First State Insurance Company and New England Reinsurance Corporation v. Nationwide Mutual Insurance Company

Filing 71

Judge Indira Talwani: For the reasons set forth in the attached MEMORANDUM AND ORDER, Nationwides Cross-Petition to Vacate Arbitration Award 33 is DENIED and First States Cross-Motion to Confirm January 30, 2014 Interim Final Award and Entry of Judgment 41 , which is treated as seeking confirmation of the full award, is ALLOWED. (MacDonald, Gail)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
FIRST STATE INSURANCE COMPANY *
and NEW ENGLAND REINSURANCE
*
CORPORATION,
*
*
Petitioners,
*
*
v.
*
*
NATIONWIDE MUTUAL INSURANCE *
COMPANY,
*
*
Respondent.
*

Civil Action No. 13-cv-11322-IT

MEMORANDUM & ORDER
March 25, 2015
TALWANI, D.J.
This case raises the question of whether an arbitral panel exceeded its scope of authority
in crafting a remedial scheme related to claim payments under numerous reinsurance agreements
between Petitioners First State Insurance Company and New England Reinsurance Corporation
(“First State”) and Respondent Nationwide Mutual Insurance Company (“Nationwide”). Now
before the court are Nationwide’s Cross-Petition to Vacate Arbitration Award [#33] and First
State’s Cross-Motion to Confirm January 30, 2014 “Interim Final Award and Entry of Judgment
[#41].1
The traditionally high level of deference given to arbitral awards by reviewing courts is
well established. See Cytec Corp. V. DEKA Prods. Ltd. P’ship, 439 F.3d 27, 32 (1st Cir. 2006)

1

Based on the court’s prior Order Allowing Reconsideration [#70], which consolidated First
State’s Petition for an Order Confirming Final Arbitration Award & Entry of Judgment [#4] with
this cross-motion, the cross-motion is read as seeking confirmation of the full final award in this
case, not merely the second-phase award issued by the arbitral panel in March 2014.

(“The authority of a federal court to disturb an arbitration award is tightly circumscribed.”); Bull
NH Info. Sys., Inc. v. Hutson, 229 F.3d 321, 330 (1st Cir. 2000) (“The district court’s review of
arbitral awards must be extremely narrow and exceedingly deferential.” (citation and internal
quotation marks omitted)).
Moreover, the First Circuit has recently decided First State Ins. Co. & New Eng.
Reinsurance Corp. v. Nat’l Casualty Co., No. 14-1644, 2015 WL 1263147 (1st Cir. Mar. 20,
2015), in which it explained that “an ‘honorable engagement’ provision . . . [adds] yet a further
level of circumscription” to this review.2 Id. at *1. As set forth in that opinion, “an honorable
engagement provision empowers arbitrators to grant forms of relief, such as equitable remedies,
not explicitly mentioned in the underlying agreement.” Id. at *4.
Applying the required deference, the court finds that the arbitral panel did not exceed its
scope of authority in crafting the remedial Phase I and Phase II awards because the panel was, at
least arguably, interpreting the contract in doing so. See id. at *3-5 (confirming substantially
similar award after consideration of highly analogous arguments in favor of vacatur).
Accordingly, Nationwide’s Cross-Petition to Vacate Arbitration Award [#33] is DENIED and
First State’s Cross-Motion to Confirm January 30, 2014 “Interim Final Award and Entry of
Judgment [#41], which is treated as seeking confirmation of the full award, is ALLOWED.
Recognizing that the parties’ briefs were submitted before the First Circuit issued its
opinion in First State Ins. Co. & New Eng. Reinsurance Corp., and that the parties therefore have
2

The reinsurance agreements at issue each contain an honorable engagement clause. See First
Casualty Excess Loss Reinsurance Contract, art. XII [#43-1]; Second Casualty Excess of Loss
Reinsurance Contract, art. XVI [#43-2]; Third Casualty Excess Loss Reinsurance Contract, art.
XVI [#43-3]; Obligatory Share Retrocession Agreement No. 13b, art. XIII [#43-4]; Obligatory
Retrocessional (Excess Business) Reinsurance Agreement, art. XIV [#43-5]; First Excess
Property and Casualty Retrocession Agreement, art. 16 [#43-6]; Obligatory Retrocession
Agreement, art. 19 [#43-7].
2

not had an opportunity to address the import of that decision to the instant dispute, the court will
leave this case open until April 24, 2015. Any motions for reconsideration addressing this
intervening authority filed before that date will be considered by the court before entering final
judgment.
IT IS SO ORDERED.
Date: March 25, 2015

/s/ Indira Talwani
United States District Judge

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