An anticipated 2nd U.S. Circuit Court of Appeals decision on whether to apply New York law to a multimillion-dollar dispute over an arbitration provision in an insurance contract could have major implications for insurers across the country, McGuireWoods partners Tony Tatum and Gregory DuBoff told Law360 in a May 11, 2022, story. The article covered a dispute between ExxonMobil Corp. and TIG Insurance Corp. over whether to apply a products liability exclusion in their insurance contract.
In the article, titled “Review of Exxon’s $25M Award Could Have Global Impact,” Tatum and DuBoff told Law360 that the 2nd Circuit’s ruling will have significant implications for insurers because of U.S. District Judge Edgardo Ramos’ decision to apply New York law to the policy. It could impact claims under political risk policies, which are expected to surge in the wake of Russia’s invasion of Ukraine.
“What’s important about this decision is the jurisdictional analysis that Judge Ramos underwent,” Tatum told Law360. “A number of insurance policies across the board, if they’re going to have a choice-of-law provision, it will be New York unless the insurer agreed to modify.”
New York has a 9% statutory interest rate for breach-of-contract damages that applies unless the right to collect interest is expressly waived. If Exxon prevails, DuBoff said, TIG could be on the hook for an eight-figure interest award on top of the $25 million policy limit.
“The timing for TIG and just the insurance industry in general is not good given what’s going on in the world,” Tatum said.