In an appeal of a District Court decision discussed in an August 30, 2006 posting in this blog, the Third Circuit recently affirmed a district court’s ruling that an arbitrator, not a court, should decide whether coverage disputes under essentially identical insurance contracts should be arbitrated separately on a contract-by-contract basis or collectively in a consolidated arbitration.
The underlying dispute related to the payment of asbestos claims under reinsurance coverage that Westchester Fire Insurance Company purchased from certain Lloyd’s of London reinsurers. The parties disagreed as to how to characterize the coverage at issue.
The Third Circuit’s decision relied heavily on two recent Supreme Court decisions, namely, Howsam v. Dean Witter Reynolds, Inc. and Green Tree Financial Corp. v. Bazzle. In light of this authority, the parties’ agreement to arbitrate their disputes, contractual silence as to the consolidation issue, and the longstanding federal policy favoring arbitration, the Court could see no reason why this procedural issue should not be resolved in arbitration. Certain Underwriters at Lloyd’s v. Westchester Fire Insurance Company, No. 06-1457 (3d. Cir., June 12, 2007).