The opinion of the court was delivered by: Simandle, U.S. District Judge
Defendant/Third-Party Plaintiff OneBeacon Insurance Group ("OneBeacon") has moved to sever and compel arbitration of all claims between itself and Defendant/Third-Party Defendant Triester, Rossman & Associates, Inc. ("Triester"). The narrow issue before the Court is whether OneBeacon has waived its right to compel arbitration of those claims pursuant to the parties' agency agreement. For the following reasons, the Court holds that OneBeacon has waived its right to compel arbitration and, therefore, that its motion will be denied.
This action arises from the structural collapse of a building at 326 Market Street, Camden, New Jersey. Plaintiff, a New Jersey corporation and the alleged owner and operator of a small restaurant and apartment units located at that address, alleges that the building was severely damaged in February 2000 when the contiguous property was legally demolished. Prior to that event, CGU Insurance, the predecessor to OneBeacon, issued insurance policies through Triester which provided property and liability coverage to Plaintiff. A dispute involving one of those policies, Number CPLP 53356 (the "Policy"), has given rise to this action.
Plaintiff, together with William Rosenberg, filed its original complaint against OneBeacon in Superior Court, Camden County, New Jersey, alleging claims of breach of contract and common law fraud, as well as claims under the Consumer Fraud Act. (Compl.) The case was removed to this Court by OneBeacon on October 22, 2003. On October 28, 2003, OneBeacon filed a third-party complaint against Triester alleging negligence and breach of the Agency Agreement between Triester and OneBeacon's predecessor, CGU, executed on December 18, 1998 ("Agency Agreement"). (See Third-Party Compl. ¶¶ 24, 25.)
OneBeacon subsequently moved on March 11, 2004 for dismissal and a more particularized pleading of the fraud claims asserted by Plaintiff in the original complaint. By Order dated May 7, 2004, this Court dismissed all claims asserted by William Rosenberg individually, and granted OneBeacon's motion for a more particularized pleading, requiring Plaintiff to file and serve an amended complaint. Plaintiff filed its Amended Complaint on May 27, 2004 against OneBeacon and Triester, claiming breach of contract, bad faith dealing and common law fraud, as well violations of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, and the New Jersey Unfair Claim Settlement Practices Act, N.J.S.A. 17B:30-13.1.*fn1 (Am. Compl.)
On July 19, 2004, Triester filed a cross-claim against OneBeacon for contribution and/or indemnity.*fn2 Almost nine months later, on April 8, 2005 OneBeacon filed a cross-claim against Triester identical in substance to its third-party claim. On October 6, 2005, Triester made a demand for indemnification, including attorney's fees and costs, against all liability arising out of the errors and omissions of OneBeacon. (OneBeacon Ex. 2.) On October 18, 2005, OneBeacon denied Triester's request for indemnification and demanded arbitration pursuant to the Agency Agreement. (Triester Ex. K.)
Defendant OneBeacon filed the instant motion to compel arbitration on November 17, 2005. On January 20, 2006, OneBeacon filed a motion for summary judgment against Triester on its third-party claims, which is currently pending. On January 23, 2006, the Court heard oral argument on OneBeacon's motion to sever all third-party claims and compel arbitration.
In support of its motion to compel arbitration, OneBeacon relies on the language of the Agency Agreement. Section IX of that agreement provides, in part:
If any dispute or disagreement shall arise in connection with any interpretation of this Agreement, its performance or nonperformance, the parties shall make every effort to meet and settle their dispute in good faith informally. If the parties cannot agree on a written settlement to the dispute within thirty (30) days after it arises, or within a longer period agreed upon by the parties, then the matter in controversy shall be settled by arbitration, in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by arbitrator(s) may be entered in any court having jurisdiction.
(November 7, 2005 Moro Cert., Ex. B.) Triester concedes that the claims between itself and OneBeacon for defense and immunity are within the contemplation of the arbitration clause contained in the Agency Agreement. (Triester Opp. Br. at 3.) Instead, Triester argues that OneBeacon has waived the right to invoke the arbitration clause.
Before the Court discusses whether OneBeacon has waived its right to compel arbitration, it must first determine when that right under the Agency Agreement arose. OneBeacon maintains that "[i]t is not the original litigation filed by [Plaintiff] that triggers OneBeacon's right to demand arbitration, but rather, as outlined in the Agency Agreement, [Triester's] demand [on October 6, 2005], after more than two years of litigation, for indemnification, ...