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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

MATSON TERMINALS, INC. v. INSURANCE COMPANY OF NORTH AMERICA

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
3:13-cv-05571 Search Pacer
ACE Group party(s): 
Opposing Party: 
Matson Terminals, Inc.
Court Type: 
Federal
US District Court: 
Northern District of California
Date Filed: 
Dec 2 2013

C. The Dispute.
12. A dispute between Matson and INA has arisen concerning the value of
Matson's indemnity claims for its losses on account of each Claimant's permanent total
disability.
13. Pursuant to Endorsement #6, INA is obligated to make a determination of the
"Annuity Value or Value of the Claim" for each permanent total disability (sometimes
hereafter "PTD") or death claim presented by Matson. Endorsement #6 contemplates that a
valuation may be performed several years after a claimant's disabling injury occurred, but it
instructs that—whenever the valuation is actually completed—it is to be done "as of the date
of maximum medical improvement ("MMI") as reflected in the award that was entered in
favor of the claimant. This involves valuing a claim retrospectively on the basis of what was
known or discoverable at the MMI date concerning the total amount of compensation and
medical benefits the claimant would receive over the course of his or her lifetime (the benefits
awarded are for life, and spousal death benefits can extend for years beyond the claimant's
death).
14. The valuations in this case have three steps. The first step involves projecting
forward—from dates in the 1980s when awards were entered in favor of each of the
Claimants—and estimating, based on their life expectancies at that time, the total amounts of
compensation and medical benefits each Claimant would

benefits that had already been received by each Claimant by the MMI date. The valuations are
to be based solely on the facts that were knowable in the 1980s, and the reasonable
expectations that would have existed at that time.
15. Endorsement #6 specifically provides for a retrospective valuation because it
states that a permanent total disability claim's value shall be established "as of the time" that
compensable permanent total disability status was "finally established" which is the MMI date.
There is no requirement that the valuation must actually be performed at the time the
Claimants became PTD in fact; as here, the valuation may be made months or even years later.
16. Once it has completed its valuations of Matson's indemnity claims for losses
from the Claimants' disabilities, INA is obligated by Endorsement #6 to promptly notify
Matson of the claim values it has established. Then, within ninety days after INA has
communicated those values to Matson, and assuming the parties have reached agreement as to
the claims' valuations, Matson "shall select either Option (1) or Option (2)." Option (1) would
involve Matson "transferring all [further] liabilities on the claim[s] up to the policy limit to
INA." Option (2) would involve INA promptly paying to Matson each claim's "Annuity
Value or Value of the Claim" (less the retention), "thereby relieving INA of all future
liabilities under the policy as respects [those] claim[s]."
17. Endorsement #6, at section 2, prescribes the manner in which each Claimant's
claim must be valued. Specifically, section 2 of Endorsement #6 provides in relevant part as
follows:
For purposes of Option (1) and Option (2) above, the
Annuity Value of any claim arising from accident or disease to an
individual shall be the annuity value of that total claim, including
but not limited to all compensation amounts paid and future, and
medical benefits paid and future, whether such compensation
amounts paid or medical benefits paid were based on permanent
total disability status or otherwise, based upon open market pricing
of the annuity with a rate of escalation assumption agreed upon
between INA and the insured. In the event that open market
annuities are not available for this purpose, the Value of the Claim
shall be determined as the value of that total claim (unescalated
and nondiscounted) as established by standard INA reserving
practices. Either the Annuity Value or Value of the Claim will beestablished as of the time that compensable permanent total
disability status has been finally established, or compensable status
of a death claim has been finally established.
18. For each of the 12 claims, INA has contended that the claim has no value at all
(zero dollars) because it argues that it has no indemnity obligation.
19. Matson disagrees with INA's valuations of each of the claims. Matson
contends that the value of each claim is as set forth in the chart below. Each of Matson's claim
valuations presented below was calculated as specified in Endorsement #6. That is, each claim
valuation was calculated "as of the date the Claimant's compensable permanent total
disability status was finally established by a physician.

D. Endorsement #6 Requires All Disputes Concerning the Valuation of a
Claim To Be Resolved By Binding Arbitration.
20. Endorsement #6 contains an arbitration provision (at section 3) that provides as
follows:
In the event that ESTA and the insured cannot agree upon the
Annuity Value or Value of the Claim, the matter shall be submitted
to binding arbitration in San Francisco, California. The parties
shall attempt to agree upon a single neutral arbitrator and if they so
agree, the arbitration shall be conducted before that single neutral
arbitrator. If the parties cannot agree upon a single neutral
arbitrator, the arbitration shall be conducted before three
arbitrators, of which each party shall select one, and the third, a
neutral arbitrator, shall be selected by the two arbitrators selected
by the parties. If there are three arbitrators, the decision of two of
them shall be binding. Arbitration shall be in accordance with the
provisions of California Code of Civil Procedure sections 1280 et
seq., and the provisions of California Code of Civil Procedure
section 1280.5 are specifically incorporated herein.
21. By letter dated August 30, 2013, and in follow-up telephone conversations
between counsel for Matson and counsel for ESTA, Matson demanded that the parties' dispute
concerning the proper valuation of each of Matson's 12 PTD claims be "submitted to binding
arbitration in San Francisco, California" as required by Endorsement #6.
22. In its letter dated October 7, 2013 and in the two subsequent telephone calls
among counsel, INA refused to submit to binding arbitration as required by Endorsement #6.
23. Matson has consistently sought to arbitrate its dispute with INA and has never
waived its right under Endorsement #6 to arbitrate the issue of the amount of contract benefits
due to Matson, based on the valuations of the 12 claims.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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