The opinion of the court was delivered by: Judge Sylvia H. Rambo
Before the court is Defendant Harco National Insurance Company's (hereinafter "Harco") Motion to Compel Arbitration and Stay Proceedings (Doc. 12). The parties have briefed the issues and the matter is ripe for disposition. For the following reasons, the court will grant Defendant's motion. Plaintiff has requested oral argument on the motion, which the court will deny as moot.
Plaintiff Aegis Security Insurance Company (hereinafter "Aegis") and Defendant Harco are insurance companies that entered into reinsurance agreements to post immigration bonds, arranged by Capital Bonding Corporation (hereinafter "Capital Bonding") and other reinsurance intermediaries.
In or around June 2001, Aegis became the surety on bonds posted by Capital Bonding for the immigration bond program through December 31, 2001. Aegis continued as surety from January 1, 2002 through December 31, 2002 pursuant to a Bond Quota Reinsurance Agreement (hereinafter "the 2002 Reinsurance Treaty"). Under the terms of the 2002 Reinsurance Treaty Harco subscribed for a portion of Aegis's gross liability under the immigration bonds posted by Capital Bonding.*fn1 Aegis withdrew as surety when the 2002 Reinsurance Treaty expired and Harco became the surety for immigration bonds posted by Capital Bonding under a 2003 agreement (hereinafter the "2003 Reinsurance Treaty"). Aegis was a party to the 2003 Reinsurance Treaty but only in connection with bail and supersedeas bonds in three states for April and May 2003.
The parties agree that Harco owes Aegis for a portion of liabilities incurred during the time period governed by the 2002 Reinsurance Treaty, in connection with a settlement negotiated by Aegis with the United States Department of Homeland Security. Harco has paid and continues to pay its allocable share of the relevant losses and adjusted loss expense arising under the 2002 Reinsurance Treaty for bail bonds and supersedeas bonds, but refuses to pay related expenses arising from immigration bonds.
Harco claims that it is entitled to offset the immigration bond expenses because Capital Bonding improperly used revenues from the sale of bonds issued in Harco's name under the 2003 Reinsurance Treaty to make payments and cover losses incurred from bonds issued in Aegis's name under the 2002 Reinsurance Treaty. Article X of the 2002 Reinsurance Treaty, the offset provision, provides:
The Company and the Reinsurer may offset any balance or amount due from one party to the other under this Agreement or any other agreement heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or ceding company.
This provision shall not be affected by the insolvency of either party to this Agreement.
In addition, the 2002 Reinsurance Treaty contains an arbitration provision, which requires the parties to arbitrate "any dispute arising out of the interpretation, performance or breach of this Agreement." Both parties agree that the 2002 Reinsurance Treaty and the offset and arbitration provisions are valid.
On March 23, 2006 Aegis filed a complaint seeking a declaratory judgment that Harco has no right to offset any amounts it owes to Aegis under the 2002 Reinsurance Treaty based on Capital Bonding's allegedly improper administration of the 2003 Reinsurance Treaty with Harco. On May 2, 2006, Harco filed the instant Motion to Compel Arbitration ...