Reinsurance Focus

In a dispute involving an earlier arbitration ordering American United Life Insurance Company (“AUL”) to make a commutation payment to The Travelers Indemnity, the parties filed cross petitions for arbitration pursuant to different clauses of a reinsurance contract. AUL argued arbitration should proceed pursuant to the Article 16 in the contract requiring all disputes between the company and the reinsurer be submitted to arbitration. It further argued that Travelers had forfeited its right to name umpire candidates, and that the court should appoint an umpire from the names submitted by AUL. Travelers, for its part, argued that the matter should proceed pursuant to Article 6 of the contract that required actuaries to make the determination concerning the amount of the loss.

The Court sided with AUL stating that an arbitration panel needed to decide the threshold issue of whether the matter should proceed pursuant to Article 16 or Article 6. The court reasoned that in order to determine whether to proceed by a panel of actuaries, the reinsurance contract had to be interpreted and that Article 16 was clear that “any dispute between the Company and the Reinsurer arising out of, or relating to the formation, interpretation, performance or breach of this Contract, whether such dispute arises before or after termination of this Contract, shall be submitted to arbitration.” Regarding AUL’s request that the court appoint an umpire from its list of candidates, the court noted that the parties were engaged in settlement discussions and Travelers had offered to name umpire candidates but AUL never responded. Based on this, the court held that Travelers never knowingly waived its right to name umpire candidates, and ordered Travelers to comply with Article 16. American United Life Insurance Co. v. Travelers Indemnity Co., et al., Case No. 3:14-cv-1339 (USDC D. Conn. Aug. 18, 2015).

This post written by Barry Weissman.

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The Ninth Circuit held that an arbitration agreement between Opus Bank and its former executive vice president Carey Brennan should be interpreted under federal, not state, law unless the parties unambiguously agreed otherwise. While Brennan’s employment contract contained a California choice-of law clause, his arbitration agreement required any employment-related dispute be resolved “by binding arbitration in accordance with the Rules of the American Arbitration Association.” Brennan argued that the arbitration agreement’s clause was substantively and procedurally unconscionable, while Opus moved to compel arbitration under the Federal Arbitration Act.

The Ninth Circuit affirmed the district court’s finding that because the contract involves interstate commerce, the FAA applies. Further, because the arbitration agreement, did not incorporate California law expressly, federal law applies. “While the Employment Agreement is clear that California’s procedural rules, rights, and remedies apply during arbitration, it says nothing about whether California’s law governs the question whether certain disputes are to be submitted to arbitration in the first place. Further, the incorporation of the AAA rules constituted “clear and unmistakable” evidence that the parties intended to have an arbitrator decide the threshold question of arbitrability. Brennan v. Opus Bank, Nos. 13-35580, 13-35598 (9th Cir. Aug. 11, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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A federal district court in New York entered an order enjoining an attempt at a second arbitration initiated by Equitas Insurance Limited and Certain Underwriters at Lloyd’s of London against Arrowood Indemnity Company. The second attempt at arbitration comes after five years of dispute, which resulted in a $45 million arbitration award in favor of Arrowood. After the arbitral award and a court order confirming the award, the Underwriters filed a motion for post-judgment discovery and relief from judgment based on a document that the Underwriters had obtained in another proceeding against Arrowood that purportedly showed the disingenuity of Arrowood’s stance in the arbitration. The court denied the motion, finding that such a motion “cannot be used to collaterally attack an arbitration award for misconduct in the arbitration in the guise of an attack on the judgment confirming it.” Following the court’s order, the Underwriters demanded a second arbitration. In response, Arrowood filed a motion seeking to enforce the court’s earlier order.

The court held that Section 10 of the Federal Arbitration Act provides “the exclusive means of addressing and redressing wrongdoing in an arbitration proceeding” and that any such grounds must be raised within three months of the award. Finding that the Underwriters’ second attempt at arbitration was “in direct contravention of the FAA” and that a second arbitration cannot be used to undo the award of the first, the court enjoined the Underwriters’ attempts at a second arbitration—perhaps bringing the dispute to a conclusion. Arrowood Indemnity Co. v. Equitas Insurance Limited, No. 1:13-cv-07680-DLC (USDC S.D.N.Y. July 30, 2015).

This post written by Zach Ludens.

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