As described in a recent posting to this blog (dated Sept. 10, 2007), Continental Casualty Company (“CCC”) and LaSalle Re are currently engaged in a dispute regarding an Excess of Loss Retrocession agreement and a subsequently executed Commutation and Release Agreement. Last month an Illinois federal court ruled that LaSalle Re’s removal of the case to federal court was proper. Quickly reaching the merits of the dispute, on September 21, the same court granted CCC’s motion to stay arbitration proceedings commenced by LaSalle Re. CCC argued that the arbitration clause contained in the Excess of Loss agreement was extinguished, along with all other obligations, by the subsequent Commutation Agreement.
Applying Illinois contract law and looking to the plain language of the Commutation Agreement, the Court concluded that “it would be difficult to envision a more clear statement of the parties’ intent to extinguish their obligations under the Retrocession Agreement.” Recognizing that the parties could have included an arbitration clause in the Commutation Agreement, but did not choose to do so, the Court concluded that the parties intended to extinguish their duty to arbitrate. Continental Casualty Co. v. LaSalle Re Ltd., Case No. 07-C 4228 (USDC N.D. Ill. Sept. 27, 2007).