FOLLOWING VACATUR OF ARBITRATION AWARD IN REINSURANCE DISPUTE AS “COMPLETELY IRRATIONAL,” COURT CONFIRMS NEW AWARD
On September 29, 2009 and November 22, 2010, respectively, we reported on a court’s vacatur of an arbitration award related to a “deficit carry forward” provision in a reinsurance agreement, and the Third Circuit’s subsequent affirmance of that order. The dispute surrounded the manner in which deficits in a reinsurer’s “experience account” under a reinsurance agreement for one year, applies to distribution of account funds under a separate reinsurance agreement for a subsequent year. The court previously vacated an arbitration award that awarded the reinsurer $6 million and failed to apply the “deficit carry forward” provision, which the court found to be unsupported by the contract and therefore “completely irrational” (notwithstanding a broad “Honorable Engagement Clause”). In a recent opinion and order, the court affirmed the award of a new arbitration panel, which interpreted the agreements and found that the “deficit carry forward” provision applied to permit the reinsurer to retain its portion of the account deficits prior to distribution to the reinsured of the funds of the account for the subsequent year. Because the panel “grounded its decision on the language” of the relevant reinsurance agreement, the court found that the panel’s decision properly “draws its essence” from the contract. Platinum Underwriters Bermuda, Ltd. v. Excalibur Reinsurance Corp., Case No. 2:12-mc-00070 (USDC E.D. Pa. July 15, 2013), and corresponding judgment entered July 18, 2013.
This post written by Michael Wolgin.
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