Trustmark Ins. Co. v. Clarendon National Ins. Co. et al.
(N.D. Ill. February 1, 2010)
Defendants reinsured plaintiff under a Variable Quota Share Treaty (“VQST”) effective on June 1, 1997 and renewed effective June 1, 1998. Defendants also reinsured plaintiff under excess-of-loss agreements.
The 1998 VQST and the excess-of-loss agreement were the basis of a dispute between the parties that culminated in both parties demanding arbitration. The parties arbitrated the excess-of-loss agreement first, which arbitration was governed by a confidentiality agreement. After that arbitration ended, the arbitrator selected by defendants for the excess-of-loss dispute contacted plaintiff’s arbitrator to select an umpire for the 1998 VQST arbitration. Plaintiff objected to defendants’ arbitrator, citing the confidentiality agreement from the prior arbitration and challenging whether she was disinterested.
Plaintiff commenced this action requesting that the court: (1) disqualify defendants’ arbitrator, (2) find defendants in breach of the confidentiality agreement for appointing her, (3) require defendants to return to arbitration and (4) enjoin defendants from participating in the arbitration if their arbitrator is on the panel. Defendants moved to dismiss plaintiff’s complaint and petitioned the court to appoint an umpire and compel plaintiff to return to arbitration.
The court granted defendants’ motion. The court held that the requirement that defendants’ arbitrator be disinterested is an issue of bias or qualification available for challenge only after an arbitration award issues. Even if all of plaintiff’s allegations were presumed true, plaintiff’s challenge was premature, and defendant’s motion to dismiss was granted as to those claims.
With respect to plaintiff’s breach of contract claims, the court held that even though plaintiff articulated a fear that the arbitrator would disclose information from the prior arbitration, plaintiff did not plead any facts showing that the defendants breached or will breach the confidentiality agreement. Fear of future breach is not a cause of action, and the court dismissed plaintiff’s breach of contract claims.
The court held that there was an arbitration agreement in place regarding the 1998 VQST and that the dispute was within the scope of that agreement. Plaintiff’s delay of over four months in responding to defendants’ choice of potential umpires in a contract where all other arbitration deadlines were thirty days justified the court in selecting an umpire and compelling plaintiff to submit to arbitration.
A copy of the decision can be found here
Toni Frain and Rick Cohen