Ario v. Cologne Reinsurance (Barbados), Ltd.
(M.D. Pa. November 13, 2009)
This action was initiated by the Liquidator of American Integrity Insurance Company to recover on a reinsurance agreement American Integrity had with defendant, Cologne Reinsurance (Barbados), Ltd. The court confirmed the arbitration award, and denied plaintiff’s motion to vacate, rejecting plaintiff’s claims that the arbitrators manifestly disregarded the law or that their partiality was evident.
The court noted that manifest disregard of the law occurs when (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case. An erroneous interpretation of the law is not enough. The court held that none of the conclusions reached by the arbitrators met this test, and accordingly, their findings were upheld.
The court also rejected plaintiff’s claims regarding the arbitrators’ evident partiality. The court concluded that there is no evident partiality from an arbitrator's accepting a position as an umpire in another, unrelated arbitration while the current arbitration is still ongoing, even if that position was partially obtained by the action of a party-appointed arbitrator, or is a position in an arbitration where one of the parties is an affiliate of a party to the current arbitration. The court noted that reinsurance is a field sufficiently specialized that those with expertise can be expected to serve on multiple arbitration panels. In these circumstances, that arbitrators appoint each other to panels does not per se manifest evident partiality or corruption.
Additionally, the court held that the arbitrators’ disclosures of other appointments were timely. The court held that disclosure is required so that the affected party can deal with the issue while the matter is still before the arbitrators. Here, the disclosures were made while proceedings were still pending before the panel, and in fact the Liquidator was able to file a motion requesting that the arbitrators recuse themselves. Accordingly, the arbitrators’ disclosure of any conflict was timely.
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Toni Frain and Jeffrey Kingsley