Reinsurance Arbitration Awards'An Uphill Battle?

• Published date: 26 August 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Reinsurance, Arbitration & Dispute Resolution
• Law Firm: Mound Cotton Wollan & Greengrass
• Author: Ms Amy J. Kallal and Andrea Fort

MAINTAINING CONFIDENTIALITY WHEN PETITIONING FOR RELIEF IN COURT

A long-running dispute between Pennsylvania National Mutual Casualty Insurance Company and one of its reinsurers, Everest Reinsurance Company, recently culminated in the unsealing of an award from an arbitration to which Everest had not been a party. Everest was able to obtain this result despite the fact that Penn National had withdrawn its petition to confirm the award (and accompanying motion to seal) mere days after filing and the district court had made no substantive decision based on the award or relied on it in any way.

After the dispute made its way to the Third Circuit for a second time, the court held that the arbitration award was a judicial record to which a common law right of access applied and that Penn National had not demonstrated a specific harm to overcome the presumption of public access.¹ Following remand to the district court, the award was finally unsealed earlier this year. Although not binding precedent for the Third Circuit (since the decision was not issued by the full court),² Penn National is nevertheless a development in the law on the unsealing of arbitration awards that both cedents and reinsurers will want to take into consideration when petitioning courts to confirm or vacate awards issued in confidential arbitration proceedings.

The award concerned Penn National's cession of lead paint claims under certain excess of loss treaties subscribed to by various reinsurers. Two of the reinsurers on the treaties (New England Reinsurance Corporation and Hartford Fire Insurance Company) did not accept Penn National's reinsurance presentation, leading to arbitration and ultimately an award in favor of the two Hartford companies in March 2018.³ Despite the fact that Penn National lost its bid for any reinsurance recoveries and a panel majority concluded that Penn National's cession methodology was 'unreasonable' and violated a policy limits warranty, and that the Hartford companies were entitled to attorneys' fees, Penn National filed a petition in the Middle District of Pennsylvania in April 2018 to confirm the award.

Together with its petition to confirm, Penn National filed an unopposed motion to seal the award, based on the terms of the standard ARIAS form confidentiality agreement, which the district court granted. A few days later, Penn National withdrew its petition. The dispute with Everest began after Penn National subsequently demanded arbitration against...