Bench From the
by Thomas A. Croft, Esq.
Two Cases, Same Party
H
ugh Scott, a Texas attorney involved with United Re, had a bad month. On July 13, a Kentucky Court of Appeals rejected his attempt to compel arbitration of his case with a Louisville company that alleged that he, personally, was liable for more than $900,000 in unpaid stop loss claims. On July 26, an Ohio Court of Appeals affirmed a trial court judgment for more than $200,000 for unpaid specific stop loss claims, plus $400,000 in punitive damages, against Scott, individually. The Kentucky case is instructive as to the issue of the enforceability of arbitration clauses in stop loss contracts, while the Ohio case demonstrates the consequences of a court’s conclusion that a party had a “sheer lack of credibility” and failed to
10
September 2013
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The Self-Insurer
observe corporate formalities, leading to personal liability on otherwise corporate obligations.
Kentucky Court of Appeals Decides Several Significant Arbitrability Issues in a Stop Loss Context (Scott v. Louisville Bedding Co., No. 2012-CA000252-MR, in the Kentucky Court of Appeals, July 12, 2013) A Kentucky Court of Appeals was faced with a host of complex issues arising out of an arbitration clause in a “Trust Agreement” it held was stop loss insurance, ultimately concluding that the clause was unenforceable. The self-insured group, Louisville Bedding, entered into a “Trust Agreement” with United Re Trust and
United Re AG (“United”) whereby (according to the Court) Louisville Bedding would be indemnified by United for claims in excess of $200,000 per person per year, or $1,878,341 in the aggregate. The precise mechanism by which such indemnity would be provided was unimportant to the Court, which held that “It is the obligation to indemnify another for risk that is the hallmark of insurance, and that obligation was the Trust’s. Therefore… the Agreement is an insurance contract.” The case is thus properly analyzed as one involving medical stop loss insurance, and is significant for its explication of the law relating to the enforceability of arbitration clauses in stop loss contracts. The case arose when the group filed an aggregate claim with United
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