Nationwide Mut. Ins. Co. v. Home Ins. Co., No. C2-95-880.

• Decision Date: 30 March 2000
• Docket Number: No. C2-95-880.
• Citation: 90 F.Supp.2d 893
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff/Petitioner, v. The HOME INSURANCE COMPANY, Defendant/Respondent.
• Court: U.S. District Court — Southern District of Ohio

90 F.Supp.2d 893

NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff/Petitioner, v. The HOME INSURANCE COMPANY, Defendant/Respondent.

No. C2-95-880.

United States District Court, S.D. Ohio, Eastern Division.

March 30, 2000.

COPYRIGHT MATERIAL OMITTED

Michael L. Cohen, Preston, Gates Ellis Rouvelas Meeds, Wash., DC, Randolf Wiseman, Bricker & Eckler, Columbus, OH, for plaintiff.

Harry P. Cohen, Roseman & Cohen, New York City, Gerald Ferguson, Vorys, Sater, Seymour & Pease, Columbus, OH, for defendant.

OPINION AND ORDER

SARGUS, District Judge.

This matter is before the Court for consideration of several motions, beginning with the motion of Nationwide Mutual Insurance Company ("Nationwide") for judgment on the pleadings and/or partial summary judgment (Doc. 137); the motion of The Home Insurance Company ("Home") to stay confirmation and vacatur proceedings pending final award or, alternatively, a stay pending consideration of Home's motion for discovery (Doc. 140); the motion of Home to compel Nationwide's compliance with the arbitration clause of reinsurance contract (Doc. 142); the motion of Home to vacate or to modify the Arbitration Panel's July 6, 1999 ruling (Doc. 159); the motion of Home for limited discovery on arbitral bias and misconduct (Doc. 160); the motion of Home for an order confirming an arbitration award of December 4, 1998 (Doc. 190); the motions of Nationwide for orders confirming arbitration award (Docs. 136 & 196); the motion of Nationwide's for reconsideration of this Court's order issued September 29, 1999 (Doc. 197); and finally, the cross-motion of Home to vacate the Arbitration Panel's December 17, 1999 ruling (Doc. 202).

I.

As explained in previous orders from this Court,¹ this dispute involves a reinsurance agreement concerning a pool managed by the London firm of M.E. Rutty Underwriting Agency Limited ("Rutty"). As a member of the pool, Nationwide authorized Rutty to obtain, underwrite, and service both direct and reinsurance business. While the pool member under whose name the policies were issued was directly responsible to the insured, the premiums and losses were divided among and between other members of the pool.

After Nationwide withdrew from the Rutty pool in 1966, it continued to have ongoing obligations to the pool as a result of continuing or contingent liabilities. In 1977, Nationwide entered into an agreement with The Home Insurance Company ("Home") by which Nationwide was to cutoff its potential losses through a reinsurance agreement with Home. In 1995, Nationwide sued Home, claiming that Home breached the contract under which it was required to cover claims against Nationwide arising from Nationwide's obligations to the Rutty pool.

On October 21, 1996, this Court ordered that Nationwide and Home submit the issues raised in this case to binding arbitration, as agreed to by the parties in the 1977 contract. In the same Order, this Court stayed the proceedings pending arbitration. Thereafter, however, on March 25, 1997, this Court also ordered defendant CIGNA Corporation ("CIGNA") to arbitration and, according to this Court's order, the entire action was dismissed.

On August 6, 1998, the Court of Appeals subsequently reversed this Court's decision of March 25, 1997, and held that CIGNA could not be compelled to submit to arbitration. Nationwide v. Home, 150 F.3d 545 (6th Cir.1998), cert. denied, 525 U.S. 1140, 119 S.Ct. 1030, 143 L.Ed.2d 39 (1999). The Court of Appeals also concluded that Nationwide could not pursue its claims directly against CIGNA, which had entered into a purchase and assumption agreement with Home, obligating CIGNA to perform Home's duties concerning the Rutty Pool. The Court of Appeals directed that the case be dismissed in its entirety.

Subsequently, Nationwide and Home submitted the dispute to arbitration, which remains ongoing. Nationwide, with an understandable measure of caution, filed simultaneously an original Complaint in a new case seeking confirmation of various orders issued by the Panel of Arbitrators,² as well as a motion to confirm award in the otherwise dismissed case. The new case, captioned C2-98-1008, has been consolidated with the older, dismissed case, C2-95-880, by Order dated October 19, 1998. This Court is of the view that the various types of relief sought in this case, including confirmation of various awards issued by the Panel of Arbitrators sought by both Nationwide and Home, together with Home's motion to vacate or modify several awards issued by the same Panel, are new matters correctly raised in the 1998 case. The parties have briefed the issues raised herein in a manner that such determination poses no prejudice to either side.

II.

The Court will first address Nationwide's motion for reconsideration of the Opinion and Order issued on September 29, 1999. In the Order, this Court held that confirmation of decisions issued by the original panel was premature, in part because the arbitration was ongoing. Moreover, Home had filed a motion to vacate or modify the awards based on allegations of arbitral bias or misconduct. Home also sought discovery, including the deposing of members of the Panel.

It was then, and still is, the hope of the undersigned that the arbitration could proceed to an expeditious conclusion. It was also the view of the Court that its confirmation or vacation powers should be used to effectuate an efficient and fair resolution of disputes through arbitration. On balance, the undersigned concluded that analyzing issues of bias, including allegations as to the personal conduct of arbitrators before arbitration had concluded, would frustrate, not facilitate, arbitration.

Nationwide asks for a reexamination of this decision. In most instances, this Court is reluctant to revisit a prior decision. To do so undercuts the goals of finality and certainty. Nonetheless, this Court is convinced that the premises underlying the prior order are no longer valid and that reconsideration is appropriate.

The Court begins the analysis with recognition of the fact that the Federal Arbitration Act, 9 U.S.C. § 1 et seq., codifies a strong public policy in favor of arbitration. E.g., Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308, 322 (6th Cir.1998). Courts are to exercise the limited authority granted with regard to matters submitted to arbitration in ways that promote and effectuate arbitration.

In this context, this Court now, for at least four reasons, believes that issues it earlier described as premature or unripe for decision must now be resolved in order to make meaningful the arbitration process. First, as of December 2, 1999, notwithstanding Home's opposition to a piecemeal confirmation process, both Home and Nationwide have moved for confirmation. Second, the original Panel which Home claims exhibited arbitral bias has resigned and a new Panel is proceeding. This Court no longer faces the potential prospect of ordering discovery, including the depositions of arbitrators, while the process remains ongoing. Third, given the length of the arbitration process, the acrimony of the parties and counsel, and the obvious need for finality, this Court concludes that the arbitration process will be enhanced by a decision confirming or vacating the awards in question. Finally, although this factor did not influence the Court in its prior decision, the panel has held on December 17, 1999 that the phrase "final decision" subject to confirmation according to the contract at issue means disposition of a "specific, discrete issue" and subject to judicial confirmation. While the Court does not disregard the decision of the Panel, the question of what is a "final decision" in this case is both a contract issue, to be answered by the panel, and a subject matter jurisdiction issue under the Federal Arbitration Act, to be answered only by this Court.

Many courts have permitted confirmation of orders issued by arbitrators which do not finally resolve the arbitration. In Island Creek Coal Sales Co. v. City of Gainesville, 729 F.2d 1046 (6th Cir.1984), the court enforced an arbitrator's award of specific performance, even though the price of the product to be delivered was subject to further arbitration. The court noted that the goal of enforcement of interim awards was efficient and effect resolution of disputes through arbitration. The interim award finalized a "separate, discrete, independent, severable issue." Id. at 1049 (citation omitted); see also Yasuda Fire & Marine Ins. v. Continental Cas. Co., 37 F.3d 345 (7th Cir.1994); Pacific Reinsurance Management Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019 (9th Cir. 1991).

The Court concludes that all of the motions to confirm various orders issued by the panel of arbitrators now are ripe for resolution.³ These include the following:

1. The Order of March 6, 1998, which rejected Home's claim for rescission. (Doc. 84) In turn, Home has moved to vacate or modify this Order based on evident partiality and arbitral bias and for discovery as to such issues. (Doc. 140)

2. The Order of July 6, 1998 in which the panel awarded Nationwide $300,000 to be paid by Home. (Doc. 136) Home has moved to vacate this award, again on the grounds of evident partiality and arbitral bias. (Doc. 159)

3. The Order of December 4, 1998, in which the panel determined that Home is not liable for Nationwide's obligations resulting from the operation of the cross liability agreement between Nationwide and other Rutty pool members; that Home is liable only for Nationwide's fixed pool share involvement in the Rutty runoff; and that Nationwide is entitled to 50% reimbursement from the Home for its past, present and future costs associated with the administration of Nationwide's fixed pool share involvement in the Rutty runoff. (Doc. 190) Nationwide does not oppose this motion, so long as all interim orders are confirmed by the Court. (Nationwide's Response, Doc. 195, p. 4)

4. The Order of ...