Reinsurance Focus

The Ninth Circuit affirmed the confirmation of an arbitration award over the respondents objections that the process employed by the arbitration panel was unfair and resulted in an implausible interpretation of the reinsurance contracts. The petitioner, U.S. Life, contended that by closing a meeting of the panel with panel-retained workers’ compensation experts, the panel refused to hear pertinent evidence regarding the appropriateness of the respondent, Superior National, claims handling. U.S. Life also contended that the panel exceeded its authority by requiring U.S. Life to pay interest in excess of the award, pay all tendered bills, and pay all future bills within thirty days. Although noting the ex parte meeting with the experts was “unusual,” the Ninth Circuit determined that the arbitration process provided the parties with a fundamentally fair arbitration, and also that the arbitration award rested on a plausible interpretation of the governing arbitration documents. It accordingly affirmed the district court’s order confirming the award.

Of interest in this case was the district court’s order on U.S. Life’s request to waive or reduce the supersedeas bond for the appeal. The liability for the judgment was $592.8 million dollars. Although the petitioner presented evidence of “considerable financial strength,” the court found that standard practice was to set a bond amount of 1.25 to 1.5 times the amount of the judgment. The district court therefore entered a bond amount of $600 million. United States Life Insurance Co. v. Superior National Insurance Co., No. 07-55938 (9th Cir. Jan. 3, 2010).

This post written by Brian Perryman.