CHICAGO — A state appeals court has refused to send to arbitration a dispute between insurer Zurich American and Personnel Staffing Group, in which Zurich claims PSG attempted to transfer more than $10 million to avoid paying an arbitration award.
In May, a three-justice panel of the Illinois First District Appellate Court affirmed a lower court's ruling denying PSG's request to compel arbitration and a stay in the legal action filed by Zurich.
Former First District Justice P. Scott Neville Jr. authored the opinion, with justices Michael B. Hyman and Mary Anne Mason concurring.
According to the decision, Zurich had taken to arbitration a disagreement with PSG over $4.6 million Zurich said it was owed in premiums from a workers compensation policy.
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However, Zurich sued PSG, and two other defendants, Daniel Barnett and Dash Management, claiming PSG transferred funds to avoid paying an anticipated arbitration award. PSG then filed a counterclaim against Zurich with the same claims it had raised during arbitration over the workers compensation policy..
Cook County Judge Thomas Mulroy then denied the defendants' motion to stay the proceedings and the court dismissed PSG's counterclaim.
PSG then appealed.
Neville agreed with the circuit court, holding that all parties involved had not agreed to arbitrate issues involving the collection of arbitration awards.
The court said it believed that staying the proceedings would clash with the Uniform Fraudulent Transfer Act and that the defendants acknowledged that both parties had agreed to arbitrate their issues.
The issue at hand began when PSG purchased workers' compensation insurance from Zurich in 2011.
The insurance contained a Loss Retrospective Agreement, which meant PSG had to pay Zurich a certain amount that depended on how much the claims paid out against PSG during the period Zurich covered PSG.
At some point, PSG and Zurich disagreed on the amounts billed. PSG then stopped paying Zurich the invoiced amount and, instead, just paid a portion of it. When the final policy term ended in June 2016, PSG bought insurance from another company.
Zurich demanded arbitration to resolve the dispute with PSG in December 2016, seeking to recover more than $4.6 million.
PSG claimed that Zurich breached their agreement because it failed to consult with PSG regarding settlements and other charges and failed to properly investigate and manage claims.
Zurich then filed its lawsuit against PSG, Dash, and Barnett, alleging PSG violated the Uniform Fraudulent Transfer Act by distributing a total of $10.3 million to Barnett and Dash, purportedly for management fees.
The appeals court affirmed the circuit court's order.
According to Cook County court records, Zurich is represented by attorneys with the firm of Locke Lord LLP, of Chicago.
PSG, Barnett and Dash Management are represented by the firm of Sperling & Slater P.C., of Chicago.