AXA Versicherung AG v. New Hampshire Ins. Co.
(S.D.N.Y. Oct. 6, 2009)
A federal judge remanded a $34 million jury verdict against AIG and its subsidiaries for fraudulent inducement involving reinsurance facilities. On appeal, AIG argued that the verdict could not stand because the plaintiff’s claims should have been arbitrated or, alternatively, that they should have been tried by the bench, not a jury. The plaintiff countered that AIG waived its right to arbitration. It also argued that a jury trial was appropriate because its claims sounded in fraud, not contract.
AIG argued that the plaintiff’s claims did not sound in fraud because, even if AIG secretly intended to treat the plaintiff’s facilities as facultative rather than facultative obligatory, such conduct reflected an undisclosed intention to breach the contract, not a collateral misrepresentation that could form the basis of a fraud claim. The Second Circuit held that it was unclear whether the lower court considered if the plaintiff’s claims sounded in fraud or contract and, therefore, whether a bench or jury trial was warranted. As a result, the case was remanded.
The Second Circuit also held that the lower court left unanswered whether AIG waived its right to arbitration in the first instance. Thus, the court remanded the case for creation of a record and resolution of the plaintiff’s waiver argument.
For a copy of the decision, click here
By Carrie Appler and Richard Cohen