Opinion
Civ. No. 04-74 (JNE/JGL)
February 18, 2004
Stephen Stublarec, Esq., and Gerald Sherman, Esq., Latham Watkins, and Jerry Snider, Esq., Faegre Benson LLP, appeared for Petitioner ReliaStar Life Insurance Company
David Kroeger, Esq., Jenner Block, LLP and John Sheran, Esq., Leonard, Street and Deinard, PA, appeared for Respondent The Canada Life Assurance Company
Larry Zelle, Esq., and Adam Gislason, Esq., Zelle, Hofmann, Voelbel, Mason Gette, LLP, appeared for Respondent Certain Underwriters upon Syndicates 861 and 1209 at Lloyd's, London
John McDonald, Esq., Meagher Geer, P.L.L.P., appeared for Respondents Clarica Life Insurance Company and The Manufacturers Life Insurance Company
ORDER
This case is before the Court on ReliaStar Life Insurance Company's Motion for a Stay of Arbitration Proceedings Pending the Court's Resolution of ReliaStar's Petition to Compel Arbitration. ReliaStar is moving on an expedited basis because, absent a stay from the Court, it will be contractually obligated to act by February 19, 2004. The Court heard oral argument on February 17, 2004, and informed the parties that the Court would issue its Order within 24 hours. For the reasons set forth below, the Court denies the motion.
I. BACKGROUND
On December 24, 2003, ReliaStar sent letters to eight reinsurance companies demanding arbitration against them. ReliaStar's demand letter instructed the reinsurers to appoint an arbitrator within thirty days. ReliaStar states that all eight reinsurers were party to the same Catastrophe Excess of Loss Reinsurance Contract (Contract), with individualized Interests and Liabilities Agreements. If the parties fail to abide by the thirty-day window for arbitrator appointment, the Contract contains an adverse appointment process. Of the eight reinsurers, two have settled with ReliaStar, two have agreed with ReliaStar to a standstill regarding the arbitrator-appointment deadline, and four named arbitrators on behalf of their individual companies. According to the Contract's prescribed time frame, ReliaStar must name its arbitrator within thirty days from receipt of respondents' named arbitrators or it will face the adverse appointment process.II. DISCUSSION
According to ReliaStar, this arbitral process should be a single, consolidated arbitration. ReliaStar contends that the four reinsurers who have named arbitrators failed to comply with ReliaStar's demand because only one arbitrator, not four, should have been named to represent the four companies. ReliaStar asserts that it will be prejudiced if it is required to name its arbitrator. Indeed, ReliaStar contends that complying with the thirty-day appointment process will "result in unauthorized arbitrations, waste the parties resources and time, create a duplication of efforts, and risk inconsistent rulings."
Neither side argues that the merits of the dispute should be determined at this time. However, in order to fairly address ReliaStar's claim that a Court-ordered stay is necessary to enforce its contractual rights, a preliminary evaluation of the contract is necessary. Respondents have directed tie Court's attention to Article 13, Article 19, and the Interest and Liabilities Agreement in support of their assertion that a consolidated arbitration is not specified by the Contract.
Article 13 clearly talks about the reinsurers as a defined group, and procedures for reaching an agreement between ReliaStar and the reinsurers are specifically delineated:
The Company [ReliaStar] shall advise the Reinsurers of any outstanding occurrences following the terms of its reinsurance of its original reinsured during that contract year which have not been finally settled and which may cause a claim under this Contract and no liability shall attach hereunder for any claim arising from occurrences not reported to the Reinsurers within the appropriate time frame.
The Company or the Reinsurers may then, or any time thereafter, request that Reinsurers liability with respect to one or more of such unsettled claims be commuted. Upon such request, the Reinsurers and the Company shall review such a claim and shall attempt to reach a settlement by mutual agreement. If the Reinsurers and the Company cannot reach a settlement by mutual agreement, then the Reinsurers and the Company shall mutually appoint an independent actuary (F.S.A./F.C.A.S. or A.S.A./A.C.A.S.) who shall investigate, determine and capitalize the present value of any such unsettled claims. In the event the Reinsurers and the Company cannot reach an agreement on an independent actuary, each party shall appoint an actuary. The two chosen actuaries shall then select a third actuary. If either party refuses or neglects to appoint an actuary within 30 days of their appointment, each of them shall name three individuals, of whom the other shall decline two, and the decision shall me made by drawing lots.
In contrast, the Interests and Liabilities Agreement and Article 19 address the individualized interests of each Reinsurer. The Interest and Liabilities agreement provides in part that "[t]he interests and liabilities of the Subscribing Reinsurer shall not be joint with those of such other subscribing reinsurers and in no event shall the Subscribing Reinsurer participate in the interests and liabilities of such other subscribing reinsurers." Article 19 contains the Contract's arbitration clause:
As a precedent to any right of action hereunder, if any dispute shall arise between the parties to this Contract with reference to the interpretation of this Contract or their rights with respect to any transaction involved, whether such dispute arises before or after termination of this Contract, such dispute, upon the written request of either party shall be submitted to three arbitrators, one to be chosen by each party, and the third by the two so chosen. If either party refuses or neglects to appoint an arbitrator within thirty days after the receipt of written notice from the other party requesting it to do so, the requesting party may appoint two arbitrators. If the two arbitrators fail to agree in the selection of a third arbitrator within thirty days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be made by drawing lots. All arbitrators shall be active or retired disinterested officers of insurance or reinsurance companies or Underwriters at Lloyd's, London, not under the control of either party to this Contract.
. . .
The decision in writing of any two arbitrators, when filed with the parties hereto, shall be final and binding on both parties. . . . Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the expense of the third arbitrator and of the arbitration.
When Article 19 is read in conjunction with the Interests and Liabilities Agreement, Article 19 provides an arbitral procedure for resolving disputes between parties to the Contract while not running afoul of the interests and liabilities agreement.
ReliaStar asserts that the parties do not dispute with that the disagreements to be arbitrated are common claims stemming from the events of September 11, 2002. Assuming the existence of common claims in this instance does not mean that the arbitration provision in Article 19 should be interpreted to fit the facts of this particular dispute. In short, the Court is not so persuaded by ReliaStar's interpretation of the Contract as calling for a single arbitration such that a stay need be ordered. At oral argument ReliaStar indicated that the real prejudice it was facing was a strategic one having to deal with the other parties knowing ReliaStar's choice of arbitrator. In this regard the Court notes that ReliaStar is seeking a stay when it now knows at least four of the reinsurers' arbitrators.
Finally, Respondent Certain Underwriters upon Syndicates 861 and 1209 at Lloyd's, London (Lloyd's) asserts that time limits are important parts of the Contract that can be enforced, but not altered by the Court. In support, Lloyd's relies on Baesler v. Continental Grain Co., 900 F.2d 1193, 1195 (8th Cir. 1990) ("[A] court may only determine whether a written arbitration agreement exists, and if it does, enforce it in accordance with its terms."), Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 221 (1985) ("The preeminent concern of Congress in passing the [Federal Arbitration] Act was to enforce private agreements . . . and that concern requires that we rigorously enforce agreements to arbitrate."), Diemaco. v. Colt's Manufacturing Co., 11 F. Supp.2d 228, 233 (D. Conn. 1998) ("Courts are not at liberty to alter an arbitration agreement."), and City of Aurora v. Classic Syndicate, Inc., 946 F. Supp. 601, 604 (N.D. Ill. 1996) ("Where arbitration agreements contain specific time limitations, courts will adhere strictly to those limitations absent a compelling reason to do otherwise."). None of these cases present facts precisely as we have here; nevertheless, the Court is reluctant to expand ReliaStar's contractual thirty-day window.
III. CONCLUSION
After reviewing the record and arguments presented, the Court is not persuaded that a stay is necessary to avoid unauthorized arbitrations, waste of the parties' time and resources, duplication of efforts, or inconsistent rulings. Accordingly, IT IS ORDERED THAT:
1. ReliaStar's motion to stay arbitration proceedings [Docket No. 2] is DENIED.