Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

You are here: Home / Archives for Carlton Fields

Carlton Fields

FIFTH CIRCUIT AFFIRMS DENIAL OF PETITION TO VACATE ARBITRATION AWARD

by

An executive terminated by Doral Financial Corporation initiated an arbitration proceeding against Doral seeking severance compensation under contract. Doral counterclaimed, asserting that the former executive had breached a contractual non-competition clause by accepting employment at a competing bank. The arbitration panel decided both issues in the executive’s favor. Doral unsuccessfully petitioned the district court for vacatur. Doral appealed the denial of the petition to the Court of Appeals for the First Circuit. In support, Doral argued that he was denied a fair hearing in contravention of the FAA because the arbitrators had refused to issue pre-hearing and hearing subpoenas to the executive’s new employer and that the arbitrators lacked the authority to grant pre-award interest. The Fifth Circuit rejected both contentions and affirmed the denial of the petition to vacate. The appellate court held that Doral had a sufficient opportunity to present evidence at the hearing, argue for the issuance of subpoenas, and, furthermore, that the panel had the authority to award pre-hearing interest. Doral Fin. Corp. v. Garcia-Velez, No. 12-1519 (5th Cir. July 31, 2013).

This post written by Ben Seessel.

See our disclaimer.

SECOND CIRCUIT COURT REVERSES PARTIAL VACATUR OF ARBITRATION AWARD, WITH INSTRUCTIONS TO CONFIRM ON REMAND

by

The Second Circuit Court of Appeals affirmed in part and vacated in part a district court’s ruling that an arbitrator committed misconduct by excluding certain evidence (as reported by ReinsuranceFocus in its March 29, 2012 Arbitration Roundup). The Second Circuit Court found that the arbitrator’s exclusion of certain evidence in a commercial property dispute was within the arbitrator’s authorized discretion, and thus remanded with instructions to confirm the arbitrator’s award in that regard. The Court also affirmed other issues appealed by both parties, finding the district court properly concluded that the arbitrator acted properly in refusing to determine a purchase price, and in dismissing the defendant’s breach of fiduciary duty and breach of the covenant of good faith and fair dealing claims. LJL 33rd Street Associates, LLC v. Pitcairn Properties, Inc., Nos. 11-5425 and 12-1382 (2d Cir. July 31, 2013).

This post written by John Pitblado.

See our disclaimer.

FEDERAL COURT ENJOINS ARBITRATION BETWEEN INSURERS AND REINSURER WHILE THE ARBITRATION PROCESS IS INVESTIGATED

by

A federal district court has issued an order enjoining the arbitration of a dispute between several workers compensation insurers and reinsurer, National Union Fire Insurance Co. of Pittsburgh, while allegations of misconduct concerning the arbitration process are investigated. The parties’ reinsurance treaty requires disputes to be adjudicated by “disinterested officials” who are “not under the control of either party.” It also provides that each side will choose one arbitrator and that the two will select an umpire. The chosen two arbitrators in the matter could not agree on an umpire; thus, after casting lots, National Union selected an umpire who was a close friend of their chosen arbitrator. The panel issued an interim final award favorable to National Union that addressed liability but left damages issues open. Plaintiffs petitioned the court to stay the arbitration.

Plaintiffs argued that National Union breached the provision in the treaty requiring disputes to be decided by arbitrators not under either party’s control. In support of their motion, plaintiffs presented National Union’s attorneys’ bills (submitted in connection with its attorneys fee request during the arbitration), demonstrating that National Union’s counsel had repeatedly communicated with its arbitrator during the course of the arbitration proceeding in violation of the arbitration panel’s order. Additionally, plaintiffs showed that the arbitration panel had made decisions without the participation of the third arbitrator chosen by plaintiffs. The court issued a corrected preliminary injunction that precludes any further orders from the arbitrators and communications between the parties and the arbitrators pending subsequent order from the court. National Union has filed a notice of appeal in which it indicates it will argue to the Sixth Circuit, among other things, that the court lacked jurisdiction to enjoin an ongoing arbitration proceeding.

Star Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, Case No. 2:13-cv-13807 (USDC E.D. Mich. Sept. 12, 2013).

This post written by Ben Seessel.

See our disclaimer.

NAIC APPROVES PROCESS FOR DEVELOPING LIST OF QUALIFIED FOREIGN JURISDICTIONS IN SUPPORT OF COLLATERAL REFORM

by

At its August 26, 2013 meeting, the National Association of Insurance Commissioners (NAIC) approved and adopted the Process for Developing and Maintaining the NAIC List of Qualified Jurisdictions, a process developed and approved by the Reinsurance (E) Task Force and the Financial Condition (E) Committee. The process now turns to the first four jurisdictions selected for expedited review: Bermuda, Germany, Switzerland, and the United Kingdom. If approved, these jurisdictions would constitute “qualified jurisdictions” within the meaning of NAIC’s Credit for Reinsurance Model Law that has been adopted by 18 states and is being considered by several more.

This post written by John Pitblado.

See our disclaimer.

TEXAS APPEALS COURT DISMISSES INTERLOCUTORY APPEAL OF ORDER COMPELLING ARBITRATION OF INSURANCE DISPUTE

by

In a dispute between two insurance companies regarding an underwriting agreement, the arbitrator selection process broke down when the arbitrators could not agree on appointment of the umpire. Each party raised concerns about the qualifications of the other party’s umpire nominees and reached such an impasse that they resorted to the courts for declaratory relief. The trial court entered a temporary injunction ordering the plaintiff to desist from arbitrating or litigating until the umpire selection dispute could be resolved and entered an order compelling arbitration and plaintiff’s participation in the umpire selection process as provided by the arbitration clause in the underwriting agreement. Plaintiff challenged both orders in an interlocutory appeal. The appellate court lacked jurisdiction to review the order to compel arbitration in an interlocutory appeal because the Federal Arbitration Act prohibits such review, but did affirm the temporary injunction. Drobny v. American National Insurance Co., Case No. 01-12-01034-CV (Tex. App. Aug. 29, 2013).

This post written by Abigail Kortz.

See our disclaimer.