In an important ruling for one of Chubb’s insurance subsidiaries, the California Court of Appeal for the Second Appellate District has reversed a trial court’s decision that had lifted a stay of litigation in a wage-and-hour class action against subsidiary ACE American Insurance Company (ACE). The appellate court ruled that the trial court erred in determining that ACE had waived its right to arbitration by failing to actually start the arbitration process.
The dispute began when plaintiffs Michelle Arzate, Anthony Esquivel, Charleston Princeton, James Kang, and David Block filed a class action lawsuit in June 2021 against ACE, alleging that the company had misclassified them as exempt employees. The employees argued that this misclassification led to violations of California labor laws, including failures to provide overtime pay, meal breaks, and rest periods. The plaintiffs later amended their complaint to include claims under the Private Attorneys General Act (PAGA).
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ACE moved to compel arbitration based on employment agreements that required employees to submit employment-related claims to arbitration. The trial court granted the motion, placing a stay on litigation, but it did not specify which party was responsible for initiating arbitration.
After neither party initiated arbitration, the plaintiffs filed a motion to lift the stay, arguing that ACE, as the party that sought to enforce arbitration, was responsible for commencing the process. The trial court agreed with the plaintiffs and found that ACE’s failure to initiate arbitration within 30 days of the court’s order constituted a waiver of its right to arbitrate.
ACE appealed the ruling, asserting that under the arbitration agreements, the plaintiffs bore the responsibility to initiate arbitration since they were the parties bringing claims against the company.
The California Court of Appeal ruled in favor of ACE, finding that the trial court misinterpreted the arbitration agreement’s language. The appellate court emphasized that the agreement required employees to “submit” their claims to arbitration and that the party seeking to assert a claim - in this case, the plaintiffs - was responsible for initiating the arbitration process.
The court pointed out that ACE’s arbitration rules were based on the American Arbitration Association (AAA) guidelines, which specify that the initiating party - typically the claimant - must file a demand for arbitration. The appellate court found that ACE was not required to initiate arbitration or submit the plaintiffs’ claims on their behalf. Since the plaintiffs had failed to initiate arbitration, the appellate court ruled that the trial court erred in lifting the stay and deeming ACE’s arbitration rights waived.
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The ruling reinforces the principle that parties asserting claims are generally responsible for initiating arbitration when an agreement so specifies. The decision may have significant implications for employment disputes and arbitration agreements in California, particularly regarding the procedural responsibilities of claimants and employers.
With this ruling, ACE retains its right to arbitration, and the case will now proceed under the original arbitration agreement terms. The appellate court denied the plaintiffs’ motion to dismiss the appeal and awarded ACE its costs on appeal.
ACE American Insurance Company was originally established as part of ACE Limited, which was founded in 1985 in Bermuda by a consortium of Fortune 500 companies seeking better insurance solutions for high-risk exposures. Over the years, ACE expanded its operations globally, acquiring a number of other insurers to strengthen its portfolio and extend its reach.
In a landmark deal, ACE Limited acquired The Chubb Corporation in January 2016 for approximately $29.5 billion. Following the acquisition, the combined company adopted the Chubb name while retaining ACE’s global capabilities and expertise. The merger positioned Chubb as one of the world’s largest publicly traded property and casualty insurance companies, with ACE American Insurance Company continuing to operate as a key subsidiary within the Chubb brand.
