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.
Arbitration / Court Decisions
Court denies multiple challenges to NASD arbitration award
A District Court has denied a motion to vacate an arbitration award in a securities matter entered by an NASD panel, which sought vacation on the following grounds: (1) the award was irrational, in light of the evidence presented; (2) the Panel improperly refused to hear the rebuttal testimony of an expert; and (3) one of the arbitrators exhibited evident partiality. The Court concluded that the “irrationality” argument amounted to nothing more than a disagreement with the arbitrators' decision, that the evidence ruling was within the discretion of the Panel and that there was insufficient evidence of evident partiality. The court noted that “[a]s long as there is some basis for the arbitrators' decision, no matter how 'slender' that basis may be, the award must be confirmed.” Edward Mellon Trust v. UBS Painewebber, Inc., Case No. 06-0184 (USDC W.D. Pa. Nov. 6, 2006).
Court of Appeal holds that California Court had personal jurisdiction over London insurance broker
A California Court of Appeals, reversing a lower court's decision, has held that the state court could exercise personal jurisdiction over Sedgwick Group Ltd., an English insurance broker which had provided brokerage services for a California excess and surplus lines insurance broker for at least 50 years. The Court found that Sedgwick had “enjoyed decades of profit as a result of purposeful and deliberate business practices aimed at California residents.” In finding the exercise of personal jurisdiction over Sedgwick proper, the Court cited, as being of particular relevance, a Ninth Circuit case that dealt with personal jurisdiction over a London-based insurance broker. Harris Rutsky & Co. Ins. Serv., Inc. v. Bell & Clements, 328 F.3d 1122 (9th Cir. 2003). Swett & Crawford v. Sedgwick Group Ltd., Case No. B183940 (Cal.Ct.App. Oct. 11, 2006).
Arbitration award refusing to avoid reinsurance confirmed
A court has confirmed, by agreement of the parties, an arbitration award that rejected an attempt to avoid multiple excess of loss reinsurance agreements based upon the contention that the reinsured had not disclosed information in its possession at the time of placement with respect to prospective losses. The Petition to Confirm Arbitration Award describes the background of the dispute, which resulted in an Award, which was confirmed in an Order entered based upon a joint stipulation. American Home Assur. Co. v. CGU Int’l Ins., Case no. 06-6819 (S.D. N.Y.).
Court allows discovery of reinsurance information on bad faith claim
CIGNA, as the administrator of managed care organizations, became a defendant in a number of federal and state class actions and individual lawsuits, some of which gave rise to a federal MDL action. CIGNA sought coverage and a defense from its insurers, and asserted a bad faith claim against one insurer which refused to provide coverage and which did not settle with CIGNA. A Pennsylvania state court has permitted CIGNA to obtain discovery as to the details of that insurer's reinsurance relationships, on the theory that such information might be relevant or lead to admissible information with respect to CIGNA's bad faith claim. Executive Risk Indemnity, Inc. v. CIGNA Corp., 2006 WL 2439733 (Pa. Ct. Common Pleas Aug. 18, 2006).