ARIAS-U.S. 3rd Quarter 2014 Quarterly

THIRD QUARTER 2014

VOLUME 21 NUMBER 3

INSIDE…

News and Notices

Disregarding Honored Traditions:Attempts to Invoke StateStatutes of Limitations in Reinsurance Arbitration

Members on the Move

Loss Notice and Sunset Clauses in Reinsurance Treaties

Arbitration Enters the Fast Lane in England

CASE NOTES CORNER

I stand strong in favor of efficiency and as for food, my attitude is somewhere on thespectrum of love and lust and worship. Thus, I have a certain attraction to Gala Dinners.When they’re held to celebrate momentously worthwhile events, I think of attendingthem as killing the proverbial two birds with one stone. Efficiency at its peak. Of course, itwould help if the two birds were a duck and a pheasant or a quail, or a partridge.(Alternatively, no need to worry about the birds, I also eat meat and fish, thank you) Sowhen I read that ARIAS•U.S. was going to mark its 20th Anniversary, with a Gala Dinnerat the Fall Conference, my heart skipped a beat. You don’t like food? Well, there’s alsogoing to be music. If that doesn’t set your spine a’tingling, there’ll be anniversaryspeeches, as well. Attend? Wouldn’t miss it for the world. I hope that each of you will bethere, too.

Looking back at ARIAS•U.S. over its twenty year history, the organization could bedescribed as either dynamically consistent or consistently dynamic. Actually, “vibrant”might be more apt. The founding objectives of fostering and advancing the arbitrationprocess have remained constant, but the organization has pursued a course ofcontinuous discussion, assessment, and improvement to make it better. In this issue ofthe Quarterly, Dan Fitzmaurice takes us on an historical journey, from the founding ofARIAS twenty years ago to the present day.

Also in this issue of the Quarterly, John DeLascio has authored an article dealing with theeffect of state statutes of limitations on arbitration proceedings. Can such statutesoperate to bar arbitrations? And who gets to decide, a court or a panel? John’s articletakes us through some judicial decisions on point.

Companies, arbitrators, and legal counsel can often be heard clamoring for a quicker andcheaper way to arbitrate minor disputes. Many ARIAS•U.S. members are involved indisputes taking place in England. As explained in an article by Jonathan Sacher, the Britshave now adopted a fast track arbitration procedure, themselves. Time will tell whetherthe clamorers will actually make use of it.

In addition, we’re featuring an article by Bob Hall, dealing with notice of loss and sunsetclauses in reinsurance treaties. Bob reviews a series of cases involving the same cedantand reinsurer where the courts considered whether a bordereau claim report will sufficefor sunset clause reporting purposes.

Finally, in a Case Notes Corner article Ron Gass discusses a decision in which a partyasserted it was entitled to vacate an award where one of the panel members had failedto disclose a serious medical condition. Spoiler alert: the court said: “No”.

Until I became Editor of the Quarterly I never noticed that every issue contains aStatement of Editorial Policy, which states, and I quote:

ARIAS•U.S. welcomes manuscripts of original articles, book reviews, comments and casenotes from our members dealing with current and emerging issues in the field ofinsurance and reinsurance arbitration and dispute resolution.

Help celebrate our twentieth anniversary. See your name in print. Send in your article,book review, comment or case note today!

EDITORIAL BOARDEditor Thomas P. [email protected]

Associate Editors Peter R. [email protected]

Susan E. [email protected]

Mark S. [email protected]

Daniel E. Schmidt, [email protected]

Teresa [email protected]

Managing Editor William H. [email protected]

International EditorsChristian H. [email protected]

Jonathan [email protected]

Ex-Officio Jeffrey M. RubinEric S. KobrickElizabeth A. MullinsJames I. Rubin____________________Production/Art Director Gina Marie Balog

VOL. 21 NO. 3THIRD QTR. 2014

editor’scomments

The ARIAS•U.S. Quarterly (ISSN 7132-698X) is published Quarterly, 4 times a year byARIAS•U.S., 131 Alta Avenue, Yonkers, NY 10705.Periodicals postage pending at Yonkers, NY andadditional mailing offices.

POSTMASTER: Send address changes toARIAS•U.S., P.O. Box 9001, Mt. Vernon, NY 10552

ARIAS•U.S.P.O. Box 9001Mt. Vernon, NY 10552914.966.3180, x112914.966.3264 [email protected]

Thomas P. Stillman

Editor’s Comments Inside Front Cover

Table of Contents Page 1

FEATURE: ARIAS•U.S.: Twenty Years of Improving Ways to Resolve Insurance and Reinsurance DisputesBY DANIEL L. FITZMAURICE Page 4

News and Notices Page 13

FEATURE: Disregarding Honored Traditions: Attempts to Invoke State Statutes of Limitations in Reinsurance ArbitrationBY JOHN E. DELASCIO Page 15

Members on the Move Page 22

FEATURE: Loss Notice and Sunset Clauses in Reinsurance TreatiesBY ROBERT M. HALL Page 23

FEATURE: Arbitration Enters the Fast Lane in EnglandBY JONATHAN SACHER AND DAVID PARKER Page 25

CASE NOTES CORNERBY RONALD S. GASS Page 27

Invitation to Join ARIAS•U.S. 0

Membership Application Inside Back Cover

ARIAS•U.S. Board of Directors Back Cover

contentsVOLUME 21 N UMBER 3

3 P A G E

Editorial PolicyARIAS•U.S. welcomes manuscripts of original articles, book reviews, comments, and case notes from our membersdealing with current and emerging issues in the field of insurance and reinsurance arbitration and dispute resolution.All contributions must be double-spaced electronic files in Microsoft Word or rich text format, with all references andfootnotes numbered consecutively. The text supplied must contain all editorial revisions. Please include also a briefbiographical statement and a portrait-style photograph in electronic form. Manuscripts should be submitted as email attachments to [email protected] .Manuscripts are submitted at the sender's risk, and no responsibility is assumed for the return of the material. Materialaccepted for publication becomes the property of ARIAS•U.S. No compensation is paid for published articles.Opinions and views expressed by the authors are not those of ARIAS•U.S., its Board of Directors, or its Editorial Board,nor should publication be deemed an endorsement of any views or positions contained therein.

Copyright NoticeCopyright 2014 ARIAS•U.S. The contents of this publication may not be reproduced, in whole or in part, without writtenpermission of ARIAS•U.S. Requests for permission to reproduce or republish material from the ARIAS•U.S. Quarterlyshould be addressed to William Yankus, Executive Director, ARIAS•U.S., P.O. Box 9001, Mount Vernon, NY 10552 [email protected] .

P A G E 4

Daniel L. FitzMaurice

The Beginnings In 1992, T. Richard Kennedy, a named partnerat a boutique law firm in New York, had anidea. A member of the AssociationInternationale de Droit des Assurances(“A.I.D.A.”),i Kennedy envisioned a society inthe United States dedicated to improvingthe processes for resolving insurance andreinsurance disputes. Kennedy pursued thisidea over the next two years with a group ofindividuals from the insurance andreinsurance industry. The individuals whobecame the initial organizers of this societywere: Debra J. Anderson (now Hall), VicePresident & General Counsel, ReinsuranceAssociation of America; Joseph A. Bambury,Jr. Esq.; Ronald A. Jacks, Mayer, Brown & Platt;T. Richard Kennedy, Werner & Kennedy;Robert A. Mangino, Senior Vice President &General Counsel, Swiss Re Holding (NorthAmerica) Inc.; Franklin W. Nutter, President,Reinsurance Association of America;Edmond F. Rondepierre, Senior Vice Presidentand General Counsel, General ReinsuranceCorporation; Daniel E. Schmidt, IV, SeniorVice President and General Counsel, SoremaN.A. Reinsurance Company; and Bert M.Thompson, retired Vice President andGeneral Counsel, RLI Insurance Company.iiThe organizers created the A.I.D.A.Reinsurance and Insurance ArbitrationSociety (ARIAS•U.S.) in 1994. As it celebratesits twentieth anniversary in 2014, ARIAS•U.S.remains as Kennedy envisioned: a societydedicated to improving the resolution ofinsurance and reinsurance disputes.

Ten years after the founding of ARIAS•U.S.,Dick Kennedy and Mark Gurevitz, membersof the first Board of Directors, wrote anarticle about the founding of the Society.They explained that the need for anorganization like ARIAS•U.S. flowed fromseveral events that began in the mid-to-late 1980s.

[D]ue to the advent of asbestos,pollution and toxic tort claimscoupled with the decision of manycompanies to cease writing andrun-off their book of business, thenumber of arbitrated reinsurancedisputes has grown exponentially.Along with the increase in sheernumbers came a sharp increase inthe complexity of the disputes andthe amount of money at issue.iii

Although the nature and number of disputeshave varied over time, the need for qualifiedand trained arbitrators persists.

Writing in the first edition of the ARIAS•U.S.Quarterly, Ed Rondepierre, the first Presidentof ARIAS•U.S., announced the formation ofthe society and the objective to “promotethe use and assist in the development ofinsurance and reinsurance arbitration for theinternational and domestic market.”iv

Rondepierre identified key elements for howARIAS•U.S. planned to fulfill this mission:

ARIAS will provide initial trainingand continuing education seminarsin the skills necessary to serveeffectively on a reinsurancearbitration panel. Upon certifying apool of qualified arbitrators,ARIAS•U.S. will serve as a resourcefor parties involved in a dispute tofind the appropriate persons toresolve the matter in a professional,knowledgeable and cost-effectivemanner.

Twenty years later, ARIAS•U.S. continues toserve as a resource for parties seekingqualified arbitrators, to offer a pool ofcertified arbitrators, and to engage intraining and continuing education.

The Development and Growthof the Membership ofARIAS•U.S.The initial organizers of ARIAS•U.S. reflectedmajor constituencies that still comprise

ARIAS•U.S. QUARTERLY - THIRD QUARTER 2014

feature

Daniel L.FitzMaurice

Daniel FitzMaurice is a partner in theHartford Office of Day Pitney LLP,where he handles arbitrations, trials,and appeals of complex commercialdisputes, including insurance and rein-surance.

ARIAS•U.S.: Twenty Years ofImproving Ways to Resolve Insurance and Reinsurance Disputes

As it celebrates itstwentieth anniversaryin 2014, ARIAS•U.S.remains as Kennedyenvisioned: asociety dedicated toimproving theresolution ofinsurance andreinsurance disputes.

5 P A G Emost of its membership: representatives ofinsurance and reinsurance companies;practicing lawyers; and arbitrators. Someindividuals may fall within two or eventhree of these categories at some point intheir careers. Other members may not fitneatly into any of these categories but maywork in areas affiliated with the insuranceindustry or arbitration process, includingbrokers, reinsurance intermediaries,independent actuaries or businessconsultants, and other positions.

At all times,v the membership process hasbeen handled by application, subject to avote of approval by either a majority of themembers of the Society present at ameeting or a majority vote of the Board ofDirectors or of the Executive Committee.vi

Membership is open to any “person, lawfirm or corporation.”vii Corporate and lawfirm members are currently entitled todesignate up to five representatives for a setamount of annual dues and to designateadditional representatives for additionalamounts.viii Each member, whether anindividual, corporation, or law firm isentitled to one vote.ix

The membership of ARIAS•U.S. grewdramatically in the Society’s first fourteenyears.x In 1999, five years after its formation,ARIAS•U.S. had 250 members.xi By 2004, tenyears post-formation, the membership hadrisen to 443, with 375 individual membersand 68 corporate and law firm members.xii

Membership reached its high-water mark inearly 2008, with 515 individuals and 121corporations and law firms for a total of 636

members.xiii Counting individuals andrepresentatives of corporations and lawfirms, the ranks of those associated withARIAS•U.S. reached 1,183 in 2008.xiv

The financial crisis that began in 2008 andcontinues to some degree todayxv did notspare ARIAS•U.S. Two years after reaching ahigh of 636 members in 2008, themembership had dropped to 560 by thesecond quarter of 2010, with 434 individualsand 126 corporations and law firms.xvi Twoyears later, in 2012, membership slid furtherto 483, with 365 individuals and 118corporations and law firms.xvii By the firstquarter of 2014, the total membership wasdown to 422, with 309 individuals and 113corporations and law firms.xviii Perhaps notsurprisingly, individual membershipsexperienced the greatest declines, fallingfrom a high of 515 in 2008 to 309 in 2014. As discussed below, changes to the criteriafor arbitrator certification may havecompounded the effects of the financialcrisis on the roll of individual members.

Although its ranks may be somewhatdiminished, ARIAS•U.S. remains a vibrant

organization with an enviable roster ofmembers. By reviewing the Society’swebsite, one can see that most of the majorinsurance and reinsurance companies doingbusiness in the United States, particularly inthe property-casualty field, participateactively in the Society, as do many nationaland international law firms and prominentarbitrators.xix The members of the currentBoard of Directors provide a measure of the


In 1999, five yearsafter its formation,ARIAS•U.S. had 250members. By 2004,

ten years post-formation, the

membership hadrisen to 443, with

375 individualmembers and 68

corporate and lawfirm members.

Membership reachedits high-water markin early 2008, with515 individuals and

121 corporations andlaw firms for a total

of 636 members.Counting individualsand representativesof corporations andlaw firms, the ranksof those associated

with ARIAS•U.S.reached 1,183

in 2008.

2000-2014: Number of Members of ARIAS•U.S.

P A G E 6active participation by major players: ACEGroup, AIG, Munich Re, Odyssey Re, Swiss Re,and Zurich, and partners from Crowell &Moring, Squire Patton Boggs, and ButlerRubin. Active participants appearing inrecent programs include representatives ofThe Hartford, Travelers, General Re, Allstate,and XL Re. Furthermore, other members ofARIAS•U.S . hale from law firms includingSimpson Thatcher & Bartlett, Sidley, CahillGordon, Milbank, Clyde & Co., and manyothers. In addition, several leadinginsurance and reinsurance arbitrators areactive members of the Society and itscommittees, including the followingcertified arbitrators who are currentlyserving on two or more committees: NasriBarakat (International and Technology); PaulDassenko (Certification and Forms &Procedures); Charles M. Foss (20thAnniversary and Publications); Mark S.Gurevitz (Ethics Discussion, Forms &Procedures, and Publications); Jim Leatzow(International and Technology); Debra J.Roberts (Education and International);Daniel E. Schmidt IV (Ethics Discussion,Publications, and Strategic Planning); andDavid Thirkill (International and Forms &Procedures).xx These and other memberscontribute in many ways to make ARIAS•U.S.an active and constructive force in arbitralreform.

The Leadership of ARIAS•U.S.From its founding to the present, ARIAS•U.S.has enjoyed the benefits of having devotedand strong leaders, including members of itsBoards of Directors, committee chairs andmembers, conference co-chairs, and manyother contributors.

The Board of Directors has always beencomprised of nine members, chosen torepresent three constituencies: cedingcompanies, reinsurers, and practicinglawyers. The founding Board, now knownas “Directors Emeriti,” consisted of: T.Richard Kennedy (Chair), Werner & Kennedy;Edmond F. Rondepierre (President), GeneralReinsurance; Charles M. Foss, Travelers; MarkS. Gurevitz, The Hartford; Charles W.Havens, III, LeBoeouf, Lamb; Ronald A. Jacks,Mayer Brown; Susan E. Mack, Aetna; RobertM. Mangino, Swiss Reinsurance, and DanielE. Schmidt, IV, Sorema.xxi The currentmembers are: Jeffrey M. Rubin (Chairman),Odyssey Re; Eric S. Kobrick (President), AIG;Elizabeth A. Mullins (Vice President), Swiss

Re; James I. Rubin (Vice President), ButlerRubin; Ann L. Field, Zurich; Michael A. Frantz,Munich Re; Deidre G. Johnson, Crowell; MarkT. Megaw, ACE; and John M. Nonna, SquirePatton Boggs.

Over the years, members of ARIAS•U.S. havedevoted countless hours to developprograms and resources to facilitate theresolution of insurance and reinsurancedisputes. A list of the current committeesprovides some measure of the level ofactivity that surrounds the Society:Executive Committee; 20th AnniversaryCommittee; Arbitration Task Force;Certification Committee; EducationCommittee; Ethics Discussion Committee;Finance Committee; Forms & ProceduresCommittee; International Committee; LawCommittee; Mediation Committee; MemberServices Committee; PublicationsCommittee; Strategic Planning Committee;and Technology Committee.

In 2004, the Society adopted a form ofspecial distinction for leadership, the “ARIASAward:”


The founding Board,now known as“Directors Emeriti,”consisted of: T. Richard Kennedy(Chair), Werner &Kennedy; Edmond F.Rondepierre(President), GeneralReinsurance; CharlesM. Foss, Travelers;Mark S. Gurevitz, The Hartford;Charles W. Havens,III, LeBoeouf, Lamb;Ronald A. Jacks,Mayer Brown; SusanE. Mack, Aetna;Robert M. Mangino,Swiss Reinsurance,and Daniel E.Schmidt, IV, Sorema.

BOARD CHAIRS

1994-1997 T. Richard Kennedy

1998-2000 Robert M. Mangino

2000-2002 Mark S. Gurevitz

2002-2003 Daniel E. Schmidt, IV

2003-2004 Charles M. Foss

2004-2005 Thomas S. Orr

2005-2007 Mary A. Lopatto

2007-2008 Thomas L. Forsyth

2008-2009 Frank A. Lattal

2009-2010 Susan A. Stone

2010-2011 Daniel L. FitzMaurice

2011-2012 Elaine Caprio

2012-2013 Mary Kay Vyskocil

2013-2014 Jeffrey M. Rubin

7 P A G E

ARIAS•U.S. QUARTERLY - THIRD QUARTER 2014ARIAS•U.S. QUARTERLY - THIRD QUARTER 2014

Although the field ofinsurance and

reinsurance mightseem to be male-dominated, women

members havecontributed

significantly to thegrowth and

development of theSociety – in ways

that would easily fillanother article. Asnoted above, DebraHall was one of the

organizers of theSociety, and Susan

Mack served on thefirst Board of

Directors.

The ARIAS AWARD is given, at thediscretion of the ARIAS Board ofDirectors, to an individual who,through his or her own conductand initiative, has epitomized theobjectives of ARIAS•U.S. by makingsignificant contributions towardsthe improvement of the arbitrationprocess and by fostering thedevelopment of arbitration law andpractice as a means of resolvingnational and internationalinsurance and reinsurance disputesin an efficient, economical andequitable manner.

Only three individuals have received thisrecognition:

T. Richard Kennedy: On November 11, 2004,the Board conferred the first ARIASAWARD in recognition of Mr. Kennedy’ssignificant contributions, including hisrole in founding the Society, his serviceas Chairman of the founding Board, andhis position as Editor-in-Chief of theQuarterly.

Mark S. Gurevitz: On November 3, 2011, theBoard conferred the ARIAS AWARD inrecognition of Mr. Gurevitz’s significantcontributions, including his service as afounding member of the Board,Chairman of the Board (2000-2002),Chairman of the Long Range PlanningCommittee (2006-2010), member of theEditorial Board and of the EthicsDiscussion Committee.

Charles M. Foss: On December 17, 2013, theBoard conferred the ARIAS AWARD inrecognition of Mr. Foss’s significantcontributions, including service as afounding member of the Board,Chairman of the Board (2003-2004), andmember of the Editorial Board as well ashis role in conceiving the IntensiveArbitrator Training Workshop and theUmpire Selection Procedure.

Although the field of insurance andreinsurance might seem to be male-dominated, women members havecontributed significantly to the growth anddevelopment of the Society – in ways thatwould easily fill another article. As notedabove, Debra Hall was one of the organizersof the Society, and Susan Mack served onthe first Board of Directors. Therese Arana-Adams, Debra Roberts, and Mary Ellen Burnswere among the early-certified arbitrators.Mary Lopatto not only served on the Board

of Directors as an officer and Chairman, shealso participated actively as a member of theLong Range Planning Committee from 2006-2010. Susan Stone served on the Board foran extended term (eight years), because shecompleted part of the term of a departingmember; during her tenure, Susan was anofficer and Chairman of the Board, oversawthe Long Range Planning Committee, andworked assiduously to improve the financesof the Society. Elaine Caprio also served asan officer and Chairman, and she initiatedthe Newer Arbitrator Program and co-chaired the Arbitration Task Force.

Mary Kay Vyskocil, another officer andChairman, continues to serve as Chair of the20th Anniversary Committee, Co-Chair of theStrategic Planning Committee, and memberof the Education Committee. Three women,Betty Mullins, Ann Field, and DeirdreJohnson, currently serve on the Board.

Aside from members of the Board, manyother individuals have volunteered andworked tirelessly for the Society. Forexample, some individuals have taken onsignificant responsibility by serving as theTreasurer of the Society. These individualshave included James P. White, Richard L.White, Robert Quigley, and Peter A. Gentile.Peter also teamed with Jeff Rubin asmembers of the first Finance Committee tohelp build financial reserves – a programthat proved to be prudent when the Societywas forced to postpone and truncate the FallConference in 2012, because of HurricaneSandy.xxii

Stephen H. Acunto of CINN Group served asthe first Executive Director of ARIAS•U.S. xxiii

Although Steve and his wife, Carol, haveremained involved in the Society’s operationsfor the past twenty years, he was succeededas Executive Director in 2002 by WilliamYankus. For the past twelve years, Bill Yankushas been indefatigable in his efforts toimprove the operations of the Society.

Arbitrators, Umpires, and MediatorsWhen the Board of Directors of ARIAS•U.S.first met on May 6, 1994, they made whatturned out to be an important decisionregarding the pool of arbitrators theyintended to create. Rather than depend onother organizations to train thesearbitrators, the Board decided that theSociety would undertake thatresponsibility.xxiv As discussed below in the

P A G E 8


section entitled “Conferences, Seminars,Workshops, and Master Classes,”ARIAS•U.S. has trained hundreds ofindividuals to be arbitrators and hasrequired that, to remain certified,arbitrators must continue to attendeducational programs.

At its annual meeting in November1995, ARIAS•U.S. adopted criteria forcertifying individuals as arbitrators thatrequired attendance at conferences andseminars of ARIAS•U.S., membership inthe Society, and experience. ByNovember 1997, the pool of certifiedarbitrators consisted of thirty-sevenindividuals:

As shown by the asterisks below, ten ofthese individuals remain in the pool ofcertified arbitrators today.xxvi

Paralleling the growth patterns of themembership of the Society, the ranks ofcertified arbitrators rose significantlythrough 2008.

After 2008, the size of the pool ofcertified arbitrators dropped. In 2010alone, the number of certifiedarbitrators dropped from 330 in the

second quarter to 262 by the fourth quarter. The declinecontinued over the next years from 240 in 2012, to 223 in 2013,to 192 as of the first quarter of 2014.xxvii The pool grew,however, in the second quarter of 2014 to 199 and, as of thiswriting stands at 205.xxviii Although the recent data are stillimmature in describing a trend, there is reason to believe thatthe number of certified arbitrators may continue to grow.

Some of the decline in the number of certified arbitrators since2008 may be attributable to more than the economicdownturn. In 2008, the Board announced that it had adoptedadditional requirements for certification, effective January 1,2009.xxix These requirements originated in recommendationsthat the Long Range Planning Committee made after extensivedeliberations, including “Town Hall” meetings conducted inconference calls with members. The new certificationstandards, which applied to all arbitrators (even those who werecurrently certified), included four components: (1) attendance atone ARIAS•U.S. conference within the past two years; (2)industry experience of at least ten years of significantspecialization in the insurance/reinsurance industry; (3)attainment of certain levels of experience in handlingarbitrators and/or specified levels of participation in educationalworkshops and seminars conducted by the Society; and (4)completion of an ethics training modulexxx. A fifth componentapplied to individuals who were not currently certified – namely,they would need to provide recommendations from threesponsors. Moreover, after meeting the new standards,arbitrators were now required to satisfy ongoing requirementsevery two years to maintain certification: (a) attendance at oneARIAS•U.S. conference; (b) completion of an on-line ethicsrefresher; and (c) completion of an ARIAS•U.S. educationalsession or service as a faculty member at an ARIAS•U.S.conference, workshop, or training session. At the same timethat it adopted these enhanced certification requirements, theBoard created two new committees, Certification andEducation, to facilitate the certification process and provide thenecessary educational seminars, ethics modules, andworkshops.

Howard Anderson

Therese Arana-Adams

Richard Bakka

Peter Bickford*

Michael Cass

Dewey Clark

James Corcoran*

Anthony DiPardo

Caleb Fowler*

James Frank

Peter Frey

Dennis Gentry

William Gilmartin

Richard Gilmore

Thomas Greene

Franklin Haftl

Robert Hall*

Robert M. Huggins

Michael Isaacson

Ronald Jacks

Peter Malloy

Robert Miller*

Charles Niles

Wayne Parker

James Powers*

J. Daniel Reilly

Robert Reinarz

Debra Roberts*

Edmond Rondepierre

Daniel Schmidt, IV*

N. David Thompson

Thomas Tobin*

Peter Tol

Norman Wayne

Paul Hawksworth

James White

Richard White*xxv

1997-2008: ARIAS•U.S. Certified Arbitrators

9 P A G EThe present pool of certified arbitrators isdeep in experience and ability. Although themajority of the proceedings probably arisein the context of property/casualtyreinsurance, ARIAS•U.S. certified arbitratorshave handled disputes over insurancecoverage, health care, disability, oceanmarine, business interruption, and manyother subject areas. Moreover, certifiedarbitrators have presided over proceedingsin Bermuda, China, the United Kingdom,Germany, France, and many other parts ofthe world. The list of certified arbitrators isavailable to members and non-members ofthe Society, and it generates frequent visitsby those in search of arbitrators who havethe requisite training and experience tomanage complex disputes.

Acting on another recommendation fromthe Long Range Planning Committee, theBoard also adopted in 2008 standards forcertifying individuals as umpires. Previously,the Society maintained an “Umpire List,”which consisted of those certifiedarbitrators who had completed service asparty-appointed arbitrators and/or neutralsin at least three arbitrations. The UmpireList grew from 36 in 2000xxxii to 89 whenthis list was discontinued in 2008.xxxiii Thenewly-designated title of “Certified Umpire”became effective in 2009. To be certified asan umpire, an individual must meet threerequirements: (1) be a certified arbitrator; (2)participate as an arbitrator or umpire in fiveor more insurance or reinsurancearbitrations through final award aftercompletion of an evidentiary hearing lastingat least three days; and (3) have completedat least one of the five arbitrations withinfive years before applying for umpirecertification.xxxiv Presently, there are 56certified umpires.xxxv

Arbitration is not the only way to resolve aninsurance or reinsurance dispute. Inrecognition of the growing significance ofmediation, the Board approved a change tothe bylaws in 2003 to include mediationtraining within the Society’s areas ofpotential endeavor.xxxvi In 2006, the Boardapproved the designation of ARIAS•U.S.Qualified Mediatorxxxvii and addedmediation experience to the searchfunction for certified arbitrators on theSociety’s website.xxxviii

Instead of providing training to mediators,however, the Society chose to accord thedesignation of Qualified Mediator to

individuals who completed a minimum ofthirty-five hours of instruction from arecognized organization or who submittedevidence of other specialized experiencesatisfactory to the Board.xxxix Presently, thereare thirty-five Qualified Mediators.xl

The ARIAS•U.S. QuarterlyIn December 1994, the Society issued its firstpublication, the ARIAS•U.S. Quarterly.Included in this publication was an article byJohn Nonna entitled “A Modest Proposal,” inwhich he suggested two modifications tocurrent arbitral procedures: all-neutralpanels and reasoned awards.xli On its own,this historical reference might suggest thata period of stasis has persisted for the pasttwenty years: John Nonna still participatesactively in the Society and, indeed, serves onthe Board of Directors; and the two majorsuggestions that he made in 2004 remainopen to regular debate and proposalstoday.xlii Nevertheless, the past twenty yearsat ARIAS•U.S. have been replete withsignificant projects and accomplishments.

The publication of ARIAS•U.S. Quarterly inDecember of 1994 was far from a singularevent. ARIAS•U.S. published two editions ofthe Quarterly each year from 1997 to 2002.Since 2003, the Society has published foureditions per year. The varied content of theQuarterly has included law review-stylearticles, opinion pieces, photos and recapsfrom conferences, information about newlycertified arbitrators, and, until his passing,many entries offering the wit and wryobservations of Gene Wollan. For example,Rhonda Rittenberg and David Thirkillconducted an extensive survey of members’views about various issues relating toarbitration in 2004 and published the resultsin the Quarterly in 2005.xliii

A dedicated group has edited the Quarterlyover the years. Dan Schmidt served asChairman of the Editorial Board from 1997 to2003; Dick Kennedy was the Editor-in-Chieffrom 2003 to 2010; Gene Wollan was Editor-in-Chief from 2010 through to the FourthQuarter of 2013. After Jim Rubin served abrief stint as Interim Editor, Tom Stillmanbecame the current Editor-in-Chief this year.

1998: The Practical Guide andthe Code of ConductIn 1998, ARIAS•U.S. announced thepublication of two, seminal resources. TomAllen and Mark Gurevitz oversaw the


ARIAS•U.S. publishedtwo editions of the

Quarterly each yearfrom 1997 to 2002.

Since 2003, theSociety has

published foureditions per year.

The varied contentof the Quarterly hasincluded law review-

style articles,opinion pieces,

photos and recapsfrom conferences,information about

newly certifiedarbitrators, and,until his passing,

many entriesoffering the wit andwry observations of

Gene Wollan.

P A G E 1 0


development of the Practical Guide to ReinsuranceArbitration Procedure, an invaluable compendium of advice,forms, and processes designed to aid arbitrations frominitiation to completion. The Society published a revisededition of the Practical Guide in 2004, under the co-chairmanship of Tom Allen and Tom Orr.xliv The otherresource that ARIAS•U.S. first published in 1998 was entitledGuidelines for Arbitrator Conduct. Three members, Jim Rubin,Dan Schmidt, and Richard Waterman, thoughtfully preparedthese ethical canons and commentary. Since its initialpublication in 1998, the Code of Conduct has guidedarbitrators, parties, and counsel, as well as several courts.xlv

As discussed below, the Ethics Discussion Committeeconducted a comprehensive review of the Code in 2013.

Conferences, Seminars, Workshops, and Master Classes

The inaugural edition of the Quarterly announced that“ARIAS•U.S. will hold its first training seminar on January20th & 21st 1995 in New York.”xlvi The announcement alsostated that “[t]he Program includes featured speakers,seminars, and a mock arbitration panel.”xlvii In most yearssince then, the Society has conducted two conferences ayear, the fall conference in New York and the springconference in various locations, including, among others,Hamilton, Bermuda, San Diego, California, Baltimore,Maryland, Las Vegas, Nevada, and, most frequently, in WestPalm Beach, Florida. The Fall Conference in 2007 set theattendance record at 660 registered participants.xlviii Theconferences have covered a wide variety of topics anddemonstrations. The format has included video “news”reports of hypothetical storms and other events, multiplephases in a single, hypothetical dispute, and paneldiscussions in point-counterpoint style. Moreover, althoughconferences often address procedural issues relating to thearbitration process, in recent years conferences have alsoaddressed substantive issues and emerging insurance andreinsurance topics, including climate change, businessinterrupt of supply claims, and aggregation of complexmedical claims.

Featured keynote speakers at various conferences haveincluded not only of CEOs from the world of insurance andreinsurance but also political figures and judges, even anAssociate Justice of the United States Supreme Court.ARIAS•U.S. has also conducted numerous educationalseminars over the years, starting with a one-day workshop inChicago in 1995 that Nick DiGiovanni and Richard Watermanco-chaired, up to and including four live webinars that theSociety is currently offering on “Underwriting a Risk from aReinsurer’s Perspective,” “Current Issues in Claims,” “CyberRisk,” and “Using and Understanding Actuaries.”

As noted above, the Board created the Education Committeein 2008. Under the leadership of Mary Kay Vyskocil, theEducation Committee has developed two Ethics TrainingModules and instituted several seminars and webinars as partof the continuing educational program for arbitrators. TheEducation Committee also conducted the first Umpire MasterClass in September 2013, in which twenty-four studentsparticipated.

Special Projects and Strategic PlansARIAS•U.S. has launched a number of special projects andprograms over the years. For example, in 2000, the Societyannounced a facility that allows parties to select neutralsrandomly and fairly, enabling them to reduce thegamesmanship that may affect the selection process.xlix In2005, ARIAS•U.S. member and certified arbitrator AndrewWalsh wrote a letter requesting that the Board establish acommittee to help arbitrators. He suggested that thecommittee might assist members with items, such as, findingprofessional liability insurance, a conflicts-tracking system,and guidance with computer applications and systems.Recognizing the value in Andy’s suggestion, the Board formedthe Member Services Committee.l

KEYNOTE SPEAKERS

Hon. Samuel Alito, Jr., Associate Justice, United StatesSupreme Court

Hon. Thomas A. Daschle, former U.S. Senate Majority Leader

Vincent J. Dowling, Co-founder, Dowling & Partners

Kenneth R. Feinberg, Professor and Special Master of theFederal September 11 Victim Compensation Fund

Maurice (Hank) Greenberg, CEO of Starr Companies

Hon. Dennis G. Jacobs, U.S. Circuit Chief Judge

Edmund F. “Ted” Kelly, Chairman, President, and CEO ofLiberty Mutual Group

Michael G. Kerner, CEO - General Insurance at ZurichInsurance Company, Ltd

Hon. George LeMieux, U.S. Senator, Florida

Thomas B. Leonardi, Connecticut Insurance Commissioner

Hon. John S. Martin, Jr., U.S. District Judge (ret.)

Scott P. Moser, CEO of Equitas Ltd.

Hon. Michael B. Mukasey, former U.S. Attorney General andUnited States District Chief Judge (ret.)

Michael C. Sapnar, President & CEO of TransatlanticHoldings, Inc.

J. Eric Smith, President and CEO of Swiss Re Americas

1 1 P A G E


discussions about the arbitrationprocess. The Society has become afertile source of solutions to improvethe resolution of insurance andreinsurance disputes.▼

i According to the organization’s website, “AIDAwas formed in 1960 for the purpose of promotingand developing, at an international level, collabo-ration between its members with a view to in-creasing the study and knowledge ofinternational and national insurance law and re-lated matters.”http://www.aida.org.uk/default.asp.

ii E. Rondepierre, ARIAS•U.S. Will Serve the Interna-tional Insurance and Reinsurance Law Community,ARIAS•U.S. Quarterly, Vol. 1, No.1 at 2 (December1994).

iii M. Gurevitz & T. R. Kennedy, ARIAS•U.S.: ItsGrowth and Importance in the Process of Resolv-ing Insurance and Reinsurance Disputes,ARIAS•U.S. Quarterly, 2d Q. at 5, (Sept. 2002)

iv E. Rondepierre, ARIAS•U.S. Will Serve the Interna-tional Insurance and Reinsurance Law Commu-nity, ARIAS•U.S. Quarterly, Vol. 1, No.1 (December1994) at 2.

v ARIAS•U.S. offered charter membership status tothe first two hundred members. See CharterMembership Application, ARIAS•U.S. Quarterly, Vol.1, No.1 at 8 (December 1994).

vi By-Laws of ARIAS•U.S., Art. 2 §2 available athttp://www.arias-us.org/index.cfm?a=6.

vii By-Laws of ARIAS•U.S., Art. 2 §1 available athttp://www.arias-us.org/index.cfm?a=6.

viii ARIAS•U.S. Membership Application, availableat http://www.arias-us.org/mp_files/img_ftp/ARIAS%202013%20Membership%20Application.pdf.

ix By-Laws of ARIAS•U.S., Art. 5 §6 available athttp://www.arias-us.org/index.cfm?a=6.

x ARIAS•U.S. offered charter membership status tothe first two hundred members. See CharterMembership Application, ARIAS•U.S. Quarterly, Vol.1, No.1 (December 1994) at 8.

xi An Invitation, ARIAS•U.S. Quarterly, (2d/3d Q.1999) (December 1994) at 18.

xii An Invitation, ARIAS•U.S. Quarterly, Vol. 11, No.3(3d Q. 2004) at 46.

xiii An Invitation, ARIAS•U.S. Quarterly, Vol. 15, No.1(1st Q. 2008) at 36.

xiv An Invitation, ARIAS•U.S. Quarterly, Vol. 15, No.2(2d Q. 2008) at 44.

xv For an interesting article on the financial crisisand its ongoing effects, see The Origins of the fi-nancial crisis: Crash Course, The Economist (Sept.7, 2013) available athttp://www.economist.com/news/schools-brief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article.

xvi An Invitation, ARIAS•U.S. Quarterly, Vol. 17, No.2(2d Q. 2010) at 44.

xvii An Invitation, ARIAS•U.S. Quarterly, Vol. 19, No.2(2d Q. 2012)..

xviii An Invitation, ARIAS•U.S. Quarterly, Vol. 21, No.1(1st Q. 2014) at 18.

xix A list of the Society’s corporate members ap-pears at http://www.arias-us.org/index.cfm?a=227).

xx This lists excludes the following current mem-bers of the Board of Directors who are also certi-fied arbitrators: Eric S. Kobrick, Ann L. Field, andMark T. Megaw.

xxi Two of the Directors Emeriti, Ron Jacks and EdRondepierre, are deceased.

In January 2006, Mary Lopatto, asChairman of the Board, conducted aform of retreat unique in the Society’shistory. In addition to the currentBoard, several former Chairmen ofARIAS•U.S. participated in discussionsabout the purpose and mission of theorganization and how the Societyshould proceed.li The retreat led to theformation of the Long Range PlanningCommittee, chaired by Mark Gurevitz.Perhaps not coincidentally, three of theeight members of that committee, EricKobrick, Ann Field, and Mark Megaw,later became members of the Board.The Long Range Planning Committee’smission included “a comprehensivereview of the arbitrator and umpirecertification requirements, whether therequirements should be enhanced,whether additional educationalrequirements should be required tomaintain certification (beyond therequired attendance at an ARIASmeeting within a two year period), andwhether there should be a mechanismto regularly review an arbitrator’s orumpire’s certification. The Committeewill also consider what ARIAS offers toinsurance and reinsurance companiesand to individual members, how ARIAScan demonstrate the value it adds tothe arbitration process, and how ARIAScan continue to address its members’needs and interests.”lii As discussedabove, the Committee’s work from2006 to 2010 resulted in significantchanges to the certificationrequirements and process, increasedethics and educational requirements,and several other constructive ideas.

In 2011, the Board approved theformation of the Arbitration TaskForce.liii The Board invited a number ofcompany representatives “to analyzeand discuss the current state of the[arbitration] process, and the role ofARIAS•U.S., with an eye towardtransformational changes.”liv With thehelp of advisors, the six votingmembers of the Task Force – all frominsurance and reinsurance companies— have proposed several changes tothe Board. For example, the Task Forcefulfilled one of the six objectives in theBy-Laws of ARIAS•U.S —“To proposemodel rules of arbitration proceedings”– by proposing Rules for the Resolution

of U.S. Insurance and ReinsuranceDisputes, which the Board modified andadopted.lv The work of the Task Forcecontinued, including development ofNeutral Arbitration Rules andStreamlined Arbitration Rules, whichhave now been approved by the Board,among other ideas.

The Ethics Discussion Committee,formed as a recommendation from theLong Range Planning Committee andchaired by Eric Kobrick, has beenanother special project that has bornefruit. In 2013, the Committee completedthe first comprehensive review of theARIAS•U.S. Code of Conduct.lvi Therevised Code of Conduct includes anextensive amount of clarification,amplification, and guidance toarbitrators on the complexities ofethical standards and requirements.The role of this committee is ongoingand includes a review of the ethicsmodule and coordination with the workof Education Committee.

Last but not least, in March of 2011, theBoard formed the Strategic PlanningCommittee and appointed Mary KayVyskocil as the first Chair. The missionof this committee is broad: “to addressstrategic issues of the organization,itself, including finances, By-Laws, thenomination process, the certificationprocess (e.g., is it now where it shouldbe), conferences (e.g., is two the rightnumber), the development of a formalresponse of ARIAS•U.S. to amicus briefrequests and to arbitration procedurespromulgated outside the organization,the mission of ARIAS•U.S., and corevalues.lvii The committee’s role is toplan and make recommendations tothe Board, not to implement.lviii At itsmeeting in March of this year, the Boardestablished the Strategic PlanningCommittee as a permanent standingcommittee of the Society.lix Thus,ARIAS•U.S. is planning for the future ofthe Society and arbitral reform.▼

ConclusionDick Kennedy’s remarkable idea hasgrown and flourished in many waysover the past years. Through thecontributions of those referenced in thisarticle and far too many others tomention, ARIAS•U.S. serves as morethan an important forum for

P A G E 1 2xxii News and Notices, 19 ARIAS•U.S. Quarterly No. 4 (4th

Q. 2012) at 8xxiii ARIAS•U.S. Quarterly, Vol. 1, No.1 (Dec. 1994) at 2.xxiv Minutes of the First Meeting of the Board of Direc-

tors of ARIAS (U.S.), May 6, 1994 (copy provided byCharles M. Foss and presented at ARIAS•U.S., Spring Conference, May 7-9, 2014).

xxv ARIAS•U.S. Certified Arbitrators, ARIAS•U.S. Quarterly,Vol. 3, No.5 (Winter 1997) at 13.

xxvi ARIAS•U.S. Certified Arbitrators, available athttp://www.arias-us.org/index.cfm?a=16&app=ar-bitrators.

xxvii See An Invitation, ARIAS•U.S. Quarterly, Vol. 19, No.4(2d Q. 2012) at 25; An Invitation, ARIAS•U.S. Quar-terly, Vol. 20, No.4 (4th Q. 2013) at 46; An Invitation,ARIAS•U.S. Quarterly, Vol. 21, No.1 (1st Q. 2014) at 18.

xxviii See An Invitation, ARIAS•U.S. Quarterly, Vol. 21, No.2(2d Q. 2014) at 26; ARIAS•U.S Certified Arbitratorsas of July 16, 2014, available at http://www.arias-us.org/index.cfm?a=16&app=arbitrators.

xxix Board of Directors Approves New Certification Re-quirements, ARIAS•U.S. Quarterly, Vol. 15, No.2 (2d Q.2008) at 9.

xxx New Arbitrator and Umpire Certification Require-ments, ARIAS•U.S. Quarterly, Vol. 15, No.2 (2d Q. 2008)at 32-34.

xxxi New Certification, Education, and InternationalCommittees Forming, ARIAS•U.S. Quarterly, Vol. 15,No.2 (2d Q. 2008) at 9.

xxxii ARIAS•U.S. Umpire List, ARIAS•U.S. Quarterly (1st Q.2008) at 6.

xxxiii ARIAS•U.S. Umpire List, Vol. 15, No.1 (1st Q. 2008) at 35.

xxxiv New Arbitrator and Umpire Certification Require-ments, ARIAS•U.S. Quarterly, Vol. 15, No.2 (2d Q.2008) at 32-34.

xxxv ARIAS•U.S. Certified Umpires, available athttp://www.arias-us.org/index.cfm?a=344&app=certified_umpires.

xxxvi Minutes of the Board of Directors of ARIAS•U.S.(Jan. 16, 2003) (noting that, on the recommenda-tion of Director T. Forsyth, the Board approved theaddition of mediation training).

xxxvii Minutes of the Board of Directors of ARIAS•U.S.(March 9, 2006).

xxxviii Mediation Experience Added to ARIAS•U.S. WebsiteSearch System, ARIAS•U.S. Quarterly, Vol. 13, No.1(1st Q. 2006) at 8.

xxxix Qualified Mediator Program Launched on Website,ARIAS•U.S. Quarterly, Vol. 13, No.1 (1st Q. 2006) at 5.

xl ARIAS•U.S. Qualified Mediator List, available athttp://www.arias-us.org/index.cfm?a=374&app=me-diators.

xli J.M. Nonna, A Modest Proposal, ARIAS•U.S. Quarterly,Vol. 1, No.1 (December 1994) at 1.

xlii See, e.g., ARIAS•U.S. Arbitration Task Force (availableat http://www.arias-us.org/index.cfm?a=413) (de-scribing the mission of this still-active effort to in-clude “exploring whether the arbitration processcould be improved . . . [by[ the potential use of Neu-tral Panels”) see also Derek T. Ho, The Standards for aReasoned Award: Emerging Lessons from Case Law,ARIAS•U.S. Quarterly , Vol. 19, No. 1 (1st Q. 2012) at 17-19(discussing judicial treatment of reasoned awardsand the increased trend toward using reasonedawards in American arbitrations)

xliii R. Rittenberg & D.A. Thirkill, Results of Our Survey,ARIAS•U.S. Quarterly, Vol. 12, No. 3 (3d Q. 2005) at 17.

xliv See New Practical Guide Completed, ARIAS•U.S.Quarterly, Vol. 11, No. 2 (2d Q. 2004) at 10.

xlv See, e.g., Scandinavian Reinsurance Co. v. St. Paul Fire& Marine Ins. Co., 668 F.3d 60, 66 (2d Cir. 2012) (dis-cussing arbitrator disclosure obligations in refer-ence to Canon IV); IRB-Brasil Resseguros S.A. v. Nat’lIndem. Co., No. 11 Civ. 1965 (NRB), 2011 U.S. Dist.LEXIS 136640 (S.D.N.Y. Nov. 29, 2011) at *16, n.6 (dis-cuss ethical considerations relating to the with-

drawal of arbitrators in reference to Canon IV);Northwestern Nat’l Ins. Co. v. Insco, Ltd., No. 11 Civ.1124 (SAS), 2011 U.S. Dist. LEXIS 113626 (S.D.N.Y. Oct. 3,2011) at *23 (discussing the confidentiality of paneldeliberations in reference to Canon VI).

xlvi Seminar Set for New York, Jan. 20-21, 1995, ARIAS•U.S.Quarterly, Vol. 1, No.1 at 1 (1994).

xlvii Id.xlviii See Record 660 Attendees Look to the Future at

ARIAS Fall Conference, ARIAS•U.S. Quarterly, Vol. 13,No. 4 (4th Q. 2006) at 10.

xlix C.M. Foss, The ARIAS•U.S. Umpire Appointment Proce-dure, ARIAS•U.S. Quarterly (1st Q. 2000) at 2-4.

l Minutes of the Board of Directors of ARIAS•U.S. (June16, 2005).

li See Board Creates Long Range Planning Committee,ARIAS•U.S. Quarterly, Vol. 13, No. 4 (4th Q. 2006) at 24.

lii Id.liii See D.L. FitzMaurice, E. Caprio, ARIAS•U.S. Announces

Company Project to Improve Arbitration, ARIAS•U.S.Quarterly, Vol. 18, No. 3 (3d Q. 2011) at 2.

liv Id.lv See D.L. FitzMaurice, S. Kennedy, & T. Farrish, The

ARIAS•U.S Rules for the Resolution of U.S. Insurance andReinsurance Disputes, ARIAS•U.S. Quarterly, Vol. 20, N. 4(4th Q. 2013) at 17.

lvi The Revised ARIAS•U.S. Code of Conduct, ARIAS•U.S.Quarterly, Vol. 20, N. 4 (4th Q. 2013) at 25.

lvii Minutes of the Board of Directors of ARIAS•U.S. (January 18, 2012).

lviii Id.lix Minutes of the Board of Directors of ARIAS•U.S.

(March 3, 2014).


Dick Kennedy’sremarkable idea hasgrown andflourished in manyways over the pastyears. Through thecontributions ofthose referenced inthis article and fartoo many others tomention, ARIAS•U.S.serves as more thanan important forumfor discussionsabout the arbitrationprocess. The Societyhas become a fertilesource of solutionsto improve theresolution ofinsurance andreinsurance disputes.

1 3 P A G E


Register Now! Fall Conference AnnouncedARIAS•U.S. 2014 Fall Conference and AnnualMeeting will take place on Thursday,November 13 and Friday, November 14, 2014at the New York Hilton Midtown Hotel inNew York City. The highlight of theconference will be a gala dinner celebrationof the 20th Anniversary of the founding ofARIAS on Thursday evening, November 13.The announcement brochure with fulldetails was emailed and mailed to allmembers in mid-August and is on thewebsite home page, along with onlineregistration and hotel reservation.

Entitled, “The Arbitrators Speak: Insight andPerspective from the Arbitrators,Themselves,” the conference will elicit fromexperienced arbitrators their views on howto conduct a traditional reinsuranceorganizational meeting, discovery, andbriefing; how to conduct an evidentiaryhearing involving life reinsurance issues;how to conduct an arbitration involvinghealth reinsurance issues; and how toconduct an insurance arbitration involvingdirect insurance with cross border issues.

Unlike most previous conferences, this onewill address best practices from thearbitrators’ perspective, explaining whatworks and what does not work. Participantscan expect to participate in breakoutsessions in which they will have theopportunity to ask questions and expresstheir views.

In addition, the conference will include anethics session, again addressing importantissues from the perspective of thearbitrators and, importantly, a second speeddating session.

A block of guest rooms has been set aside atthe Hilton at below market rates. At $359 fora Standard King Room and $419 for a DeluxeKing, these rooms are $25 and $21 below lastyear’s rates. The ARIAS•U.S. website homepage (yellow button) now links to the“Welcome ARIAS•U.S.” page of Hilton’sonline reservation system. If you prefer tocall 212-586-7000 to make your reservation,be sure to mention that you are with ARIAS.Plan to stay, at least, the nights ofNovember 12th and 13th.▼

20th Anniversary Dinner Details AnnouncedThe 20th Anniversary Committee has begunto release some of the details of the Galadinner on November 13. The evening willbegin with a reception at 6:00. A jazzquartet will play during that time and laterduring dinner.

Dinner will begin at 7:00. Attendees willeach be assigned to a table, including thoseconference attendees who have beeninvited to sit at platinum sponsors’ tables.Table assignments will be given out inadvance, upon arrival at the reception.Spouses and guests who have beenincluded with conference registrations (at $200 each) will have table assignments,as well.

Flowers will decorate the tables. Bannerswill decorate the room. At appropriate timesduring the dinner, speakers will address thegathering, showing photographs from thepast and introducing people who have beenimportant to ARIAS•U.S. or who still are.Although the event was still comingtogether at press time, early plans indicate avery happy and rewarding experience for allattendees.▼

September 18 Intensive Workshop is SetThe Education Committee will conduct thenext Intensive Arbitrator Training Workshopon September 18. The experienced arbitratorswho will lead the teaching sessions areSusan S. Claflin, Alea Group, Ronald S. Gass,The Gass Company, Inc., and SusanGrondine-Dauwer, SEG-D Consulting LLC. Intotal, these long-time ARIAS members haveserved as arbitrators in 228 arbitrations.

The day-long event will be led by LisaKeenan, Odyssey Reinsurance Company,Charles W. Fortune, Sieger Gfeller Laurie LLP,and Stephen M. Kennedy, Clyde & Co., allexperienced arbitration attorneys.

Full details of the workshop were emailed toall members in July and are on the websitecalendar. Registration closed on August 29.

This will be the only intensive workshopoffered during 2014. It will take place in theNew York City offices of Squire Patton Boggs(US) LLP at 1185 Avenue of the Americas.▼

newsand

notices

Dinner will begin at7:00. Attendees willeach be assigned to

a table, includingthose conference

attendees who havebeen invited to sit at

platinum sponsors’tables. Table

assignments will begiven out in advance,

upon arrival at thereception. Spouses

and guests who havebeen included with

conferenceregistrations (at

$200 each) will havetable assignments,

as well.

“Career Gear” and “Dress forSuccess” Clothing Drives atFall ConferenceAgain this year at the Fall Conference, ARIASwill be collecting gently used businessclothes for disadvantaged men and womentrying to find jobs. Mound Cotton Wollan &Greengrass volunteers will handle thecollection process and distribute the clothesto the two organizations. Collection willtake place on the morning of November 13.Full details will be announced by email toregistrants.▼

Wallis Named ARIAS CertifiedUmpireAt its meeting on June 20, the ARIAS•U.S.Board of Directors approved Jeremy R. Wallisas an ARIAS Certified Umpire, bringing thetotal number to 56.▼

Second Webinar Draws 32 The second-ever ARIAS webinar took placeon June 17 and attracted a total of 32attendees, ten better than the Marchsession. This webinar is part of a four-session schedule in 2014.▼

This session, entitled “Using andUnderstanding Actuaries,” was led by twoactuaries, with decades of experience inboth industry norms and the ARIAS disputeresolution process: Paul Braithwaite, SeniorManaging Director of FTI, and BarbaraNiehus, President of Niehus ActuarialServices. Education Committee memberSeema A. Misra moderated the discussion,which lasted 85 minutes.

Leaders addressed a variety of matters, suchas understanding the credentials of theactuary before you, assessing his/herprofessional background and expertise, andevaluating opinions in light of actuarialpractice and standards. Case studiesdemonstrated how actuarial insights canadd valuable perspective on interpretingreinsurance contract provisions. This sessionis available on demand at no cost (and nocredit) through the webinar link.

The remaining two events are set forSeptember 24 and December 10. Details areavailable on the Webinar Program calendarpage. Registration for the Septembersession is open now (from the home page)and will remain open until it begins.▼

Umpire Master Class and BasicElements of Arbitration onTrack for November 12Last year, the first-ever Umpire Master Classtook place in September. This year, it will beone of two tracks on the afternoon beforethe Fall Conference, along with the BasicElements of Arbitration. The latter coursethis year will focus on Dealing withDiscovery, Ex Parte, and Experts.▼

The Umpire Master Class will addressDissent in the final award, confidentiality,and the new disclosure requirements in theARIAS•U.S. questionnaire.

Full details was be announced by email to allmembers in late August and can always befound on the 2014 Fall Seminars calendarpage of the ARIAS•U.S. website. Registrationopens on September 15 and closes onOctober 24.▼

Kevin J. WalshARIAS•U.S. member Kevin Walsh, a partner inthe New York Office of Locke Lord LLP, passedaway on June 22 after a long struggle withlymphoma. He was 64 years old.▼


The remaining twoevents are set forSeptember 24 andDecember 10. Detailsare available on theWebinar Programcalendar page.Registration for theSeptember session is open now (fromthe home page) andwill remain openuntil it begins.

P A G E 1 4

newsand

notices

John E. DeLascio

I. IntroductionAs courts increasingly resolve and addressreinsurance disputes, the reinsurancelandscape continues to be altered and theprivate arbitration process becomesprogressively transformed into a morecourtroom-like experience. In an industrywhere once it was “not uncommon to formreinsurance contracts via ‘gentlemen’sagreements’ concluded with handshakes orwritten on cocktail napkins…” much haschanged.2 Historically, reinsurancerelationships were premised upon thehonored tradition of “utmost good faith,”and certain fundamental principles ofreinsurance and “honorable engagement”provisions set reinsurance apart from therealm of general commercial contracts.3 Thefact that reinsurance disputes weretraditionally resolved through confidentialand private arbitrations, as opposed topublic court actions, further preserved thedistinctly unique nature of reinsurance. Yet,the industry’s rich history and customsappear to be eroding and may be giving wayto new commercial and legal realities.

Over the past decade, “reinsurance contractshave moved away from the handshakeagreements of yesteryear and focus moreon the realities of the bottom line.”4

Numerous courts have addressed andresolved reinsurance disputes and, in doingso, some have injected strict legal conceptsinto the reinsurance relationships whichmay serve to fundamentally change howreinsurance disputes are resolved in thefuture.5

Whether one views these recentdevelopments as shedding light into the“shadows”6 of reinsurance or as thelamentable “legalization” of the reinsurance

world, the fact remains that reinsurancerelationships are changing and the mannerwithin which disputes are resolved appearsto be as well. One area which signals adrastic change in the reinsurance arbitrationarena is the effort by some to imposestatutes of limitation.

Of course, there are numerous factual andlegal issues that would need to beconsidered in determining whether aparticular statute of limitations applies toreinsurance disputes and, if so, when theclock starts ticking. However, this article willfocus on the two most fundamental ofthreshold inquiries. First, there is thequestion of whether a state’s statute oflimitation even applies to reinsurancecontract disputes at the outset.7 Althoughstatute of limitation defenses were nottraditionally raised in reinsurance disputes,some courts appear to have effectivelydisregarded this long-observed industrycustom. Some courts have recognized thedeparture from industry custom andtradition and found that the statute oflimitations defense was now “fair game” inreinsurance cases pending before courts.See, e.g., Transport Insurance Company v. TIGInsurance Company, 202 Cal. App. 4th 984,136 Cal. Rptr.3d 315, 320 (Cal. App. 2012). Thisprecedent may have some limitedapplicability with respect to court actions;however many reinsurance disputes are stillresolved by private arbitrations as opposedto in public courtrooms.

Accordingly, the next inquiry is whether aparticular state’s statute of limitationsapplies to private arbitrations or whether thestatute of limitations applies only to courtactions. A body of law has emerged fromcourts across the country finding thatstatutes of limitations do not apply todisputes in a private arbitration. However,not all courts have agreed on this point andthe issue remains hotly contested or is


1 5 P A G E

feature

John E. DeLascio

John E. DeLascio is a Partner at MecklerBulger Tilson Marick & Pearson LLP andfocuses his practice in the areas ofcomplex insurance coverage and rein-surance matters. The views in this arti-cle do not necessarily reflect the viewof the Meckler Bulger Tilson Marick &Pearson LLP law firm and/or any of itsclients.

Disregarding Honored Traditions:Attempts to Invoke State Statutesof Limitations in Reinsurance Arbitration

Over the pastdecade, “reinsurance

contracts havemoved away from

the handshakeagreements

of yesteryear andfocus more on the

realities of the bottom line.”

P A G E 1 6


feel that it is a custom not to assertthem.” 77 F.3d 16, 21-22 (2d Cir. 1996).See also Superintendent of FinancialServices of the State of New York v.Guarantee Insurance Company, 2013 N.Y.Misc. LEXIS 2442 (N.Y. Sup. Ct. June 10,2013) (finding that the breach ofcontract claims accrued shortly after theceding insurer provided its reinsurerwith notice of loss and that thereinsurance claims were barred by thestatute of limitations).

In Transport Ins. Co. v. TIG Ins. Co., 202 Cal.App. 4th 984, 136 Cal. Rptr. 3d 315 (Cal.App. Jan. 13, 2012) a California court alsoacknowledged the history of reinsurerstreating their reinsureds with “theutmost good faith,” yet rejected thehistorical view concluding that: “[i]nother words, all issues are fair game,including the statute of limitations…”Transport, 202 Cal. App. 4th at 990.

B. Applying the “Storm Warn-ings” Doctrine in a Reinsur-ance-Related Dispute:Further Eroding Industry Custom and Traditions

The Second Circuit, in an unpublishedopinion, has adopted the “stormwarnings” doctrine in a reinsurancedispute. AXA Versicherung AJ v. NewHampshire Ins. Co., 391 Fed. Appx. 25,2010 WL 3292927 (2d Cir. (N.Y.) 2010)(unpublished). Generally speaking, the“storm warning” doctrine creates aduty on the part of a reinsurer toinquire into circumstances when itreceives “storm warnings” that it isbeing defrauded. The statute oflimitations begins to run at the timethe duty arises. In AXA Versicherung AJv. New Hampshire Ins. Co., 2010 WL3292927 (2d Cir. (N.Y.) 2010)(unpublished), the Second Circuitfound that reinsurance facilitymembers’ allegations sounded in fraudand thus were not subject toarbitration. It also held the parties’fraudulent inducement claims weretime-barred and that, under New Yorklaw, the period of limitations began torun when the insurance facilitymember was placed on inquiry noticethat it was being operated in a mannerthat directly contradicted its ownexpectations. The Second Circuit foundthat “storm warnings” of fraud or

largely unresolved in manyjurisdictions. Finally, even if the hurdlesto applying the statute of limitationsare otherwise overcome, there aremultiple considerations to address indetermining whether the statute oflimitations acts as a bar to theparticular claim. The answer normallywill depend on various facts, as well asthe nuances of the particular state’slaw.

II. The Venerable History ofReinsurance vs. Applyingthe Statutes of Limita-tions Defenses to Rein-surance Contracts

Statutes of limitations generally werenot raised as defenses to reinsurancecontracts by virtue of the unique andspecial nature of reinsurance, its longhistory of “gentility,” and the bedrockconcepts of “utmost good faith” thatgovern reinsurance relationships.8Courts and reinsurance expertsrecognized that the reinsurer andreinsured were “partners,” who owedeach other a duty of utmost good faith.Importantly, the parties in areinsurance relationship must treateach other with “utmost good faith.”Commercial Union Ins. Co. v. SevenProvinces Ins. Co., Ltd., 217 F.3d 33, 43 (1stCir. 2000), cert. den. 531 U.S. 1146 (2001).This duty of extreme good faith arisesout of “the traditional mores of theindustry” under which reinsurance isseen as “an honorable engagement.”Transport Ins. Co. v. TIG Ins. Co., 202 Cal.App. 4th 984, 136 Cal. Rptr. 3d 315 (Cal.App. 2012).

A. Some Courts Have Declaredthat Statute of LimitationsDefenses May Now Be “FairGame” in Reinsurance Dis-putes Pending in Courts

The United States Court of Appeals forthe Second Circuit Court in ContinentalCasualty Company v. StrongholdInsurance Company, Ltd., 77 F.3d 16 (2dCir. 1996) applied New York’s statute oflimitations to a reinsurance disputepending before a court and held thatthe statute had begun to run only after

a reinsured reported the losses to itsreinsurers and the reinsurers haddenied the claims. Although there didnot appear to be a great deal ofdiscussion and/or argument in theappellate briefing regarding thefundamental question of whetherstatutes of limitations even apply toreinsurance contracts, the SecondCircuit acknowledged that its rulingdeparted from the historical view thatstatutes of limitations had not beenapplied to reinsurance disputes. 9Specifically, it noted that:

Because custom and usagehave established a gentilityand unity of interest betweenthe reinsured and its reinsurer,cf. Sumitomo Marine & Fire Ins.Co. v. Cologne Reins, Co., 76N.Y.2d 295, 298, 552 N.Y.2d 891,892, 552 N.E.2d 139, 140 (1990)(reinsurance is “a field in whichdifferences have often beensettled by handshakes andumpires”), a generation ago, wedoubt that the defendantswould even have consideredasserting a statute oflimitations defense. (“Defensesbased on available periods oflimitation usually have notbeen taken by insurers in theLondon market, and someparticipants in the market feelthat it is a custom not to assertthem.”) With the collapse ofprominent British reinsurers,and the financial distress ofLloyd’s of London, times mayhave changed. . . . (citationsomitted). As Francois Villonsighed: Où sont les neigesd’antan? (“Where are thesnows of yesteryear?”).

Id. at 22.

In Stronghold, it was also recognizedthat “[a]lthough it has been said thatthe relationship between a reinsuredand its reinsurer is not technically afiduciary one. . . centuries of historyhave treated both as allies, rather thanadversaries” and, accordingly,“[d]efenses based on available periodsof limitations usually have not beentaken by insurers in the London market,and some participants in the market

1 7 P A G E


Although there is aswelling of cases

from some courtsapplying the statute

of limitations toreinsurance contract

disputes, the issuehas not been

resolved in mostjurisdictions.10

Moreover, manyreinsurance disputesare still resolved byprivate arbitrationsand, as discussedbelow, numerous

courts have declaredthat a particularstate’s statute of

limitations appliesonly to court actions

and not to privatearbitrations.

misrepresentation by a cedent may triggerthe running of the statute of limitationsand that the reinsurance facility memberwas “confronted with clear storm warningsin August of 1998, as well as additionalfacts in 2000 ‘such as to suggest. . . theprobability that [it] had been defrauded.’”Id. at *3 (citations omitted). Theunpublished decision arguably sheds little,if any, light on whether a statute oflimitations will be applied in the context ofa reinsurance arbitration. Yet, the court’sembrace of the “storm warning” doctrine inthe context of a reinsurance dispute maysignify the further judicial expansion ofstrict legal principles into reinsurancerelationships.

Although there is a swelling of cases fromsome courts applying the statute oflimitations to reinsurance contract disputes,the issue has not been resolved in mostjurisdictions.10 Moreover, many reinsurancedisputes are still resolved by privatearbitrations and, as discussed below,numerous courts have declared that aparticular state’s statute of limitationsapplies only to court actions and not toprivate arbitrations.

III. A Majority Rule HasEmerged That Statutes ofLimitations Apply Only toCourt Actions and Not Private Arbitrations

The fact that some courts now deem thestatute of limitations defense as “fair game”in court actions does not resolve or evenaddress the issue of whether statutes oflimitations apply to private reinsurancearbitrations. In fact, numerous courts acrossthe country hold that statutes of limitationsapply only to court proceedings and do notapply to private arbitration. Reinsurancetreatises note that it is “unusual” for areinsurer to even assert the statute oflimitation in a reinsurance arbitration.Eugene Wollan, Handbook on ReinsuranceLaw, § 105 (2003). An ARIAS U.S. Quarterlyarticle explained that “a specific jurisdiction’sstatute of limitations is almost alwaysinapplicable” in the context of privatereinsurance arbitrations and stated:

The reinsurance legal world doesnot operate this way – in fairness, itusually does not need to. Statutesof limitations are largely

unimportant because the vastmajority of reinsurance disputes areresolved through private arbitration.In this setting, a specificjurisdiction’s statute of limitations isalmost always inapplicable.

Thomas E. Klemm, Statute of LimitationsIssues and Reinsurance Disputes – TheOverlooked Potential for a Problem, ARIAS•U.S.Quarterly (2008).

There are several arguments to support theposition that statutes of limitations do notand should not apply to private arbitrations,including that: (1) numerous courts hold thatstatutes of limitations apply only to courtactions and not to private arbitrations; (2)arbitration is a consensual and privatecontractual resolution process in whichparties are free to arbitrate any disputes -“including old ones”; (3) “honorableengagement” clauses found in reinsurancecontracts free arbitrators from followingstrict legal rules such as the statute oflimitations; and (4) the doctrine of utmostgood faith mandates that the parties treateach other with a heightened duty.

Of course, the arguments in favor forextending statute of limitations to thearbitration setting include some of thosesame reasons that support the argumentthat statute of limitations should apply incourts, including preventing parties fromhaving to address stale claims, avoiding therisk of witness memories fading anddocuments (proof) no longer being available,and discouraging parties from sitting ontheir rights. Moreover, even if a party issuccessful in convincing an arbitration panelthat the strict rules of a statute of limitationsdoes not apply in an arbitration, thearbitrators are most likely free to apply thedoctrine of laches if the facts of the case sowarrant. In addition, there are othersignificant and relevant timeliness issuesbeyond the strict application of a noticestatute of limitation including, for example,late notice.

A. Numerous Courts around the Country Have Held thatStatutes of Limitations Do Not Apply to Arbitration Matters

Numerous courts across the country haveheld that statutes of limitation apply onlyto court “actions” or lawsuits and do notapply to bar any claims asserted in

P A G E 1 8


In addition, anarbitrationproceeding generallyis regarded to be inthe nature of anequity proceeding.In manyjurisdictions,statutes oflimitations only applyto actions in law.Statutes oflimitations havetraditionally appliedto actions in law,but not toproceedings inequity. Accordingly,statute of limitationsmay not apply toequity matters suchas arbitrations.

that in Florida, are worded so as to apply to“proceedings.” Until mid-last year, twoFlorida courts, including the District Courtof Appeal of Florida, found that the Floridastatute of limitations’ use of the word“proceeding” did not render it applicable toarbitrations. In the Spring of 2013, theSupreme Court of Florida reversed thatprecedent and, in a controversial opinion,held that the term “proceeding” as used inthe statutory provision was a broad term soas to encompass arbitrations. 126 So.3d 186(Fla. 2013). The Florida Court’s recentexpansive reading of the Florida statute oflimitations as to include arbitrations mayhave some additional impact. As suggestedby a Florida Bar Journal article, such aninterpretation opens a “Pandora’s Box.”Answer Brief of Respondents, 2012 WL6569452 at * 25 (2012) (citations omitted).For example, the state’s evidence code,which defines its reach to include “civilactions and all other proceedings pending”could arguably next be applicable to allarbitrations in the state. Id. at * 25 (citationsomitted).

Notably, some states such as New York,Delaware, and Georgia have a special statuteof limitations limiting the ability toarbitrate.12 After the 2010 Broom case,wherein the Washington Supreme Courtfound the statute of limitations did not applyto arbitrations, the Washington Legislatureamended the State’s Uniform Arbitration Actto allow the statute to apply to arbitralproceedings. R.C.W. § 7.04A.090 becameeffective July 28, 2013. The fact that somestate legislatures specifically reference“arbitration” as being within the scope of thestatute of limitation lends some support tothe argument that those states with statutesthat do not specifically reference arbitrationdid not intend to include arbitrations aswithin the scope of their respective statute.

In addition, an arbitration proceedinggenerally is regarded to be in the nature ofan equity proceeding. In many jurisdictions,statutes of limitations only apply to actionsin law. Statutes of limitations havetraditionally applied to actions in law, butnot to proceedings in equity. Accordingly,statute of limitations may not apply toequity matters such as arbitrations. See, e.g.,In re IMO Restated Recoverable Trust ofLawrence F. Conlin, 2014 WL 242655 at *3 (Del.Ch. Jan. 21, 2014)(“Because . . . claims soundin equity, the statute of limitations does nottechnically apply”).

arbitrations. See, e.g., Broom v. MorganStanley DW, Inc., 236 P.3d 182 (Wash. 2010)(holding that a private arbitration, unlike atraditional lawsuit in court, is not an“action” and the statute of limitations didnot bar claims in arbitration); AetnaCasualty and Surety Co. v. Dravo Corp., 1997WL 560134 (E.D. Pa. 1997) (affirmingarbitration award refusing to apply statuteof limitations in an arbitration context);Lewiston Firefighters Ass’n v. City ofLewiston, 354 A.2d 154, 167 (Me. 1976)(“arbitration is not an action at law andthe statute [of limitation] is not, thereforean automatic bar” to recovery); Tufaro v.Allstate, 2010 WL 2573529 (Conn. Super.May 14, 2010) (holding that arbitration wasnot a “legal action” against an insured andtherefore did not fall within scope ofstatute of limitations); Har-Mar, Inc. v.Thosen & Thorshov, Inc., 300 Minn. 149(Minn. 1974) (stating that a time bar isconfined to court actions, not toarbitrations); Clayton v. Unsworth, 188 Vt.432, 8 A.3d 1066, 1073 (Vt. 2010)(“[c]ertainly, parties are free to agree toarbitrate all kinds of disputes, including oldones.”); Morgan v. Carillon Investments, 109P.3d 82, 210 Ariz. 187 (2005) (“Statutes oflimitations apply to actions brought incourt. Arbitration agreed to by contract isnot an action brought in court.”); Skidmore,Owings & Merrill v. Connecticut General, 197A.2d 83 (Conn. 1963) (recognizing that anarbitration is not the bringing of an actionwithin the meaning of that phrase as usedin the statute of limitation); Son Shipping v.De Fosse & Tanghe, 199 F.2d 687 (2d Cir.1952) (finding that arbitration is not withinthe term “suit” as used in the statute oflimitation, and is instead the performanceof a contract providing for the resolutionof controversy without suit).

In NCR Corp. v. CBS Liquor Control (“NCR”), thecourt affirmed the arbitrator’s refusal toapply a statute of limitation in an arbitra-tion, finding that the arbitrator’s decision didnot amount to manifest disregard of thelaw.11 The court explained that: “the effect ofa statute of limitations is to bar an action atlaw, not arbitration.” NCR, 874 F.Supp. 168, 172(S.D. Ohio Nov. 16, 1993).

Courts do not speak with one voice on thisissue, however, as noted in the recentdecision from the Supreme Court ofFlorida. Raymond James Financial Services,Inc. v. Phillips, 126 So.3d 186 (Fla. 2013).Some states’ statutes of limitations, like

1 9 P A G E


decisions without basing themon established principles of lawor making written findings tosupport the arbitrator’sconclusions; and providingvirtually no right of appeal inthe case of error in thearbitrator’s decision.

Id. at * 8 (citations omitted).

C. Honorable EngagementClauses Free Arbitratorsfrom Applying StrictLegal Rules

Those seeking to avoid the statute oflimitations defense may also argue that“honorable engagement” clauseseffectively free arbitrators from applyinga statute of limitations. Reinsurancecontracts typically contain honorableengagement clauses which mayarguably support the position thatstatutes of limitations are not to beapplied in private arbitrations.Honorable Engagement and/orHonorable Undertaking clauses mayvary as to the particular verbiage usedyet they typically relieve arbitrationpanels of “judicial formalities,” such that“strict rules of law” will not need to beadhered to so that arbitration panels arefree to act “reasonably” and inaccordance with industry standards.15

Generally speaking, courts have readhonorable engagement clausesgenerously, consistently finding thatarbitrators have wide discretion to orderremedies they deem appropriate. See,e.g., Banco de Seguros del Estado v. Mut.Marine Office, Inc., 344 F.3d 255, 261 (2dCir. 2003); St. Paul Fire & Marine Ins. Co. v.Eliahu Ins. Co. Ltd., 1997 WL 357989, at *7(S.D.N.Y. June 26, 1997) (stating thatarbitrators are “free to disregard NewYork substantive law.”). This languagefrees an arbitration panel “fromtechnical constraints under any body ofsubstantive or procedural law,authorizing it to do substantial justicein the circumstances, according to theprofessional judgment of its members.”Elwood v. One Beacon America Ins. Co., 28Mass. L. Rptr. 81, 2011 WL 679840 at *3(Mass. Super. Feb. 9, 2011).

Importantly, too, is the fact that oftentimes arbitration provisions call for a

B. Arbitration Is a Private Con-tractual Resolution Processand Parties Are Free to Arbi-trate All Manner of Disputes- including Old Ones

Another asserted rationale for notextending the reach of statutes oflimitations to private arbitrations is tofurther the goal of preservingarbitration as a private disputeresolution process, a process which is acreature of contract.13 Arbitration, as acontractual creature, can be conductedin a variety of ways under proceduresestablished by the parties themselves.For example, the parties to the contractcan agree on whether the arbitrationwill be held with one or morearbitrators, or under the formal rules ofa dispute resolution provider, such asARIAS, JAMS, FINRA or AAA.14 Theserules are usually contractually agreedupon by the parties and thiscontractual element distinguishesarbitration from litigation. Declining toapply statute of limitations furtherpreserves the private contractualelements of arbitration.

Under this argument, if arbitrationscontinue to be more akin to courtproceedings, it could ultimatelyeliminate the usefulness of and needfor private arbitration and effectivelyerase the desirable distinctionsbetween arbitration and litigation. Tothat point, parties to an arbitrationagreement choose to resolve disputesin a manner different from litigationfor a number of reasons. There aremany significant differences betweenprivate arbitration and litigation. Forexample, arbitrator selection differsdramatically from judicial selection.In fact, the parties to an arbitrationgenerally agree to a process wherethe rules of evidence are eithercompletely absent or are relaxed. Inaddition, appellate review ofarbitration rulings is often much morelimited, as is discovery. Thefundamental differences betweenarbitration and litigation are bydesign. Transforming arbitrations tomore courtroom-like proceedingspotentially could eliminate the needfor arbitrations altogether.

Some courts, in declining to bless the

applicability of the statute oflimitations to arbitrations, haverecognized and reaffirmed thecontractual elements that keeparbitrations distinct from court actions.For example, in Clayton v. Unsworth, 188Vt. 432, 8 A.3d 1066, 1073 (Vt. 2010) theSupreme Court of Vermont reaffirmedthat “absent an agreement to thecontrary, the relevant statute oflimitations, by its plain terms, does notapply.” After discussing thefundamental nature of arbitration, itpointed out that “[u]nlike the initiationof a civil suit, parties who participate inprivate arbitration must agree toarbitrate and it is their agreement thatprovides the source of the arbitrator’sauthority.” Stating the obvious, thecourt recognized that “[c]ertainly,parties are free to agree to arbitrate allkinds of disputes, including old ones.”Id. at 1073.

The Alabama Supreme Court recentlyreversed and remanded a court’s orderdenying a motion to vacate anarbitration award, finding that thearbitrator exceeded his powers inapplying a statute of limitations. Gowerv. Turquoise Properties Gulf, Inc., 2013 WL6703453 (Ala. Dec. 20, 2013). The courtnoted that:

Turquoise contends that Goweris seeking to impose theprocedural rigors of courtproceedings in arbitration,which “undermines a centralpurpose of arbitration, that isto resolve disputes betweenparties in a manner not subjectto the formalities and rules ofcourt proceedings.” Turquoiseis correct that the manyprocedural requirements ofcourt proceedings do not applyin the arbitration context.

[T]he due process safeguardsfound in judicial proceedingsare largely absent inarbitration. The reputedinformality and the relativespeediness of an arbitrationprocedure are achieved byseverely limiting discovery;imposing few evidentiary rules;giving the arbitrator almostunbridled discretion to make

P A G E 2 0


On the other hand,those seeking toutilize a statute oflimitations defensemay assert that, if areinsurance contracthas an expresschoice of lawprovision, thislanguage potentiallyundercuts theargument that the“honorableundertaking” clauses relieves the arbitrationpanel from strictlyfollowing the state’s law.

panel composed of arbitrators with presentor past industry experience, which mayprovide further support that statutes oflimitations do not apply. As a court inMassachusetts noted, the contractrequirement in the arbitration provision thatthe members of the arbitration panel be“executive officers of insurance companies”may suggest an intent that the panel applynorms in the insurance industry. Elwood v.One Beacon America Ins. Co., 2011 WL 679840at n. 8 (Mass. Super. Feb. 9, 2011).

D. Choice of Law Provisions in Arbi-tration Agreements Likely Do NotInclude the Procedural Rules,such as Statutes of Limitations

On the other hand, those seeking to utilize astatute of limitations defense may assertthat, if a reinsurance contract has an expresschoice of law provision, this languagepotentially undercuts the argument that the“honorable undertaking” clauses relieves thearbitration panel from strictly following thestate’s law. However, some courts hold thatexpress choice of law provisions do notencompass statute of limitations. FederalDeposit Ins. Corp. v. Petersen, 770 F.2d 141, 142-43 (10th Cir. 1985) (recognizing thatcontractual choice of law provisions do notencompass statute of limitations absentexpress statement of intent); Gluck v. UNIYSCorp., 960 F.2d 1168, 1179-80 (3rd Cr. 1992)(“Choice of law provisions in contracts do notapply statutes of limitations, unlessreference is express.”).

Courts hold that: “[c]hoice of law provisionsin contracts are generally understood toincorporate only substantive law, notprocedural law such as statutes oflimitation.” Gluck v. UNIYS Corp., 960 F.2d1168, 1179-80 (3rd Cir. 1992). Generallyspeaking, courts hold that statutes oflimitations are procedural provisions and notsubstantive. See, e.g., Westinghouse ElectricCorp. v. Worker’s Compensation Appeal Board,584 Pa. 411, 426, 883 A.2d 579, n. 11 (Pa. 2005)(holding statute of limitations are proceduraland extinguishes the remedy rather than thecause of action).

In Trenwick American Reinsurance Corp. v.Unionamerica Ins. Co., 2013 WL 3716384 (D.Conn. July 12, 2013), Trenwick sought to enjoinUnionamerica from pursuing an arbitrationdemand previously sent to Trenwick.Ultimately, the court found thatUnionamerica was entitled to pursuearbitration against Trenwick despite the fact

that the agreement contained a choice oflaw provision calling for the law of a statewith a statute of limitations relativearbitration. The court reasoned that:

The Supreme Court has held that achoice of law provision contained inan arbitration agreement, withoutmore, cannot impute a specificintent to exclude certain disputesfrom arbitration. See Mastrobuono v.Shearson Lehman Hutton, Inc., 514U.S. 52, 59 (1995) (“We think the bestway to harmonize the choice-of-lawprovision with the arbitrationprovision is to read ‘the laws of theState of New York’ to encompasssubstantive principles that New Yorkcourts would apply, but not toinclude special rules limiting theauthority of arbitrators. Thus, thechoice-of-law provision covers therights and duties of the parties,while the arbitration clause coversarbitration; neither sentenceintrudes upon the other.”)(emphasis added).

Id. at * 6.

E. “Who Decides Who Decides”Whether the Action Is Timely

Another area of some dispute in the courts isthe issue of whether the arbitrators or thecourts are to determine the timeliness of anarbitration demand. Many courts have heldthat an arbitration panel rather than a courtcan address the timeliness issue. See, e.g.,Merchants Mut. Ins. Co. v. American ArbitrationAss’n., 433 Pa. 250, 248 A.2d 842 (1969) (statingthat the issue of the applicability of thestatute of limitations came within thearbitrator’s purview). See Howsam v. DeanWitter Reynolds, Inc., 537 U.S. 79, 86, 123 S.Ct.580, 154 L.Ed. 2d 491 (2002) (holding thequestion of whether NASD limitations rulesbarred arbitration is a matter for thearbitrators to decide).

In contrast, New York Civil Practice Law andRules (§ 7502(b)) makes New York one of thefew state statutes stipulating that thresholdstatute of limitations issues are for a court todecide. See also Chambers v. Sun WestMortgage Company, Inc., 2014 WL 2211015 (S.D.Ohio May 28, 2014) (finding that it is forarbitrators to decide whether a claim is time-barred). Recently, a court in New York, In ReROM Reinsurance Management Company, Inc.v. Contintental Ins. Co., 2014 WL 92835 (N.Y.

2 1 P A G EA.D. 1 Dep’t March 11, 2014), concluded that,given the arbitration agreement’s choice oflaw provision calling for application of NewYork law, the timeliness issue was to bedecided by the court. See also, Central States,Southeast and Southwest Area Pension Fundv. Allega Concrete Corp., 2014 WL 99075 (N.D.Jan. 9, 2014) (holding that question ofwhether the arbitration request was timelywas for the court, rather than the arbitratorto decide). Previously, the Second Circuit inBechtel De Brasil Construcoes Ltda v. UEGAraucAria Ltda., 638 F.3d 150 (2d Cir. 2011),found that the district court had erred indeciding the statute of limitation issue. TheSecond Circuit determined that “theprovisions in question do not modify theparties’ fundamental and broadcommitment to arbitrate any disputerelating to the agreement.” Id. at 155(emphasis in original).

IV. ConclusionAs the trend continues for courts to resolvereinsurance disputes, litigants and partiesmay be tempted to further transformprivate arbitrations into a more courtroom-like experience complete with the statutesof limitations defense. Participants in theindustry should be mindful of erosion of thereinsurance industry’s honored traditionsand the potential ramifications of havingarbitrations mirror court proceedings.▼

2 Trenwick America Reinsurance Corp. v. IRC, Inc., 764F.Supp. 2d 274, 299 (D. Mass. 2011) (citations omitted).

3 That the reinsurance industry has generally been re-garded as unique is further evidenced by the fact thatseveral courts have entertained expert testimonyfrom individuals in the reinsurance industry regard-ing the traditional mores of the industry. See, e.g.,Commercial Union Ins. Co. v. Seven Provinces Ins. Co.,Ltd., 217 F.3d 33, 44 (1st Cir. 2000) (citations omitted)(considering extrinsic evidence from reinsurance ex-perts on trade usage and industry custom); Munoz v.PHH Corp., 2013 WL 2146925 (E.D. Cal. May 15, 2013)(considering expert testimony of reinsurance “indus-try standards”).

4 John J. McDonald, Jr. Reinsurance Arbitration 2001: WillThe New Ways Cripple The Arbitration Clause, 68 Def.Couns. J. 328, 329 (July 2001).

5 Republic Ins. Co. v. Banco DeSecuros Del Estado, 2013 WL3874027 at *6 n. 4 (N.D. Ill. July 26, 2013) (“Consistentwith the practice of some underwriters. . ., claimsagainst other quota share participants were settledwithout the invocation of the statute of limitations.”)(Citations omitted).

6 See Transport Insurance Company v. TIG Ins. Co., 202Cal. App. 4th 984, 136 Cal. Rptr.2d 315, 320 (Cal. App.2012) (“reinsurance has emerged from the shadows inthe last 20 years.”) (quotations omitted).

7 The Federal Arbitration Act (“FAA”) does not provide astatute of limitations under which a party must insti-tute an arbitration. 9 U.S.C. §12.

8 See, e.g., Transport Insurance Co. v. TIG Ins. Co., 202 Cal.

App. 4th 984, 991, 136 Cal. Rptr. 3d 315, 321 (Cal. App.2012) (citations omitted).

9 See Brief for Defendant-Appellants at 1995 WL 17203514(2d Cir. 1995); Brief of Plaintiff-Appellee, 1995 WL17203515; Reply Brief of Defendant-Appellants, 1995 WL17049722 (2d Cir. 1995); Reply Brief for Defendant-Ap-pellants, 1995 WL 17203516 (2d Cir. 1995).

10 Some courts simply address the statute of limitationswithout discussion of the threshold issue of whetherthey even apply to reinsurance contracts or the par-ties agree to the applicability of a particular state’sstatute. See, e.g., OneBeacon Ins. Co. v. Aviva Ins. Ltd.,2013 WL 2147958 at * 4 (E.D. Pa. May 17, 2013) (conclud-ing that certain ceded claims were time barredwherein the parties in the case had agreed that theapplicable statute of limitations was four years.)

11 NCR Corp. v. CBS Liquor Control, 874 F.Supp. 168 (S.D.Ohio 1993), partially modified on unrelated grounds,1993 WL 767119 (S.D. Ohio Dec. 24, 1993) (No. C-391-027,C-3-01-031), aff’d sub nom NCR Corp v. Sac-Co., 43 F.3d1076 (6th Cir. Ohio 1995), rehearing en banc denied,1995 U.S. App. LEXIS 3559 (6th Cir. Feb. 21, 1995), cert. de-nied sub nom. Sac-Co Inc. v. AT&T Global Info. SolutionsCo., 516 U.S. 906, 116 S. Ct. 272, 133 L. Ed. 2d 193 (1995).

12 Some statutes specifically apply statute of limitationsto arbitrations. See, e.g., N.Y. CPLR § 7502(b) (New York).

13 See, e.g., Answer Brief of Respondents, 2012 WL 6569452at * 27 (2012).

14 Id.15 See, e.g., B.D. Cooke & Partners Ltd. v. Certain Under-

writers at Lloyd’s, London, 606 F.Supp.2d 420 (S.D. N.Y.2009) (addressing arbitration clause stating: “[t]hearbitrators and umpire shall consider this Contractan honourable engagement rather than merely alegal obligation [and] they are relieved of all judicialformalities and may abstain from following the strictrule of law”); Global Reinsurance Corp. v. Argonaut Ins.Co., 634 F.Supp.2d 342 (S.D. N.Y. 2009) (contracts werenot strict legal documents, as the panel was givensubstantial freedom to interpret them as honorableundertakings).


As the trendcontinues for courts

to resolvereinsurance

disputes, litigantsand parties may betempted to furthertransform privatearbitrations into a

more courtroom-likeexperience completewith the statutes oflimitations defense.Participants in theindustry should bemindful of erosionof the reinsuranceindustry’s honoredtraditions and the

potentialramifications of

having arbitrationsmirror courtproceedings.

In each issue of the Quarterly, this columnlists employment changes, re-locations, andaddress changes, both postal and email thathave come in during the last quarter, so thatmembers can adjust their addressdirectories.

Although we will continue to highlightchanges and moves here, remember that theARIAS•U.S. Membership Directory on thewebsite is updated frequently; you canalways find there the most currentinformation that we have on file. If you seeany errors in that directory, please notify usat [email protected].

Do not forget to notify us when your addresschanges. Also, if we missed your changebelow, please let us know, so that it can beincluded in the next Quarterly.

Recent Moves and AnnouncementsThere has been very little membermovement this quarter.

Jay Deiner has moved to a new location. Heis now at Burt & Scheld FacultativeCorporation, 802 Sterthaus Drive, Suite C,Ormond Beach, FL 32174, phone: 386-677-4453 ext. 3001, fax: 386-673-1630, cell: 386-383-0459, email [email protected] .

Tom Stillman has a new address, specifically,55 East Erie, 4805, Chicago, Il. 60611, phone312 961-4897, email [email protected] .

As of September 1, 2014, Jonathan Rosen hasrelocated his office to 1133 Broadway, Suite600, New York, NY 10010. All of his othercontact details remain the same.

Susan Mack has returned to her home inbeautiful Ponte Vedra Beach to resume full-time practice as an umpire, arbitrator, andmediator. She can be reached at 1510 BirkdaleLane, Ponte Vedra Beach, FL 32082. Phone forPortia Consulting Services LLC is 904-280-7779, cell remains 904-477-6461.

members on

the moveBack to the

Breakers!

www.thebreakers.com

THE BREAKERSPALM BEACH, FLORIDA

May 6-8, 2015 Save the Date…

ARIAS•US intersperses Spring Conference visits to

other venues to avoid having The Breakers become too

routine, but the record of good experiences there com-

pels us to return. Block out the dates of May 6-8, 2015

to avoid planning anything else. Many members have

said we should always have ARIAS•U.S. Spring Con-

ferences at The Breakers, but a change of scenery helps

us to keep our Breakers experiences fresh. Plan to be

there for our 2015 return!

P A G E 2 2


2 3 P A G E


feature

Robert M.Hall

Mr. Hall is an attorney, a former lawfirm partner, a former insurance andreinsurance executive and acts as aninsurance consultant as well as an ar-bitrator and mediator of insurance andreinsurance disputes and as an expertwitness.

Sunset clauses wereinvented during thehard market of the

mid-1980’s as ameans of reducing

the reinsurer’s longtail exposure. In

essence, theyterminate the

reinsurer’s liabilityfor claims which are

not reported by aspecific date.

Robert M. Hall

I. IntroductionSunset clauses were invented during thehard market of the mid-1980’s as a meansof reducing the reinsurer’s long tailexposure. In essence, they terminate thereinsurer’s liability for claims which are notreported by a specific date. It has alwaysbeen an open question as to what type ofreport is necessary to preserve the cedent’srights to claim reinsurance recoverables i.e. abrief bordereau approach or the full detailrequired by the loss notice provision in thetreaty. Thirty years hence, there is some caselaw which suggests an answer to thisquestion.

II. Contract LanguageThe case law on point is a series of decisionsrelated to a retrocessional contract betweenMunich Reinsurance America, Inc.(“Munich”) as cedent and American NationalInsurance Company (“American National”)as the assuming carrier. The sunset clause,which was contained within a commutationprovision, provided:

Seven years after the expiry of thisAgreement, the Company shalladvise the Reinsurer of all claims forsaid annual period, not finallysettled which are likely to result in aclaim under this Agreement. Noliability shall attach hereunder forany claim or claims not reported tothe Reinsurer within this seven yearperiod.i

The loss notice provision provided:

A. The Company agrees to advisethe Reinsurer promptly of allclaims coming under thisAgreement on being advised by[the policy issuing company], andto furnish the Reinsurer withsuch particulars and estimates

regarding same as are in thepossession of the Company. Anomission on the part of theCompany to advise the Reinsurerof any loss shall not be held toprejudice the Company’s rightshereunder.

B. In addition, the following categoriesof claims shall be reported to theReinsurer immediately, regardless ofany questions of liability of theCompany or coverage under thisAgreement:

1. Any accident reserved at 50% of thereinsured attachment point;

2. Any accident involving brain injury;

3. Any accident resulting in burns over25% or more of the body; or

4. Any spinal cord injury.ii

III. Sunset Clause Claim Reporting

The sunset clause reporting by Munichconsisted of a bordereau-like, 24 pagespreadsheet that listed all workerscompensation claims reported to Munich bythe policy issuing insurer during the courseof the program including claims during yearsthat American National did not participatein the cover. The spreadsheet, as of August 8,2008, provided 21 categories of informationfor each claim including named insured, dateof loss and reported and paid loss amountsand ALAE. There was no legend on thespreadsheet to identify codes used andMunich’s fact witnesses could not identify allof the codes.iii

IV. The DecisionA. Round One

In general, this was a suit by Munich againstAmerican National for reinsurancerecoverables. American National asserted adefense of late notice and counterclaimedfor rescission based on violation of the

Loss Notice and Sunset Clauses in Reinsurance Treaties

obligation of utmost good faith, amongother things. Round one, Munich Reins.Amer., Inc. v. American National Ins. Co., 2012U.S. Lexis 140334 (D.N.J.) consisted of rulingson motions for partial summary judgment.

On the issue of loss notice, the court ruledthat providing notice in accordance with theloss notice clause in § II, supra, is not acondition precedent to the obligation to payclaims.iv However, the court did notaddress the sunset clause issue.

B. Round Two

Munich Reins. Amer., Inc. v. AmericanNational Ins. Co., 2013 U.S. Dist. Lexis 4435(D.N.J.) was a reconsideration of the earlierdecision. The court agreed to reconsider theloss notice issue on the basis that thesunset clause issue had not beensufficiently highlighted in the briefs. Thecourt found that the sunset clause was acondition precedent to the obligation to payclaims commenting: “On its face, the sunsetprovision here is straightforward: it preventsMunich from reporting claims inperpetuam, by excluding from coveragethose claims not noticed with seven yearsfollowing the expiration of eachretrocessional agreement.”v The court ruled:

In sum, because [the sunset clause]operates as a condition precedent,it makes clear that [AmericanNational] is obligated to indemnifyonly those claims that were noticedwithin seven years following theexpiration of the relevantretrocessional agreement. . . . Withrespect to the 2001 agreement,Munich was obligated to notify[American National] of all claims bythe sunset deadline of December21, 2008, Munich contends that itprovided notice of those claims viathe August 8, 2008 spreadsheet.vi

The court found that there were issues ofmaterial fact as to the sufficiency of thenotice provided by the spreadsheet thussetting the stage for round three.

C. Round Three

The court cited to testimony from a claimsperson at American National that when shereceived the spreadsheet, she informed hercounterpart at Munich that the spreadsheetwas not sufficient notice and that anindividual notice on each claim inaccordance with the loss notice provision

quoted above in § II. Munich Reins. Amer., Inc.v. American National Ins. Co., 2014 U.S. Dist.Lexis 25078 *94-5. Apparently, this was notforthcoming.

The court considered expert testimony that:(a) loss bordereaux are a common form oftreaty loss reports but that (b) the sunsetclause was part of a commutation provisionand that more robust information isnecessary to determine which claims mightpenetrate the reinsured layer and to supportthe calculations necessary for acommutation. The court held that thespreadsheet did not provide adequate noticecharacterizing the issue as follows:

I find that the August Spreadsheetdid not include sufficientinformation that would haveallowed [the MGA for AmericanNational] to make a determinationon the likelihood that a claimarising under the [relevant treaty]would breach [American National’s]retrocessional layer. vii

V. CommentsThis series of cases suggests an answer tothe question of whether or not a bordereauclaim report will suffice for sunset clausepurposes. However, the decision is notablein that it did not subject the claim reportingfor purposes of the sunset clause to therequirements of the general notice of lossrequirements described in § II, supra. Perhapssubsequent case law will determine whatlevel and/or type of claim reporting will besufficient for sunset clause purposes.▼

ENDNOTESMr. Hall is an attorney, a former law firm partner, a for-mer insurance and reinsurance executive and acts as aninsurance consultant as well as an arbitrator and media-tor of insurance and reinsurance disputes and as an ex-pert witness. He is a veteran of over 160 arbitrationpanels and is certified as an arbitrator and umpire byARIAS•U.S. The views expressed in this article are thoseof the author and do not reflect the views of his clients.Copyright by the author 2014. Mr. Hall has authored over100 articles and they may be viewed at his website:robertmhall.com.

i Munich Reins. Amer., Inc. v. American National Ins. Co.,2013 U.S. Dist. Lexis 44345 *46 (D.N.J).

ii Id. at *4.iii Munich Reins. Amer., Inc. v. American National Ins. Co.,

2014 U.S. Dist. Lexis 25078 *90-2 (D.N.J). iv 2012 U.S. Dist. Lexis 140334 *41.v 2013 U.S. Dist. Lexis 44345 *51.vi Id. at 59-60. vii 2014 U.S. Dist. Lexis 25078 *99 – 101.

This series of casessuggests an answerto the question ofwhether or not abordereau claimreport will sufficefor sunset clausepurposes. However,the decision isnotable in that it didnot subject theclaim reporting forpurposes of thesunset clause to therequirements of thegeneral notice ofloss requirementsdescribed in § II,supra. Perhapssubsequent case lawwill determine whatlevel and/or type ofclaim reporting willbe sufficient forsunset clausepurposes.

P A G E 2 4


2 5 P A G E

feature

JonathanSacher

Jonathan Sacher, Partner and Head ofDispute Resolution and David Parker,Senior Associate, Berwin Leighton Pais-ner LLP, London

The recentpublication of the

ARIAS UK Fast TrackArbitration Rules

(“AFTAR”)1 introducesan arbitration

procedure thatoffers a fast and

cost efficientsolution to disputes

in England.

DavidParker

Jonathan SacherDavid Parker

The recent publication of the ARIAS UK FastTrack Arbitration Rules (“AFTAR”)1 introducesan arbitration procedure that offers a fastand cost efficient solution to disputes inEngland.

Will AFTAR be a success or will it get stuck inthe Pit Lane?

Developments in English ArbitrationIf asked, reinsurers would probably cite therelative speed and the consequent costsavings as reasons for choosing arbitrationover other dispute resolution forums,particularly resolution in court. In fact, theneed for speed is enshrined in the EnglishArbitration Act 1996 (“the Act”) whichgoverns arbitration in England. Section 1 ofthe Act states that “… the object ofarbitration is to obtain the fair resolution ofdisputes […] without unnecessary delay orexpense…”2

This, together with the opportunity toappoint arbitrators with experience ofmarket customs and practice and England’sfinely tuned and developed body ofreinsurance law, leads to a large number ofreinsurance contracts containing Englisharbitration clauses.

Increasingly, the arbitration process inEngland has moved away from its roots. Inmany cases, arbitrators and disputingparties alike adopt the very procedures usedin court that arbitration was originallyenvisaged to avoid. Perhaps the moststriking example of this is thedisclosure/discovery process. Despite theparties having wide discretion to agree onthe scope and extent to which documentswill be exchanged, arbitrators often adoptthe English court approach. This usuallyresults in parties having to produce asignificant number of documents, usually

beyond those upon which they rely.

Coupled with the preference to havearbitration tribunals which consist of threearbitrators (each party appointing anarbitrator with a third arbitrator/chairmanappointed by the party appointedarbitrators), all leads to longer and expensivearbitrations.

AFTAR – Key ProvisionsAFTAR was drafted by an experienced panelmade up of those in the insurance andreinsurance market in London and lawyerswith many years of practice.

The key features of AFTAR are:

1. Arbitration will be before a sole arbitrator;

2. Unless the arbitrator deems an oralhearing is required, the case will proceedon documentary evidence alone. TheGuide to AFTAR published on the ARIAS UKwebsite states that : “The presumption isthat oral argument and evidence will be theexception, not the rule”;

3. Directions will be given at a preliminarymeeting within seven days of thearbitrator being appointed;

4. The directions will aim to set out a processwhich enables the arbitration to beconcluded in four months (from theappointment of the arbitrator); and

5. On legal fees (“costs”), the guidance to therules provides: “ARIAS recommend thatwhen convening the preliminary meetingthe Arbitrator requests each Party toestimate the nature and extent of the coststhey anticipate incurring to the conclusionof the arbitration. The Arbitrator should alsoconsider whether to place an overalllimitation on costs that may be recoveredby a successful party. The Arbitrator maythen take these estimates into accountwhen making an award relating to costs….”

However, the general principle on costsremains as set out in the Act and thearbitrator “shall award costs on the general

Arbitration Enters the Fast Lane in England


principle that costs should follow the eventexcept where it appears to the (Arbitrator)that in the circumstances this is notappropriate in relation to the whole or partof the costs.”3

The AFTAR draftsmen set out four situationswhere they consider that parties mightconsider agreeing to adopt AFTAR (this isonly guidance), namely where disputes areof:

(1) limited scope;

(2) particular urgency;

(3) modest value; and/or

(4) a “one-off” kind.4

How Will AFTAR Work in Practice?The whole process is to be completed in fourmonths from the date of the arbitrator’sappointment which means that the partieswill need to proactively manage their diariesto ensure this happens. Arbitrators will alsohave to be proactive in dealing with anyattempts to delay matters by either party.

The Way Ahead?The success of AFTAR depends, ultimately, onhow willing the insurance and reinsuranceindustry is to embrace the new procedure.In some ways, AFTAR is a hostage to fortuneand its success or otherwise depends uponthe frequency with which disputes areconsidered suitable for resolution under thenew procedure arise. Those with a disputewhich might result in legal fees becomingdisproportionate are certainly likely towelcome the option of adopting the newfast track procedure.

For centuries, oral argument and witnessevidence have been pillars of the disputeresolution process and perhaps the biggestchallenge that AFTAR will face is how partiestake to a procedure where this will be theexception rather than the norm.

Whilst, as yet, there is little empiricalevidence on the extent to which AFTAR is arebeing adopted, the new rules should help tokeep London on the front row of the grid forreinsurance arbitrations.▼

1 AFTAR came into effect on 3 October 20132 Section 1(a) of the Act3 Introduction to the Guide to AFTAR4 Section 6(2) of the Act

For centuries, oralargument andwitness evidencehave been pillars ofthe disputeresolution processand perhaps thebiggest challengethat AFTAR will faceis how parties taketo a procedurewhere this will bethe exception ratherthan the norm.

P A G E 2 6


BRING AN EXTRA SUIT TO THE2014 FALL CONFERENCE!

Again, this year, take a look in your closet before the Fall Conference.See if there isn’t a suit or two in there that are in fine condition, but

that you haven’t worn for a year because you have moved on to newerones. There are people who could use those suits, and any accessories

that you aren’t using, to help them land jobs and change their lives.

At the Fall Conference, ARIAS•U.S. will be collecting men's andwomen's suits and accessories that are in very good condition fordistribution to Career Gear (men) and Dress for Success (women).

These are national non-profit organizations that promote the economicindependence of disadvantaged men and women by providing not only

a suit, but also a network of support and the necessary careerdevelopment tools to help them become successful, self-sufficient

members of their communities.

Full details will be sent to members in late September.

2 7 P A G E

case notescorner

Ronald S.Gass

Mr. Gass is an ARIAS-U.S. Certified Um-pire and Arbitrator. He can be reachedvia e-mail at [email protected] orthrough his Web site atwww.gassco.com. Copyright © 2014 by The Gass Com-pany, Inc. All rights reserved.

If the parties areunaware of the

arbitrator’s illnessduring the

proceeding, couldthis constitute a

denial offundamental fairness

under § 10 of theFederal Arbitration

Act (“FAA”) such thatthe subsequentaward may be

vacated?

Ronald S. Gass

Cases addressing the perplexing question ofwhat happens when an arbitrator dies orresigns due to a serious illness during anarbitration have been featured in severalprevious Case Notes Corner columns. Gass,Ronald S., Case Notes Corner: WhenArbitrators Resign: Second Circuit Affirms NewRule that a Substitute Arbitrator Should beAppointed Instead of Starting ArbitrationAnew, 17 ARIAS•U.S. Quarterly 25 (3rd Quarter2010); Gass, Ronald S., Case Notes Corner:Federal Court Rules that Party-Arbitrator’sResignation Due to Illness and SubsequentRecovery Does Not Require Arbitration toStart Anew, 16 ARIAS•U.S. Quarterly 26 (3rdQuarter 2009); Gass, Ronald S., Case NotesCorner: When an Arbitrator Dies: FederalCourt Rules That the Arbitration Must “BeginFresh,” 11 ARIAS•U.S. Quarterly 30 (4thQuarter 2004). However, if an arbitrator issuffering from a serious medical conditionduring the hearing and decision-makingprocess but does not voluntarily disclose itor resign, what are the implications? If theparties are unaware of the arbitrator’sillness during the proceeding, could thisconstitute a denial of fundamental fairnessunder § 10 of the Federal Arbitration Act(“FAA”) such that the subsequent awardmay be vacated? Just such a scenario arosein the context of a recent maritimearbitration governed by the Carriage ofGoods by Sea Act (“COGSA”), ch. 229, 49 Stat.1207 (1936) (codified as a note to 46 U.S.C. §30701), and subject to a vacatur motionbefore a New York federal district courtapplying both the FAA and the Conventionon Recognition and Enforcement of ForeignArbitral Awards, 9 U.S.C. § 202 (2014).

In this case, a dispute arose between the

manufacturer/shipper of a chemical used inmaking plastics and the tanker companychartered to transport 3,500 metric tons of itfrom Houston to South Korea. The chemicalwas tested by independent surveyors toensure compliance with the manufacturer’sspecifications both before it was loaded ontothe tanker and when it was unloaded priorto being pumped into on-shore storagetanks at the tanker’s destination. In bothinstances, the chemical showed no signs ofcontamination. However, when the chemicalwas tested again after six weeks in storage,it was found to be contaminated. Theshipper alleged that the contaminationoccurred during the tanker’s voyage as theresult of being in contact with the residue ofanother chemical left in the ship’s storagetanks from a prior charter. The tankercompany denied this and contended thatthe contamination occurred after the shipperaccepted delivery in South Korea and while itwas being stored on shore. Because of thecontamination and the coincidental suddendrop in the market price for this chemical,the shipper was forced to sell it at aconsiderable loss and then sued the tankercompany for its contract damages.

The charter party agreement required thedispute to be resolved by the Society ofMaritime Arbitrators (“SMA”) under itsrules. In April 2011, the two party-appointed arbitrators selected an umpire.Ten hearings were subsequently held, andin August 2013, the panel issued a 2-1decision in favor of the tanker company.The majority found that the shipper hadnot shown by a preponderance of theevidence that the alleged contaminationtook place while the cargo was in thetanker company’s custody nor had it proventhat it was entitled to damages in light ofthe “plunging market” for the chemical

Is an Arbitrator “Corrupt” or Guiltyof “Misconduct” for Failing to Disclose a Serious Illness Warranting Vacatur of an Award?


P A G E 2 8


This case spotlights the difficultiesinherent in dealing with arbitrators whobecome seriously ill during the course ofan arbitration and do not disclose theirmedical condition or voluntarily resign.If the illness obviously impairs theircompetency to serve on the panel andthey do not disclose it or resign, thiscase suggests that a tactful recordshould be made documenting theparty’s concerns for use in laterproceedings. However, if the impact ofthe arbitrator’s illness is undetectable,the arbitrator does not voluntarilydisclose the medical condition, and thepanel renders an adverse award, thelosing party will need a lot more thanjust reliance on FAA § 10(a)(2) or (3)grounds to vacate it.3▼

Zurich American Insurance Co. v. TeamTankers A.S., No. 13cv8404, 2014 U.S. Dist.LEXIS 89260 (S.D.N.Y. June 30, 2014).

2 Society of Marine Arbitrators, Inc., Maritime Arbi-tration Rules § 9 (“Disclosure by Arbitrators ofDisqualifying Circumstances”) (rule in effectprior to Oct. 23, 2013), available athttp://www.smany.org/doc1a-arbitrationRules.html. As the court observed, thisSMA rule does not require an arbitrator to dis-close a serious medical condition during the pen-dency of an arbitration. Compare this rule withthe ARIAS•U.S. Practical Guide § 2.4 (“DisclosureStatements”) and ARIAS•U.S. Code of Conduct,Canon IV, which also focus primarily on the dis-closure of “real, potential, or apparent” conflictsand any interests in or relationships with the par-ties, counsel, and co-panelists. Note, however,that Canon IV, Comment 5 does offer somehealth-related guidance: “After the Panel hasbeen accepted by the parties, an arbitratorshould recognize the consequences to the par-ties and the process of a decision to withdrawand should not withdraw at his or her own insti-gation absent good reason, such as serious per-sonal or family health issues.” [Emphasis added.]However, like the SMA rule, nothing in theseARIAS•U.S. guidelines compels disclosure of, orresignation due to, a “personal health issue.”

3 In this vacatur proceeding, the court awarded theprevailing tanker company its attorney’s fees andexpenses as provided for in the charter partyagreement; however, in doing so, the judge tookthe occasion to remind the shipper of his pre-motion conference warning that the court be-lieved a vacatur motion based on the umpire’sfailure to disclose his medical condition was“baseless.” The judge’s initial and blunt reactionto the shipper’s “corruption” and “misconduct”FAA arguments signals the inherent weakness ofsuch a strategy and perhaps the likelihood thatcosts or sanctions against the moving party willbe imposed even in the absence of a contractual“costs to the prevailing party” provision.

upon its arrival in South Korea.Sometime in 2012 during thependency of this arbitration, theumpire was diagnosed with aninoperable brain tumor, but he neverinformed the parties about it.However, in April 2013, he did notifyother counsel in a separate arbitrationproceeding about his illness, and heultimately resigned from that otherpanel. In January 2014, the umpiredied.

Challenging the panel’s award, theshipper (and its insurer) filed a motionto vacate in New York federal districtcourt based on two theories: (1) theumpire’s failure to disclose his medicalcondition constituted “corruption”under FAA § 10(a)(2) and “misconduct”under § 10(a)(3); and (2) manifestdisregard of the law. The shipper’sfirst argument was the mostintriguing. Citing the SMA’s maritimearbitration rules, it contended that theumpire was obligated to “disclose anycircumstance which could impair [his]ability to render an unbiased awardbased solely upon an objective andimpartial consideration of theevidence presented to the Panel.”2

Referencing a cancer medical journal,the shipper argued that malignantprimary brain tumors cause profoundchanges in cognitive function; hence,the SMA’s rule required the umpire todisclose that he suffered from such atumor. Rejecting this argument, thecourt held that violations ofarbitration rules or ethics codes arenot grounds for vacating anarbitration award under the FAA asthey lack the force of law, and neitherthey nor the parties’ contract arecapable of expanding a court’sauthority to vacate an award beyondthe specific and limited groundsprovided in the statute. As the courtsuccinctly put it: “It is highlyquestionable whether the SMA rulesrequire disclosure of a medicalcondition that might affect cognitionbut does not impair objectivity orcause bias or impartiality.”

Changing tack, the shipper next arguedthat the umpire was “corrupt” forbilling his time while allowing theparties to labor under the mistakenimpression that “none of his

subjectivities could interfere with hisobjective consideration of the evidence”and that, given his illness, the umpire“changed from a sound condition to anunsound condition,” i.e., he became“corrupt.” Rejecting this semanticargument, the court observed thatwhile cancer may cause the“corruption” of healthy tissue in a brain,no one would regard that human beingas a “corrupt” person in the senseintended by language of § 10(a)(2),“where there was . . . corruption in thearbitrators, or either of them.”

As for the § 10(a)(3) “misconduct”allegation, the court found noindication that the shipper was actuallyprejudiced by the umpire’s failure todisclose his illness. Over the course ofthe ten hearing days, the shipperconceded that it saw nothing thatmade it question the umpire’scompetence. Moreover, the tankercompany’s party-appointed arbitratorevidently reached the same conclusionas the allegedly impaired umpire. Theshipper’s after-the-fact contention thatif it had known about the umpire’simpairment, it would have asked him toresign still did not demonstrate that itsuffered actual prejudice, particularlywhen under the SMA’s rules there wasno basis for compelling him to do so. Insum, the court concluded that theshipper’s motion “seeks to transform apersonal tragedy into a second chancefor parties disappointed with theoutcome of their arbitration” – a resultrunning afoul of the twin goals ofarbitration, settling disputes efficientlyand avoiding long and expensivelitigation.

Without delving into the technicalitiesof the parties’ maritime charter partycontract and related COGSAarguments here, suffice it to say thatthe court was unimpressed with theshipper’s manifest disregard of the lawtheory, even though that FAA doctrineremains viable in the Second Circuit. Itheld that the panel majority did notmisapply COGSA and that therecertainly was a colorable justificationfor the outcome reached. In short, theshipper had not met its “extraordinary”burden of showing that the majoritymanifestly disregarded the law.

S

ARIAS•U.S EDUCATIONAL SEMINARSNOVEMBER 12, 2014

Two Concurrent Programs: Choose between (1) a fresh look at how to effectively manage basic issues of an arbitration and

(2) an Umpire Master Class course that will challenge attendees on difficult issues that umpires encounter.

Remember that renewal of your status as an ARIAS•U.S. Certified Arbitrator requires completion of an ARIAS•U.S. continuing educationseminar every two years. You can find specific information about this requirement in the Certification Procedures section under theArbitrators/Umpires menu of the ARIAS•U.S. website.

Whether you need to complete an educational seminar, or are just interested in improving your craft as an arbitrator, consider attendingone of these seminars, both of which will be offered in New York City during the afternoon of November 12 – the day before the start of the2014 Fall Conference.

The Programs“Dealing with Discovery, Ex Parte, and Experts” – Basic Elements of Arbitration

This seminar for newer arbitrators will address frequently contested issues and provide a framework for how arbitrators can deal with them ef-fectively and efficiently. The session will be split up into three segments. First, the panel will provide practical tips and examples for addressingdiscovery issues during the organizational meeting. Next, there will be a presentation about recent case law developments on ex parte commu-nications, a discussion of traps for the unwary, and a discussion among all participants about how to set rules around ex parte communicationto avoid potential pitfalls. Finally, the panel will address the use of experts in reinsurance arbitrations and provide perspectives of parties,lawyers and arbitrators, followed by a lively discussion among all participants about ways to deal with competing approaches to experts.

“Umpire Master Class – Guidance for Experienced Arbitrators”

This seminar will focus on the following three topics.

• Dissent in the final award. What to allow, what to discourage, how to manage it. Deciding who the audience is. Is the award written toexplain to the loser? How should it be written? It ties to the need for reasons…in deliberations if not in the award. Giving reasons providesinsight into the decision.

• The new disclosure requirements in the ARIAS questionnaire. Why were they added? How are umpire candidates handling them?What does it mean for record keeping and documents retention? How do experienced arbitrators define some of the terms that are not de-fined? These are a few of the questions to be answered.

• Confidentiality. Is it within the Panel’s inherent authority to order it over the objection of one party? Does it affect arbitrator behavior?How does it relate to the question whether a reasoned award is desirable or necessary? What does it mean for subsequent arbitrations?

SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | S

New York Hilton MidtownCheck-in: East Corridor, 2nd FloorLunch starting at 12:00 NoonMeetings begin at 1:00 p.m. and end at 5:00 p.m.

Complete seminar information will be announced by emailand on the website calendar in August.

Registration will begin on the ARIAS•U.S. website at 11:00 a.m. EDT on September 15.

The fee of $450 includes meeting costs, lunch, and mid-afternoonrefreshment break. Information about staying at the Hilton is onthe opposite page.

CLE Credit will be provided.

Location and Schedule Cost and Registration

SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | S

Do you know someone who is interested inlearning more about ARIAS•U.S.? If so, pass on this letter of invitation and membership application.

An Invitation…The rapid growth of ARIAS•U.S. (AIDAReinsurance & Insurance Arbitration Society) sinceits incorporation in May of 1994 testifies to theincreasing importance of the Society in the field ofreinsurance arbitration. Training and certification ofarbitrators through educational seminars,conferences, and publications has assistedARIAS•U.S. in achieving its goals of increasing thepool of qualified arbitrators and improving thearbitration process. As of August 2014,ARIAS•U.S. was comprised of 295 individualmembers and 105 corporate memberships, totaling805 individual members and designated corporaterepresentatives, of which 205 are certified asarbitrators, 56 are certified as umpires, and 35 arequalified as mediators.

The Society offers its Umpire AppointmentProcedure, based on a unique software programcreated specifically for ARIAS, that randomlygenerates the names of umpire candidates from thelist of ARIAS•U.S. Certified Umpires. Theprocedure is free to members and non-members. It is described in detail in the Selecting an Umpiresection of the website.

Similarly, a random, neutral selection of all threepanel members from a list of ARIAS CertifiedArbitrators is offered at no cost. Details of theprocedure are available on the website underNeutral Selection Procedure.

The website offers the "Arbitrator, Umpire, andMediator Search" feature that searches the extensivebackground data of our Certified Arbitrators. Thesearch results list is linked to their profiles,containing details about their work experience andcurrent contact information.

Over the years, ARIAS•U.S. has held conferencesand workshops in Chicago, Marco Island, SanFrancisco, San Diego, Philadelphia, Baltimore,Washington, Boston, Miami, New York, PuertoRico, Palm Beach, Boca Raton, Las Vegas, Marinadel Rey, Amelia Island, Key Biscayne, andBermuda. The Society has brought together manyof the leading professionals in the field to supportits educational and training objectives.

For many years, the Society published theARIAS•U.S. Membership Directory, which wasprovided to members. In 2009, it was broughtonline, where it is available for members only.ARIAS also publishes the ARIAS•U.S. PracticalGuide to Reinsurance Arbitration Procedure, TheARIAS•U.S. Rules for the Resolution of U.S.Insurance and Reinsurance Disputes, and theARIAS•U.S. Code of Conduct. These onlinepublications … as well as the ARIAS•U.S. Quarterlyjournal, special member rates for conferences, andaccess to educational seminars and intensivearbitrator training workshops, are among thebenefits of membership in ARIAS.

If you are not already a member, we invite you toenjoy all ARIAS•U.S. benefits by joining. Complete information is in the Membership area ofthe website; an application form and an onlineapplication system are also available there. If youhave any questions regarding membership, pleasecontact Bill Yankus, Executive Director, [email protected] or 914-966-3180, ext. 116.

Join us and become an active part of ARIAS•U.S.,the leading trade association for the insurance andreinsurance arbitration industry.

Sincerely,

Jeffrey M. Rubin Eric S. Kobrick

Chairman President

MembershipApplication

AIDA Reinsurance & Insurance Arbitration SocietyPO BOX 9001MOUNT VERNON, NY 10552

Online membership application is available

with a credit card through “Membership”

at www.arias-us.org.

Complete information about

ARIAS•U.S. is available at

www.arias-us.org.

Included are current

biographies of all

certified arbitrators,

a current calendar of

upcoming events,

online membership

application, and

online registration

for meetings.

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________________________________________________Signature of Individual or Corporate Member Applicant

P.O. Box 9001Mt. Vernon, NY 10552

Board of DirectorsChairman

Jeffrey M. RubinOdyssey Reinsurance Company300 First Stamford PlaceStamford, CT [email protected]

President Eric S. Kobrick

American International Group, Inc.80 Pine Street, 35th FloorNew York, NY [email protected]

Vice PresidentElizabeth A. Mullins

Swiss Re America Holding Corporation175 King StreetArmonk, NY [email protected]

Vice PresidentJames I. Rubin

Butler Rubin Saltarelli & Boyd LLPThree First National Plaza70 West Madison StreetChicago, IL [email protected]

Ann L. FieldZurich Insurance Group1400 American LaneSchaumburg, IL [email protected]

Michael A. FrantzMunich Re America 555 College Road EastPrinceton, NJ [email protected]

Deirdre G. Johnson Crowell & Moring LLP1001 Pennsylvania Avenue NWWashington, D.C. [email protected]

Mark T. Megaw ACE Group Holdings436 Walnut StreetPhiladelphia, PA [email protected]

John M. Nonna Squire Patton Boggs (US) LLP1185 Avenue of the AmericasNew York, NY 10036Phone: [email protected]

Chairman EmeritusT. Richard Kennedy

Directors EmeritiCharles M. FossMark S. GurevitzCharles W. Havens IIIRonald A. Jacks*Susan E. MackRobert M. ManginoEdmond F. Rondepierre*Daniel E. Schmidt, IV

*deceased

AdministrationTreasurer

Peter A. Gentile7976 Cranes Pointe WayWest Palm Beach, FL. [email protected]

Executive Director/ CorporateSecretary

William H. YankusSenior Vice PresidentCINN Worldwide, Inc.P.O. Box 9001Mt. Vernon, NY 10552914-966-3180 ext. [email protected]

ARIAS-U.S. 3rd Quarter 2014 Quarterly

Documents

Transcript of ARIAS-U.S. 3rd Quarter 2014 Quarterly