Public Risk Innovations, Solutions, and Management v. Amtrust Financial Services, Inc.

— 1 — — 2 — — 3 — 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA — 6 — 7 PUBLIC RISK INNOVATIONS, Case No. 21-cv-03573-EMC SOLUTIONS, AND MANAGEMENT, — 8 — Petitioner, ORDER RE PETITIONER’S MOTION 9 TO COMPEL ARBITRATION AND v. RESPONDENT’S CROSS-MOTION TO 10 COMPEL ARBITRATION AMTRUST FINANCIAL SERVICES, 11 INC., et al., Docket No. 12, 20 12 Respondents. — 13 — — 14 — 15 Currently pending before the Court are the parties’ cross-motions to compel arbitration. 16 Both parties agree that they have two disputes that should be arbitrated (one concerning the GL-1 17 Certificate and the other concerning the GL-2 Certificate). However, they disagree over who the 18 arbitrators should be; hence, the pending motions. The crux of the dispute is whether Mr. Conley, 19 the arbitrator selected by PRISM (one of three people on the arbitration panel), should be 20 disqualified from being an arbitrator. 21 Having considered the parties’ briefs and accompanying submissions, the Court finds that 22 Mr. Conley is not a qualified arbitrator under the terms of the parties’ arbitration agreement. 23 However, the Court rejects AmTrust’s argument that, because Mr. Conley is not a qualified 24 arbitrator, PRISM has failed to select an arbitrator and that therefore AmTrust has the right to 25 select a second arbitrator of its choice. 26 I. DISCUSSION 27 As an initial matter, the Court notes that the parties agreed that this dispute should be 1 if it were the losing party in the arbitrations, could seek to vacate the arbitration decisions on the 2 ground of bias on the part of Mr. Conley). Compare Serv. Partners, LLC v. Am. Home Assurance 3 Co., No. CV-11-01858-CAS(Ex), 2011 U.S. Dist. LEXIS 67207 , at *11 (C.D. Cal. June 20, 2011) 4 (noting that “the Agreement does not allow one party to disqualify the other's named arbitrator”; 5 also, “[i]t is well established that a district court cannot entertain an attack upon the qualifications 6 of or partiality of arbitrators until after the conclusion of the arbitration and the rendition of an 7 award”), with Availl, Inc. Ryder Sys., 110 F.3d 892, 895-96 (2d Cir. 1997) (noting there are some 8 “cases in which an arbitrator was removed prior to arbitration on account of a relationship with 9 one party to the dispute”). 10 Turning to the merits, the Court rejects PRISM’s argument that AmTrust has waived the 11 right to challenge Mr. Conley. 12 "'[W]aiver is the intentional relinquishment of a known right after knowledge of the facts.' The burden . . . is on the party claiming a 13 waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and 'doubtful cases will be 14 decided against a waiver.'" 15 Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 31 (1995). PRISM has not satisfied this high 16 burden. Although the arbitration agreement includes a “time is of the essence” provision, it did 17 not provide a specific deadline by which a party must make an objection to an arbitrator. PRISM 18 has not proven a waiver here. 19 AmTrust contends that Mr. Conley is not a qualified arbitrator because (1) he is not a 20 “current or former official[] of [an] . . . insurance or reinsurance compan[y]” and (2) even if he 21 were, he is not a “disinterested” official. Brenneman Decl., Exs. A-B (Certificates, General 22 Condition No. 9) (providing that the arbitrators on the panel must be “disinterested current or 23 former officials of property and casualty insurance or reinsurance companies not under the control 24 or management of either party”). 25 AmTrust’s first argument is not persuasive. Admittedly, Mr. Conley has only been 26 “general counsel to numerous joint powers authorities [JPAs] and self-insurance joint powers 27 authorities and risk pools.” Brenneman Decl. ¶ 19. Also, courts have held that self-insurance 1 Code. Nevertheless, that does not mean that JPAs can never be deemed insurance companies for 2 purposes of the arbitration agreement at issue here. This is especially true given that, as a practical 3 matter, a self-insurance pool serves the same purpose as insurance and is recognized as an 4 alternative to insurance. See City of South El Monte v. S. Cal. Jt. Powers Ins. Auth., 38 Cal. App. 5 4th 1629, 1634 (1995) (noting that the intent of the legislature in adopting Ca. Gov’t Code § 6 990.8(c) was to “recognize these self-insuring pools as an alternative to insurance and remove 7 them from regulation under the Insurance Code”) (emphasis added). 8 The case on which AmTrust relies, Orange County Water Dist. v. Ass’n of Cal. Water 9 Agencies Joint Powers Ins. Auth., 54 Cal. App. 4th 772 (1997), is not dispositive because the 10 Court must consider the specific contract before it. Here, the contract at issue indicates that the 11 term “insurance” should be interpreted more broadly (i.e., compared to the California Insurance 12 Code). For example, the Certificates refer to PRISM as a “Company,” even though it is a public 13 entity, and to the coverage PRISM provides its members as both a “Policy” and “(re)insurance 14 contract(s)” (and not just Memoranda of Coverage). See Brenneman Decl., Exs. A-B (Certificates, 15 General Condition No. 1) (defining “Company” as “[t]he entity or entities ceding reinsurance 16 under this Certificate” and the “Policy Reinsured” as “[t]he (re)insurance contract(s), including 17 Memorandum Of Coverage(s) reinsured by this Certificate”); see also Reply at 3 n.4 (noting that 18 “JPAs do not issue policies – they issue Memoranda of Coverage”). 19 Furthermore, a more generous interpretation of “insurance” is consistent with the specific 20 process that the parties agreed to for selection of the arbitration panel – i.e., as PRISM argues, the 21 whole point of the selection process was to allow each side to pick an arbitrator representative of 22 its general interests and then have those arbitrators pick the third neutral. See Reply at 4. 23 That Mr. Conley can fairly be said to have worked for an “insurance” company within the 24 meaning of the arbitration agreement, however, is not the end of the matter. He must also be 25 “disinterested.” Mr. Conley does not meet this requirement. PRISM does not dispute that Mr. 26 Conley is currently an official for (1) entities that have members who are also members of PRISM 27 or (2) entities that are actually members of PRISM itself. Given this fact, Mr. Conley cannot be 1 some pressure to take positions favorable to PRISM because of the relationship between PRISM 2 and the entities he works for. This is true even if the entities or their members have no direct 3 financial interest in how the parties’ dispute here is resolved. 4 Accordingly, the Court concludes that Mr. Conley is not a qualified arbitrator. PRISM 5 must now select a new arbitrator(s) for the GL-1 and GL-2 arbitrations. The Court acknowledges 6 AmTrust’s contention that PRISM has forfeited the right to select an arbitrator for the GL-2 7 arbitration. This contention is meritless. PRISM did not fail to appoint an arbitrator; it appointed 8 Mr. Conley. That Mr. Conley is not qualified to be an arbitrator does not mean that PRISM failed 9 to act. 10 II. CONCLUSION 11 Mr. Conley is not a qualified arbitrator, but PRISM has the right to select a new arbitrator 12 in his place for both the GL-1 and GL-2 arbitrations. 13 Because the pending dispute between the parties has been resolved, the Court directs the 14 Clerk of the Court to administratively close this case. However, this does not preclude the parties 15 from asking the Court to reopen this action should there be another dispute about the qualifications 16 of an arbitrator. Any further dispute shall be brought to the Court’s attention by way of a short 17 joint letter, not a fully noticed motion. The Court strongly discourages further litigation about the 18 arbitration (litigation which inflicts needless and wasteful costs on the clients) and urges the 19 parties to carry out the arbitrations. 20 This order disposes of Docket Nos. 12 and 20. — 21 — 22 IT IS SO ORDERED. — 23 — 24 Dated: July 12, 2021 — 25 — 26 ______________________________________ EDWARD M. CHEN 27 United States District Judge