Forge Underwriting Ltd. v. AmTrust Financial Services, Inc.

Background

AmTrust obtained several directors-and-officers-liability insurance policies from multiple insurers. Forge and Aspen issued a policy covering part of an excess-insurance layer. The Forge policy stated that New York law governed and that disputes were subject to the exclusive jurisdiction of New York courts. It also included a dispute-resolution section stating that disputes involving underlying insurance disputes would be heard together in the same court or arbitration proceedings.

The Forge policy did not itself contain an arbitration clause. It incorporated the dispute-resolution provisions of the primary policy, which also did not contain an arbitration clause. Other policies issued by Markel did contain arbitration clauses. After AmTrust demanded arbitration against Forge and Markel, Forge petitioned the Court to stop the arbitration and sought a preliminary injunction. AmTrust moved to compel Forge to participate in the arbitration.

AmTrust’s Motion to Compel Arbitration

The Court applied the Federal Arbitration Act and New York contract-law principles. The key question was whether Forge and AmTrust had entered into a valid agreement to arbitrate. The Court noted that a party cannot be required to arbitrate a dispute it did not agree to submit to arbitration.

AmTrust argued that the Forge policy’s reference to disputes being heard together in the same “court or arbitration proceedings” incorporated the Markel policies’ arbitration clauses or otherwise required Forge to join any arbitration involving an underlying insurer. The Court rejected both arguments. The Forge policy did not identify the Markel policies by name, policy number, or another specific feature, and its brief reference to arbitration did not clearly communicate an intent to incorporate those policies’ arbitration provisions. The reference to arbitration also appeared alongside a reference to court proceedings, which supported an interpretation allowing the disputes to proceed together in court.

The Court held that the Forge policy did not incorporate the Markel policies’ arbitration clauses and did not require Forge to arbitrate merely because AmTrust was arbitrating with Markel. The Court therefore denied AmTrust’s motion to compel arbitration. Because it resolved the matter on the absence of an arbitration agreement, it did not decide Forge’s separate argument that AmTrust had waived any right to arbitrate by filing the Delaware lawsuit.

Forge’s Injunction Motions

The Court found that Forge satisfied all four requirements for preliminary injunctive relief: Forge was likely to succeed because it had not agreed to arbitrate; being forced to arbitrate an unagreed dispute would cause irreparable harm; the balance of hardships favored Forge; and preventing an improper, duplicative arbitration served the public interest. The Court therefore granted Forge’s motion for a preliminary injunction.

Although Forge’s motion formally sought preliminary relief, Forge also requested a permanent injunction in its briefing. The Court consolidated consideration of the preliminary and permanent injunction requests, concluding that AmTrust had notice and a fair opportunity to present its arguments. Applying the requirements for permanent injunctive relief, the Court found that monetary damages would not adequately remedy the harm and that the other factors favored Forge. The Court therefore granted Forge’s request for a permanent injunction barring AmTrust from proceeding with the arbitration against Forge.

Disposition

The Court denied AmTrust’s motion to compel arbitration and granted Forge’s motion for a preliminary injunction and request for a permanent injunction. The Clerk was directed to enter judgment in favor of Forge’s petition, terminate the motions, and close the case.