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Minnieland Private Day School, Inc. v. Applied Underwriters Captive Risk Assurance Co., Inc.

United States Court of Appeals, Fourth Circuit

August 11, 2017

MINNIELAND PRIVATE DAY SCHOOL, INC., a Virginia corporation, Plaintiff-Appellee,
v.
APPLIED UNDERWRITERS CAPTIVE RISK ASSURANCE COMPANY, INC., Defendant-Appellant.

          Argued: May 10, 2017

         Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Anthony J. Trenga, District Judge. (1:15-cv-01695-AJT-IDD)

         ARGUED:

          Daniel William Olivas, LEWIS, THOMASON, KING, KRIEG & WALDROP, Nashville, Tennessee, for Appellant.

          James Scott Krein, KREIN LAW FIRM, Prince William, Virginia, for Appellee.

         ON BRIEF:

          R. Dale Bay, Emily H. Mack, LEWIS, THOMASON, KING, KRIEG & WALDROP, Nashville, Tennessee, for Appellant.

          Before GREGORY, Chief Judge, and SHEDD and WYNN, Circuit Judges.

         Affirmed in part, reversed in part, and remanded by published opinion. Judge Wynn wrote the opinion, in which Chief Judge Gregory and Judge Shedd joined.

          WYNN, Circuit Judge.

         Defendant Applied Underwriters Captive Risk Assurance Company, Inc. ("Applied Underwriters"), a subsidiary of Berkshire Hathaway, Inc., appeals an order of the U.S. District Court for the Eastern District of Virginia (1) denying Applied Underwriters' motion to compel arbitration and (2) holding that Applied Underwriters was judicially estopped from arguing that an agreement between Applied Underwriters and Plaintiff Minnieland Private Day School, Inc. ("Minnieland") did not constitute an insurance contract for purposes of Virginia law. For the reasons that follow, we conclude that the district court correctly denied Applied Underwriters' motion to compel arbitration. But the district court reversibly erred in applying the doctrine of judicial estoppel to hold that the agreement constituted an insurance contract. Accordingly, we affirm in part, reverse in part, and remand the case to the district court for further proceedings consistent with this opinion.

         I.

         A.

         Minnieland, a provider of child daycare, is required under Virginia law to provide workers' compensation insurance to its employees. In 2013, Minnieland entered into a "Reinsurance Participation Agreement" ("RPA") with Applied Underwriters, as part of Minnieland's purchase of Applied Underwriters' "Equity Comp" program, which Applied Underwriters held out to be a "Worker's Compensation Program." J.A. 9. Under the RPA, which had a three-year term, one or more "Issuing Insurers"-all of which were affiliates of Applied Underwriters and subsidiaries of Berkshire Hathaway- would issue workers' compensation insurance policies to Minnieland. Also pursuant to the RPA, Applied Underwriters would establish a "segregated protected cell" through which Minnieland would share in the Issuing Insurers' profits and losses attributable to Minnieland's policies. Following execution of the RPA, Applied Underwriters' affiliate, and Berkshire Hathaway subsidiary, Continental Indemnity Company ("Continental") issued a workers' compensation policy to Minnieland. The RPA appointed another Berkshire Hathaway subsidiary as the billing agent for Applied Underwriters and the Issuing Insurers. Throughout the term of the agreement, Minnieland paid premiums on the policy to Applied Underwriters.

         The RPA included an arbitration provision mandating resolution of "any disputes arising under this Agreement" through binding arbitration in the British Virgin Islands and under the provisions of the American Arbitration Association. J.A. 29-30. In particular, the arbitration agreement provided that "[a]ll disputes between the parties relating in any way to (1) the execution and delivery, construction or enforceability of this Agreement, (2) the management or operations of the Company, or (3) any other breach or claimed breach of this Agreement" were subject to mandatory binding arbitration. J.A. 30.

         For the first 33 months of the 36-month term, Minnieland's monthly premiums averaged $58, 810. But on November 9, 2015, Applied Underwriters billed Minnieland $471, 213, a 1, 167% increase from the October 2015 premium and an 801% increase from the average premium Minnieland had paid over the first 33 months of the policy. Though Applied Underwriters refused to disclose the basis for the premium increase, Minnieland nevertheless paid the November premium. After Minnieland failed to pay a second similarly large billed premium in December 2015, Applied Underwriters terminated the EquityComp ...


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