Insurance Company of North America v. Public Service Mutual Insurance Company (2nd Circuit, 2010)
Public Service Mutual Insurance Company (PSMIC) commenced an arbitration against Insurance Company of America and INA Reinsurance (collectively referred to as INA) for payments made to its insured for the settlement of various pollution claims. The panel consisted of an arbitrator chosen by PSMIC and INA, as well as an umpire. The panel signed an order granting judgment in favor of PSMIC.
INA moved for reconsideration, however, while the motion was pending, the arbitrator INA chose was forced to resign for health problems. INA believed a new panel should be convened while PSMIC contended INA should just choose a new arbitrator or allow the court to do so. INA filed a petition to stay the arbitration. The motion was granted by the court. Eventually, PSMIC learned that the arbitrator had recovered and sought relief from the stay order – based upon this newly discovered evidence. The court granted this motion and PSMIC appealed.
The court noted the “general rule” that absent “special circumstances,” where a member of a three person panel dies before the rendering of an award and the agreement does not anticipate the circumstance, the arbitration must commence “anew” with a new panel. The Second Circuit, however held that this rule does not apply to vacancies caused by resignations. While the court did not conclude the general rule is invalid, it held that it was simply distinguishable and not controlling.
The court noted that while this may lead to some unfairness, the potential for manipulation and the waste of resources that would be inevitable in convening a new panel weighs against applying the standard rule in this context.
For a copy of the decision click here
Brian Biggie and Sharon Angelino
https://www.goldbergsegalla.com/attorneys/Biggie.html
https://www.goldbergsegalla.com/attorneys/Angelino.html
case provided courtesy of Lexis.