In an August 24 post, we reported on a District Court decision allowing Lloyds to appoint both arbitrators in a dispute with Argonaut Insurance due to Argonaut not appointing an arbitrator in a timely manner. Argonaut filed a Notice of Appeal of that decision, but the District Court recently entered an Order denying Argonaut's motion for a stay of the enforcement of the decision pending the appeal. This likely means that the arbitration will proceed with the two arbitrators appointed by Lloyds while the appeal proceeds.
Arbitration Process Issues
Court remands matter to arbitrators for clarification of award
Parties to a reinsurance arrangement arbitrated their disputes, and a question later arose as to whether the conduct of one of the parties was in compliance with the terms of the award entered by the arbitration panel. Finding that the arbitration award was ambiguous, a District Court remanded the dispute to the arbitration panel for clarification of the award, so that the Court could appropriately enforce the award. Security Ins. Co. of Hartford v. Trustmark Ins. Co., Case No. 03-1000 (USDC D. Ct. Nov. 13, 2006).
Parties litigate issues relating to London arbitration award in US Court
Noble Assurance Company insured its parent, Shell Petroleum, Inc., and reinsured the risks with Gerling-Konzern General Insurance Co – UK. When a dispute arose over the reinsurance, the parties arbitrated the dispute in London. The Panel ruled in Nobel's favor, and Gerling then filed suit in US District Court in Vermont against Noble and Shell, seeking rescission of the reinsurance agreement, vacature of the London arbitration award on the basis that it violated public policy and was issued in manifest disregard of the law and declarations that various contracts were void. In a preliminary ruling, the District Court permitted jurisdictional discovery as to the claim against Shell, denied Gerling's motion for summary judgment and granted Noble's motion to dismiss in part. The fundamental issue of whether the US court action could attack the London arbitration award was not presented in these motions. Gerling-Konzern General Ins. Co – UK v. Noble Assurance Co., Case No. 06-76 (D. Vt. Nov. 1, 2006). It will be interesting to follow this action, since it appears to be, at least in significant part, a collateral attack on the London arbitration award.
Court takes on task of appointing umpires
Parties to facultative and quota share reinsurance involving two separate arbitration demands had protracted disputes over the selection of arbitrators. In both arbitrations, the appointed umpire resigned, and the parties disagreed as to how to appoint a replacement. Noting that it had been two years since the service of the arbitration demands, that neither arbitration had an umpire in place, and that the reinsurance agreements did not specifically address the appointment of replacement arbitrators, the Court ruled that it would appoint umpires, giving the parties an opportunity to suggest names and then to object to the persons suggested by the other party. AIG Global Trade and Political Risk Ins. Co. v. Odyssey America Reinsur. Corp., Case No. 05-9152 (USDC S.D. N.Y. Sept. 21, 2006).
Court bars run-off administrator from arbitration
National Indemnity Company provided reinsurance to Seaton Insurance Company and Stonewall Insurance Company, both of which were in run-off. Castlewood, Inc. entered into an agreement with Seaton and Stonewall to provide administratrive services for the run-off of their business. When arbitrations commenced between NICO and Seaton and Stonewall on their reinsurance agreements, NICO sought to add Castlewood to the arbitrations, despite the lack of an arbitration agreement in Castlewood's agreements with Seaton and Stonewall. The Court granted Castlewood's request for a preliminary injunction preventing its addition to the arbitrations, subject to a $1 million injunction bond. Castlwood, Inc., v. National Indemnity Co., Case No. 06-6842 (USDC S. D. N.Y. Oct. 24, 2006). NICO sought to compel Castlewood to arbitrate based upon theories of assumption and estoppel, and because Castlewood's agreement provided that its administration of the run-off would not conflict with the reinsurance obligations of Seaton and Stonewall. The Court found this an insufficient basis to compel Castlewood's participation in arbitration.