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City of Visalia v. Chartis Inc.

January 11, 2013

CITY OF VISALIA,
PLAINTIFF,
v.
CHARTIS INC., ET AL.,
DEFENDANTS.



ORDER GRANTING DEFENDANTS' MOTION TO STAY OR DISMISS (Doc. 6)

This is an action for breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing brought by Plaintiff City of Visalia ("City") against Defendants Chartis, Inc.; Chartis Aerospace Insurance Services, Inc.; Chartis Claims Service, Inc.; Chartis Global Services, Inc.; Chartis Insurance Agency, Inc.; Chartis Casualty Company; Chartis Property Casualty Company; Chartis Warranty Guard, Inc.; National Union Fire Insurance Company of Pittsburg, PA; The Insurance Company of the State of Pennsylvania; American Home Insurance Company; New Hampshire Insurance Company; AIU Insurance Company; Commerce and Industry Insurance Company; Illinois National Company; American International South Insurance Company; American International Visalia Insurance Company; Granite State Insurance Company; Landmark Insurance Company; National Union Fire Insurance Company of Louisiana; and Does 1-50 inclusive ("Defendants"). Defendants have filed a motion to dismiss or, in the alternative, to stay the action pending completion of arbitration. See Court's Docket, Doc. No. 6.

The City timely filed an opposition, and Defendants filed a reply. See id., Doc. Nos. 7, 8. For the reasons stated herein, Defendants' motion will be granted.

BACKGROUND

Defendant National Union Fire Insurance Company of Pittsburgh, PA ("National Union") provided workers' compensation coverage to the City. The insurance coverage was governed by a Payment Agreement executed by the City and National Union, on behalf of its itself and all companies affiliated with National Union that provided insurance coverage and services to the City, effective June 30, 1999 (the "1999 Payment Agreement"). See Court's Docket, Doc. No.6-2, Decl. of Evan Smoak, Ex. 1. In 2000, National Union issued a second Payment Agreement, effective June 30, 2000 (the "2000 Payment Agreement").*fn1 See id. at Ex. 2. The Payment Agreements each contained the following arbitration clause:

HOW WILL DISAGREEMENTS BE RESOLVED?

What if we disagree about payment due?

If you disagree with us about any amount of Your Payment Obligation that we have asked you to pay, within the time allowed for payment you must:

* give us written particulars about the items with which you disagree;

* and pay those items with which you do not disagree We will review the disputed items promptly and provide you with further explanations, details, or corrections . . . Any disputed items not resolved within 60 days after our response to your written particulars must be immediately submitted to arbitration as set forth below . . .

What about disputes other than disputes about payment due?

Any other unresolved dispute arising out of this Agreement must be submitted to arbitration. You must notify us in writing as soon as you have submitted a dispute to arbitration. We must notify you in writing as soon as we have submitted a dispute to arbitration.

Smoak Decl., Exs. 1, 2 at 8-9. The Payment Agreements further provide that the arbitrators "will have exclusive jurisdiction over the entire matter in dispute, including any questions as to its arbitrability." See Smoak Decl., Exs. 1, 2 at 9. On or about May 10, 2010, the City received an invoice for $540,991 for claims incurred during 1999-2001. See Compl. ¶ 29. On March 28, 2012, National Union, on behalf of itself and all of its affiliates, made a demand for arbitration upon the City for payment of the invoice.*fn2 See Smoak Decl., Ex. 3.

On May 31, 2012, the City filed the instant action in Tulare County Superior Court seeking a declaratory judgment that Defendants' claim for the amount due and owing is time-barred, and for damages for breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing. See Court's Docket, Doc. No. 1. On July 19, 2012, Defendants removed the action to this Court on the basis of diversity jurisdiction. Id. Defendants now move to ...


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