Reinsurance Group Secures Federal Court Confirmation of Arbitration Award Over Opposition from London Market Reinsurers
On July 28, 2011, the United States District Court for the Southern District of New York granted a motion to confirm a reinsurance arbitration award filed by Christine Russell (argued), Ellen Burrows and Brendan McQuiggan on behalf of Century Indemnity Company. (Harper Ins. Ltd. et al. v. Century Indemnity Company, 2011 WL 3366484 (S.D.N.Y. July 28, 2011)). In confirming the award, the court agreed with Century’s argument that a challenge to the award brought by certain reinsurer parties to the underlying arbitration was insufficient as a matter of law.
The underlying arbitration (which was also handled by White and Williams’ reinsurance practice group) concerned a reinsurance contract known as Treaty 101, which reinsured commercial insurance policies Century Indemnity had issued to multiple policyholders. When a nationwide flood of asbestos bodily injury claims produced huge liabilities for Century and its reinsurers, certain London Market Reinsurers (LMR), who were parties to Treaty 101, instituted a program in which Century would have to meet certain Reinsurance Documentation Requirements (RDRs) in order to receive indemnification. Century believed the RDRs imposed unilateral extra-contractual obligations and represented a departure from past course of dealing between the parties, and were designed to slow and minimize payment of reinsurance billings. Century subsequently initiated arbitration under Treaty 101. After a hearing, an arbitration panel issued an interim award requiring, among other things, payment in full of undisputed reinsurance claims, and 75 % payment of disputed claims, within 106 days of the date of billing. The panel retained jurisdiction to resolve any dispute over the award. Three years later, the Panel relinquished jurisdiction over the dispute and declared its interim award final. The Panel denied a request by LMR at that time to remove the 75% pre-payment for disputed claims from the final award.
Certain of the LMR who were party to the Treaty 101 arbitration then moved to vacate the arbitration award in the SDNY, on grounds that (1) the pre-payment provision of the award altered the contract between the parties (a change which exceeded the arbitrators permitted powers) and (2) that neither party had specifically requested the 75% pre-payment provision (and therefore the arbitrators ruled on an issue that had not been submitted to arbitration). Century cross-moved to confirm the award, and opposed LMR’s motion as legally flawed and procedurally improper because it was filed after an applicable 90 day deadline for motions to vacate. Following briefing and oral argument, Judge Naomi Reice Buchwald of the SDNY denied LMR’s motion and confirmed the award as requested by Century. The judge held that instituting the pre-payment provision was within the scope of the arbitrators’ authority under the arbitration clause. The judge also held that a specific remedy need not be requested so long as the award draws its essence from the agreement to arbitrate, which the panel’s award clearly did. While the court ruled that LMR’s motion failed on the merits and therefore the court did not need to address the procedural issue, it also held that Century’s contention that LMRs motion was late had considerable merit.