Tuesday, July 12, 2016

U.S. District Court denies insurer's request to remove arbitrator prior to arbitration award being issued

The following case is a straightforward decision on the law of arbitration, but it provides a glimpse into the world of reinsurance as well as the mergers, acquisitions, demergers and sales of insurance entities. 

John Hancock Life Insurance Company entered into an agreement with Employers Reassurance Corporation  by which John Hancock would transfer to Employers a percentage of its retention of liability under some of its policies.  The transfer agreement included an arbitration clause that provided that in the event of a dispute each party would appoint one arbitrator and those two arbitrators would select a third. 

John Hancock initiated arbitration to resolve a dispute regarding Employers' right to increase the reinsurance premiums charged under the agreement.  Employers selected Denis Loring as its appointed arbitrator.

John Hancock alleged that the appointment of Loring violated the agreement's prohibition on the appointment of arbitrators who were past or present employees of John Hancock or its affiliates because Loring had worked for one of its affiliates.  Employers asserted that the appointment was consistent with the agreement because Loring ceased working for the affiliate before it became affiliated with John Hancock, and the affiliate is no longer affiliated with John Hancock.  (The name of the affiliate is John Hancock Mutual Life Insurance Company -- not to be confused with John Hancock Life Insurance Company, the plaintiff in this case.) 

In John Hancock Life Insurance Company (U.S.A.) v. Employers Reassurance Corporation, 2016 WL 3460316 (D. Mass.) (unpublished), the United States District Court for the District of Massachusetts held that the Federal Arbitration Act does not authorize a court to remove an arbitrator before a final arbitration award has been issued.

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