Reinsurance Focus

LDG Re reinsured workers' compensation and employers' liability risks retained by Legion Insurance and a related company under two quota share reinsurance agreements. LDG Re booked the reinsurance into a pool facility in which a number of companies participated, including Chartwell Reinsurance (which was later purchased by Trenwick America Reinsurance). When LDG failed to make timely payments under the quota share agreements, Legion demanded arbitration. A settlement was reached. When LDG allegedly failed to make payments required by the settlement agreement, Legion sought to reactivate the arbitration. LDG objected, contending that the dispute was not arbitrable and that the pool members were entitled to set off other debts owed to them by Legion. The panel entered an award purporting to enforce the settlement agreement, requiring a payment by LDG of over $5 million, not mentioning the set off request. Legion moved to confirm the award, and Trenwick moved to intervene in both the District Court action and in Legion's liquidation proceeding in Pennsylvania state court, seeking to assert a set off. In a Memorandum Opinion, followed by an Order and Judgment, the District Court confirmed the arbitration award, but stayed execution pending the submission by Legion or Trenwick of a motion in the liquidation proceeding seeking a ruling as to whether the claimed set off should be allowed. Koken v. LDG Re Corp., Case No. 06-81 (USDC ED Pa. Dec. 29, 2006).