In Syngenta Crop Protection, LLC v. Ins. Co. of North America, the United States District Court for the Southern District of New York addressed an action against a liability insurer for coverage for asbestos claims. The policyholder first notified the insurer of the claims in 1999. The insurer responded with a reservation of rights letter explaining why the claims may not be covered. However, the insurer took no further action on the claims. In 2008, the policyholder made a formal demand for indemnification. In 2017, the insurer finally issued a denial of coverage. In its denial, the insurer asserted for the first time that the claims were encompassed by a 1999 settlement agreement and release in which the policyholder had released any “environmental claims” it had against the insurer. The agreement provided that any subsequent disputes regarding the agreement must be submitted to arbitration.
The insurer subsequently instituted an arbitration action with regard to the asbestos coverage claims. The policyholder responded by filing a declaratory judgment action in the Southern District and filing a motion to enjoin the arbitration. The insurer filed a motion to stay the civil action pending the outcome of the arbitration.
The Court began its analysis by considering the policyholder’s argument that the insurer had waived its right to arbitration by not demanding arbitration until 18 years after the claims were first presented. The Court observed that under established precedent, the question of whether arbitration had been waived was an issue for arbitration, rather than the courts. The Court noted that an exception to this rule existed when a litigant had potentially waived its entitlement to arbitration by participating in the litigation with regard to the underlying dispute. However, as this exception clearly did not apply here, the Court held that the question of whether the insurer had waived arbitration must be resolved through arbitration.
The Court next examined the policyholder’s claim that the insurer had waived its ability to assert the settlement and release as a defense to the asbestos claims, due to its failure to reference the settlement and release in a timely disclaimer letter, as required by New York law. The Court noted that this issue concerned the merits of the underlying dispute, rather than a procedural defense to the arbitration. Under New York law, whether such an issue is subject to arbitration depends upon the language of the arbitration agreement.
As noted above, the arbitration clause at issue required that “any dispute with respect to” the settlement agreement must be resolved through arbitration. The Court concluded that under such language, the question of whether the insurer had waived its ability to assert the release as a defense to coverage was subject to arbitration. The Court observed that this result was further supported by language in the arbitration clause stating that arbitration would proceed according to the rules of the American Arbitration Association. These rules provided that the arbitrator “shall have the power to rule on his or her jurisdiction, including any objections with respect to the existence, scope, or validity of the agreement.”
The Court therefore held that the dispute was subject to arbitration, and granted the insurer’s motion to stay pending arbitration.
