Subrogation suit dismissed based on contractual limitations period in arbitration clause
November 22nd, 2011
In Vigilant Insurance Company v. American Mechanical Services of Maryland, LLC, the U.S. District Court for the District of Columbia dismissed a subrogation action by an insurance company against a contractor on the grounds that the claim was barred by a contractual limitations period.
Vigilant sued American Mechanical Services to recover amounts paid by Vigilant to Venable, LLP following a fire at Venable's offices which Vigilant claimed was caused by American Mechanical Services. As Vigilant was subrogated to the rights of its insured, it was bound by the contract between American Mechanical Services and Venable, LLP, which included a mandatory arbitration clause. That clause included a requirement that a written demand for arbitration needed to be served within one year after the date the dispute arose.
Vigilant conceded that no written demand for arbitration was made, but argued that a demand letter sent to American Mechanical Services (which did not mention arbitration) was sufficient to discharge American Mechanical Services' obligation to initiate arbitration. The Court disagreed, finding that the term was unambiguous, and that no reasonable jury could find that American Mechanical Services had lulled Vigilant into disregarding the contractual period of limitations.
Vigilant sued American Mechanical Services to recover amounts paid by Vigilant to Venable, LLP following a fire at Venable's offices which Vigilant claimed was caused by American Mechanical Services. As Vigilant was subrogated to the rights of its insured, it was bound by the contract between American Mechanical Services and Venable, LLP, which included a mandatory arbitration clause. That clause included a requirement that a written demand for arbitration needed to be served within one year after the date the dispute arose.
Vigilant conceded that no written demand for arbitration was made, but argued that a demand letter sent to American Mechanical Services (which did not mention arbitration) was sufficient to discharge American Mechanical Services' obligation to initiate arbitration. The Court disagreed, finding that the term was unambiguous, and that no reasonable jury could find that American Mechanical Services had lulled Vigilant into disregarding the contractual period of limitations.
