Reinsurance Focus

Petitioners, Insurance Co. of North America and INA Reinsurance (collectively “INA”), and Respondent, Public Service Mutual Insurance Co. (“PSMIC”), came before the Southern District of New York on the question of whether an arbitration proceeding halted in medias res upon resignation of one party-appointed panelist may continue or whether under such circumstances the arbitration must commence anew. Under the terms of the parties’ arbitration agreement, each party was to choose their own arbitrator and then together select a third arbitrator to comprise a three person panel. After the arbitration had commenced and the panel had issued a Summary Judgment Order, one of the arbitrators was forced to withdraw for health considerations. PSMIC demanded that INA appoint a replacement arbitrator; INA demanded the arbitration commence anew. This case followed.

As a general rule, under Marine Products v. MT Globe Galaxy, 977 F.2d 66 (2d Cir. 1992) if a member of a three person arbitration panel dies before the rendering of an award, and the arbitration agreement does not anticipate that circumstance, the arbitration must commence anew with a new panel. The arbitration does not have to start over, however, if the panel has issued a “partial final award” and “was without power to revisit that question.” Here, the court determined that the original arbitration panel’s Summary Judgment Order did not “conclusively decide every point” and instead only rule on the applicability and effect of case law on INA’s primary defense. The court noted that the Summary Judgment Order was an interim decision on a matter of law and did not conclusively deal with all aspects of the case, including liability and damages. Further, the court determined that since the arbitration was fairly straightforward and not, as in Zeiler v. Deitsch, 931 F.3d 157 (2d Cir. 2007), “ongoing and complex arbitration.” As a result, the partial final award exception did not apply, and the court ordered arbitration to commence anew, with each party appointing its own arbitrators. The court further denied PSMIC’s motion to confirm the original panel’s Summary Judgment Order because the order did not “finally dispose of a separate, independent claim.” Ins. Co. of North Am. v. Public Service Mutual Ins. Co., Case No. 08-7003 (USDC S.D.N.Y. Dec. 10, 2008).

This post written by John Black.