MOTIVA ENTERPRISES LLC v. SWISS RE INTERNATIONAL S.E. et al Complaint

7/30/2019 MOTIVA ENTERPRISES LLC v. SWISS RE INTERNATIONAL S.E. et al Complaint

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EXHIBIT A-PART 1

Case 1:12-cv-01460-UNA Document 1-1 Filed 11/13/12 Page 1 of 79 PageID #: 9


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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MOTIVA ENTERPRISES LLC, )

)Plaintiff, )

)vs. ) C.A. No.:)

SWISS RE INTERNATIONAL S.E. f/k/a )

SR INTERNATIONAL BUSINESS )

INSURANCE COMPANY PLC; LIBERTY )MUTUAL INSURANCE COMPANY; ZURICH )

AMERICAN INSURANCE COMPANY; )

CHARTIS PROPERTY CASUALTY COMPANY; )ACE AMERICAN INSURANCE COMPANY; )

STARR TECHNICAL RISKS AGENCY, INC.; )

GENERAL SECURITY INDEMNITY )COMPANY OF ARIZONA; ARCH INSURANCE )

COMPANY; LANCASHIRE INSURANCE )

COMPANY LIMITED; CATLIN, LLOYDS )

SYNDICATE NO. 2003 SJC; QBE MARINE & )ENERGY SYNDICATE 1036; NAVIGATORS )

MANAGEMENT COMPANY )

INC. f/k/a NAVIGATORS SPECIAL RISKS, INC. ))

Defendants. )

VERIFIED COMPLAINT

Plaintiff, Motiva Enterprises LLC (Motiva or Plaintiff), on its own behalf, by and

through its undersigned counsel, for its Verified Complaint against defendants Swiss Re

International S.E. f/k/a SR International Business Insurance Company PLC, Liberty Mutual

Insurance Company, Zurich American Insurance Company, Chartis Property Casualty Company,

ACE American Insurance Company, Starr Technical Risks Agency, Inc., General Security

Indemnity Company of Arizona, Arch Insurance Company, Lancashire Insurance Company

Limited, Catlin, Lloyds Syndicate No. 2003 SJC, QBE Marine and Energy Syndicate 1036, and

Navigators Management, Inc., f/k/a Navigators Special Risks, Inc. (collectively, Defendants or



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Insurers), alleges upon knowledge with respect to its own actions and upon information and

belief as follows:

NATURE OF THE ACTION

1. This action presents an exigent dispute in which Motiva requests emergency relief

to preclude Defendants from wrongfully pursuing arbitration in London over disputes that the

parties contractually agreed to litigate in the courts of the State of Delaware.

2. In consideration of premiums paid by Motiva, Defendants issued a Construction

All Risks insurance policy to Motiva, Policy No. MHOIJ07150 (the Policy), indemnifying

Motiva against all risks of damage to Motivas insured property in relation to the Port Arthur

Refinery Crude Expansion Project (the Project).1

3. Under the express terms of the Policy, Defendants agreed that any dispute

concerning the interpretation of terms, conditions, limitations, and exclusions contained in the

Policy are governed by Delaware law.

4. Defendants also agreed to submit all disputes with Motiva, except disputes

regarding the amount to be paid under the Policy, to the exclusive jurisdiction of the courts of the

State of Delaware and to comply with all requirements to enable such jurisdiction.

5. On August 22, 2012, Motiva filed an action in the Superior Court of Delaware

(the Superior Court Action) (see Ex. C) seeking (1) a declaratory judgment that the corrosion

exclusion does not apply to this loss and (2) damages incurred as a result of fraud and

misrepresentations perpetrated by the Defendants agent Loss Adjuster, Cunningham Lindsey

International (the Adjuster). See Ex. D.

1The Policy and its extensions are attached as Exhibit A, and are hereby incorporated by

reference into this Verified Complaint.



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6. Notwithstanding the express provisions governing choice of law and forum

selection in the Policy, Defendants filed a notice of removal removing the Superior Court Action

to the United States District Court for the District of Delaware. See Ex. E.

7. On November 6, 2012, Defendants again breached the express provisions of the

Policy by purporting to initiate an arbitration action in London, seeking resolution of liability

issues, contract interpretation issues and conciliation of other Policy disputes, including fraud

and misrepresentation claims, by a three-member ARIAS (UK) arbitration panel. Under the

Policy, all of these issues plainly fall within the exclusive jurisdiction of Delaware state courts,

not a London arbitrator. See Ex. F.

8. In their unauthorized arbitration filing, Defendants demand that Motiva appoint a

single arbitrator to serve on a three-arbitrator panel. In their demand, Defendants threaten to

petition ARIAS (UK) to appoint an arbitrator to fill the vacancy if Motiva fails to select an

arbitrator within 14 days (i.e., no later than November 20, 2012). See Ex. F at 8. Defendants

demand places Motiva in the impossible position of appointing an arbitrator for an ultra vires

arbitration proceeding in direct violation of the Policys terms or risk losing its right to select

an arbitrator.

9. Accordingly, Motiva respectfully requests that this Court (1) temporarily restrain,

preliminarily enjoin, and permanently enjoin Defendants from pursuing this prohibited

arbitration; (2) declare that all disputes arising out of and relating to the Policy except only for

those disputes regarding solely the amount to be paid must be filed in the courts of the State of

Delaware; and (3) declare that Defendants have breached the terms of the Policy.



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JURISDICTION

10. This Court has subject matter jurisdiction over this dispute pursuant to the

Delaware Uniform Arbitration Act (the DUAA), and specifically pursuant to 10Del. C.

5702(c).

11. This Court has jurisdiction to grant equitable and injunctive relief pursuant to 10

Del. C. 341 and 342 and to grant declaratory relief pursuant to 10Del. C. 6501.

PARTIES

12. Motiva is a Delaware limited liability company that refines, distributes, and

markets oil products in and throughout the eastern and southern United States. Motivas

principal place of business is in Houston, Texas.

13. Swiss Re International S.E. f/k/a/ SR International Business Insurance Company

PLC is an excess and surplus lines company, chartered in the United Kingdom, with its principal

place of business in the United Kingdom.

14. Liberty Mutual Insurance Company is a corporation organized under the laws of

the Commonwealth of Massachusetts with its principal place of business in Boston,

Massachusetts.

15. Zurich American Insurance Company is a corporation organized under the laws of

the State of Illinois with its principal place of business in Schaumberg, Illinois.

16. Chartis Property Casualty Company (formerly known as AIG Casualty Company)

is a corporation organized under the laws of the Commonwealth of Pennsylvania with its

principal place of business in New York, New York.

17. ACE American Insurance Company is a corporation organized under the laws of

the Commonwealth of Pennsylvania with its principal place of business in Philadelphia,

Pennsylvania.



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18. Starr Technical Risks Agency, Inc. is a corporation organized under the laws of

the State of New York with its principal place of business in New York, New York.

19. General Security Indemnity Company of Arizona is a corporation organized under

the laws of the State of Arizona with its principal place of business in New York, New York.

20. Arch Insurance Company is a corporation organized under the laws of the State of

Missouri with its principal place of business in New Jersey.

21. Lancashire Insurance Company Limited is a foreign insurer domiciled in

Bermuda.

22. Catlin, Lloyds Syndicate No. 2003 SJC is an unincorporated association with its

principal place of business in London, United Kingdom.

23. QBE Marine and Energy Syndicate 1036 is an unincorporated association with its

principal place of business in London, United Kingdom.

24. Navigators Management Company, Inc. f/k/a Navigators Special Risks, Inc. is an

unknown entity, with unknown corporate residence. It likely is an agent for an insurer that has

not been disclosed to Motiva.

FACTS

25. On December 10, 2007, Defendants issued the Policy to Motiva. On its face, the

Policy states that it is issued and delivered as a Texas surplus lines coverage.

26. The Policy commenced on September 1, 2007, for an initial period expiring on

July 1, 2010. It was extended by various endorsements including Endorsement No. 010, which

extended the Policy to cover the time period of June 1, 2012 to July 1, 2012.

TERMS OF THE POLICY

27. The Policy covers All Risks of Damage to the Insured Property forming part of

the Project from any cause whatsoever not excluded in the Policy at the site of the Project



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occurring during the period of the Policy. The term Damage is defined to mean physical

damage, physical loss or physical destruction. The Insured Property includes all materials,

equipment, supplies, machinery, and all other property of the Project including temporary

works/structures including spare parts, common facilities, and facilities which are improvements,

tie-ins, connections, and additions/modifications to existing facilities, pipelines, and all other

property collectively known as the Project, to the extent that the value thereof is included in the

estimated insurable value declared/intended to be included in the final insurable value.

28. Under the Policy, Cunningham Lindsey International was appointed to serve as

Adjuster. See Ex. A at 7. The Adjuster serves as liaison between Motiva and Defendants and

analyzes claims to determine if they fall within the scope of the Policy. Once the Adjuster

analyzes a claim and makes a recommendation as to payment, it becomes an adjusted claim.

The Adjusters performance is a critical predicate for payment insofar as once an adjusted

claim is filed, Defendants have 30 calendar days to pay the claim. Further, acceptance of

satisfactory proof of loss to the Insurers and a loss occurrence are prerequisites to the Policys

requirement that the Insurers advance Motiva any mutually agreed amount of the estimated loss

prior to the production of a final proof of loss.29. Section Ten of the Policy Schedule entitled Law and Jurisdiction provides that

[i]n the event of a dispute between the Insured and Insurers this policy shall be subject to the

Law of Delaware [and] Jurisdiction of the State of Delaware, USA. See Ex. A at 7.

30. Section Four of the Policy General Conditions entitled Mediation/Arbitration

provides that the parties should first mediate prior to filing an arbitration action. See id. at 21.

The Policy goes on to state that if mediation is unsuccessful or either party refuses to participate

in mediation, then either party may refer the Dispute to arbitration, in respect to quantum only.



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See id. (emphasis added). Section Four reiterates that arbitration is permitted under the Policy

exclusively when the Principal Insured and the Insurer(s) shall fail to agree as to the amount to

be paidunder this Policy. See id. at 22 (emphasis added).

31. Section Thirteen of the Policy General Conditions entitled Disputes Clause

reiterates the parties agreement to litigate all disputes within the State of Delaware.

Specifically, Section Thirteen provides that the Underwriters hereon, at the request of the

Insured, will submit to the jurisdiction of a Court of competent jurisdiction within the State of

Delaware. See id. Section Thirteen also limits the applicability of the arbitration clause: For

disputes relating solely to the amount to be paidunder this Policy such disputes shall be

governed by the terms of the arbitration clause. See id. at 26 (emphasis added).

32. In the event that either party commences an arbitration proceeding, the Policy

mandates that that within 14 days of being called upon to select an arbitrator, the called upon

party must select an arbitrator and notify the other party of its selection. See id. at 22.

33. If the called upon party fails to select an arbitrator within 14 days, then the other

party shall make an application to ARIAS (UK) to appoint an arbitrator to fill the vacancy. See

id.

EVENTS GIVING RISE TO THE PRESENT DISPUTE

34. This dispute began after Motiva suffered extensive losses to its Insured Property

at its Port Arthur refinery from physical damage due to caustic cracking discovered in connection

with fires that occurred on or about June 9, 2012.

35. On June 12, 2012, Motiva gave timely and proper notice of its loss to Defendants

through the Adjuster. See Ex. B.



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36. Thereafter, Motiva gave the Adjuster access to the Port Arthur Refinery. The

Adjuster and other representatives of Defendants, including Defendants expert consultants, have

had access to the insured site and the Damage to the Insured Property. Motiva has diligently

attempted to find ways to accommodate the Insurers investigation, including an offer to mediate

over the investigation protocol, but a stalemate still exists at the present time. Additionally,

Motiva has stored representative damaged property at its own expense for inspection and

analysis by the Adjuster and Defendants.

37. On August 22, 2012, the Adjuster issued a Reservation of Rights Letter on behalf

of the Insurers addressing liability under various Policy provisions in the circumstances of this

loss. The Reservation of Rights Letter indicated that the damages may be excluded by one or

more of the exclusions or other provisions of the Policy.

38. Presently, the parties continue to dispute whether the Policy provides coverage for

the Damage to the Insured Property.

39. At all times, Motiva has complied with the claims procedures set forth in the

Policy. However, to do this day, neither the Adjuster nor Defendants have advised Motiva of

any coverage determination despite reasonable time and opportunity to do so.

PENDING LITIGATION AND ARBITRATION

40. Motiva filed a Complaint for declaratory relief in the Superior Court of Delaware

on August 22, 2012, seeking a judgment interpreting the policy terms and a declaration that the

corrosion exclusion does not apply to this loss. See Exhibit C.

41. Subsequently, Motiva filed with the Superior Court a First Amended Complaint

adding the Adjuster as a defendant and asserting allegations of fraud and negligent

misrepresentation. See Exhibit D.



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42. In contravention of the Policys requirement that all disputes arising from the

Policy be brought in Delaware state courts, Defendants removed the Superior Court Action to the

United States District Court for the District of Delaware (the District Court). See Ex. E.

Motiva has moved to remand the action to the Superior Court, which motion has been briefed but

currently has not been resolved by the District Court. Accordingly, the District Court has not yet

determined whether it has jurisdiction to hear Motivas claims. See Ex. H.

43. In defiance of the Policys forum selection clause, Defendants purported to serve

upon Motiva a Notice of Arbitration and Demand for Appointment of Arbitrator on November

6, 2012. See Ex. F.

44. On that same date, Defendants filed a Motion to Stay all litigation proceedings

before the District Court pending the outcome of the London arbitration Defendants purported to

initiate. See Ex. G.

45. In their Notice of Arbitration, Defendants purported to demand that all disputes

be arbitrated. Defendants stated that they anticipate that the issues to be arbitrated include

whether [the parties] had an agreement on the wording of Mediation/Arbitration Clause, the

scope of the disputes to be arbitrated, [Motivas] refusal to allow loss investigation and

adjustment . . . the applicability, if any, of the various sub limits, the applicability, if any, of the

deductible, the damages claim ([including] the basis of the claims . . . if any) made by [Motiva]

in respect of alleged fraud and negligent misrepresentation . . . . See Ex. F at 7. Thus,

Defendants purported to demand that an arbitrator decide issues of liability and Policy

interpretation disputes that arise from the Policy and, pursuant to the express terms of the

Policy, should be litigated in Delaware state courts.



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50. The plain language of the Policy requires the parties to pursue all claims arising

from the Policy, excluding only claims regarding the amount to be paid, in the courts of the State

of Delaware.

51. Defendants chose to ignore the parties agreed upon choice of forum and instead

initiated arbitration proceedings in London.

52. Pursuant to the DUAA, 10Del. C. 5703(b), and 10Del. C. 341-42, this

Court should enter an Order temporarily, preliminarily, and permanently enjoining Defendants

from arbitrating any disputes with Motiva that do not relate to the amount to be paid under the

Policy. Specifically, inter alia, the Court should temporarily, preliminarily, and permanently

enjoin Defendants from proceeding with the arbitration they purported to initiate on November 6,

2012 through their Notice to Arbitrate.

53. Motiva has no adequate remedy at law.

COUNT II

(Declaratory Relief)

54. Motiva repeats and realleges all of the preceding paragraphs as though fully set

forth herein.

55. Defendants have purported to initiate arbitration proceedings against Motiva

relating to claims of liability and contract interpretation.

56. The plain language of the Policy requires the parties to pursue all claims arising

from the Policy, excluding only claims regarding the amount to be paid under the Policy, in the

courts of the State of Delaware.

57. Defendants chose to ignore the parties agreed upon choice of forum and instead

initiated arbitration proceedings in London.



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58. Thus, the issues raised by Motiva in this Verified Complaint present a controversy

that:

(1) involves the rights or other legal relations of Motiva, insofar as the declaration

sought will clarify what the parties rights are under the terms of the Policy;

(2) comprises a claim of right or other legal interest by Motiva that is asserted

pursuant to the Policy against Defendants who have an interest in contesting the

claim to minimize or avoid their own obligations under the Policy;

(3) is between parties whose interests are real and adverse, pursuant to their

differing interpretations of their rights and obligations under the Policy and

applicable principles of law;

(4) is ripe for judicial declaration because: (a) Defendants have filed an

arbitration action seeking to force Motiva to submit to arbitration and select anarbitrator; (b) until this Court declares that the choice of law and venue provisions

are enforceable and precludes Defendants from pursuing arbitration for any

claims arising out of the Policy (with the limited exception of claims for the

amount to be paid), Motiva is faced with uncertainty as to its legal obligationsunder the Policys provision regarding appointment of an arbitrator; and (c) as a

result of the foregoing, Motiva has incurred and is continuing to incur significant

expense regarding an arbitration that should never have been filed.

59. Pursuant to 10Del. C. 6501, this Court should enter a declaration proclaiming

that the Policy prohibits Defendants from arbitrating with Motiva any issues arising out of or

relating to the Policy with the exception of the amount to be paid.

COUNT III

(Breach of Contract)

60. Motiva repeats and realleges all of the preceding paragraphs as though fully set

forth herein.

61. The Policy is a legally valid and enforceable contract by and among Motiva and

Defendants.

62. Motiva has duly performed all of the conditions and duties imposed on it under

the Policy and at all times has remained ready, willing, and able to continue doing so.



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63. By the conduct described above, including Defendants refusal to comply with the

Policys dispute resolution provisions, Defendants have, without justification or excuse,

breached their contractual duties, including their implied obligation of good faith and fair dealing

owed to Motiva pursuant to the Policy.

64. Defendants have expressly breached Sections Four and Thirteen of the Policy

General Conditions and Section Ten of the Policy Schedule by initiating arbitration proceedings

for claims relating to liability, Policy interpretation, and resolution of Motivas fraud and

misrepresentation claims instead of pursuing these claims in the parties agreed upon forum of

Delaware state courts.

65. Defendants breaches are willful.

66. Plaintiff has suffered and continues to suffer damages in an amount to be proven

as a direct and proximate result of Defendants breaches.

PRAYER FOR RELIEF

WHEREFORE, Motiva respectfully requests that this honorable Court enter judgment

in favor of Plaintiff and against Defendants as follows:

A. Temporarily, preliminarily, and permanently enjoining Defendants, and their

agents, from prosecuting the arbitration that they have purported to bring against Motiva;

B. Permanently enjoining Defendants from initiating or prosecuting any arbitration

proceedings against Motiva relating to or arising out of the Policy except a proceeding limited to

determination of the amount to be paid under the Policy;

C. Declaring that the Policy prohibits Defendants from initiating or prosecuting any

arbitration proceedings against Motiva relating to or arising out of the Policy except for any

proceeding limited to determination of the amount to be paid under the Policy;



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D. Declaring that Defendants have breached the Policy;

E. Awarding Motiva damages in an amount to be determined at trial;

F. Awarding Motiva its expenses and costs incurred in bringing this action,

including reasonable attorneys fees; and

G. Awarding Motiva such additional and further relief as the Court may deem just

and proper.

Dated: November 13, 2012

MORGAN, LEWIS & BOCKIUS LLP

/s/ Colm F. Connolly

Colm F. Connolly (I.D. No. 3151)

Nemours Building

1007 North Orange StreetSuite 501

Wilmington, DE 19801

(302) [email protected]

WILKS, LUKOFF & BRACEGIRDLE, LLC

/s/ Thad J. BracegirdlePaul M. Lukoff (I.D. No. 96)

Thad J. Bracegirdle (I.D. No. 3691)

1300 N. Grant Avenue, Suite 100Wilmington, DE 19806

(302) 225-0850

[email protected]

[email protected]

Attorneys for Plaintiff Motiva Enterprises LLC



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MOTIVA ENTERPRISES LLC v. SWISS RE INTERNATIONAL S.E. et al Complaint

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Transcript of MOTIVA ENTERPRISES LLC v. SWISS RE INTERNATIONAL S.E. et al Complaint