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Reinsurance Team Successfully Argues in the New York Supreme Court, Appellate Division - First Department

May 28, 2015

The White and Williams Reinsurance Group successfully argued to the New York Supreme Court, Appellate Division – First Department that a reinsurer’s statute of limitations defense should be decided by an arbitration panel rather than the court in In re ROM Reinsurance Mgmt. v. Continental Insurance Company

Continental Insurance Company was reinsured by ROM Reinsurance Management and commenced an arbitration against ROM to collect balances on the Thorpe Insulation and J.T. Thorpe accounts. Both parties appointed their respective arbitrators. Before umpire selection, however, ROM filed a petition in New York Supreme Court to stay the arbitration because it alleged that the court should decide whether Continental’s claim was barred by the statute of limitations. ROM’s petition was based on the fact that (1) the applicable reinsurance contract provided that “the arbitration laws of New York State shall govern such arbitration” and (2) CPLR §§7502 and 7503 – the applicable New York provisions – permitted a party, which has not “participated” in an arbitration, to apply to a court to stay arbitration if the claim sought to be arbitrated is barred by the applicable statute of limitations. Continental opposed ROM’s petition on two grounds. First, the reinsurance contract did not contain the critical language necessary to deprive an arbitration panel of authority over the statute of limitations issue. Second, even if the CPLR were applicable, ROM had participated in the arbitration by appointing its arbitrator, and thus, it could not avail itself of those provisions. 

The New York Supreme Court, in its first decision, agreed with Continental that the CPLR was not applicable to the reinsurance contract, and based on that opinion, it did not need to decide whether ROM had participated in the arbitration. ROM appealed that decision and the appellate division reversed and held that the reinsurance contract contained the requisite language to make CPLR applicable to the statute of limitations issue. On remand, Continental urged the lower court to find ROM had participated in the arbitration by appointing its arbitrator and the case should proceed before a panel of arbitrators. ROM argued that until a full arbitration panel is formed and the umpire seated, there is no arbitration in which to participate. The lower court ruled in favor of Continental and ROM once again appealed. This time, however, in a 5-0 decision, the appellate division disagreed with ROM and affirmed the trial court ruling. According to the court, ROM “participated in the arbitrator selection process, even though they were undoubtedly aware of their statute of limitations claim. Under these circumstances, the court correctly determined that petitioners participated in the arbitration and therefore are precluded from seeking a stay on statute of limitations grounds.” As a result of that ruling, ROM’s statute of limitations defense is properly before the arbitration panel.  

Continental is represented by Michael Olsan, Rafael Vergara and Sarah Connelly.

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