Texas District Court Finds Arbitration Required in Hurricane Harvey Dispute and That Independent Adjusting Firm May Join in Arbitration

Carlton Fields
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Carlton Fields

This action involves plaintiff Living Steward Properties’ insurance claim for property damage caused by Hurricane Harvey. The insurer defendants moved to compel arbitration of the plaintiff’s claims that the insurer defendants underpaid the company for Hurricane Harvey damage.

The insurer defendants argued that this case presented the same arbitration language and the same issues that the U.S. District Court for the Southern District of Texas adjudicated in Corpus Christi Island Apartment Villas Management Group, LLC v. Underwriters at Lloyd’s London, No. 2:19-cv-00188, 2019 WL 8273959 (S.D. Tex. Oct. 18, 2019), in which the court found there existed a written agreement to arbitrate and an unchallenged delegation clause, which required all additional questions be resolved by the arbitrators. Because the plaintiff made no effort to distinguish its case from Corpus Christi Island, the court ordered that the plaintiff’s claims against the insurer defendants be submitted to arbitration.

The plaintiff also sued CJW, the public adjusting firm assigned to its claim, for unfair settlement practices under the Texas Insurance Code and breach of the common law duty of good faith and fair dealing. CJW argued that these claims and their underlying facts were inextricably intertwined with the claims against the insurer defendants such that they all belonged, together, before the arbitrators. CJW sought to compel arbitration of the claims made against it by joining with the insurer defendants to enforce the policy’s arbitration agreement and to extend that agreement to include the extra-contractual claims made against CJW. The court found that equitable estoppel prevented the plaintiff from avoiding the contractual arbitration agreement for claims against CJW, a nonparty to the insurance policy, because the plaintiff relied on the policy in making its claims against CJW, and the claims against both the insurer defendants and CJW were inextricably intertwined.

Because the plaintiff failed to brief any argument against the application of equitable estoppel, the court granted CJW’s joinder and ordered that the plaintiff’s claims against both the insurer defendants and CJW be submitted to arbitration.

Living Steward Properties, Ltd. v. Certain Underwriters at Lloyd’s London, No. 2:20-cv-00001 (S.D. Tex. May 18, 2020).

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