Reinsurance Focus

Various BCBS healthcare plans and BCS Insurance Company became engaged in a coverage dispute pertaining to certain professional liability coverage issued by BCS to member plan administrators. As per applicable contracts containing arbitration provisions, the parties each named arbitrators. According to the contracts’ governing procedure, when those two arbitrators failed to reach agreement, some of the health plans brought an action in Illinois federal court seeking appointment of a neutral third arbitrator. In the course of that proceeding, BCS cross-moved for an order to compel individual arbitration, rather than class arbitration, which it styled as a motion to compel non-consolidated arbitration. The court ruled first on BCS’s cross-motion, finding that decision on that issue should be made by the arbitrator(s), not the court. BCS immediately appealed that decision. The court, finding BCS’s appeal an improper interlocutory appeal, thereafter appointed the neutral third arbitrator as requested by the plans and ordered the parties to continue the arbitration with the panel so constituted. BCS appealed that order as well, arguing that its previous interlocutory appeal deprived the district court of jurisdiction to enter its order. The Seventh Circuit held that the first appeal was an improper attempt to circumvent proper arbitration procedure under the FAA, and dismissed it as interlocutory. It then held that the dismissal of the first appeal mooted the basis for the second appeal, since the trial court had jurisdiction to enter its order appointing an arbitrator. Blue Cross Blue Shield of Massachusetts, Inc. v. BCS Ins. Co., Nos. 11-2343 & 11-2757 (7th Cir. Dec. 16, 2011)

This post written by John Pitblado.

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