814 F.2d 1324 (9th Cir. 1987), 86-5740, Pacific Reinsurance Management Corp. v. Ohio Reinsurance Corp.

Docket Nº:86-5740.
Citation:814 F.2d 1324
Party Name:PACIFIC REINSURANCE MANAGEMENT CORPORATION and Mission Insurance Company, Petitioners-Appellees, v. OHIO REINSURANCE CORPORATION; Walton Insurance Ltd.; Abeille-Paix Reassurances; Hamburg International Reinsurance Co.; Hassneh Insurance Co. of Israel, Ltd.; and Seguros America, S.A., Respondents-Appellants.
Case Date:April 10, 1987
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1324

814 F.2d 1324 (9th Cir. 1987)

PACIFIC REINSURANCE MANAGEMENT CORPORATION and Mission

Insurance Company, Petitioners-Appellees,

v.

OHIO REINSURANCE CORPORATION; Walton Insurance Ltd.;

Abeille-Paix Reassurances; Hamburg International

Reinsurance Co.; Hassneh Insurance Co. of Israel, Ltd.;

and Seguros America, S.A., Respondents-Appellants.

No. 86-5740.

United States Court of Appeals, Ninth Circuit

April 10, 1987

        Argued and Submitted Jan. 8, 1987.

Page 1325

        Elliot M. Kroll, Los Angeles, Cal., for respondents-appellants.

        Linda M. Lasley, Los Angeles, Cal., for petitioners-appellees.

        Appeal from the United States District Court for the Central District of California.

        Before PREGERSON and NORRIS, Circuit Judges, and REED, Jr., [*] District Judge.

        EDWARD C. REED, Jr., District Judge:

        FACTS

        Appellee Pacific Reinsurance Management Corporation (Pacific Re) acted as a reinsurance pool manager for the other parties to this action from 1970 through June, 1984. In that capacity, Pacific Re provided underwriting and claims handling facilities to service the reinsurance business it assumed on behalf of the insurers who participated in the pool. Under the management agreement which Pacific Re entered into with the pool members, it had the authority to underwrite and sign reinsurance agreements on behalf of the pool members, collect premiums and settle claims, and bill the pool members for their share of the losses. One standard form of management agreement was used from 1970 to 1979 (the 1970 management agreement), and a revised version of the agreement (the 1979 management agreement) was executed by all of the companies participating in the pool from 1979 to June of 1984.

        In addition, appellee Mission Insurance Company (Mission) "fronted" for pool members Walton and Ohio Reinsurance Corporation. Under this arrangement, Mission assumed reinsurance for itself, Walton, and Ohio, and then reinsured that portion of the reinsurance business it assumed on behalf of the other pool members. This fronting arrangement was documented by reinsurance agreements similar to the management agreements used by appellee Pacific Re. The reinsurance agreements also followed a standard form, created in 1970 (the 1970 reinsurance agreements) which was amended in 1979 (the 1979 reinsurance agreements).

        All four forms of agreements contemplated arbitration of possible disputes between the parties. The 1970 management and reinsurance agreements did not establish any particular procedure for the selection of neutral umpires. Both the 1979 management and reinsurance agreements, however, incorporated a detailed procedure

Page 1326

for the selection of arbitrators and for the selection of a neutral third arbitrator to serve as an umpire. Specifically, the 1979 management and reinsurance agreements included a provision which indicated that

[a]ny 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 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 designation shall be made by drawing lots.

        C.R. 23, ex. C. 1

        Because some of the appellants entered into more than one of the said forms of agreement with the appellees, twelve separate agreements thus existed between the parties to this action. Five of the agreements, the 1970 management and reinsurance agreements, contained no contractual procedure for the selection of a neutral umpire, while the other seven 1979 agreements did.

        In February of 1985, the pool members filed suit against Pacific Re and Mission in the U.S. District Court for the Southern District of New York, seeking rescission of the twelve agreements, damages, and an accounting. In May of that year, Pacific Re petitioned the U.S. District Court for the Central District of California for an order compelling arbitration of the disputes contained in the pool member's New York action. That court granted Pacific Re's motion to compel arbitration on June 25, 1985, and specifically ordered the pool members to arbitrate their disputes with Pacific Re "according to the terms of their respective management agreements." C.R. 23, ex. C.

        In accordance with the order of the court and with their contracts, the parties named their respective arbitrators, who then began their attempt to select a neutral third party to serve as umpire. Both arbitrators named two candidates for the position. They then attempted to reach agreement over which one of the four candidates should fill the position as the contract required, but they were ultimately unsuccessful. At this point, Mr. Koepke, the appellants' arbitrator, insisted that the lot-drawing procedure found in the seven 1979 agreements be used to select the umpire for all twelve of the contracts. Mr. Gilmartin, the appellees' arbitrator, was opposed to the lot-drawing procedure in general, and refused to follow it even for the seven agreements...

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