Illinois Federal Court Bars Assignee Of Claims Under A Reinsurance Treaty From Invoking Arbitration Clause


Pine Top Receivables of Ill., Inc. v. Banco de Seguros Del Estado, No. 12 C 6357, 2013 U.S. Dist. LEXIS 81516, 2013 WL 2574596 (N. D. Ill. June 11, 2013).

An Illinois federal court granted a reinsurer’s motion to dismiss claims to compel arbitration asserted by a cedent’s assignee in liquidation.  The cedent, which was ordered by an Illinois state court to liquidate, sold and assigned all of its rights to payment from the reinsurer.  The assignee filed suit after the reinsurer refused a demand for payment under the treaties.  The assignee argued that an arbitration clause in the treaties dictated that the dispute be arbitrated.  The reinsurer filed a motion to dismiss the claim to compel arbitration, arguing that the agreement assigning the right to payment from the cedent to the assignee did not indicate that the right to invoke arbitration was included in the assignment.

In granting the reinsurer’s motion to dismiss and denying the assignee’s motion to compel arbitration, the court agreed with the reinsurer.  The court found that, while certain portions of the assignment agreement broadly transferred all of the cedent’s rights to obtain information, the provisions transferring the insurer’s rights to obtain payment under the treaties were limited to specifically defined powers, including the right to sue for, compromise, and recover amounts due.  Because the assignment agreement specifically stated that it did not include a novation or full assignment, the court held that the deliberate use of limiting language in the transfer of rights to obtain payment evidenced an intent to convey only the rights expressly granted, of which the right to arbitrate was not one.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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