Continental Insurance v. Jantran, Inc.

Citations: 906 F. Supp. 362; 1995 U.S. Dist. LEXIS 17158; 1995 WL 683475Docket: Civ. A. 94-2550

Court: District Court, E.D. Louisiana; November 15, 1995; Federal District Court

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The court case Continental Insurance Company et al. v. Jantran, Inc. involves a motion for summary judgment and a motion to compel arbitration filed by Sphere Drake Insurance p.l.c., alongside a summary judgment motion on coverage by Jantran, Inc. The incident in question occurred in November 1993 on the Mississippi River, where several barges owned by Bunge Corporation broke away from their fleet. Bunge and its insurer, Continental Insurance Company, claim negligence on Jantran's part in securing the barges. Sphere Drake was added as a defendant under the Louisiana Direct Action Statute, and Jantran filed a cross-claim against Sphere Drake for insurance coverage.

Sphere Drake argues for dismissal, asserting that it is not subject to the Louisiana Direct Action Statute because Louisiana law does not apply. The court references a Louisiana Supreme Court ruling clarifying that the statute does not create an independent cause of action but rather provides a procedural right when there is a substantive cause of action against the insured. The applicability of the Direct Action Statute requires that the policy was either written or delivered in Louisiana, or that the accident occurred there. Given that the accident did not occur in Louisiana, the focus shifts to whether the Sphere Drake policy was written or delivered in Louisiana. 

The facts indicate that Jantran, a Mississippi corporation, sought coverage from Continental Underwriters in Louisiana, which then contacted a London broker to secure the insurance from Sphere Drake. The coverage was officially approved for a twelve-month period starting February 20, 1993. An endorsement was subsequently added to the policy on April 19, 1993, further confirming the coverage. The court ultimately determines that the claim against Sphere Drake should be dismissed and that Jantran's cross-claim is subject to mandatory arbitration in London.

Sphere Drake issued a 'Certificate of Insurance' and Marine Insurance Policy SD350/93 to John Plumer after June 3, 1993, in England. Continental prepared a 'Certificate of Insurance' for Jantran but delivered it to Jantran's representatives in Covington, not to their Mississippi offices, after litigation began. Jantran contends that this certificate constitutes a policy under the Louisiana Direct Action Statute and claims it was issued in Louisiana. However, this argument is largely unsupported by evidence. Key points against Jantran’s position include: 

1. The Sphere Drake policy required issuance by Sphere Drake, not a broker.
2. Sphere Drake did not authorize Continental to issue its policies.
3. A broker's certificate does not equate to an insurance policy.
4. Continental acted on behalf of Jantran, not Sphere Drake.

Jantran's assertion that the Sphere Drake policy is incomplete is flawed; the only policy presented was the one delivered to Plumer in London. The court found no merit in Jantran's argument regarding delivery circumventing the statute, noting that the situation does not meet the conditions for 'constructive delivery' as established in relevant case law. Additionally, the court reiterated that business decisions to accept policy delivery outside Louisiana do not contravene the Direct Action Statute. Jantran's claim that Plumer acted as an agent for Sphere Drake lacks factual backing, and an affidavit demonstrates Plumer was not an agent for Sphere Drake. The applicability of the Direct Action Statute in this maritime case, which involves a Mississippi River accident with non-Louisiana corporations, is also questioned, indicating that the initial filing in Mississippi may reflect an acknowledgment of its inapplicability.

Sphere Drake seeks enforcement of an arbitration agreement in its policy with Jantran, stipulating that any disputes related to the insurance policy should be arbitrated in London under the Arbitration Acts from 1950 to 1979. The Fifth Circuit, in Sedco, Inc. v. Petroleos Mexicanos, identified four factors for evaluating arbitration clauses under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards: the existence of an agreement to arbitrate, whether it is in a Convention signatory territory, if it arises from a commercial relationship, and if a party is a non-American citizen. The Fifth Circuit previously ruled in Sphere Drake Insurance PLC v. Marine Towing, Inc. that an arbitration agreement does not require a signature to be valid. 

Jantran opposes arbitration, claiming the clause is ambiguous, that the Convention and FAA are preempted by the McCarran-Ferguson Act, that Louisiana law renders the agreements void, that there is no valid arbitration agreement, that the clause is an unenforceable adhesion contract, that its claims fall outside the arbitration scope, and that compelling arbitration is impractical. The Court finds these arguments largely unsupported, concluding that the arbitration clause is unambiguous and broad, clearly covering any disputes arising from the policy. 

The Court also asserts that the McCarran-Ferguson Act does not impact contracts made under the Convention, agreeing with Judge McNamara's previous rulings. Jantran's claim regarding a lack of agreement to arbitrate is dismissed, referencing prior case law that supports enforcement despite not having received a copy of the policy before a loss. The Court maintains that disputes with Jantran's brokers do not pertain to the arbitration issues at hand.

The Court determines that the arbitration clause in the insurance policy related to Jantran's claims is enforceable and integral to the policy itself. Jantran fails to provide convincing authority to support its arguments against the clause, which is not considered an unenforceable adhesion contract. The Court emphasizes that the broad nature of the clause extends its applicability rather than limits it. Furthermore, Jantran does not contest any pertinent facts required by the Sedco inquiry, mandating arbitration under the Convention. The Court asserts its obligation to uphold the law as established by Congress and disagrees with Jantran’s assertion that enforcing arbitration clauses complicates dispute resolution. The Court's examination of arbitration remains confined despite any additional efforts by parties involved. Consequently, the Court orders: 1) granting of Sphere Drake Insurance p.l.c.'s motion for summary judgment; 2) granting of Sphere Drake’s motion to compel arbitration and stay cross-claim; and 3) dismissal of Jantran, Inc.'s motion for summary judgment on coverage as moot. Additional notes include that Bunge filed suit against Jantran in Mississippi, which lacks a Direct Action Statute, and the Court previously rejected a broker-issued document as a valid policy for such purposes. The Court also notes Jantran's defense of lack of personal jurisdiction and tentatively considers the application of Louisiana law, concluding that no substantial authority supports its applicability to the Sphere Drake policy.