 at 3. Plaintiffs allege that they made inquiries about their claim that went unanswered until CJW sent them a letter in May 2018 stating that the Policy's deductible was $3, 600, 000. Id. Plaintiffs contend that the deductible should instead be $600, 000. Id. at 4. This disagreement is at the center of Plaintiffs' Complaint. Id.

         Defendants' Motion to Compel is based on the arbitration provision in the Policy's “Conditions” section. It reads as follows:

ARBITRATION CLAUSE: All matters in difference between the Insured and the Companies (hereinafter referred to as “the parties”) in relation to this insurance, including its formation and validity, and whether arising during or after the period of this insurance, shall be referred to an Arbitration Tribunal in the manner hereinafter set out.
The seat of the Arbitration shall be in New York and the Arbitration Tribunal shall apply the law of New York as the ...

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