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First State Ins. Co. v. National Casualty Company

United States Court of Appeals, First Circuit

March 20, 2015

FIRST STATE INSURANCE COMPANY and NEW ENGLAND REINSURANCE CORPORATION, Appellees,
v.
NATIONAL CASUALTY COMPANY, Appellant

Page 8

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Rya W. Zobel, U.S. District Judge.

Affirmed.

Kendall W. Harrison, with whom Godfrey & Kahn, S.C., Susan A. Hartnett, Patrick J. Hannon, and Sugarman, Rogers, Barshak & Cohen, P.C. were on brief, for appellant.

Lloyd A. Gura, with whom Michael P. Mullins, David W.S. Lieberman, Day Pitney LLP, Amy J. Kallal, Matthew J. Lasky, and Mound Cotton Wollan & Greengrass were on brief, for appellees.

Before Selya, Circuit Judge, Souter,[*] Associate Justice, and Lipez, Circuit Judge.

OPINION

Page 9

SELYA, Circuit Judge.

A party that implores a court to vacate an arbitration award normally faces a steep uphill climb: the scope of judicial review of arbitration awards is " among the narrowest known in the law." Me. Cent. R.R. Co. v. Bhd. of Maint. of Way Emps., 873 F.2d 425, 428 (1st Cir. 1989). And where, as here, the arbitration clause contains an " honorable engagement" provision, judicial review is encumbered by yet a further level of circumscription. Surveying this arid landscape, the court below refused to vacate the challenged arbitration award and instead confirmed it. Discerning no error, we affirm.

I. BACKGROUND

In industry parlance, a primary insurer may cede risk to another insurer, who effectively becomes a reinsurer. See N. River Ins. Co. v. ACE Am. Reins. Co., 361 F.3d 134, 137 (2d Cir. 2004). When a reinsurer cedes assumed risk to yet another insurer, that transfer is called a retrocessional agreement. See Compagnie de Reassurance d'Ile de France v. New Eng. Reins. Corp., 57 F.3d 56, 62 (1st Cir. 1995). Here, First State Insurance Company and New England Reinsurance Corporation (collectively, First State) entered into a number of reinsurance and retrocessional agreements with a reinsurer, National Casualty Company (National). In August of 2011, First State demanded arbitration under eight of these agreements to resolve differences of opinion about billing disputes and the interpretation of certain contract provisions relating to payment of claims.[1] By agreement of the parties, all the arbitrations were consolidated in a single proceeding before a panel of three arbitrators.

At First State's suggestion and over National's objection, the arbitrators agreed to consider the contract interpretation issues first. As to those issues, First State sought declaratory relief addressing (i) the minimum quantum of information required to be furnished in order to trigger National's payment obligations and (ii) whether National could condition payment on its exercise of its contractual right to inspect First State's files.

After briefing and argument, the arbitrators handed down a contract interpretation award dated December 13, 2012. This award established a payment protocol under the agreements, which provided that National's payment obligations were to be triggered " upon its receipt of a billing supported by a Proof of Loss and Reinsurance Report(s) prepared by First State in a form and content generally as those introduced with the briefings on this motion." The award further noted that " [s]aid payments may be made subject to an appropriate reservation of rights by [National] in instances where it has or does identify specific facts which create a reasonable ...


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