Reinsurance Newsletter - September 2013: Pennsylvania Federal Court Confirms Arbitration Award On Second Try

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Platinum Underwriters Bermuda Ltd. v. Excalibur Reinsurance Corp., No. 12-70, 2013 U.S. Dist. LEXIS 98671 (E.D. Pa. Jul. 15, 2013).

A Pennsylvania federal court has had a second chance to review an arbitration award arising out of a dispute between a cedent and reinsurer over the calculation of the experience account after commutation. Unlike the prior arbitration award, which was vacated when the panel removed the deficit carry forward clause and ordered relief not requested by the parties (PMA Capital Ins. Co. v. Platinum Underwriters Bermuda, Ltd., 400 F. App’x 654 (3d Cir. 2010), the new award, the court found, drew its essence from the reinsurance contract and was confirmed.

In its decision, the court provides a nice lesson on the role of a court in reviewing an arbitration award. Here are some good quotes: “I may vacate the Final Award only for irrationality, not for over or under ‘literality’.” “I may not vacate an arbitration award simply because I disagree with it.” The court distinguished its two decisions, stating that the current arbitration panel did not eviscerate the reinsurance contract, but grounded its decision on the language of that agreement. And that is the job of the arbitration panel: to render an award that draws its essence from the agreement.

The prior arbitration award engendered a fair amount of controversy.  This award, as confirmed by the court, likely will not.