Reinsurer Cannot Compel Arbitration Based on Direct Benefits Estoppel, 2nd Cir. Affirms

NEW YORK — The 2nd Circuit U.S. Court of Appeals has upheld denial of Travelers Indemnity Co.’s petition to compel a school district to arbitrate underlying windstorm claims, ruling that Texas law does not support the reinsurer’s direct benefits estoppel theory.

In a Nov. 11 summary order, the appellate panel predicted that the Texas Supreme Court would conclude that direct benefits estoppel would not apply in the case.

Grapeland Independent School District obtained property insurance coverage from Texas Rural Education Association Risk Management Cooperative (TREA) for the period of Sept. 1, 2018, through Sept. 1, 2019. The policy contained no …