Minneland Private Day School, Inc. v. Applied Underwriters Captive Risk Assur. Co., Inc., No. 16-1511, 2017 U.S. App. LEXIS 14916 (4th Cir. Aug. 11, 2017).
The Fourth Circuit Court of Appeals affirmed in part and denied in part a decision denying a motion to compel arbitration and a finding of waiver concerning the characterization of a reinsurance participation agreement.
Whether a reinsurance participation agreement is a reinsurance contract or an insurance contract in the context of a comprehensive workers' compensation program has been a matter of controversy between providers of workers' compensation programs and their insureds. In this case, the district court denied the insurer's motion to compel arbitration under the arbitration clause contained in the reinsurance participation agreement. The court also applied judicial estoppel to hold that the reinsurance participation agreement was an insurance contract for purposes of Virginia law.
In affirming the denial of the motion to compel arbitration, the circuit court concluded that the court, not an arbitrator, should determine whether the reinsurance participation agreement is an insurance contract under Virginia law. This decision, argued the insurer, was in conflict with the Sixth and Third circuits, which have allowed the arbitrability issue to be decided by an arbitrator and not the courts. The distinction, according to the circuit court, was that those cases did not address whether the relevant state law rendered unenforceable the delegation provision in the reinsurance participation agreement.
In reversing in part, the circuit court found that judicial estoppel was inapplicable. The court found that, because the insurer's assertion that the reinsurance participation agreement was not an insurance contract for purposes of Virginia law was not inconsistent with any position it took in other similar litigation, there was no basis for judicial estoppel. Accordingly, the court directed the parties to brief the issue of whether the reinsurance participation agreement is an insurance contract for purposes of Virginia law and remanded the matter back to the district court to make that determination.