Court confirms award granting collateral estoppel effect to prior foreign trial decision

A reinsurer (Sphere Drake Insurance Limited) which successfully persuaded an arbitration panel to accord collateral estoppel effect to a decision of the London, England, Commercial Court, has convinced a District Court to confirm the award, which avoided four excess of loss reinsurance slips. The London Commercial Court had determined that the four slips at issue in the arbitration had been procured through fraud by the reinsurer’s broker, and were void. The startling aspect of this decision is that the reinsured in the arbitration, Lincoln National Life Insurance Company, had not been a party to the London case. The Court found that the decision did not violate due process, since Lincoln was in “privity” with the broker party to the London case due to a similarity of interests. Sphere Drake Insurance Limited v. Lincoln National Life Insurance Co., Case no. 05-6411 (N.D. Ill. Sept. 13, 2006). Given the deference given to arbitration awards, it may be very difficult for Lincoln to obtain reversal of this decision on appeal. Further background is provided in Sphere Drake’s motion for confirmation of the arbitration award. The London Commercial Court decision (Sphere Drake v. EIU) was the subject of an earlier entry in this blog.