Century Indemnity v. Underwriters, Lloyd's, London
Citation | 584 F.3d 513 |
Decision Date | 15 October 2009 |
Docket Number | No. 08-2924.,08-2924. |
Parties | CENTURY INDEMNITY COMPANY, Appellant v. CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, SUBSCRIBING TO RETROCESSIONAL AGREEMENT NOS. 950548, 950549, and 950646. |
Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Carter G. Phillips (argued), William M. Sneed, Melanie Jo Triebel, Sidley Austin LLP, Chicago, IL, Lawrence Nathanson, Siegal & Park, Mount Laurel, NJ, for Appellant.
Mark J. Hill, Mark J. Hill & Associates, Philadelphia, PA, John M. Wulfers, Hugh S. Balsam, Susan P. Jordan (argued), Locke Lord Bissell & Liddell LLP, Chicago, IL, for Appellee.
Before McKEE, HARDIMAN and GREENBERG, Circuit Judges.
This matter comes on before this Court on an appeal by appellant Century Indemnity Company ("Century") from two orders of the District Court, one entered May 18, 2006, granting a motion of appellee Certain Underwriters at Lloyd's, London ("Lloyd's") to compel arbitration of a disputed claim based on a set of reinsurance-of-reinsurance agreements, and one entered May 30, 2008, denying Century's motion to vacate an arbitration panel's subsequent award in favor of Lloyd's. Inasmuch as we conclude both that there was a valid agreement to arbitrate between Century and Lloyd's and that the dispute in this case falls within the scope of that agreement, we hold that the District Court properly compelled the parties to submit their dispute to arbitration. Moreover, because we reject Century's argument that the arbitration panel deprived it of a fair hearing when the panel excluded certain evidence that Century proposed to introduce, we also hold that the District Court properly denied Century's motion to vacate the arbitration panel's award.
Insurance, the shifting of risk through contract, may involve multiple layers of shifts. To start the process, insurance companies issue policies under which the insurer assumes certain risks in exchange for premiums that the policyholders pay. The insurance companies then may pass on all or part of the risk through reinsurance agreements, in which another insurance company provides insurance of all or part of the first insurer's risk by accepting such risk in exchange for a percentage of the original premium.1 Reinsurance agreements covering classes or lines of business, rather than a particular policy, are called reinsurance treaties. Subsequently, reinsurers may seek to spread their exposure to risk through further reinsurance. The reinsurance of reinsurance is called a retrocession, and the reinsurers of reinsurers—that is, reinsurers who assume retrocession risk through retrocessional agreements—are called retrocessionaires.2
This case involves a dispute between Century, the original reinsurer, and Lloyd's, the retrocessionaire, arising from three retrocessional agreements under which Lloyd's agreed to reinsure certain reinsurance treaties that Century's predecessor had formed with Argonaut Insurance Company ("Argonaut"), another insurer that was the original insurer of the insured in the policies underlying the litigation.
The material facts are not in dispute. Century's predecessor, the Insurance Company of North America ("INA"), reinsured Argonaut according to the terms of three excess-of-loss treaties (the "reinsurance treaties"). Argonaut had issued insurance policies to its insureds, Western Asbestos Company and Western MacArthur Company (together "Western"), to cover losses from Western's distribution of asbestos products. INA, Century's predecessor, then entered into three retrocessional agreements with Lloyd's (the "retrocessional agreements"), pursuant to which Lloyd's agreed to pay 90% of the losses in return for 90% of the premiums that accrued to Century's predecessor under the corresponding reinsurance treaties.3
In the late 1970s, Western began receiving injury claims from persons allegedly exposed to asbestos who sought to hold Western responsible for injuries traceable to their exposure. Western looked to Argonaut for coverage on the insurance policies that Argonaut had issued and that Western believed protected it against those claims, but Argonaut resisted Western's efforts, a position that led to declaratory judgment litigation between Western and Argonaut over the scope of the policies' coverage.
Argonaut then sought reimbursement for its litigation expenses from Century under its reinsurance treaties with Century. Century concluded that the reinsurance treaties entitled Argonaut to recover those expenses and, accordingly, in 2001 made payments to Argonaut pursuant to the reinsurance treaties.
After paying Argonaut, Century turned to Lloyd's, its retrocessionaire, for Lloyd's's 90% share of Century's payout to Argonaut pursuant to the retrocessional agreements between Century and Lloyd's. Lloyd's refused to pay the approximately $2.2 million that Century sought, contending that it did not owe the reimbursement because Century should not have paid Argonaut for the declaratory judgment litigation expenses.
This lawsuit followed. Century sued Lloyd's in the Court of Common Pleas in Philadelphia County to recover the amount that Century alleged that Lloyd's owed it under the retrocessional agreements.4 Lloyd's answered the complaint filed in state court, asserting that the retrocessional agreements incorporated the reinsurance treaties' arbitration clauses and that therefore the dispute should be arbitrated, and then Lloyd's removed the case to the District Court pursuant to 9 U.S.C. § 205.5 In the District Court, Century moved to remand the case to the state court and Lloyd's moved to compel arbitration.
Of course, it was not immediately obvious that Lloyd's was...
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