In Koken v. Cologne Reinsurance (Barbados) Ltd., Case No. 98-0678 (USDC M.D. Pa. Aug. 23, 2006), a District Court reaffirmed its earlier decision that an arbitration provision was binding upon the Insurance Commissioner of Pennsylvania, acting as the liquidator of American Integrity Insurance Company, rejecting an argument based upon the McCarran-Ferguson Act. The Court declined to vacate the majority of the award under the manifest disregard of law standard, holding that “an erroneous interpretation by the arbitration panel does not warrant a finding of manifest disregard,” but vacated one paragraph of the award as being in manifest disregard of law, becuase it continued an insurance coverage past the time provided for by an unambiguous Pennsylvania statute.
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Vacation of arbitration awards due to failure to follow arbitration agreement
Two opinions recently have addressed the issue of whether an arbitration award should be vacated when the arbitrators fail to follow the arbitration agreement.
- In Martin v. Wells Fargo Financial, Inc., 2006 WL 2466945, Case No. 05-00003 (9th Cir. Aug. 25, 2006), the Court of Appeals affirmed a District Court decision vacating an arbitration award “because the underlying arbitrations were not conducted in accordance with the terms of the parties' arbitration agreement.” This unreported opinion is not available on Pacer, and it does not reveal what the Court of Appeals viewed as the deficiencies in the arbitration.
- In Allstate Ins. Co. v. Superior Court, 2006 WL 2473419 (Cal.Ct.App. Aug. 29, 2006), the Court reversed the vacation of an award on the basis that the panel rendered a “reasoned” award when the arbitration agreement provided that the award should not state reasons. Instead of vacating the award, the Court directed that the “reasons” be stricken from the confirmed award as surplusage.
FASB receives comments on financial reporting bifurcation proposal
The Financial Accounting Standards Board (FASB) has now received and posted, for public viewing, 53 comments to its proposed Bifurcation of Insurance and Reinsurance Contracts for Financial Reporting. Among the organizations submitting comments are the National Association of Insurance Commissioners, the Reinsurance Association of America and the American Academy of Actuaries.
Party loses right to appoint arbitrator due to untimely appointment
An arbitration provision required that both parties appoint an arbitrator within 30 days of receipt of written notice from the other party requesting that it do so. Lloyd's appointed an arbitrator timely. The 30th day after receiving such notification for Argonaut fell on the Sunday before Labor Day, and when the appointment was not made by the end of Sunday, Lloyd's appointed a second arbitrtator on Labor Day. Argonaut appointed an arbitrator the following day, claiming that the time for its appointment was extended since its deadline fell on a Sunday, followed by a holiday. The Court disagreed, holding that the agreement to appoint within 30 days was binding, and upheld Lloyd's appointment of two arbitrators. Certain Underwriters at Lloyd's v. Argonaut Insurance. Co., Case No. 04-5852 (N.D. Ill. Aug. 8, 2006).
Court of Appeals defers issues of arbitration procedure to arbitrators
In an unreported opinion, the United States Court of Appeals for the Ninth Circuit affirmed the action of a District Court that declined to become involved in how an arbitration would be conducted, including whether consolidating multiple arbitrations was appropriate. The Court followed Supreme Court precedent in holding that the courts should only decide “gateway issues” such as whether there was a valid agreement to arbitrate, leaving issues relating to arbitration procedure to the arbitrators. Certain Underwriters at Lloyds v. Cravens Dargan & Co., 2006 WL 2337959, Case No. 05-56154 (9th Cir. Aug. 14, 2006).