The Right to Arbitrate Against Receivers: Koken v. Reliance Decision Raises Questions
The enforcement of arbitration rights against receivers of insolvent insurers has long been an issue of intense
debate, especially between receivers and reinsurers. Whether a receiver can be forced to arbitrate disputes is well settled
in a few jurisdictions but largely unresolved in most jurisdictions. Until recently, Pennsylvania was one of the
jurisdictions in which the courts had steadfastly enforced arbitration rights.
On March 22, 2004, the Commonwealth Court of Pennsylvania reopened the debate under Pennsylvania law when
it issued an Order and Opinion refusing to compel the Liquidator of Reliance Insurance Company to arbitrate a
setoff dispute under two reinsurance agreements. The Court's decision, however, raises more questions than it
answers, and its precedential value in light of contrary prior decisions is unclear. The decision is subject to debate
for a number of reasons.