Reinsurance Focus

Founders Ins. Co. entered a Reinsurance Agreement with primary insurer Lyndon Property Ins. Co. which required Founders and Lyndon to arbitrate any insurance-related disputes. A dispute regarding coverage arose, and the parties submitted to arbitration in Boston. The arbitration panel issued a ruling requiring Founders to post a sum in prejudgment security. Lyndon subsequently filed suit in the District of Massachusetts asserting that Founders had failed to comply with the panel’s order and had evidenced no intent to do so. The parties disputed the choice of the District of Massachusetts as an appropriate forum under seemingly conflicting provisions of the Reinsurance Agreement. The arbitration provision provided for the enforcement of arbitration awards in any court of competent jurisdiction, while a choice-of-law and submission-to-jurisdiction provision named Missouri law as controlling and courts in Missouri as being appropriate.

The court held that while “gate keeping” decisions relating to arbitration may be made by courts, disputes regarding the procedure to be followed in the arbitration were to be decided by the arbitrators. Because the issue here was a procedural one – the proper interpretation of the Agreement’s choice of forum clauses – the interpretation was left to the arbitrators. The court determined that the holding in Richard C. Young & Co., Ltd. v. Leventhal, 389 F.3d 1 (1st Cir. 2004), was dispositive in the instant case as it proclaimed that a dispute between the parties over the location of the arbitration raised not a question of arbitrability but a procedural question and was appropriate for the arbitrator and not the court. The case was dismissed so that the arbitrators could decide the dispute. Lyndon Property Ins. Co. v. Founders Ins. Co., Ltd., Case No. 08-11359 (USDC D.Mass. Nov. 20, 2008).

This post written by John Black.