In , Case No. 06-0606 (USDC M.D. Pa. June 22, 2006), there was a dispute as to whether one party to two reinsurance agreements could offset an amount under one treaty against a liability owed under the other treaty. The reinsurance agreements contained an offset provision. The District Court compelled arbitration, holding that the dispute involved the interpretation of the offset provision, bringing the dispute within the arbitration provision, which required the arbitration of “any dispute arising out of the interpretation, performance or breach of this Agreement.”
Arbitration Process Issues
In Positive Software Solutions, Inc. v. New Century Mortgage Corp., No. 04-11432 (Jan. 11, 2006), the United States Court of Appeals for the Fifth Circuit (in a case which did not involve reinsurance) affirmed the judgment of a District Court vacating an arbitration award due to the failure of the sole arbitrator to disclose that his law firm served as co-counsel in an unrelated case with counsel for one of the parties in 1990 – 1996. The Court found that the failure to disclose the prior relationship created a reasonable impression of possible partiality that warranted vacating the arbitration award. The evidence was undisputed that the party against which the arbitration award had been entered did not know of the relationship until after the entry of the award. On May 5, 2006, the Fifth Circuit granted a petition for rehearing en banc, setting the matter for argument in September 2006.
In Century Indemnity Company v. Paladin Reinsurance Corp., Civil Action No. 05-3755, in the United States District Court for the Eastern District of Pennsylvania, the Court denied a motion to stay the confirmation of an arbitration award on equitable or prudential grounds, due to the insolvency of the party against which the award had been entered. The Court rejected the arguments that confirmation would provide the holder of the award an unfair advantage over other creditors, or that confirmation would interfere with ongoing regulatory proceedings before the New York Insurance Department.
In , 2006 WL 851643 (7th Cir. April 4, 2006), the United States Court of Appeals for the Seventh Circuit held that whether an arbitration agreement contained in a reinsurance agreement prohibited consolidated arbitration with other reinsurers was a prodecural issue to be decided by arbitrators, rather than an in issue of arbitrability for courts to decide.