Employers Ins. Co. of Wausau v. Munich Reins. Am., Inc. (S.D.N.Y. May 16, 2011)
The district court for the Southern District of New York recently held that the issue of whether a law firm should be disqualified from representing a reinsured where the same law firm represented the reinsurer in a prior matter is one for the judiciary, not the arbitrators. The court found that the law firm was not disqualified from representing the reinsured in a subsequent arbitration because the two matters where not the same or substantially similar.
Allianz Insurance Company wrote several insurance policies for the Roman Catholic Archdiocese of Los Angeles from June 1979 to June 1986. During that period, Munich Re issued seven facultative reinsurance certificates that reinsured six policies written by Allianz. In 2003, California adopted a statute that revived certain previously-stale claims of childhood sexual abuse. Thereafter, the Archdiocese agreed to resolve all 508 claims for a payment of $660 million, with Allianz agreeing to pay $62 million. Munich Re agreed to pay Allianz $17.5 million pursuant to its reinsurance agreement. Munich Re then submitted billings to its reinsurer, Employers Insurance Company of Wausau, pursuant to a reinsurance contract between Wausau and Munich Re’s predecessor.
Wausau objected to Munich Re’s representation by the law firm of Rubin Fiorella & Friedman LLP on the ground that the firm had represented Wausau in a reinsurance arbitration against Paladin Reinsurance Corporation in 2007. It commenced an action in which it sought a declaration that it was not permissible for Rubin Fiorella to represent Munich Re against Wausau in the reinsurance arbitration demanded by Munich Re because the representation violated Rule 1.9 of New York’s Rules of Professional Conduct.
The court noted that scant authority had been found on the issue of whether the disqualification of an attorney from an arbitration is a matter left to the arbitrators or the court. The court concluded that the dispute over whether Wausau’s former lawyer may represent a party who is adverse to it did not arise from the reinsurance treaties and was not within the customary expertise of insurance industry arbitrators. The court went on to find that Munich Re’s law firm was not disqualified insofar as the past and present matters lacked a substantial relationship from which the law firm could have benefited in the present arbitration. Moreover, the court stated that “[p]redilections and prejudices on the selection of an arbitrator or umpire gained from a small number of prior representations, is an insufficient ground for disqualification.”
For a copy of the decision, click here