ARIAS•U.S.

Long Range Planning Committee Status Report to

Membership

2009 Spring Conference May 7, 2009

Palm Beach, Florida

Update on Ethics Work

• Review of ethics survey results

• Areas of concentration for LRPC

• Review of LRPC’s initial work

• Next steps

1

Survey Results

• 178 members responded

• 67 percent of those responding replied affirmatively that the perception within the insurance/reinsurance industry is one of confidence that arbitrators and umpires observe high standards of ethical conduct

• 43 percent, however, responded that they personally have less than full confidence that arbitrators and umpires observe high standards of ethics

and 59 percent are aware of or have observed conduct by arbitrators or umpires that they would consider unethical behavior

2

Survey Results (cont’d)

• Write-in responses identified ethical issues in each aspect of the process. The highest number of responses were concentrated in the following areas:– Overt advocacy and bias by party-appointed

arbitrators– Offering and accepting appointments,

particularly during pendency of proceedings– Disclosure of potential conflicts– Abuse/mis-use of ex parte communications

3

Survey Results (cont’d)

• 61 percent of those responding felt that ARIAS should develop a questionnaire for party arbitrators

• 79 percent felt that ARIAS should establish an ethics advisory committee

• Finally, 60 percent felt that ARIAS should establish an enforcement mechanism, where ethical breaches can be reported and 73 percent of those responding felt that ARIAS should impose sanctions when a violation is found

4

Areas of Concentration for LRPC• Informed by the survey results, the LRPC

recommended nine (9) ethics-related proposals to the ARIAS Board

1. Establish Ethics Advisory Committee

2. Prepare guidelines on acceptable versus unacceptable advocacy on behalf of party by party arbitrator

3. Develop questionnaire for party appointed arbitrators

4. Expand guidelines on whether to accept appointment as arbitrator or umpire

5

Areas of Concentration (cont’d)

5. Develop guidelines for panel disclosures at organizational meeting

6. Define bounds of discussion between party and/or counsel and a potential arbitrator candidate

7. Clarification of scope of ex parte communication (when permitted)

8. Appointments during pendency of a proceeding

9. Considerations of when an arbitrator should resign.

6

• We decided to focus on the first four of these initially:

1. Establish Ethics Advisory Committee

2. Prepare guidelines on acceptable versus unacceptable advocacy on behalf of party by party arbitrator

3. Develop questionnaire for party appointed Arbitrators

4. Expand guidelines on whether to accept appointment as arbitrator or umpire

7

Initiative:

Establishment of an Ethics Advisory

Committee (“EAC”)(Mary Lopatto, Tom Forsyth)

8

Establishment of an Ethics Advisory Committee (“EAC”)

• Approximately 79% of the ARIAS Members responding to the recent Ethics Survey indicated that a committee should be established to offer guidance and advice on ethical issues.

Accordingly, after careful consideration and debate, the Long Range Planning Committee proposes the following for consideration:

9

Structure of the EAC

The Board should appoint 10-12 individuals representing the ARIAS constituencies, i.e., insurers, reinsurers, arbitrators, and law firms.

An ARIAS Director should also be appointed to the EAC to serve as a liaison to ARIAS’s leadership.

One individual should be appointed by the Board as EAC Chair.

10

Structure of the EAC

The EAC members should retain their positions for two years after appointment to facilitate the launch of this initiative.

Thereafter, the EAC members should be appointed (or re-appointed) for one-year terms following the annual ARIAS Membership Meeting.

11

Solicitation and Provision of Advice

The EAC would be charged with considering questions and requests for advice from Members and for providing counsel and advice to Members.

It is recommended that this advisory service be provided on a confidential basis and that the identity of the Member(s) requesting the advice or involved in the ethical issue presented not be disclosed beyond the EAC and perhaps not to all EAC Members.

12

Confidentiality

The EAC would be charged with developing procedures for the submission of confidential requests for advisory services, their consideration by the EAC, and the issuance of appropriate advice.

The EAC should develop procedures to ensure that the EAC members handling or ruling on a specific ethical issue do not have a conflict of interest with that issue or that they properly recuse themselves.

13

Confidentiality

Due regard should be given to whether the request for advice should be made only on a hypothetical basis.

Also, consideration should be made of whether the EAC should issue its advice in writing or orally only, and whether confidential records of the requests, the EAC’s discussions, and the EAC response should be maintained and by whom.

14

Confidentiality Due regard should be given to concern that an ethics request submitted to the EAC concerning an arbitration subject to a confidentiality agreement would breach that agreement.

The EAC should consider whether this concern is valid even if ethics requests are submitted on a hypothetical basis.

Also, the EAC should consider recommending revisions to the ARIAS Confidentiality Agreement form to provide that requests to the EAC solely for the solicitation of confidential ethical advice would not breach the confidentiality agreement.

15

Caveat

In all written and electronic communications, the EAC should consider including the following caveat:

The advice provided herein is intended to serve as informal guidance from the volunteer professionals serving on the Ethics Advisory Committee. This advice does not represent the views of ARIAS as an organization or of any of its Members.

16

Column in the ARIAS Quarterly

As the work of the EAC progresses, and should it find that certain ethical issues it has been asked to address might be helpful to the Membership as a whole, the EAC is urged to publish generalized, hypothetical advisory opinions in the ARIAS Quarterly or such other vehicles appropriate to further the educational goals of the organization.

17

Initiative:

Guidelines on Acceptable Versus Unacceptable Advocacy by a Party

Arbitrator(Gene Wollan, Paul Dassenko, Mark Gurevitz)

18

1. The arbitrator should never imply special power or influence in the outcome to the appointing party– The arbitrator should never purport to guarantee

a particular result– The Arbitrator should never purport to carry

special weight with the umpire

19

2. The arbitrator should not attempt to duplicate or supplement the role of the attorneys

– The arbitrator should not engage in adversarial cross-examination style questioning of a witness during the testimonial phase of the hearing

– The arbitrator can and should pursue gaps or inconsistencies in the witness’ testimony by way of clarification and comparison to documents

– The arbitrator should not raise a wholly new point except in rare circumstances

– The arbitrator, in all circumstances, must behave in a manner designed to create confidence in the process

20

3. The arbitrator, in deliberations, must openly consider and actively discuss all plausible arguments presented– The arbitrator may present all arguments in favor of the

appointing party to insure full discussion and consideration of the case presented

– The arbitrator must give a fair hearing and actively discuss opposing arguments

– The arbitrator must distinguish his/her contrary views with support from the record

4. The arbitrator must be guided only by the evidence in voting, notwithstanding the duty to present all plausible arguments raised by the party who appointed him/her

21

Initiative:

Party-Appointed Arbitrator Disclosure Form(Ann Field, Dan FitzMaurice)

22

In the interest of full and fair disclosure, please supply the following information: 1. Name: __________________________________________________ Company: _______________________________________________ Address: ________________________________________________ Telephone: _______________________________________________ Fax: ____________________________________________________ Cell Phone: ______________________________________________ Email: __________________________________________________ Home Address: ___________________________________________ Telephone: _______________________________________________ 2. EMPLOYMENT HISTORY Please list all former employers or attach a resume or CV 3. PARTIES AND SUBJECT MATTER OF THE ARBITRATION This arbitration involves [Counsel inserts a neutral description of the dispute between the parties which includes a short description of the type and/or name of the reinsurance contract] ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

23

4. COUNSEL REPRESENTATION Counsel for Petitioner, ________________, is ________________________ Counsel for Respondent, ______________, is _________________________ 5. OTHER ARBITRATOR AND UMPIRE You have been appointed by: __________________ (Petitioner/Respondent - choose one) The opposing party has appointed: ____________________________ The umpire or neutral is: ____________________________________ 6. ARBITRATION EXPERIENCE Have you previously participated as party-appointed arbitrator, umpire, and/or expert witness in connection with insurance and/or reinsurance disputes? [ ] Yes [ ] No If yes, please set forth: Number of appearances as an umpire: ___ Number of appearances as a party-appointed arbitrator: ____ Number of appearances as an expert witness: _____

24

7. EXPERIENCES WITH THE PARTIES, COUNSEL, AND OTHER ARBITRATORS Please identify number of current and past appointments as a party-appointed arbitrator, expert witness and/or umpire with the parties,, counsel, or other arbitrators identified above:

Party-Appointed Arbitrator

Umpire Expert Witness

Current Past Current Past Current Past Petitioner Petitioner's Counsel Respondent Respondent'sCounse Other Party-Arb. Umpire

Overlap in Experience: Did two or more of the parties, counsel, or other arbitrators in the present arbitration also participate in any of the arbitrations that you identified in the chart above?

[ ] Yes [ ] No

If yes, for each other arbitration in which there was such an overlap, please identify which of the parties, counsel, and/or other arbitrators were involved, the capacity they served and that you served, and whether the other proceeding has concluded and, if so, when.

________________________________________________________________________

________________________________________________________________________

25

8. INCOME ASSOCIATED WITH THE PARTIES AND COUNSEL Regarding the party-appointed arbitrator and expert witness appointments listed above, please state whether any appointment or appointments for one party or counsel accounted for 25% or more of the income you received or receive in any calendar year (including the present year-to-date)? If yes, please identify the party and the applicable year or years: ______________ ____________________________________________________________________________ 9. THE REINSURANCE CONTRACT Have you had any prior involvement in the contract(s) involved? [ ] Yes [ ] No If yes,

is there a potential that you could be called as a fact witness? [ ] Yes [ ] No is there a potential that your decision-making would be focused upon

evidence that is not available to other members of the tribunal and/or you would not be open to consider evidence ? [ ] Yes [ ] No

please explain in what capacity and the frequency: ________________________________________________

26

10. EXPERIENCE WITH THE SUBJECT MATTER OF THE CURRENT DISPUTE. Have you previously served as a party-appointed arbitrator, umpire, expert witness, counsel, or consultant in any arbitration, litigation, or other matter concerning or relating to the subject matter of this arbitration, as described in item 3 above? [ ] Yes [ ] No If Yes, please explain your role and, to the extent permissible, the nature of your other engagement.: _______________________________________________ 11. FINANCIAL INTEREST Do you have any financial interest in the result of this arbitration? [ ] Yes [ ] No To your knowledge, do any companies with which you are presently affiliated or in which you presently have a financial interest have an ongoing business relationship with any of the parties and/or affiliates listed above? [ ] Yes [ ] No If yes, please explain. ________________________________________________________________________ ________________________________________________________________________

27

12. OTHER RELATIONSHIPS AND OVERALL ABILITY TO SERVE IN THIS MATTER Do you have a close social and/or business relationship with any of the lawyers, panel members, party representatives, and/or potential witnesses? [ ] Yes [ ] No If yes, please explain: ____ ______________________________________________________________ If yes, do you believe that you can render a just and unbiased decision in this arbitration? [ ] Yes [ ] No Considering all appointments and disclosures listed above as well as any personal or professional relationships that you may have with counsel and/or the party representatives, do you believe that you can render a just decision in this arbitration? [ ] Yes [ ] No Signature: _______________________ Date: _________________________

28

Initiative:

Guidelines on Whether to Accept Appointment as Arbitrator or Umpire

(Mark Megaw, Eric Kobrick)

29

• Canons I and II require, among other things, that arbitrators/umpires serve only in those matters in which they can render a just decision

• It is not only important that arbitrators/umpires can render a just decision but that the parties have complete confidence that the arbitrators/umpires can do so

• The parties’ confidence in the arbitrators’/ umpires’ ability to render a just decision is influenced by many factors, which arbitrators/umpires should consider prior to accepting an appointment

30

• The following are principal factors that arbitrators/ umpires should consider in deciding whether to accept an assignment:– whether they have any financial interest in

matter– whether they currently serve as an umpire on a

panel featuring the company that has asked to appoint them in a non-neutral role

– whether they serve as an expert witness for a party and they are being asked to serve as an umpire or non neutral role

31

– whether they have a fixed view on the central issue(s) involved, such that they are not open to consider evidence

– whether they have involvement in the contracts involved

o such that they could reasonably be called as a fact witness

o Such that their decision-making would be focused upon evidence that is not available to other members of the tribunal

o Such that they are not open to consider evidence

32

– whether they have previously served as a lawyer for either party on issues that are closely associated with the issue on the merits of this matter

– whether they have, or previously had any significant professional, familial or personal relationships with any of the lawyers, factual witnesses or expert witnesses involved such that it would prompt a reasonable adversary to doubt whether they could render a just decision

33

– where they have had many appointments, whether a significant majority of those appointments comes from the company involved

– where they have had many appointments, where a significant percentage of their revenue earned as a panel member or expert witness comes from the company involved

– where they have had many appointments, where a significant percentage of their revenue earned as a panel member or expert witness comes from the law firm involved

34

Next Steps

• Work in progress• Post drafts on ARIAS website• Period for member feedback• Finalize initial four recommendations and submit to

Board for approval and implementation• Begin similar process for remaining initiatives

35