The Consolidation Circus Continues | Insurance and Reinsurance Disputes Blog

Ethnic Tug of War

In December 2018, we blogged about a new reinsurance arbitration consolidation case.  We mentioned that the reinsurer filed several other petitions to compel arbitration in various jurisdictions all seeking to allow for consolidation of these disputes in three arbitrations  based on the different reinsurance programs.  The facts are the same so read the December 2018 post for the details.  The most recent decision in this series of cases came down in February 2019. We discuss this case below.

In Employers Ins. Co. of Wausau v. The Hartford, No. HHDCV 186099158S, 2019 Conn. Super. LEXIS 354 (Ct. Super. Feb. 13, 2019), a Connecticut motion court denied a reinsurer’s motion to compel arbitration and granted the cedent’s cross-motion to compel arbitration.  Sounds strange, but the issue is whether the arbitration would be before one arbitration panel as the cedent sought or multiple arbitration panels as the reinsurer insisted. The cedent demanded arbitration on the treaty in issue and 18 other contracts arising out of 8 different reinsurance programs (this is all about asbestos losses).  The cedent appointed 1 arbitrator and the reinsurer insisted on 3 separate arbitrations and appointed 3 arbitrators.  When the parties reached an impasse on consolidation, suits were filed by the reinsurer, including this one requiring the cedent appoint an arbitrator under this specific treaty.  This action was similar to the other collateral actions asking for the cedent to appoint an arbitrator on specific disputes.

In granting the cedent’s motion and denying the reinsurer’s motion, the court ruled that consolidation was for the arbitration panel to decide and not for the court.  The court noted that the parties here did not dispute that they entered into a valid arbitration agreement and that their dispute falls within the scope of that agreement.  “Thus, the court need not and cannot proceed with any further analysis.  The procedural question of consolidation is for the arbitrators, not for the court, to decide.”  The court rejected each of the reinsurer’s arguments, finding that by ordering the reinsurer to arbitrate it is merely enforcing the agreement as the parties drafted it.  Essentially, the reinsurer’s act of naming 3 arbitrators instead of one in response to the cedent’s arbitration demand allowed the court to compel the reinsurer to comply with the treaty and appoint a single arbitrator and proceed to form a panel.

It will be the panel’s job on this treaty to determine whether there should be consolidation or three separate arbitrations.  But given the separate litigation, through which each court separately granted either the cedent’s or the reinsurer’s motion, there may be several arbitration panels addressing this same issue.  One would hope coordination will avoid further collateral litigation.

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