New York Federal Court Interprets Reinsurance Contract’s Arbitration Provision and Transfers Venue to Massachusetts


First State Ins. Co. v. Nat’l Cas. Co., No. 13 Civ. 0704 (AJN), 2013 U.S. Dist. LEXIS 142518, 2013 WL 5439143 (S.D.N.Y. Sept. 27, 2013).

A cedent and a reinsurer were parties to various reinsurance agreements, each of which contained an arbitration provision.  Due to irreconcilable differences between the two parties regarding the agreements, the parties negotiated an Agreement for Consolidation of Arbitration (“Agreement”).  The Agreement provided, in pertinent part, that “[a]ny arbitration hearing pursuant to [the Agreement] shall take place in Boston, Massachusetts, unless the [arbitration panel and parties] agree otherwise.”  It further provided that “[a]ny judicial proceeding concerning this agreement, or confirmation, vacatur, or modification of any award pursuant to Sections 9, 10, or 11 of the Federal Arbitration Act, shall be brought in the district court in and for the district within which the arbitration hearing is held.”  Subsequently, both parties disputed over contractual interpretations on payment issues.  The dispute was ultimately determined by an arbitration panel sitting in New York.  After the arbitration panel released its order regarding the contractual dispute and the cedent filed this action, the arbitration panel held a final evidentiary hearing concerning findings of liability and damages in Massachusetts.  The arbitration panel issued a final monetary award.  Hence, the issue before the court was the proper venue for the petition to confirm the arbitration award.

In transferring the case to Massachusetts, the court first construed the Agreement’s “shall be brought” clause as a mandatory forum-selection clause.  Second, the court determined that the “arbitration hearing” clause of the Agreement was referring to only one location, not multiple locations.  Simply put, the court was confronted with the task of settling the debate of whether the “arbitration hearing” clause in the Agreement referred to the contractual dispute hearing in New York or the Massachusetts hearing regarding the findings of liability and damages.  The court determined that the Agreement language referenced a single arbitration hearing (“Boston, Massachusetts”) and could not be construed to contemplate many arbitration hearings in different locations.

As such, the court found that the language of the forum selection clause in the Agreement was unambiguous and to specifically exclude alternative venues for the petition to confirm the final monetary award.  Thus, the court transferred the case to the United States District Court for the District of Massachusetts.

Topics:  Arbitration, Contract Interpretation, Mandatory Arbitration Clauses, Reinsurance, Transfer of Venue, Venue

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure 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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