Arrowood Indem. Co. v. Trustmark Ins. Co., No. 3:03cv1000(JBA), 2013 U.S. Dist. LEXIS 46566 (D. Conn. Mar. 29, 2013).
A Connecticut federal court denied a cedent’s motion for judgment and contempt against a reinsurer where the motion sought to enforce an arbitration award that had been improperly revisited by the underlying arbitration panel. The court determined that the arbitration panel was acting functus officio, or without authority, to determine the reinsurer’s ultimate responsibility to the cedent.
As outlined by the court, in 2003, an arbitration panel found that the cedent was entitled to reimbursement of more than $9 million in payments made under the reinsurance contract. The panel also concluded that if the cedent determined that offset would not provide it with timely recapture, the cedent could execute a power of attorney enabling the reinsurer to initiate arbitration or other appropriate legal proceedings in the cedent’s name for cost recovery. The cedent and the reinsurer subsequently litigated whether the reinsurer was in contempt of the terms of the arbitration award, and the reviewing court found on two separate occasions—in 2007 and again in 2010—that the arbitration award was ambiguous and remanded the award to the panel.
The 2010 remand was the subject of this court’s review. The court concluded that the arbitration panel was without authority to further determine the reinsurer’s “ultimate responsibility” to the cedent and the role of the reinsurer’s “best faith efforts” beyond the original award. In revisiting the award in its 2010 decision, the court held that the arbitration panel had acted functus officio and therefore the 2010 ruling was void. The court further held that whatever dispute the parties have now about how the reinsurer carried out its duties under the power of attorney must be litigated in a separate proceeding.