Massachusetts Federal Court Denies Reinsurer’s Motion to Enjoin Arbitration

Explore:  Arbitration Reinsurance

Allstate Ins. Co. v. OneBeacon Am. Ins. Co., No. 13-12368-NMG, 2013 U.S. Dist. LEXIS 146826 (D. Mass. Oct. 8, 2013).

A Massachusetts federal court denied a reinsurer’s motion to enjoin arbitration. The reinsurer sought a preliminary injunction to enjoin arbitration because the designated umpire received notification that the cedent had proposed that he be appointed umpire.

The substantive dispute was over two reinsurance contracts.  The umpire was chosen by the two party-appointed arbitrators. The umpire, however, came to know that the cedent had proposed that he be appointed umpire. The reinsurer argued that this knowledge would “fundamentally corrupt the integrity of the process.” For this reason, the reinsurer filed a preliminary injunction to enjoin arbitration.

In denying the motion, the court recognized four criteria that a movant needed to demonstrate in order for a preliminary injunction to be granted: that the movant was likely to succeed on the merits; that the movant was likely to suffer irreparable harm in the absence of preliminary relief; that the balance of equities tipped in the movant’s favor; and that an injunction was in the public’s interest.  The court found that the reinsurer could not prove that the cedent violated the arbitration agreement. Moreover, the court considered the reinsurer’s claim to be nothing more than a “dressed-up bias claim against an allegedly impartial arbitrator.” Therefore, according to the court, the reinsurer did not meet its first burden—it did not prove that it was likely to succeed on the merits of its underlying claim. In addition, the court found that the reinsurer did not adequately illustrate that there was sufficient irreparable harm to warrant an injunction. The court noted that a legal remedy existed to deal with bias on an arbitration panel: a post-award challenge to the arbitration proceeding itself.  On the third factor, the court held that the reinsurer’s hardship—namely the presence of bias tainting the arbitral process—was not the sort of harm sufficient to tilt the balance of equities in the reinsurer’s favor. Finally, as to the fourth prong, the court remarked that a dispute over arbitration procedure between two reinsurance companies did not involve much public interest.

Because the reinsurer failed to meet any of its burdens as a movant, the court denied the reinsurer’s preliminary injunction. The court also ruled that, as the same four-factor test applied to permanent injunctions, the reinsurer’s motion for a permanent injunction should be denied as well.

Topics:  Arbitration, Reinsurance

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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