Reinsurance Focus

New reinsurance-related and arbitration developments from Carlton Fields

ARBITRATORS ORDERED TO SELECT UMPIRE WITHOUT ATTORNEY INTERMEDDLING

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A federal court has ordered party-selected arbitrators to proceed with the umpire selection process “without intermeddling, obstruction, interference, or other direction from the parties or counsel.” Liberty Mutual’s petition claimed counsel for the reinsurer defendants “injected himself” into the umpire selection process, causing unnecessary complication and delay. The reinsurers’ memorandum in opposition claimed that Liberty Mutual’s petition was prematurely filed, and that the selection process had only been shut down by Liberty Mutual’s filing of a petition in court. The main point of contention was whether the reinsurance agreements at issue contained provisions requiring that prospective umpires fill out written questionnaires as part of the selection process. The court’s two-paragraph order avoids any analysis of the issues addressed by counsel, with the apparent implication that the umpire selection issues are to be worked out entirely by the arbitrators. Liberty Mutual Insurance Co. v. Nationwide Mutual Insurance Co., No. 11-10651 (USDC D. Mass. July 6, 2011).

This post written by John Pitblado.

CEDENT ORDERED TO PRODUCE CONSULTANT ANALYSES IN DISCOVERY

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A federal court granted in part a motion to compel filed by the defendant reinsurer, Clearwater, against the plaintiff cedent, Granite State. Clearwater reinsured Granite State under a facultative reinsurance agreement covering certain losses arising from underlying asbestos bodily injury claims against Granite State’s insured. Granite State made claim for payment under the agreement to Clearwater. Clearwater disputed its obligation to pay under the agreement, claiming that Granite State failed to promptly notify Clearwater of the claims. Granite State sued. In discovery, Clearwater sought information pertaining to Granite State’s reserving, relative to an underlying settlement of certain asbestos claim coverage disputes. Granite State objected to the request. The court, in a summary opinion, ordered Granite State to produce “copies of any final reviews, analyses or studies, conducted by any consultants or other third parties, on the principal subject of the adequacy of Granite State’s reserves for asbestos exposures, claims, and/or losses, during the period from 1980 through 2009.” Granite State Insurance Co. v. Clearwater Insurance Co., No. 09-Civ-10607 (USDC S.D.N.Y. June 27, 2011).

This post written by John Pitblado.

COURT ORDERS LIQUIDATION OF REINSURANCE COMPANY OF AMERICA

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An Illinois circuit court entered an order for the liquidation of Reinsurance Company of America based upon a finding of insolvency. The court appointed Michael T. McRaith, Illinois Director of Insurance, as liquidator, vesting him with broad powers to take action as required to serve the interests of RCA, its policyholders, beneficiaries, creditors, and the public. RCA’s sole stockholder consented to the entry of the order. People v. Reinsurance Co. of America, Case No. 10 CH 6207 (Ill. Cir. Ct. Apr. 27, 2011).

This post written by Ben Seessel.

ARBITRATION DECISION UPDATE

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Manifest Disregard:

Turkey Run Properties, L.P. v. Air Structures Worldwide, Ltd., Case No. 4:09-cv-00217 (USDC M.D. Pa. June 22, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; rejecting claim that award was “moot or impossible to follow” as grounds for vacatur)

Stone & Youngberg, LLC v. Kay Family Revocable Trust, Case No. 3:11-cv-00198 (USDC N.D. Cal. June 22, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; noting that manifest disregard is “all but impossible” to show where the award does not set forth panel’s reasoning)

Fluke v. Cashcall, Inc., Case No. 2:08-cv-05776 (USDC E.D. Pa. May 26, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; noting that the Third Circuit has not yet determined whether manifest disregard is still a valid ground for vacatur of an arbitration award under the FAA)

Affinity Financial Corp. v. AARP Financial, Inc., Case No. 1:10-cv-02055 (USDC D.C. July 1, 2011) (confirming $2.75 million arbitration award; holding no manifest disregard; noting that the D.C. Circuit has not yet determined whether manifest disregard is still a valid ground for vacatur of an arbitration award under the FAA; District of Columbia statute that permits a court to vacate an award made in arbitration on “other reasonable grounds” construed narrowly as the “recognized principle” that an award may be vacated for manifest disregard of the law)

Valueselling Associates, LLC v. Temple, Case No. 3:09-cv-01493 (USDC S.D. Cal. June 23, 2011) (confirming arbitration award; denying motion to vacate; absent explicit reference to choice of state arbitration law, FAA governs; holding no manifest disregard for failure to reference controlling authority; arbitrator’s findings related to matters incident to dispute submitted for resolution were not “completely irrational”)

Remand for Clarification:

Atlas One Financial Group, LLC v. Freecharm Ltd., Case No. 1:10-mc-24539 (USDC S.D. Fla. May 15, 2011) (remanding FINRA arbitration award “for clarification as to why the award was rendered so that the Court will know exactly what it is being asked to enforce, modify or vacate”)

Exceeding Arbitrator’s Authority:

Interactive Fitness, Inc. v. Souresh Basu, Case No. 2:09-cv-01145 (USDC D. Nev. May 13, 2011) (denying motion to confirm arbitration award; arbitrator exceeded powers by finding alter ego liability without providing defendant sufficient due process)

Standing/Finality:

Chinmax Medical Systems Inc. v. Alere San Diego, Inc., Case No. 3:10-cv-02467 (USDC S.D. Cal. May 27, 2011) (denying motion to vacate; interim order by single emergency arbitrator issuing temporary equitable relief under AAA International Dispute Resolution Procedures was not a final order and thus not subject to review by the court)

Administrative District Council 1 of Illinois of the International Union of Bricklayers and Allied Craftworkers, AFL-CIO v. Pierport Development & Realty, Inc., Case No. 1:10-cv-07800 (USDC N.D. Ill. June 13, 2011) (denying motion to vacate arbitration award; a party who is uncertain about the finality or appealability of an arbitration award should err on the side of compliance; failure to challenge award within applicable limitations period precludes untimely challenge to award)

Dwyer v. Eagle Marine Services Ltd, Oakland, Case No. 4:10-cv-04440 (USDC N.D. Cal. June 30, 2011) (denying motion to vacate arbitration award; no standing for challenge to arbitration award under LMRA where plaintiff not a party to arbitration and did not allege improper conduct by union representatives; no standing for challenge to arbitration award under FAA where plaintiff not a party to arbitration; notwithstanding lack of standing, award “draws its essence” from agreement, arbitrator did not exceed powers or manifestly disregard law, and award did not violate public policy)

Arbitrator Bias:

Own Capital, LLC v. Celebrity Suzuki of Rock Hill, LLC, Case No. 2:11-cv-10109 (USDC E.D. Mich. May 25, 2011) (denying motion to vacate arbitration award; holding no manifest disregard; claim that mandatory arbitrator selection procedures were violated was waived by party affirmatively stating they had no objection to proposed arbitrators; arbitrator did not exceed powers by failing to disclose work with opposing counsel on other cases; rulings consistently in favor of a party does not necessarily show bias)

Own Capital, LLC v. Johnny’s Enterprises, Inc., Case No. 2:11-cv-12772 (USDC E.D. Mich. June 28, 2011) (confirming arbitration award of $4,034,711; denying motion to vacate award; party waived objection to arbitrator selection procedure by failing to participate in selection process and arbitration proceedings; arbitrator did not exceed powers or possess improper motives when, after action was already pending, plaintiff’s counsel joined firm where arbitrator practiced; holding no manifest disregard)

This post written by Michael Wolgin.