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.
Court dismisses case against Equitas entities for lack of jurisdiction
A US District Court, which had twice before denied motions to dismiss for lack of personal jurisdiction filed by Equitas Holdings Limited, Equitas Reinsurance Limited and Equitas Limited, has granted a motion to dismiss on the same ground filed by the same entities in a third case seeking arbitration of issues arising out of the denial of reinsurance claims. Employers Insurance Company of Wausau v. Equitas Holdings Limited, Case no. 06-291 (W.D. Wisc. Sept. 12, 2006). The Court found that the factual record before it in the prior cases had not been fully developed, and that it was joining the majority of courts that had ruled on this issue.
Court dismisses case against Equitas for lack of jurisdiction
A US District Court, which had twice before denied motions to dismiss for lack of personal jurisdiction filed by Equitas Holdings Limited, Equitas Reinsurance Limited and Equitas Limited, has granted a motion to dismiss filed by the same entities in a third case seeking arbitration of issues arising out of the denial of reinsurance claims. Employers Insurance Company of Wausau v. Equitas Holdings Limited, Case no. 06-291 (W.D. Wisc. Sept. 12, 2006). The Court found that the factual record before it in the prior cases had not been fully developed, and that it was joining the majority of courts that had ruled on this issue.
Summary judgment granted on surety bonds despite forgery claim
A Court has granted summary judgment on most claims relating to surety bonds that secured obligations under premium finance agreements. Westrm-West Risk Markets, Ltd. v. XL Reinsur. America, Inc., Case No. 02-7344 (USDC S.D. N.Y. July 19, 2006). The claims were complicated by allegations that the signature of the broker's representative were forged on some of the documents.
First Circuit announces harsh manifest disregard of law standard
The United States Court of Appeals for the First Circuit has joined numerous other Circuits this year in announcing a harsh standard for vacating arbitration awards on the basis that they are in manifest disregard of the law. In McCarthy v. Citicorp Global Markets, Inc., Case No. 06-1001 (1st Cir. Sept. 19, 2006), the Court vacated a District Court Order that set aside an arbitration award. The Court of Appeal held that to prevail in establishing manifest disregard, “there must be some showing in the record, other than the result obtained, that the arbitrators knew the law and expressly disregarded it. … 'Disregard' implies that the arbitrators appreciated the existence of a governing legal rule but wilfully decided not to apply it.” The District Court had previously vacated a decision by the Panel and remanded with instructions, which it believed the Panel “might” have disregarded on remand. The Court of Appeal held that this was insufficient to vacate the Panel's second award, because, as stated by the Supreme Court in United Paperworkers Int'l Union v. Miusco, Inc., 484 U.S. 29, 38 (1987), courts “do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts.” The First Circuit concluded that even if legal error is “painfully clear, courts are not authorized to reconsider the merits of arbitration awards.”