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CITY OF AURORA v. CLASSIC SYNDICATE

November 26, 1996

CITY OF AURORA, COLORADO, Movant,
v.
THE CLASSIC SYNDICATE, INC. and THE CLASSIC FIRE & MARINE INSURANCE COMPANY, Respondents.



The opinion of the court was delivered by: NORGLE

 CHARLES R. NORGLE, SR., District Judge:

 Before the court are the parties' cross motions to direct arbitration. For the following reasons, the court grants the motion of the Movant and denies the cross motion of the Respondents.

 I. BACKGROUND

 Both parties move the court to direct arbitration of an insurance coverage issue pursuant to the terms of an insurance policy. They disagree about which arbitrators should preside over the arbitration.

 The City of Aurora, Colorado, ("Aurora") obtained excess liability insurance through the Illinois Insurance Exchange ("IIE") in a series of policies dating from 1986 through 1994. The underwriting risk for these policies was placed entirely with Classic Syndicate, Inc./Classic Fire & Marine Insurance Company ("Classic"). The relevant policy names the IIE as the insurer. As a matter of course, Aurora made claims for coverage under the policies to Classic's designated claims administrator.

 In 1988, one of Aurora's former employees received a judgment against Aurora at trial for violations of his federal civil rights. Aurora then sought reimbursement from Classic.

 Aurora states that, on July 15, 1996, after unsuccessful attempts at seeking reimbursement for the judgment payment from Classic, Aurora invoked the "binding arbitration clause" of the relevant insurance policy. The policy states, in relevant part:

 
The Company and all Insureds under this policy agree that in the event of any difference arising between the Insured and the Company with reference to this policy, such difference will be referred to three disinterested arbitrators, one being chosen by the Insured, one chosen by the Company, and the third chosen by the two aforesaid arbitrators before they enter into arbitration.

 (Aurora Mot. to Direct Arbitration Ex. A). Further, the policy provides:

 
In default of any party hereto qualifying its arbitrator within four (4) weeks after receipt of written notice from the other party, requesting party may name both arbitrators, and they shall proceed in all respects as above stipulated.

 (Mot. to Direct Arbitration Ex. A). Endorsement 3 of the relevant policy states,

 COMPANY DEFINED

 
Whenever used . . ., the term "The Company" . . . means the underwriting syndicate(s) of the Illinois Insurance Exchange listed on ...

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