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Letter: Response to Houston Casualty Company

Published on Friday, May 21, 2010 Email To Friend    Print Version

Dear Sir:

As previously stated, we welcome the fact that Houston Casualty Company and/or its parent HCC Insurance Holdings, Inc. (collectively together with its agents referred to as "HCC") seems to have finally chosen to engage with Embassy in a more public forum, which is less susceptible to the vagaries of any single decision-maker.

However, it is disappointing that the latest letter, which Houston Casualty Company has instructed Appleby, its Cayman lawyers, to write to the press, contains further statements which appear to be false, misleading and/or misrepresentative.

For example, HCC has described the initial ruling of the Sole Arbitrator, Mr Stephen Males QC, dated 8 January 2010 as being “final and binding”. The reality (as clearly evident from the actual source material including the actual transcripts of the hearings which Embassy has already provided to the press in the interests of complete openness and transparency so that the press can see the real facts for themselves instead of having to rely on anyone’s interpretation of those facts) is that as the deadline for Embassy to decide whether or not to appeal the Arbitrator’s initial ruling was looming, Baker Botts wrote a letter to the Arbitrator, which was emailed to the Arbitrator and copied to Houston Casualty Company’s attorneys at 5:46pm on 28 January 2010, clearly stating that “Embassy seeks a correction of the Award”.

It seems that the Arbitrator was so concerned that Embassy may appeal his questionable initial ruling that he provided a positive indication in Embassy’s favour within 25 minutes of Embassy’s request for clarification by reply-to-all on that email.

Following which Houston Casualty Company’s attorneys wrote a letter to the Arbitrator on 1 February 2010 stating “HCC has been put to considerable trouble and expense in dealing with Embassy's Texas proceedings, investing appreciable legal costs in them and removing them from State Court, where Embassy originally filed suit, to Federal Court, which HCC considers the most suitable and expedient venue” and then went on to state “Further, Judge Hughes is already familiar with the matter. For all these reasons HCC has a legitimate interest in seeing Embassy's proceedings remaining stayed, rather than terminated and re-filed in a different Court at a later date.”

Unless HCC know something in relation to Judge Hughes in Texas that Embassy doesn’t and it would obviously be wholly improper for HCC to be communicating with Judge Lynn N. Hughes without Embassy, it is clearly nonsense for HCC to claim that "Judge Hughes is already familiar with the matter" given, as Baker Botts rightly pointed out in their letter of 3 February 2010, “the case has been stayed almost since inception and there have been no substantive hearings in the case.”

Even more alarming, however, is HCC’s claim that “HCC has been put to considerable trouble and expense in dealing with Embassy's Texas proceedings, investing appreciable legal costs in them and removing them from State Court, where Embassy originally filed suit, to Federal Court, which HCC considers the most suitable and expedient venue” given the fact that as far as Embassy is aware, only minor procedural steps have been undertaken by either party in Texas because as previously reiterated “the case has been stayed almost since inception and there have been no substantive hearings in the case.”

Further, given the fact that as far as Judge Lynn N. Hughes was concerned the case in his court in Texas was stayed until both parties were to jointly notify him together of any change, it seems remarkably coincidental that Judge Lynn N. Hughes just happened, out of the blue, to suddenly initiate a request for a status update on a case that was already stayed in Texas under a UK Court Order on exactly the same date as the date of the UK Arbitrator’s initial questionable ruling i.e. on 8 January 2010!

After the Arbitrator had considered both parties’ formal submissions, he rejected HCC’s submissions and ruled in Embassy’s favour in his subsequent clarification i.e. the “Addendum” dated 3 February 2010 correcting his earlier initial ruling dated 8 January 2010. In this subsequent ruling, the Arbitrator refers to "The policy which underlies the Act is one of enabling the arbitral process to correct itself where possible, without the intervention of the Court." Under the section headed “The tribunal may ... correct an award” the Arbitrator goes on to state “Accordingly it would not be acceptable to refuse to make any correction at all.”

As clearly noted in the Arbitrator’s subsequent attached clarification in Embassy’s favour, even the Arbitrator himself highlights HCC’s unreasonable tactical manoeuvrings in Texas and remarks on HCC’s continuing insistence that the case in Texas only be heard in a Court being presided over by Judge Lynn N. Hughes.

The Arbitrator concludes that “there is therefore no principled basis” for HCC to continue to refuse to consent to the withdrawal/termination by Embassy of the Texas proceedings without prejudice to Embassy’s right to re-file after the end of the Standstill Period, before a different judge in Texas State Court (where Embassy had filed it following which HCC had it moved at inexplicably “considerable trouble and expense" to a Court being presided by Judge Lynn N. Hughes) and goes on to state “it would be unfair for HCC to be allowed to make applications to the Texas court without Embassy being able to respond”. Under the section headed “Corrected award” the Arbitrator goes on to state

“For the reasons set out above, I withdraw §204(h) of my award and order instead as follows”.

Despite the fact that HCC’s position was so clearly rejected by the Arbitrator in his subsequent clarification, HCC continue to fail to comply with the Arbitrator’s ruling by still, i.e. even after the Arbitrator’s clarification, continuing to refuse to consent to the withdrawal by Embassy of the Texas proceedings without prejudice to Embassy’s right to re-file after the end of the Standstill Period, before a different judge in Texas State Court, where Embassy actually filed it following which HCC had it moved at inexplicably “considerable trouble and expense" to a Court being presided by Judge Lynn N. Hughes.

Having insisted that Judge Henderson be the only Judge in Cayman to hear their case, it is particularly noteworthy that HCC are now similarly continuing to be remarkably insistent that only Judge Lynn N. Hughes hear Embassy’s case against HCC in Texas, especially considering the fact that Embassy actually filed suit in State Court i.e. not Federal Court where Judge Lynn N. Hughes sits and HCC arranged for it to be subsequently transferred.

The fact that HCC’s remaining co-insurers paid on 17 March 2010, i.e. more than two months after the Arbitrator’s initial ruling on 8 January 2010 in HCC’s London arbitration against Embassy, clearly evidences how little weight should really be given to it and to Appleby’s comments in relation to it, especially considering Appleby claims to also be acting on behalf of those same remaining co-insurers of HCC who have since (i.e. after the Arbitrator’s initial ruling) actually now paid the agreed policy proceeds, leaving only Houston Casualty Company to decide whether it will pay for the damage caused by Hurricane Ivan or, at its option, reinstate the Hotel in accordance with the terms of the insurance policy.

Bill Powers
General Manager
Grand Cayman Beach Suites
(formerly the Hyatt)
 
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