FIRST QUARTER 2003 Obtaining Pre-Hearing Discovery from the Uncooperative Reinsurance Intermediary

Doing a Reasoned Award without Confidentiality New ARIAS•U.S. Website Provides Key Resource In Focus: Recently Certified Arbitrators …and more PAGE 2 contents COVER: Obtaining Pre-Hearing Discovery from the Uncooperative Reinsurance Intermediary

MICHELE L. JACOBSON, ROBERT LEWIN, AND ROYCE F. COHEN Page 3

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FEATURE: Doing a Reasoned Award

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ARIAS•U.S. Board of Directors Page 28 3 PAGE Obtaining Pre-Hearing Discovery cover from the Uncooperative story Reinsurance Intermediary: The Current State of the Law and Avenues for Reform …intermediaries

Michele L. Jacobson, Robert Lewin, take positions in disputes between clients, have simply and Royce F. Cohen intermediaries have simply refused to pro- 1 Stroock & Stroock & Lavan LLP duce documents and appear for deposi- refused to pro- tions, even when subpoenaed by arbitra- Introduction tion panels. Unlike other non-parties to duce documents reinsurance contracts, reinsurance interme- Reinsurance intermediaries play an diaries are not strangers to the contracts and appear for integral role in the formation of con- that they have negotiated, and should be tracts of reinsurance. They are treated differently than other non-parties depositions, even responsible, in large measure, for the to those agreements. negotiation and placement of reinsur- when subpoenaed ance agreements, the wordings of the This article examines the current state of agreements, and the flow of funds the law regarding pre-hearing discovery, by arbitration under those agreements. The reinsur- and argues that reinsurance intermediaries ance agreements placed by intermedi- should be held to a different standard than panels. aries often contain, as is customary in other nonsignatories to arbitration agree- the industry, arbitration clauses. ments. We submit that reinsurance inter- These clauses require that the parties mediaries, having benefited from the rein- to the reinsurance contract arbitrate surance agreement containing the arbitra- their disputes and, hence, are gov- tion clause, should be held to be third- erned by the body of state and federal party beneficiaries and required under that law concerning arbitration. clause to submit to discovery ordered by Surprisingly, as many practitioners arbitration panels. Finally, this article and arbitrators have found, arbitra- examines various proposals designed to tion law can be unfriendly towards confrontthe reinsurance intermediary dis- pre-hearing discovery of non-parties, covery issue, and makes recommendations especially when itcomes to oral for the industry and parties to reinsurance examination prior to the arbitration agreements. hearing. Standing on the reluctance of some courts to require non-parties I. The Integral Role of the to submit to pre-hearing discovery, and to the frustration of parties to Reinsurance Intermediary arbitrations and their panelists, inter- mediaries have increasingly refused A reinsurance intermediary has an integral to participate in pre-hearing discovery. role in reinsurance transactions, usually (1) Oftentimes, the dispute at hand placing the risk on behalf of a ceding com- involves alleged misrepresentations pany; (2) participating in the negotiation of the reinsurance contract; and (3) serving as Michele L. Jacobson and Robert Lewin concerning the risks ceded under a are partners in the Litigation treaty or interpretation of wordings. a conduit for communication between the cedent and the reinsurer, transmitting pay- Department of Stroock & Stroock & The reinsurance intermediary is in a Lavan LLP’s New York office. unique position to provide crucial ments, collecting balances due and settling losses.2 The intermediary usually receives a Ms. Jacobson and Mr. Lewin information concerning these mat- concentrate in complex insurance ters. However, whether due to con- percentage of the premium ceded to the reinsurer.3 and reinsurance matters. cerns relating to their own errors and Royce F. Cohen is an associate in omissions liability, or the desire not to As a general rule, mostcases recognize an Stroock’s Litigation Department. PAGE 4 agency relationship between the reinsurance agreement, utilizing their Reinsurance intermediary and the cedent.4 own forms. Therefore, although the However, depending upon the rela- reinsurance intermediary may not be intermediaries tionship between the reinsurer and a signatory to a reinsurance contract, the intermediary, it is possible that an having drafted the clause, and having possess critical intermediary could be deemed a dual accepted the benefits and responsibil- agent.5 ities thereunder, it should be bound to information the parties via that contract, and be The intermediary is generally not a required to cooperate with the parties signatory to the reinsurance agree- and may, as their fiduciary in the dispute reso- ment, although it is a beneficiary lution mechanisms setoutin that thereunder. Many, if not most, rein- indeed, be the contract. surance agreements contain “inter- sole source mediary clauses” which designate an intermediary, setting out its role in II. The Current State of the of that communications between the parties and its agency status as for purposes Law With Respect to Pre- information. of collecting amounts due between the parties. The intermediary is gen- Hearing Documentary and erally responsible for drafting the intermediary clause and including it Testimonial Discovery in the reinsurance agreement.6 The following is a sample intermediary from Non-Parties clause: There is a growing amountof case law concerning non-party discovery, (Intermediary Name) is hereby rec- specifically with respect to pre-hear- ognized as the Intermediary negoti- ing non-party documentary and testi- ating this Contract for all business monial evidence. This issue is espe- hereunder. All communications cially importantand relevantwhen (including butnotlimited to the non-party/nonsignatory is the notices, statements, premium, reinsurance intermediary. return premium, commissions, Increasingly, reinsurance intermedi- taxes, losses, loss adjustment aries have become less than coopera- expense, salvages and loss settle- tive when dealing with arbitration ments) relating thereto shall be panels. Reinsurance intermediaries transmitted to the Company or the possess critical information and may, Reinsurer through (Intermediary indeed, be the sole source of that Name and Address). Payments by information. Parties may have lost the Company to the Intermediary their documents due to the passage shall be deemed to constitute pay- of time, personnel changes or docu- ment to the Reinsurer. Payments by mentretention policies. And, where the Reinsurer to the Intermediary rescission on the grounds of misrepre- shall be deemed to constitute pay- sentation of the reinsured risk is at ment to the Company only to the issue, or the wordings are ambiguous, extent that such payments are actu- the reinsurance intermediary is the ally received by the Company.7 lynchpin. Thus, broad discovery from The intermediary may therefore be the intermediary in the arbitration said to have consented orally or by process is essential. The current state conduct to a duty of faithful trans- of the law may not, however, be hos- mission under the intermediary pitable towards broad discovery when clause or estopped to deny it.8 Ithas the intermediary refuses to produce been held that the reinsurance con- documents or submit to oral exami- tract is a three-party contract, even nation as set forth in subpoenas though it was only signed by two par- issued by an arbitration panel. ties, once the intermediary begins A. The Federal Arbitration Act performance under the contract or accepts benefits under it.9 Moreover, The Federal Arbitration Act (“FAA”)10 reinsurance intermediaries are often defines an arbitration panel’s authori- the architects of the wordings for the ty to require nonsignatories or third 5 PAGE parties to submit to discovery.11 discovery allowed for non-party docu- parties.18 The Fourth Circuit noted, Within an agreement, parties cannot mentrequests butnotallowed for however, that there is no blanket rule only agree to arbitrate but they can non-party depositions; (3) broad pre- prohibiting non-party discovery. The also impose discovery obligations on hearing discovery permitted; and (4) Court acknowledged that there could the signatories. Parties cannot, how- non-party discovery as set forth in be cases where “special needs” would ever, impose discovery obligations on arbitration agreement. require an exception to the general nonsignatories. Section 7 of the FAA rule prohibiting discovery. While not 1. Interpreting the FAA Strictly: states: defining “special needs,” the Court No Pre-Hearing Discovery emphasized that a party would have The arbitrators selected either as Absent “Special Need” to demonstrate an inability to get the prescribed in this title or otherwise, The most restrictive approach, information elsewhere.19 or a majority of them, may summon embraced by the United States Court in writing any person to attend A few months later, the Fourth Circuit of Appeals for the Fourth Circuit, per- before them or any of them as a wit- affirmed a district court’s decision mits pre-hearing discovery from non- ness and in a proper case to bring permitting pre-hearing discovery from parties only in instances of demon- with him or them any book, record, a party where the lower court had strated “special need.” In Comsat document, or paper which may be found a “special need.” In Application Corporation v. National Science deemed material as evidence in the of Deiulemar Compagnia Di Foundation,13 the Fourth Circuit held case. The fees for such attendance Navigazione S.p.A. v. M/V Allegra,20 the that, since non-parties are not bound shall be the same as the fees of wit- petitioner contended that a ship it by the underlying arbitration agree- nesses before masters of the United had chartered had sub-par speed due ment, an arbitrator has no power to States courts. Said summons shall to engine problems. The petitioner compel non-party participation in dis- issue in the name of the arbitrator sought to inspect the vessel, arguing covery absentauthority derived from or arbitrators, or a majority of them, that the respondent was making the FAA. There, an arbitration panel and shall be signed by the arbitra- repairs to the ship, including the had issued a pre-hearing subpoena to tors, or a majority of them, and shall engine. Thus, absent the taking of non-party National Science be directed to the said person and pre-hearing evidence, itwould have Foundation (“NSF”) to produce certain shall be served in the same manner no evidence of the ship’s condition. It records and employee testimony as subpoenas to appear and testify requested perpetuation of evidence related to a construction contract before the court; if any person or that if not preserved was going to dis- between Comsat Corporation persons so summoned to testify appear and or be materially altered.21 (“Comsat”) and Associated shall refuse or neglectto obey said The Fourth Circuit held that: Universities, Incorporated (“AUI”). NSF summons, upon petition the United refused to comply with the subpoena [i]n this narrow set of facts, we States district court for the district and a districtcourtordered itto do agree with the district court’s con- in which such arbitrators, or a so.14 The Fourth Circuit reversed the clusion that Deiulemar faced a “spe- majority of them, are sitting may holding, and restricted the arbitrators’ cial need” that justified preserving compel the attendance of such per- power over non-parties to the actual the evidence on the Allegra....We son or persons before said arbitrator appearance before the arbitration leave for future determination the or arbitrators, or punish said person panel atthe hearing.15 proper scope of the “special need” or persons for contempt in the same exception as it applies to other manner provided by law for secur- The Courtheld thatthe subpoena forms of discovery in aid of arbitra- ing the attendance of witnesses or powers of an arbitrator should be tion.22 their punishmentfor neglector strictly limited to those explicitly pro- refusal to attend in the courts of the vided for in the FAA. Reading section Under the Fourth Circuit’s approach, United States. 7 of the FAA narrowly, the Fourth parties to a reinsurance arbitration Circuit held that the phrase “before agreementwould need to demon- Federal Arbitration Act, 9 U.S.C. § 7 them” meant attendance before the strate that they had a “special need” (emphasis added).12 While specifically arbitrator at the actual hearing.16 The in order to obtain pre-hearing discov- addressing the subpoena power of Courtexplained its rationale as fol- ery from a reinsurance intermediary. arbitration panels to require non-par- lows: Parties in arbitration have This “special need” may be shown, for ties to appear and produce at the waived their right to rely on the dis- example, by arguing that the interme- arbitration hearing, the FAA does not covery devices available in conven- diary possesses vital information not address the arbitrators’ power to tional litigation, opting instead to obtainable from other sources. This is require non-parties to submit to pre- resolve disputes in a less lengthy, especially true where the issue before hearing discovery. This “gap” in the more cost-efficient, manner than liti- the arbitration panel is one of misrep- FAA has resulted in a split of authori- gation.17 Since both parties have resentation in the placement of the ty, which can be divided into four cat- elected to arbitrate, neither may rea- reinsurance agreement. Only the egories: (1) no pre-hearing discovery sonably expectto obtain full-blown intermediary’s placement file and tes- from non-parties permitted unless discovery from the other or from third timony will show what was commu- there is a special need; (2) pre-hearing PAGE 6 nicated to the reinsurer, and what panel’s power to subpoena relevant tor at the request of ACIC, compelling was originally communicated to the documents for production at a hear- non-parties32 to appear for deposition intermediary by the ceding company. ing is the power to order the pro- and produce documents relating to Where the issue is one of intent, the duction of relevant documents for the reinsurance agreements at issue intermediary similarly possesses cru- review by a party prior to the hear- between ACIC and Integrity, as well as cial information. Finally, in instances ing.27 a related director’s and officer’s action where the parties’ records are unavail- involving Integrity.33 The district court The Court, however, did not analyze able, the intermediary’s records and held that an arbitrator may compel whether the arbitration panel could recollections may be the only source the production of documents prior to compel pre-hearing depositions, of information dispositive of a dis- the arbitration hearing but may not because the appeal was moot as to pute. Thus, while overly restrictive, compel attendance of a non-party to the request for witness testimony. there is “wiggle room” within the a pre-hearing deposition. Fourth Circuit’s rubric to obtain pre- Likewise, the United States District The districtcourtreasoned that, hearing discovery from intermediaries Court for the Southern District of and other non-parties. New York came to a similar conclu- [a]rbitration is, however, a creation sion. In In re Arbitration Between of contract, bargained for and volun- 2. Cases Upholding Pre-Hearing Douglas Brazell v. American Color tarily agreed to by the parties. The Discovery for Non-Party Graphics, Inc.,28 the district court petitioners, who are not parties to Document Requests directed a third-party, pursuant to its the arbitration agreement, never Another approach, adopted by the authority under Section 7 of the FAA, bargained for or voluntarily agreed United States District Court for the to comply with an the arbitrator’s to participate in an arbitration. Eighth Circuit, is more expansive. In In subpoena. There, a party obtained a After weighing the policy favoring re Security Life Insurance Company of subpoena from an arbitrator for cer- arbitration against the rights and America,23 the Eighth Circuit upheld tain documents from a third-party, privileges of non-parties, this Court an arbitration panel’s exercise of its Laser Tech Color Corporation (“LTC”).29 concludes that an arbitrator does implicitpower to order the pre-hear- American Color Graphics, Inc. (“ACG”) not have the authority to compel ing production of documents. There, asserted a counterclaim in which ACG non-party witnesses to appear for Security Life Insurance (“Security”) alleged, inter alia, that Brazell had pre-arbitration depositions.34 purchased reinsurance from a pool of breached the noncompetition, confi- The Integrity court found a significant reinsurers managed by Duncanson & dentiality and nonsolicitiation clauses distinction between testimonial evi- Holt(“D & H”).24 When the reinsur- in the Employment Agreement; dence and documentary evidence. ance pool refused to reimburse specifically, that Brazell violated these Since the FAA specifically states that Security for a loss, Security demanded clauses in dealings with LTC. The documentary evidence is required at arbitration against D & H. Security court noted that, while LTC was not a the hearing from parties and non-par- then served a subpoena issued by the participant in the arbitration, it had ties alike, the Integrity court explained arbitration panel on Transamerica an established history with the par- that documents are only produced Occidental Life Insurance Company ties and was not a mere third-party once, whether it is at the arbitration (“Transamerica”), one of the reinsur- drawn into the matter capriciously. hearing or prior to it.xxxv However, ers, to produce documents and testi- After analyzing the case law in both the court was unwilling to burden mony of one of its employees. the district and outside, and the dis- non-parties with, potentially, two Security petitioned for an order com- trict court upheld the arbitrator’s appearances. The courtfound that pelling either the reinsurer’s compli- authority to provide for pre-hearing ance with the subpoena or its partici- production of documents from third [c]ommon sense encourages the pro- pation in the arbitration proceed- parties. duction of documents prior to the ings.25 Transamerica refused to hearing so that the parties can famil- Another district court in the Southern respond to subpoena. The district iarize themselves with the content of District, however, has taken a slightly courtordered Transamerica to do so, the documents. Depositions, howev- differentapproach, stopping shortof and Transamerica appealed.26 The er, are quite different. The non-party authorizing subpoenas compelling Eighth Circuit held that may be required to appear twice— third parties to submit to pre-hearing once for deposition and again at the [a]lthough the efficient resolution depositions. In Integrity Insurance Co. hearing. Thata non-party mightsuf- of disputes through arbitration nec- v. American Centennial Insurance Co.,30 fer this burden in a litigation is irrele- essarily entails a limited discovery a dispute arose out of a number of vant; arbitration is not litigation, and process, we believe this interest in reinsurance agreements. The liquida- the non-party never consented to be a efficiency is furthered by permitting tor of Integrity instituted arbitration partof it. Furthermore, as the deposi- a party to review and digest relevant proceedings againstAmerican tion is not held before the arbitrator, documentary evidence prior to the Centennial Insurance Co. (“ACIC”) pur- there is nothing to protect the non- arbitration hearing. We thus hold suant to those agreements.31 party from harassing or abusive dis- that implicit in an arbitration Subpoenas were issued by an arbitra- covery.36 7 PAGE The Court then concluded that pre- tive to litigation.” (Citation omitted) . While Willis Corroon and BSIS are not hearing depositions of non-parties . . Furthermore, the court finds that parties to the arbitration, they are should not be permitted in arbitration under the Arbitration Act, the arbi- intricately related to the parties proceedings. trators may order and conduct such involved in the arbitration and are discovery as they find necessary.41 not mere third parties who have As a drafter and beneficiary of the been pulled into this matter arbitrar- reinsurance contract, the intermediary The United States District Court reject- ily.46 is no stranger to the reinsurance con- ed, without explanation, the con- tract, and should not be treated as tention that the FAA only permits the Like the pool manager in Meadows, one. Generally speaking, the interme- arbitrators to compel witnesses at the the reinsurance intermediary is “intri- diary has an established history with hearing and prohibits pre-hearing cately related” to the parties. the parties and is not a mere third- appearances.42 Although the Meadows courtdid not party drawn into arbitration impul- deal directly with pre-hearing testimo- Similarly, in Meadows Indemnity sively. Given the intermediary’s role in nial evidence, its rationale should Company, Ltd. v. Nutmeg Insurance drafting the reinsurance agreement, it apply to any discovery relating to rein- Co.,43 the United States District Court is well familiar with the terms, includ- surance intermediaries. Only if the for the Middle District of Tennessee ing those requiring arbitration. Thus, arbitration panel has all documentary perceived value in broad pre-hearing the intermediary should anticipate and testimonial evidence can it make discovery. There, Meadows Indemnity that it may be drawn into arbitration a “full and fair” determination of the Company, Ltd. (“Meadows”) had com- proceedings atsome pointshould a issues. Broad pre-hearing discovery menced a lawsuitagainstseveral dispute arise between the parties. rules are suitable for reinsurance inter- insurance companies and their pool The policy reasons behind notrequir- mediaries. managers relating to the operation of ing non-parties to submit to pre-hear- a casualty insurance/reinsurance pool. 4. Non-Party Discovery Agreed to ing depositions articulated by the dis- The districtcourtcompelled arbitra- in Arbitration Agreement trictcourtin Integrity, therefore, are tion, and stayed litigation vis-à-vis the notapplicable in the reinsurance Another example of broad pre-hearing pool managers, including Willis intermediary context. non-party discovery comes from the Corroon. The arbitration panel issued United States District Court for the 3. Broad Pre-Hearing Discovery a subpoena requiring the production Northern District of Illinois. In Amgen, Permitted of documents from Baccala & Shoop Inc. v. Kidney Center of Delaware Insurance Services (“BSIS”), a company In Stanton v. Paine Webber Jackson & County, Ltd.,47 the arbitrator of the dis- wholly owned by Willis Corroon. Willis Curtis, Inc.,37 investors brought an pute between two corporations issued Corroon moved for a protective order, action alleging violations of the a subpoena to a non-party to produce arguing that, as a non-party to the Commodity Exchange Act, Florida documents and send a representative arbitration proceedings, the arbitra- security law and common law. The to testify at a deposition.48 The sub- tion panel lacked statutory authority United States District Court for the poenaed party argued that there were to require it to produce numerous doc- Southern District of Florida granted territorial restrictions in the FAA, uments, not for the panel’s review at the defendants’ motion to compel which prevented the court from the hearing, but for inspection and arbitration pursuant to the FAA. The enforcing the subpoena. At the out- copying by Meadows prior to the hear- various defendants then sought docu- set, the district court held that the ing.44 The district court rejected Willis ments from non-parties before the arbitrator was within his right to issue Corroon’s contention, finding that hearing.38 In response, plaintiffs a pre-hearing documentary and testi- non-party discovery was vital for the soughtan order enjoining the defen- monial subpoena to a non-party to an arbitrator to make a “full and fair” dants from requesting the issuance of arbitration proceeding. Citing the determination of the issues in dispute. and serving subpoenas for the atten- Stanton and Meadows decisions with The courtalso found thatsince the dance of witnesses and/or production approval, the district court held that arbitrator has the authority to require of documents before the hearing.39 “implicit in the power to compel testi- non-parties to produce documents at The court observed that the plaintiffs mony and documents for purpose of a the hearing, the arbitration panel were trying to impose judicial control hearing is the lessor (sic) power to implicitly has the power to do the over the arbitration proceedings, and compel such testimony and docu- same before the hearing.45 The gave strong consideration to the over- ments for purposes prior to hearing.”49 Meadows Courtdeferred to the arbi- all purpose of the FAA.40 The court Turning to the jurisdictional issue, the trator’s judgment to establish the acknowledged that: court concluded that the parties’ potential burdens and benefits of pre- agreement in their contract that the Such action by the court would viti- hearing discovery. Of interest to our Federal Rules of Civil Procedure would ate the purposes of the Federal discussion, the Meadows courtdrew govern the arbitral discovery process Arbitration Act: “to facilitate and further support for its conclusion from permitted the courts to enforce a sub- expedite the resolution of disputes, the fact that Willis Corroon was not a poena issued by an attorney pursuant ease courtcongestion,and provide stranger to the parties to the arbitra- to Rule 45 of the Federal Rules of Civil disputants with a less costly alterna- tion: PAGE 8 Procedure. The districtcourtnoted In order for third-party beneficiaries that the parties’ agreement to incor- III. Obtaining Discovery from to benefit from the terms of the con- porate the Federal Rules of Civil tract, the third-party beneficiary must Procedure meantthatthe Federal Intermediaries through also abide by the terms of the con- Rules, which “contemplate and pro- tract. A third-party beneficiary is vide both for a mechanism for nation- Principles of Contract bound by the terms and conditions of wide discovery, and preserving the the contract that it attempts to testimony of witnesses unavailable at Interpretation and Agency invoke.53 The beneficiary cannot trial because they are outside the dis- While case law concerning non-party accept the benefits and avoid the bur- trict, by use of evidence depositions” discovery is one means of obtaining dens or limitations of a contract.54 would govern.50 discovery from recalcitrant intermedi- Third-party beneficiary law is deter- aries, principles of contract and agency 5. Summary mined by state contract law, rather law may also assistin the discovery than the FAA. In fact, case law is split Pre-hearing discovery is a crucial and process. Practitioners may persuasive- from jurisdiction to jurisdiction as to essential part of the arbitration ly argue that, as third-party beneficiar- whether there needs to be an inten- process. Further, since Section 7 of ies of the reinsurance agreement and tion to bind the third-party benefici- the FAA gives the arbitrators the as agents for one or more of the prin- ary to the arbitration clause under the power to order both documentary cipals to that agreement, reinsurance contract in which it is a beneficiary.55 and testimonial evidence at the arbi- intermediaries are bound to the arbi- Thus, itis unclear whether merely tration hearing, it is illogical that they tration clauses contained in those being a third-party beneficiary under would nothave the power to issue agreements. Thus, one could argue a contract containing an arbitration pre-hearing subpoenas if they deem that disputes with intermediaries are clause sufficiently binds a third-party them to be necessary and relevant. subject to arbitration, and, that, beneficiary to those arbitration provi- The purpose of arbitration is to pro- accordingly, the intermediaries should sions. vide a quick, easy and fair resolution also be bound to the discovery orders of disputes. That resolution can only of panels in arbitrations between the We believe, however, that a strong be fair if the arbitration panel has all reinsured and reinsurer. argumentcan be made thatan inter- of the vital information it requires. mediary is a third-party beneficiary A. The Intermediary as a Third-Party Pre-hearing discovery is especially under a reinsurance agreementwhich Beneficiary under the important where the non-party is contains an intermediary clause.56 Reinsurance Agreement outside the subpoena power of the Intermediaries benefit from the terms panel for attendance at the hearing. Where parties to a contract intend of the reinsurance agreement, and Pre-hearing discovery also promotes that a third-party should benefit from receive fees from the operation of settlement, by eliminating surprise at that contract, the third-party is an that agreement. Thus, by accepting the hearing. Case law restricting pre- intended beneficiary who has enforce- the benefits from the reinsurance hearing discovery is often founded on able rights under the contract.li The agreement, intermediaries should be the notion that, in general, since non- Restatement (Second) of Contracts bound thereunder. Accordingly, as a parties did not agree to become part defines an intended beneficiary as: third-party beneficiary, the reinsur- of the arbitration process, they should ance intermediary should be bound § 302. Intended and Incidental notbe burdened by pre-hearing dis- by the arbitration clause of the con- Beneficiary covery. This rationale does not apply tract, and should be required to par- to the reinsurance intermediary. A (1) Unless otherwise agreed between ticipate in the arbitration proceedings reinsurance intermediary is not a promisor and promisee, a beneficiary commenced by the parties to the con- stranger to the contract. It is very of a promise is an intended benefici- tract. familiar with the reinsurance agree- ary if recognition of a right to per- B. Binding Non-Signatories to the mentand, in mostinstances actually formance in the beneficiary as Agreement to Arbitrate drafted it. Therefore, broad pre-hear- appropriate to effectuate the inten- ing discovery for intermediaries, bene- tion of the parties and either The United States Supreme Court has held that “a party cannot be required fits all involved and ensures an equi- (a) the performance of the promise to submit to arbitration any dispute table outcome. will satisfy an obligation of the which he has notagreed so to sub- promisee to pay money to the bene- mit.”57 Nevertheless, in cases arising ficiary; or under the FAA, courts have consistent- (b) the circumstances indicate that ly held that “a nonsignatory party the promisee intends to give the may be bound to an arbitration agree- beneficiary the benefit of the prom- mentif so dictated by the ordinary ised performance.52 principles of contract and agency.”58 ••••• Expanding upon that theme, the Second Circuit stated in Thomson-CSF, 9 PAGE S.A. v. Prudential Bache Securities, Inc.:59 Uniformity and certainty, therefore, do wordings as a whole, and making the notexistin this area. Itis unlikely, reinsurance agreementa three-way This Courthas recognized a number moreover, that evolving case law will agreementamong the ceding compa- of theories under which nonsigna- give arbitration panels and practition- ny, reinsurer(s) and the intermediary; tories may be bound to the arbitra- ers any comfortthatthey will be able or (2) signing the reinsurance agree- tion agreements of others. Those to secure the pre-hearing discovery ment as to the intermediary and arbi- theories arise out of common law that they require from reinsurance tration clauses alone. The arbitration principles of contract and agency intermediaries. This industry, however, clause would then provide that the law. Accordingly, we have recog- should agree that access to a reinsur- intermediary must submit to pre- nized five theories for binding ance intermediary’s information in a hearing discovery ordered by the arbi- nonsignatories to arbitration agree- pre-hearing context is critical to the tration panel in disputes arising out ments: 1) incorporation by reference; success of the arbitration process. of the reinsurance agreement. 2) assumption; 3) agency; 4) veil- Reform, whether contractual or regu- Disputes with the intermediary would piercing/alter ego; and 5) estoppel.60 latory, is therefore in order. also be subject to arbitration under A reinsurance intermediary, although this approach. This approach is espe- One commentator, Robert M. Hall, an a nonsignatory, is an agent of the par- cially attractive where the intermedi- ARIAS-certified arbitrator and umpire, ties under the reinsurance agreement, ary is located outside of the United has suggested three options for having accepted the fees thereunder, States, such as in the United reform: (1) amending the FAA; (2) and the responsibilities associated Kingdom, where discovery devices are making the intermediary a party to with communications and payment. even more limited in the arbitration the reinsurance agreement; and (3) Many courts have held that where a setting. Contractual provisions would amending intermediary laws and reg- principal is bound under the terms of thus bind the intermediary without ulations.63 a valid arbitration clause, its agents, need to resort to normally available employees and representatives are A. Amending the Federal discovery. While attractive, however, it also covered under the terms of such Arbitration Act should be noted that this approach agreements.61 Notably, the United would undoubtedly meet with resist- As noted above, it is the “gap” in the States District Court for the Southern ance from intermediaries, who often FAA that has created uncertainty in District of New York has held that an are the draftspersons of the reinsur- the case law with respect to the avail- intermediary who was not a party to ance agreement, and who have little ability of pre-hearing discovery from a reinsurance arbitration was collater- incentive to submit to additional obli- non-parties. Thus, an amendment of ally estopped from relitigating the gations, which may inure, ultimately, the statute to expressly permit the issues decided by the arbitration to their detriment (i.e., by exposing taking of pre-hearing discovery from panel.62 Even though reinsurance themselves to errors and omissions non-parties and provide for the intermediaries are nonsignatory third liability). enforceability of an arbitration panel’s parties, as agents under the reinsur- subpoenas in that regard would, Second, ceding company clients can ance contract, they ought to be bound plainly, be the best solution. However, require their intermediaries to add a to the arbitration clause of the rein- an amendmentof the FAA would provision in the contract (or letter of surance agreement and participate in have broad applicability, and would authorization) between the interme- pre-hearing discovery. not affect this industry alone. As diary and the ceding company that noted by Robert Hall, suggesting an requires the intermediary to cooper- IV. Proposals for Obtaining amendment of a federal statute is ate with an arbitration panel in pre- intricate and would have conse- hearing discovery in the event that a Broad Discovery from quences that are difficult to predict. dispute arises under a reinsurance With the required lobbying effort, contract that it places on behalf of Reinsurance potential political opposition and the ceding company. This approach bureaucratic red tape, what appears provides an incentive for the interme- Intermediaries to be the best solution is also the diary: If the intermediary will not sign Although, as discussed above, there mostimpractical one. the contract, the ceding company can use another intermediary for its rein- are opportunities for practitioners and B. Contractual Methods of Binding surance business. arbitration panels to obtain broad dis- Reinsurance IntermediariesTo covery from reinsurance intermedi- Pre-Hearing Discovery C. Amending Reinsurance aries, this area is not free from doubt Intermediary Laws and There are two different contractual under existing case law. Certain juris- Regulations dictions are plainly more favorable methods of requiring reinsurance than others. Even courts permitting intermediaries to provide pre-hearing Almost all states have laws and regu- discovery from non-parties will often testimonial and documentary evi- lations governing the activities of undergo a fact-specific analysis with dence. First, the intermediary may be intermediaries. It is possible, through respectto the case athand. made a party to the reinsurance the amendment of these laws and agreement, by either (1) signing the PAGE 10 regulations, to impose pre-hearing ment, reduces surprise at the arbitra- 6 Staring, Graydon S., Law of Reinsurance § 7:4 discovery requirements upon interme- tion proceeding, and will work to (1993) diaries, and to provide for penalties in shorten the arbitration hearing itself. 7 The Brokers & Reinsurance Markets the absence of compliance with pre- Given the current uncertain state of Association Contract Wording Reference hearing subpoenas served in arbitra- the law, participants in the arbitration Book, § 23A Intermediary available at http://www.brma.org/contracts/index.htm. tion proceedings. In his article, Robert process mustlook toward different M. Hall has suggested the following approaches in obtaining pre-hearing 8 Staring at § 7:4. should be sanctionable: discovery from recalcitrant intermedi- 9 U.S. International Reinsurance Co. v. Saturn aries. The mostefficientand prompt Intermediaries, Ltd., No. 91 C 3739, 1992 WL 51694 Failure to comply with the order of a option is to add a provision to the (N.D. Ill. March 9, 1992). reinsurance arbitration panel to pro- reinsurance contract or letter of duce documents or testimony with 10 9 U.S.C. § 1, et. seq. authority between the ceding compa- respect to a dispute being consid- 11 The FAA applies to any written agreement ny and the intermediary that requires ered by the panel unless the inter- to arbitrate “a contract evidencing a transac- the intermediary to participate in the mediary obtains an order of a court tion involving commerce.” 9 U.S.C. § 2. arbitration process should disputes Reinsurance agreements typically involve of competent jurisdiction quashing arise under the reinsurance agree- commercial entities in different jurisdic- the panel’s order on non-jurisdic- ments it places. This approach may tions, and hence are properly considered tional grounds.64 interstate commerce. Allied-Bruce Terminix also be combined with an industry Companies, Inc. v. Dobson, 513 U.S. 265 (1995) This language would still permit the effort to amend existing intermediary (FAA extends to limits of Congress’ com- intermediary to protest the scope of laws and regulations to provide for merce clause power); see also Hart v. Orion discovery to a court, but not the abili- sanctions in the absence of intermedi- Ins. Co., 453 F.2d 1358 (10th Cir. 1971); ty to protest pre-hearing discovery in ary cooperation with orders of arbitra- Woodmen of World Life Ins. Society v. White, 35 F. Supp. 2d 1349, 1355 (M.D. Ala. 1999)(FAA its totality. tion panels. applied because insurance involves inter- Notably, this approach suffers from a state commerce); VCW, Inc. v. Mutual Risk Management, Ltd., 46 S.W.3d 118 (Mo. Ct. App. similar problem as with amending 2001). When the FAA applies, state courts the FAA. However, since the con- are constrained to apply federal, and not stituency is more uniform, its chance 1 Copyright 2003 by the authors. state, law. Webb v. R. Rowland & Co., 800 of success is greater. It should be 2 Ostrager, Barry R. & Mary Kay Vyskocil, F.2d 803 (8th Cir. 1986); Masthead MAC noted, however, that even if the laws Modern Reinsurance Law and Practice §§ 1.03, Drilling Corp. v. Fleck, 549 F. Supp. 854 (S.D.N.Y. 4.03[a] (2d ed. 2000). 1982); Bunge Corp. v. Perryville Feed & and regulations were modified to Produce, Inc., 685 S.W.2d 837 (Mo. 1985). require intermediaries to submit to 3 Id. § 4.03[a]. pre-hearing discovery atthe risk of 12 Unlike the FAA, the Uniform Arbitration Act 4 Houston Casualty Co. v. Certain Underwriters (“UAA”), does have a provision for pre-hear- sanction, in order to be meaningful, at Lloyd’s London, 51 F. Supp. 2d 789, 799-800 ing discovery. The UAA of 1956 has been these laws and regulations would (S.D. Tex. 1999)(holding that the reinsurance adopted in thirty-three jurisdictions and the need to be enforced. This would broker was the agent of the ceding compa- UAA of 2000 has been adopted in four juris- require the cooperation of state regu- ny); Pritchard & Baird, Inc. v. Francis, 8 B.R. 265 dictions (and has been “introduced” in four- lators and the devotion of resources (D.N.J. 1980), aff’d, 673 F.2d 1301 (3d Cir. 1981) teen jurisdictions). As noted above, however, (upholding ruling of the bankruptcy court to the extent that a state has adopted the that some state departments of that Pritchard & Baird, the intermediary, was UAA, or a modified version thereof, the UAA insurance lack. the agent of the ceding company while hold- would not apply where the matter at hand ing premiums intended for the reinsurer); involved interstate commerce. Section 7 of Calvert Fire Insurance Company v. Unigard the UAA, which is the same in both the 1956 V. Conclusion Mutual Insurance Company, 526 F.Supp. 623 Actand the 2000 Act,provides: Reinsurance intermediaries, as (D.Neb. 1980), aff’d, 676 F.2d 707 (8th Cir. 1982) (holding that the intermediary was the a) The arbitrators may issue (cause to be nonsignatory third-party beneficiaries agentof the reinsured). issued) subpoenas for the attendance of to the reinsurance agreements that witnesses and for the production of they negotiate and provide services 5 See, e.g., Capitol Indemnity Corp. v. Stewart books, records, documents and other evi- Smith Intermediaries, Inc., 593 N.E.2d 872, 876 dence, and shall have the power to under for a fee, should be bound to (Ill. App. Ct. 1992) (finding that although a administer oaths. Subpoenas so issued the agreement to arbitrate and to reinsurance intermediary typically represents shall be served, and upon application to pre-hearing discovery requirements. the reinsured, the intermediary may also the Court by a party or the arbitrators, They are in a unique position to pro- become the agent of the insurer or both par- enforced, in the manner provided by law vide vital documents and testimony ties); Paul M. Hummer, Reinsurance for the service and enforcement of sub- Intermediaries: When Are They Liable and To poenas in a civil action. to the parties and to the arbitrators. Whom?, Mealey’s Litigation Reports The reinsurance intermediary must be September 25, 1996 § Commentary; Vol. 7, No. b) On application of a party and for use as held to the same standard as a party 10 (affirming that “courts have found inter- evidence, the arbitrators may permit a mediaries to be the agents of reinsurers for deposition to be taken, in the manner and to the reinsurance contract and upon the terms designated by the arbitra- should be compelled to produce docu- purposes of collecting premiums, but the agents of cedents for purposes of misrepre- tors, of a witness who cannot be subpoe- mentary and testimonial evidence in sentations made in the underwriting naed or is unable to attend the hearing. advance of the arbitration hearing. process”). The Uniform Arbitration Act is available at Pre-hearing discovery fosters settle- http://www.lectlaw.com/files/adr06.htm. 11 PAGE

13 190 F.3d 269 (4th Cir. 1999), were duces tecum only, the plaintiffs in could not establish that the intermediaries Stanton soughtan order enjoining the were third-party beneficiaries under the 14 Id. at274. defendants from “requesting the issuance of contract. Id. This case is readily distinguish- 15 Id. at275. and serving subpoenas for the attendance able from reinsurance agreements which of witnesses or production of documents, contain intermediary clauses identifying the 16 Id. other than for attendance or production intermediary, and requiring it to perform 17 Id. at276. before the arbitration panel.” 685 F. Supp. at tasks under the agreement. 1241. Thus, the Stanton court, in rejecting the 58 United Steelworkers of America v. Warrior & 18 Id. plaintiffs’ application, directly considered Gulf Navigation Co., 363 U.S. 574, 582 (1960). whether the arbitration panel was author- 19 The record in Comsatshowed thatComsat ized to issue subpoenas compelling testimo- could have obtained the materials it 59 Thomson-CSF, S.A. v. American Arbitration ny before the hearing. soughtthrough the Freedom of Association, 64 F.3d 773, 776 (2d Cir. 1995); see also Letizia v. Prudential Bache Securities, Inc., Information Act, as it had earlier obtained 43 157 F.R.D. 42 (M.D. Tenn. 1994) hundreds of responsive documents 802 F.2d 1185, 1187 (9th Cir. 1986) (stating through that process. Id. at276. 44 Id. at44. that a variety of nonsignatories of arbitra- tion agreements have been held to be 45 Id. at45. 20 198 F.3d 473, 481 (4th Cir. 1999) bound by such agreements under ordinary common law contract and agency princi- 21 Id. 46 Id. at45. ples); Interbras Cayman Co. v. Orient Victory 22 Id. The Fourth Circuit also found that the 47 879 F. Supp. 878 (N.D. Ill. 1995) Shipping Co., 663 F.2d 4, 7 (2d Cir. 1981) “extraordinary circumstances” presented in 48 Id. (granting trial on whether alleged principal- this situation warranted the granting of agent relationship bound nonsignatory petitioner’s Federal Rule of Civil Procedure 49 Id. at880. party to arbitration agreement). Rule 27 motion for the perpetuation of evi- 50 Id. at883. 60 64 F.3d 773 (2d Cir. 1995) dence. Id. at486-7. 51 Gomez v. Huntington Trust Co., No. 61 Id. at776; see also Wells Fargo Bank v. London 23 228 F.3d 865 (8th Cir. 2000) 3:98CV7436, 2001 WL 1110350, at*11 (N.D. Steam-Ship Owners’ Mutual Ins. Ass’n, 408 F. 24 Id. at867. Ohio August28, 2001). Supp. 626, 628-30 (S.D.N.Y. 1976) (in deter- mining who is bound to arbitration agree- 53 Restatement (Second) of Contracts: Chapter 25 Id. at867-8. ment, federal courts look to state-law con- 14 Contract Beneficiaries § 302 Intended and tract principles). 26 Id. at868-9. Incidental Beneficiaries (American Law 27 Id. at870-1. Institute Publishers, 1982). 62 Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3rd Cir. 1993) (holding 54 Interpool Limited v. Through Transport 28 No. M-82 AGS, 2000 WL 364997 (S.D.N.Y. that arbitration agreement applied to con- Mutual Insurance Association, 635 F. Supp. April 7, 2000) sultant and sister corporation, even though 1503, 1505 (S.D. Fla. 1985). 29 Id. they had not signed it); Arnold v. Arnold 55 Id. Corp.—Printed Communications for Business, 30 885 F. Supp. 69 (S.D.N.Y. 1995) 920 F.2d 1269 (6th Cir. 1990) (holding that 56 Compare In re Prudential Ins. Co. of America officers of corporation were entitled to arbi- 31 See Id. at69-70. Sales Practice Litigation, 133 F.3d 225, 229 (3d tration as agents of corporation even Cir. 1998)(requiring that there be “an expres- 32 Although non-parties, one of the subpoe- though they had not signed the arbitration sion of the requisite intent between the naed individuals was nota “stranger” to agreement); The North River Ins. Co. v. third party and the plaintiff to arbitrate their Integrity, being a former officer and/or direc- Transamerica Occidental Life Ins. Co., No. claims”); Mowbray v. Moseley, Hallgarten, tor of the company. The other subpoenaed Civ.A. 399-CV-0682-L, 2002 WL 1315786 at*6 Estabrook & Weeden, Inc., 795 F.2d 1111, 1117 individual was his attorney. Id. at70. (N.D. Tex. June 12, 2002). (1stCir. 1986) with Nesslage v. York Securities, 33 Id. Inc., 823 F.2d 231, 233-34 (8th Cir. 1987) (hold- 63 Commonwealth Insurance Co. v. Thomas A. ing that third-party beneficiaries could Greene & Co., Inc., 709 F. Supp. 86 (S.D.N.Y. 34 Id. at71. enforce terms of arbitration clause without 1989) (holding the reinsurance intermediary 35 Id. at73. a discussion of intention to bind those bene- was bound by the arbitration because: 1) it ficiaries to arbitration clause). was in privity with the ceding company; and 36 Id. at73. 2) the ceding company’s theory, previously 57 Itshould be noted that,in atleastone 37 685 F. Supp. 1241 (S.D. Fla. 1988) rejected by the arbitrators, was identical to instance, a court has held, under the facts that of the intermediary). 38 Id. before it, that intermediaries were not third- party beneficiaries of a reinsurance pool 64 Hall, RobertM., Intermediaries and Discovery 39 Id. managementagreementfor purposes of in Reinsurance Arbitrations, Mealey’s standing to compel arbitration under that Litigation Report: Reinsurance, December 2, 40 Id. at1242. agreement. Mutual Benefit Life Ins. Co. v. 2002 at30-1. 41 Id. Zimmerman, 783 F. Supp. 853, 866-67 (D.N.J. 65 Hall, RobertM. Intermediaries and Discovery 1992). There, the management agreement in Reinsurance Arbitrations, Mealey’s 42 The Integrity court attempted to distinguish atissue authorized a line slip manager to Litigation Report: Reinsurance, December 2, Stanton on the grounds that (1) the objec- obtain insurance risks on behalf of pool 2002 at31. tion to the subpoenas was made by a party members. The agreementmade no explicit as opposed to the subpoenaed non-party; reference to the intermediaries. The only and (2) the subpoenas issued by the arbitra- “hook” that the intermediaries had under tion panel were for documents only. See the managementagreementwas the Integrity Insurance Co. v. American Centennial implicit possibility that the line slip might Insurance Co., 885 F. Supp. at72. These employ other intermediary brokers to obtain attempted distinctions, however, fall flat. risks for the line slip. The court concluded Although the subpoenas directly at issue that this “indirect reference to third parties” PAGE 12 news and Spring Board notices Conference a Decisions

Recentdecisions of the ARIAS•U.S. Board of Sell-out Directors thatyou mightlike to know about. To the distress of many who had been con- January 16, 2003 Meeting: sidering going to Bermuda but had not taken steps to register, on March 4 Bill Term Limits Resolution Yankus announced by email to all mem- WHEREAS, managementof ARIAS-U.S. bers that registrations were closed. This (hereinafter the “Society”) is vested in a startling announcement came 25 days nine-member Board of Directors (here- before the registration deadline and over inafter the “Board”) elected pursuant to five weeks before the conference, itself. Article VI of the By Laws; The conference facilities at Elbow Beach WHEREAS, under Article VI, Board members had been reserved in May of lastyear, just are elected for three year terms and the By after the Spring Conference in Puerto Rico. Laws impose no limiton the number of With that meeting having drawn 118 atten- terms a Board member may serve; dees, the 150 capacity of Elbow Beach’s largestroom seemed to offer a cushion of RESOLVED, Effective with Board elections in extra meeting space. However, by the time 2003 and thereafter, the Board will not registrations could be closed, 174 attendees nominate for re-election a member who were already on board. has served two full terms, unless the Board determines that an additional term for a Elbow Beach wentto work re-configuring particular member would be in the best the space to see how many could be interests of the Society. Interest and accommodated for the general assembly sessions. The absolute maximum came FURTHER RESOLVED, the Chairman of the membership in out to 170 seats, with no standing room. It Nominating Committee is directed to pub- will be a very cozy series of meetings. lish this resolution in the next available ARIAS•U.S. has been edition of the Society’s newsletter and Interest and membership in ARIAS•U.S. has reportto the Board periodically on Board increasing in recent been increasing in recentmonths. Also, candidates brought to the Committee’s the early publicity and ease of registration attention. through the website registration system months. Also, may have contributed to the sudden surge. New Certifications the early publicity Even spouses have increased their atten- The following members were certified as dance. Last year, 30 attended in addition ARIAS•U.S. arbitrators: to the 118 attendees; this year, the number George A. Budd and ease of is 52. Bermuda seems to have an extra JanetJ. Burak attraction. registration John R. Cashin Bill has assured everyone that all future Theodor Dielmann through the website large ARIAS•U.S. conferences (Spring or Peter F. Reid Annual) will have a contingency for expan- Peter A. Scarpato registration sion, so that registration closing of these Michael J. Toman meetings will not happen again. James Veach system may Andrew S. Walsh have contributed to the sudden surge. 13 PAGE PETER SCARPATO February 28, 2003 Meeting: American International Group First Year Dues ARIAS Members 175 Water Street 4th Floor A dues pro-ration schedule will go into New York, NY 10038 effectApril 1 thatreduces the amountof JIM MCCARTHY the first-year dues for individual and on the Move Diamond McCarthy Taylor corporate members. Finley Bryant& Lee, LLP A reduction of one-third occurs on April 1, Peter H. Bickford has leftCozen 1201 Elm, Suite 3400 another one-third on July 1. Any member O’Connor to focus on his arbitration Dallas, Texas 75270 joining after October 1 will be considered and consulting work. He can be found phone 214-389-5307 paid for the upcoming calendar year. The at750 Lexington Avenue, 31stFloor, fax 214-389-5399 new schedule is reflected on the member- New York, NY 10022. His new contact email ship form on page 31 of this issue of the numbers are: phone 212-826-3817, fax [email protected] Quarterly. 212-593-4283, email THOMAS M. DALY & Associates [email protected]. 19 WestRidge Road Designated Representatives New Fairfield, CT 06812 New Addresses The Board clarified the handling of fees JOHN ALLARE: when a firm’s designated representative In each issue, we’ll listthe address [email protected] leaves. Thatperson may transfer to another changes, both postal and email, that firm and be designated,without payment have come in over the quarter, so that RICHARD WATERMAN: of an initiation fee. However,if transfer is to members can compare the list with [email protected] their address books and Palm Pilots. an individual membership,an initiation fee EMORY WHITE: Don’tforgetto notify us when your must be paid. If the representative is a certi- [email protected] fied arbitrator,membership must be contin- address changes. If we missed your uous for certification to be maintained. change here, please fill outand fax the J. MICHAEL GOTTSCHALK: form on page x so we will be sure to Acceptance Insurance Companies,Inc. New Certifications catch you next time. Or send an email Suite 1600 The following members were certified to [email protected] with the subject 300 WestBroadway as ARIAS•U.S. arbitrators: “Quarterly News.” Council Bluffs, IA 51503 Paul D. Brink T. RICHARD KENNEDY phone: 712-329-3751 fax: 712-329-3834 Kevin J. Tierney 16 Sutton Place, Apt 8B New York, NY 1002 I. Davis Jessup phone 212-893-8722 fax 212-893-8744 cell 917-796-2106 email [email protected]

ARIAS•U.S. Conferences Bring Credit to Members

For the past three years, ARIAS•U.S. has been an eral states after the fact, for last November’s accredited provider of CLE courses in New York Annual Conference. Pennsylvania, Wisconsin, Texas, State. This means that our conferences are pre- and Ohio have given creditfor thatmeeting. approved by the state CLE Board for continuing Texas and Pennsylvania have approved the Spring legal education credits for New York attorneys. In Conference in advance. Documentation will be fact, the CLE Board has just renewed this status for available in Bermuda for Texas and Pennsylvania another three-year period. attorneys. Attorneys from other states often submit While New Jersey does notgive creditfor out-of- ARIAS•U.S. conferences individually to their state state conferences, other states may. ARIAS will boards for credit. However, where a number of assistmembers whose CLE boards give out-of-state attorneys require credit for a conference, their credit. Contact Bill Yankus at [email protected] to applications have recently been facilitated by direct initiate the process. submissions from ARIAS. This was done with sev- PAGE 14 feature

Both parties Doing a Reasoned Award asked that the without Confidentiality written reasons be made known by Angus H. Ross AWARD Introduction in the market North American arbitration decisions are normally closely guarded secrets between The claim is made pursuant to the arbitra- because of the the parties, and while the results occasion- tion provisions in the Property Catastrophe ally trickle out into the market, the reasons First and Second layer treaties entered into market importance almost never do. An unusual instance took by the Applicant and Respondents. The place in Canada in 1997. Both parties asked Respondents had refused to settle a claim of the decision in that the written reasons be made known arising from hail damage in Winnipeg, in the market because of the market Manitoba and in Calgary, Alberta on July the arbitration: importance of the decision in the arbitra- 16th, 1996 made upon them by the tion: Is a peril an occurrence in a catastro- Applicanton the basis of a single occur- Is a peril an phe treaty? Nowadays, itis the common rence. By agreement of the parties the practice in Canada for written reasoned matter proceeded with written submis- occurrence in a decisions to be requested; however, they sions followed by an oral hearing on are almostnever publicized! October 6th and 7th, 1997. catastrophe treaty? In the hope that it will assist my fellow It was agreed between the parties that cer- ARIAS arbitrators and umpires in drafting tain variances from the Arbitration clause their own written reasons, following is the contained in the treaties were acceptable. full written decision (with anonymity for These variances were: the parties and the witnesses). This deci- Agreed modification of the time con- sion was prepared by me, serving as straints contained in the clause. umpire, with the assistance of James Cameron and Douglas Cutbush, who were Agreed that the appointed arbitrators the arbitrators. For clarification purposes, would notactas advocates butas disin- itshould be noted thatReinsurer A was a terested parties. directparticipantand prepared its own Agreed that the Umpire would partici- wordings; the other reinsurers used word- pate in all proceedings of the Arbitration. ings prepared by an intermediary. Facts On July 16th, 1996 between the hours of 1900 and 2400 (local times) thunderstorm activity with accompanying hail took place in Winnipeg, Manitoba and in Calgary, Alberta. The Applicantsustained 822 claims in Winnipeg and 513 claims in Calgary. Angus H. Ross is an ARIAS•U.S. Certified Arbitrator. Now Chairman of L & A The storms causing the damage were not Concepts, a reinsurance, arbitration, the same storm; they were separate atmos- and environmental consultancy, Mr. pheric disturbances. Ross spent over 36 years in domestic and international property/casualty The Applicant takes the position that the reinsurance, retiring as President of claims arose outof one occurrence and Sorema N.A.’s Canadian operations in that the losses should be aggregated for June, 2000. He is a past Chairman of the Reinsurance Research Council of the purposes of claim under their property Canada. 15 PAGE

catastrophe excess of loss treaties. ing the continued occupation of an assured premises by strikers, provided It could even be The Respondent takes the position that such occupation commenced during the the claims arose out of two separate aforesaid period. argued that hail occurrences. As regards earthquake (the epicentre of Quantum is not in dispute and if the damage in Australia which need notnecessarily be within the claims are one loss occurrence, the limit of confines referred to in Paragraph A. of the Catastrophe First layer treaty would be and hail damage in this Article) and fire following directly exhausted. occasioned by the earthquake, only Canada were the The relevantoccurrence section of the those individual fire losses which com- contracts, Article VI of the Agreements, mence during the period of 168 consecu- same event. reads as follows: tive hours may be included in the REIN- SURED’S “occurrence”. DEFINITION OF OCCURRENCE. This is patently not The word “occurrence” shall have the fol- As regards “freeze” only individual losses lowing meanings: occasioned by collapse, breakage of glass the intent nor and water damage (caused by bursting The word “occurrence” shall mean the frozen pipes and tanks) may be included purpose of a sum of all individual losses directly occa- in the REINSURED’S “occurrence”. sioned by any one disaster, accident or catastrophe treaty. loss or series of disasters, accidents or Exceptfor those “occurrences” referred to losses arising outof one eventwhich in subparagraphs 1 and 2 of paragraph A. occurs within the area of one state of above, the REINSURED may choose the the United States or province of Canada date and time when any such period of and states or provinces contiguous consecutive hours commences, provided thereto and to one another. However that it is not earlier than the date and the duration and extent of any one time of the occurrence of the first “occurrence” shall be limited to all indi- recorded individual loss sustained by the vidual losses sustained by the REIN- REINSURED arising outof thatdisaster, SURED occurring during any period of accidentor loss and provided thatonly 168 consecutive hours arising out of and one such period of 168 hours shall apply directly occasioned by the same event, with respect to one event. except that the term “occurrence” shall However, as respects those “occurrences” be further defined as follows: referred to in subparagraphs 1 and 2 of As regards windstorm, hail, tornado, paragraph A. above of greater duration hurricane, cyclone, including ensuing than 72 consecutive hours, then the collapse and water damage, all individ- REINSURED may divide that disaster, ual losses sustained by the REINSURED accidentor loss into two or more “occur- arising outof and directly occasioned rences”, provided that no two periods by the same event. However the event overlap and no individual loss is included need not be limited to one state or in more than one such period, and pro- provinces or states or provinces con- vided that no period commences earlier tiguous thereto. than the date and time of the occur- rence of the first recorded individual loss As regards riot, riot attending a strike, sustained by the REINSURED arising out civil commotion, vandalism and mali- of thatdisaster, accidentor loss. cious mischief, all individual losses sus- tained by the REINSURED occurring dur- No individual losses occasioned by an ing any period of 72 consecutive hours eventthatwould be covered by 72 hours within the area of one municipality or clauses may be included in any “occur- county or municipalities or counties con- rence” claimed under the 168 hours pro- tiguous thereto arising out of and direct- vision. ly occasioned by the same event. The For the purposes of this Agreement, maximum duration of 72 hours may be extended in respect of individual losses which occur beyond such 72 hours dur- CONTINUED ON PAGE 20 PAGE 16

New ARIAS•U.S. Website

“With this feature, those who are involved in a dispute have a powerful tool for focusing on a highly qualified pool of candidates.”

If you haven’t visited the ARIAS•U.S. website recently, you should stop by and take a look (www.arias-us.org). The re-constructed website opened in January with features that make it a highly useful tool for anyone who has any interest in ARIAS or in reinsur- ance arbitration. Here are some of its key features: 1. Improved Navigation – The major sections of the site are listed down the left side of the screen on every page, except the arbi- trators’ profile pages (which open in a new browser window). As a result, moving from one area of the site to another is quick, easy, and never confusing. Also, any links to pages within each of those sections appear in a drop-down menu, as soon as your arrow is placed over the section name. Clicking within the menu opens the link. 2. ARIAS•U.S. Quarterly – The society’s quarterly publication, which is sent in 3. Arbitrator and Umpire Biographies – printed form to all members, is also Profiles of all certified arbitrators are available online, along with a growing available on the site, and those who number of pastissues. Itopens through qualify as umpires are also separately the ADOBE Portable Document Format listed and linked to their profiles. All of system, which enables printing out the information about applying and pages with a high degree of clarity. qualifying is there for easy reference. 17 PAGE Provides Key Resource

4. Search by Keyword – The 5. Code of Conduct and Practical search system, available at the Guide to Reinsurance bottom of the fixed naviga- Arbitration Procedure – These tion panel throughout the two publications are the pri- site, allows visitors to the site mary manuals for guidance of to locate information or arbi- ARIAS•U.S. members in the trators by a wide variety of cri- process of arbitration. They are teria. For example, using a provided on the website in their search keyword, such as, entirety. In addition to refor- “asbestos,” brings up names matting them for easier under- of eleven certified arbitrators standing, the re-construction who have indicated asbestos projectadded links throughout experience in their back- that take the user directly to grounds. With this search fea- forms as they are mentioned in ture, those who are involved in the text. a dispute have a powerful tool 6. Online Registration for for focusing on a highly quali- Conferences – All large confer- fied pool of candidates. ences are now featured on the home page, and a registration system enables immediate reg- istration, using a credit card. Workshops are notincluded, since attendance must be close- ly monitored due to registration limits. The ARIAS•U.S. administrative team worked closely with the Technology Committee, chaired by Larry Schiffer, in specifying and implementing these changes. Mountain Media of Saratoga Springs, New York provides design and supportservices. While Phase II of the website reconstruction will bring further improvements, responses from members to changes already completed have been very positive. PAGE 18

Intensive Workshop Record Book The Intensive Arbitrator Workshop, held in Washington, D.C. on January 28, was the fourth in this series of events that are becoming the core of the initiation process for ARIAS•U.S. arbitrators. Opening with a reception the night before at LeBoeuf, Lamb, Greene & MacRae, the group of 27 stu- dents and 20 faculty members became quickly involved in the scenario of the mock dispute. When they met the next day at Chadbourne & Parke’s Edwin Muskie Conference Center and broke into their respective panels, they tracked through the three stages of the arbitration with only slightly less intensity than a real world arbitration. These intensive one-day workshops began in January of 2001, under the guidance of Charlie Foss. As he takes over Presidential responsibilities, he is being assisted in the organization and fielding of these events by Board member Mary Lopatto. Not only do these sessions provide new arbitrators with a taste of the pressures of dispute resolu- tion, but also they give law firm associates the experience of presenting arguments and defending their positions. Everyone benefits from the guidance and critiques provided throughout the course of the day by experienced ARIAS•U.S. arbitrators. As of January, the workshops have turned out a total of 101 graduates. They have been supported by the contributions of 12 law firms and 14 experienced arbitrators. The complete record of partici- pants involved in the four workshops is provided here.

ARIAS•U.S. wishes to thank everyone who has contributed to make these workshops such valuable training experiences. 19 PAGE

New York City Chicago Boston Washington January 2001 January 2002 September 2002 January 28 2003 LAW FIRMS: LAW FIRMS: LAW FIRMS LAW FIRMS: Lord Bissell & Brook Bingham Dana Choate, Hall & Stuart Chadbourne Lovells & Parke LLP Choate, Hall & Stuart Day, Berry Sidley & Austin & Howard, LLP LeBoeuf, Lamb, Greene Simpson Thacher Brown & Wood & MacRae LLP & Bartlett Edwards & Angell EXPERIENCED White & Williams LLP EXPERIENCED EXPERIENCED ARBITRATORS: ARBITRATORS: ARBITRATORS: EXPERIENCED Frank Barrett ARBITRATORS: Charles L. Niles, Jr. RobertB. Greene Richard Waterman Ronald S. Gass Daniel E. Schmidt, IV RobertM. Hall Eugene Wollan Martin D. Haber RobertF. Hall Thomas Tobin GRADUATES: T. Richard Kennedy GRADUATES: Eugene Wollan GRADUATES: Howard Anderson David P. Behnke GRADUATES: Theodore Dielmann Thomas Daly Stephen Adams Clive Becker-Jones William W. Fox Andrew Ian Douglas Howard Breindel Katherine L. Billingham Ronald S. Gass Lawrence F. Harr Paul Brink James Cameron Lawrence F. Harr George E. III Hartz George Budd John R. Cashin Jim Hazard John H. Howard JanetBurak John D. Cole John H. Howard Joel S. Iskiwitch Carol Correia RobertComeau Mark Kantor Leo J. Jordan Thomas Daly Charles F. Cook James I. Keenan, Jr. James Killelea Brian Donnelly R. Dennis Corrigan Michael A. Knoerzer Patricia Kirschling Gregg Frederick ClementS. Dwyer Walter A. Milbourne John McKenna Colin Gray William D. Hager David L Rader RobertB. Miller James Hazard I. Davis Jessup, II John H. Reimer Edwin Millette RobertHolland W. James MacGinnitie David Robb Jeffrey L. Morris Lydia Kam Lyew Paul J. McGee Debra Roberts Francis J. Mulcahy Jerome Karter David Nichols Franklin Sanders Gerald Murray Jim Leatzow Barbara Niehus Wolfgang Schlaeger Peter A. Scarpato Roderick Mathews John Nonna GilbertJ. Stallings Savannah Sellman Frank Montemarano James M. Oskandy Walter C. Squire Lewis B. Shepley RobertO'Hare John M. Parker Jeremy Wallis Susan Stone Andrew Pinkes Michael R. Pinter Emory L. White, Jr. John W. Thornton Rhonda Rittenberg RobertC. Quigley W. Mark Wigmore Kevin J. Tierney Kevin Ryan Radley D. Sheldrick John M. Wulfers Eugene Wilkinson Peter Scarpato David Thirkill Thomas M. Zurek RobertSoderstrom David W. Tritton Allan Taylor Jacobus Van de Graaf Raymond Tibbitts, Jr. Michael T. Walsh Michael Toman Charles J. Widder Andrew Walsh Philip Jay Wilker PAGE 20 CONTINUED FROM PAGE 15 Applicant and two witnesses for the 1994, 1995 and 1996 wordings was Respondents, all with considerable similar. experience in their respective fields. “province” and “provinces” include The 1994 wording used the expression They gave their evidence in a forth- the Northwest Territories and Yukon. “out of one atmospheric disturbance”. rightand articulate manner. The wit- Given that the coverage intentions for It should be noted that in the word- nesses were: ing provided by the intermediary, 1995 and 1996 were unchanged, what Article VI begins: For the Applicant: would have been the effect on the 1996 losses if, instead of “occasioned Mr. A – Vice President- Applicant “DEFINITION OF LOSS OCCURRENCE by the same event”, the contract had The word “occurrence” shall Mr. B – Reinsurance Broker read “out of one atmospheric distur- bance”? The answer to this lies mean……….. Mr. C – Climatologist unequivocally in paragraph 5 on page Throughoutthe intermediary word- For the Respondents: 2 of the Applicant’s written submis- ing the word “Company” is used Mr. D – Assistant Vice President, sion: wherever the word “REINSURED” Reinsurer A appears in the above wording. “5. The Applicantacknowledges These variations are of no signifi- Ms. E – London reinsurance consult- that the thunderstorms which cance. ant occurred atWinnipeg and Calgary within 91 minutes of each other Submissions of the Applicant The claim were not the same thunderstorm. It was admitted that there were two After due consideration of the submis- They arose outof two atmospheric storms 90 minutes apart. The storms sions of counsel and the evidence of disturbances.” occurred in Winnipeg and Calgary but the witnesses, we conclude that the This view was substantiated by Mr. C. geography and time are not an issue. claim by the Applicant hinges on two The circumstances and language of specific aspects: the intentions of the The changes requested by the the contract are such that one occur- parties in the negotiation of the con- Applicantand agreed by Reinsurer A rence took place. In particular the tracts, and the meanings of “event”, were for the purposes of consistency eventcausing all individual losses is “peril” and “occurrence”. and notchange in coverage. We hail damage and itwas the same accept that position. It follows that Intentions eventin both Winnipeg and Calgary. coverage under the 1996 contract Evidence given by Mr. A and by Mr. D should be no differentfrom that In 1995 and 1996 Reinsurer A agreed confirmed that the first layer of cover- which would have obtained had the to delete the phrase “out of one age was taken over by Reinsurer A in 1994 wording continued to be used. atmospheric disturbance” and replace 1994 and the wording for that year The 1994 wording would clearly have itby “occasioned by the same event,a was prepared by Reinsurer A. The had two losses as there were two mostsignificantchange. The other change in contract wording referred to atmospheric disturbances. It must subscribing reinsurers followed that above was made atthe requestof the follow that the result under the 1996 wording. Applicant in order to have consistency wording should be no different. We Submissions of the Respondents of wording and was justone of a conclude that the parties did not number of items where there was intend to treat losses such as these as The Applicant admitted that there non-concurrency. Both agreed that one loss occurrence. If we rely on the were two storms, hence it follows the question of any change in cover- intentions of the parties these would that there were two occurrences and age was not addressed by either party be two loss occurrences. two losses. The meaning of words in and neither party anticipated or the contract is critical and the defini- “Event”, Occurrence” and “Peril” expected that the “cosmetic” changes tion of event is bound by time and to the treaty wording expanded or The written submission of the place. restricted the coverage. Mr. D said Applicant supported by the evidence The intention of the parties was clear there had been no talk of aggregate given by Mr. A postulated that the and the change in contract wording losses nor of categorization. There word “event” as used in the 72 hour from “out of one atmospheric distur- had been no discussion of changes in clause refers to the listed perils. The bance” in 1994 to “occasioned by the reinstatements nor information pro- argumentwas thatlosses caused by same event” in 1995 and 1996 did not vided on aggregated losses, which the same peril are indeed caused by give rise to a change in the interpreta- would have meantdifferentloss pat- the same event. Under cross-exami- tion. terns. From the absence of discussion nation Mr. A stated that a hypotheti- cal loss of hail damage in British The evidence on coverage issues and the stated pur- pose of change being to ensure con- Columbia followed two days later by a We were provided with written sub- sistency of wordings, it is logical and separate hail loss in Newfoundland missions of the parties and heard evi- reasonable to conclude that the cover- would be the same event. To the dence of three witnesses for the age intended and granted under the question of whether there would 21 PAGE therefore be two losses for damage occurrence are occasioned by more rentinsurance and reinsurance mar- arising outof two perils (and hence than one peril, then the losses from ket practice rather than in accor- two events) – hail in Winnipeg and each peril mustbe splitout,for each dance with a literal interpretation of storm/water damage in Calgary there forms a separate event. This is not his- the language of this Agreement. was no answer. torical market practice and nor is it They shall interpret this Agreement realistic. A company could have five as an honourable engagement Evidence given by Mr. B indicated that separate perils implicated in the same rather than only as a legal obligation there had been problems with defini- occurrence, each giving rise to losses and may abstain from judicial for- tions in the past in Canada which had equalling its retention under its catas- malities and strictly following the resulted in arbitrations. The most trophe protection. Were each peril rules of law. notable was the Barrie/Leamington considered as an event, there would be storms where two arbitrations were We have analyzed the wording as no catastrophe claim although the held. Where the words “atmospheric introduced in evidence by the parties total loss occurrence is five times the disturbance” had been used in the and have applied common sense company’s retention. definition it was found that there meanings to the words used and the were two occurrences; where these Secondly, in a reductio ad absurdam treaty agreement as a whole. We are words had notbeen used, itwas argument, if a peril is an event then all not obliged to resort to a strict legal found to be one occurrence. The pur- losses occasioned by unrelated fires interpretation on the construction of pose of an hours clause was to have a during a 168 hour period could be the contractbutconclude thatit capping effect and to make the defini- aggregated and presented as one would lead us to the same findings. tion of eventeasier. Itis notintended catastrophe occurrence arising from We therefore find that on interpreta- to expand the coverage but to limit it the same event. It could even be tion of the contract there were two to a time frame. The hours limitation argued that hail damage in Australia occurrences. has notin factbeen triggered in a and hail damage in Canada were the Conclusion Canadian catastrophe. On the ques- same event. This is patently not the tion of the words “ further defined” in intent nor purpose of a catastrophe The hail damage losses occasioned in paragraph A. of Article VI he stated treaty. Winnipeg and in Calgary on July 16th, that on first reading he believed it 1996 did notresultfrom “one occur- Mm. Justice L’Heureux-Dube stated in meant that it further expanded on rence” as defined in the Agreement. the Supreme Court of Canada case, the definition but a second meaning The claim made by the Applicant Scott vs Wawanesa Mutual Insurance could be redefinition. therefore fails. Company, recorded as [1989] 1 Ms. E. in her evidence gave the opin- S.C.R.1445, 59 D.L.R. (4th) 660, at page ion that the contracts in question are 1467: occurrence-based and that they When the wording of a contract is respond to a single loss occurrence unambiguous …… courts should not defined as arising outof one event give it a meaning different from that and then further defined according to which is expressed by its clear terms, the peril involved. The occurrence unless the contract is unreasonable or clause is primary and the hours clause has an effect contrary to the inten- subsidiary. A peril is notin itself an tion of the parties. eventand more than one peril can be involved in an event. In this instance Applying marketpractice,usage and The hail damage it is agreed that there were two logic, we find that the meanings of storms emanating from two weather the words used in the occurrence defi- losses occasioned in systems and common sense would nition (Article VI) are clear and free of say there were two events. An insured ambiguity. All insured perils fall firstly Winnipeg and in peril poses a danger or threat and an within the 168 hours clause in the eventmay be due to a peril. The main definition (paragraph A.) Certain Calgary on cause and the event are not inter- listed perils are then subject to further changeable. limitations of time (72 hours), geogra- July 16th, 1996 phy (municipality or county) or type In lightof the conflicting views (“freeze” perils). A step by step reading did not result from expressed by the witnesses it behoves in this order leaves no doubt as to the us to examine the arguments in clarity of the definitions.The “one occurrence” detail. Arbitration clause in the treaties pro- Is a peril an event? If the answer to vided that: as defined in this is in the affirmative, then there The arbitrators and umpire shall are two conclusions which can be the Agreement. make their award with regard to cur- drawn. Firstly, that if losses in an PAGE 22 in focus Recently Certified Arbitrators

Paul D. Brink marketing and underwriting of reinsurance business and Paul D. built a substantial and profitable book. In early 2002, he Brink Paul Brink is recently retired from The Dow Chemical was asked to take over AXA C.S. Insurance until his Company where, for the last several years of his career, retirement, which he had announced a year earlier. he was Corporate Director of Risk Management and A graduate of Georgetown University (1962), Mr. Budd Insurance. In addition he was CEO and President of received an MBA from Fairleigh Dickinson University in Dorinco Reinsurance Company, a Michigan-based rein- 1970; he achieved the Chartered Property Casualty surance subsidiary of Dow Chemical. Underwriter designation in 1969. While at AXA Re, he Earlier in his career, Mr. Brink held various positions as a actively participated on the Reinsurance Association of corporate finance and taxation attorney for Dow, resid- America’s Natural Disasters Committee and was a mem- ing in Hong Kong, Switzerland and Michigan. For sev- ber of the Natural Disasters Coalition, an intra-industry eral years prior to taking on the insurance responsibili- group dedicated to finding ways that allow the insur- ties, he was Corporate Director of Taxation, responsible ance/reinsurance industry to provide protection for losses for all of the company’s global tax compliance and plan- from major natural disasters. He is past chairman of the George A. ning. He was also at various times an ex officio mem- Society of CPCU’s Reinsurance Interest Section Budd ber of the Corporate Finance, Audit, and Environmental Committee and has been a director of the New York Health and Safety Committees of the Dow Board of Chapter of CPCU. He was also an officer and commit- Directors. tee chairperson of the Society of Insurance Research, As the Director of Risk Management and Insurance, he author of the CPCU New York Chapter’s research project had overall responsibility for the company’s insurance on punitive damages and has been a speaker at numer- risk assessment, risk financing and claims prosecution ous insurance and reinsurance functions. activities. This included oversight of group insurance subsidiaries in Bermuda, Vermont and Jersey. John R. Cashin In his separate role as CEO of Dorinco, he had overall responsibility for this A.M. Best “A” rated reinsurance John Cashin is of Counsel to the law firm of Stroock & John R. company, with approximately $250 million of annual Stroock & Lavan LLP in New York City. With over thirty Cashin premium income. years experience in the insurance and reinsurance indus- Mr. Brink has a bachelor’s degree in mechanical engi- try, he has had broad exposure to many aspects of the neering from Purdue University and a law degree (J.D.) primary and reinsurance segments of the business. from Indiana University. He is an active member of the Prior to joining Stroock, he was Deputy Superintendent State Bar of Michigan and has served on numerous of Insurance for the State of New York. There, he was industry and civic associations. This included serving as responsible for the property/casualty bureau that pro- the chief U.S. delegate to the International Chamber of vides regulatory oversight to all p&c carriers, reinsurers, Commerce Tax Committee in Paris, France, and serving agents and brokers licensed in the state. While at the as a member of the Risk Management and Decision Insurance Department, he presided over the dissolution Process Advisory Committee of the Wharton School and of the Medical Mutual Insurance Association through a the University of Pennsylvania. loss portfolio transfer and a winding up of the compa- ny’s affairs. He has also conducted numerous George A. Budd Department hearings on fines and penalties, proposed regulations and similar matters. George A. Budd, CPCU, recently retired as President and Previously, Mr. Cashin had spent twenty years in the rein- ARIAS•U.S. Chief Operating Officer of AXA Corporate Solutions surance brokerage business, most recently as Executive Insurance Company. Previously, he was Senior Vice Vice President at Willis Re. He held numerous executive encourages President and manager of the company’s treaty reinsur- positions at other reinsurance intermediaries, beginning ance operation in New York City. At present, he is con- in 1980 at Guy Carpenter& Company. members to sulting and working on arbitrations involving reinsur- Prior to joining Guy Carpenter, he served for two years apply for ance matters. as chief counsel to the Senate Insurance Committee in Mr. Budd began his insurance career in 1962 as a multi- the New York State Senate. His experience also includes certification. ple-lines underwriter with the Royal Insurance Company. ten years of sales and systems engineering at IBM focus- He joined Great American Insurance, as a data process- ing solely on Information Technology for the property ing senior systems analyst in 1969, but returned to and casualty industry. Royal the following year and managed the Corporate Mr. Cashin has served on the Board of Directors for the For procedure, Planning and Research Department for the next eight United Nations Development Corporation and the Jacob years. Javits Convention Center Operating Corporation. He is a see our web site In 1979, Mr. Budd changed careers into reinsurance as a member of the American Bar Association Torts and treaty underwriter with Worexco (today, QBE Re). In Insurance Practice and Excess and Reinsurance Sections. at 1984, he joined AXA, as it was just beginning its own He was admitted to the New York State Bar in 1977 and www.arias-us.org U.S. operations, to establish the treaty underwriting is admitted to the Federal District Court for the Eastern department. In this capacity, he was responsible for the and Southern Districts of New York (1978), The US 23 PAGE

Court of International Trade (1991) and the United In 1998, CRC was acquired by Gerling Global States Supreme Court (1991). He is a graduate of St. Reinsurance Corporation where she became Senior Vice Francis College (1968); he holds an MBA from Baruch President and Deputy General Counsel. She later in focus College of the City University of New York (1972), a law assumed the role of Senior Vice President of Claims degree from Fordham Law School (1976), and an LLM where she oversaw the claims in the runoff operation of in International Law from NYU (1993). Gerling’s New York branch office. Her duties included handling all arbitrations and litigations as well as the Theodor Theodor Dielmann supervision and management of the claims staff. She Dielmann coordinated all claim payments, retrocessional recoveries Theodor Dielmann is the chief executive of his own and audits. Previously, Ms. Kaminsky worked for 14 consulting firm, Th.Dielmann GmbH, Hannover, years in private law practice providing all aspects of legal Germany, founded in 1991. services to domestic and foreign insurance and reinsur- His reinsurance career dates back to the year 1967. He ance companies. learned his trade in the London Market as non-marine Ms. Kaminsky is a member of the Federation of Defense reinsurance broker at Willis, Faber & Dumas Ltd., being and Corporate Counsel, The American Corporate one of the first foreign nationals actively broking in the Counsel Association, and Association of Professional market. Insurance Women. She was a former member of the Mr. Dielmann returned to Germany in 1972 to join the Reinsurance Association of America Law Committee and Hannover Re, where his tenure as a senior executive Reinsurance Dispute Task Force. Ms. Kaminsky is admit- (member of the executive board) spanned over almost ted to practice law in New York State and the federal Sylvia 20 years. He was instrumental in developing the US Courts in the Eastern and Southern Districts of New Kaminsky reinsurance business, being the chief underwriter for York, the District of Arizona and the Ninth Circuit Court the USA and various other markets, such as UK, of Appeals. Canada, Japan and South Africa, to name a few. The US book of business remained profitable over the entire Peter F. Reid period, not a mean accomplishment given the vagaries of this market. Peter Reid is the President/CEO of European-American He was also very actively involved in the settlement of Inc, an insurance management, consulting and services all major US claims, initiated the “finite risk” reinsur- firm with offices in New Jersey, New York City and ance book, was responsible for the actuarial services, London, England. The firm, which he founded in and set up offices in Canada and South Africa. 1990, represents foreign insurance companies in the Peter F. Theodor Dielmann has travelled widely in Asia, Europe U.S, assists U.S. insurers expanding overseas, and pro- Reid and USA. His main activities as consultant are reinsur- vides insurance consulting and risk management assis- ance dispute resolutions. He was an exclusive consult- tance to multinational commercial and professional ant for a major Japanese and Finnish insurance compa- firms, both domestic and foreign. Peter Reid is also a ny for many years. principal of Weichert European-American, an intermedi- His former company is again one of his major clients. ary joint venture with the Weichert organization, in New Mr. Dielmann also acted as expert witness in a number Jersey. He is personally active in ADR for insurance of reinsurance disputes and chaired one of the largest industry disputes, as mediator, arbitrator, umpire or reinsurance arbitrations on record in the USA. expert witness. Due to his multi-faceted experience in the reinsurance Prior to forming European-American, Mr. Reid was field over 35 years, he hopes to contribute to the con- Senior Vice President – International for Continental tinued success of ARIAS•U.S., now that he is one of its Insurance Companies in New York from 1987-1990, and certified arbitrators. Senior Vice President and Director of Alexander and Theodor Dielmann is a German national with a high- Alexander International Inc. from 1976-1987. From level command of English. 1990- 2001, he also acted as President and CEO of He also speaks Spanish fluently and has a basic knowl- Gothaer USA Inc., the US representative office for the edge of French. Gothaer Insurance Group, Cologne, Germany. Peter Reid’s 35 years experience in the insurance busi- Sylvia Kaminsky ness has encompassed most major aspects of senior level insurance activity in underwriting, claims, reinsur- Sylvia Kaminsky has been in the insurance/reinsurance ance, brokerage and consulting in both the industry for more than 20 years, having extensive expe- Property/Casualty and Life/Health areas. In addition to rience in the conduct and supervision of insurance and ARIAS•U.S., Mr. Reid is an active member of numerous reinsurance disputes. professional organizations including, the CPR Institute From 1995 to 1998, Ms. Kaminsky was Senior Vice for Dispute Resolution (Panel of Insurance Neutrals), the President, General Counsel and Corporate Secretary of Reinsurance Association of America (Arbitrators Constitution Reinsurance Corporation (“CRC”). In this Directory), the American Arbitration Association position, she was responsible for all legal activities sup- (Insurance Panel). He is also an Associate of the porting the business operations of the company, includ- Chartered Insurance Institute, London where he holds ing the handling of all arbitrations and litigations, over- the designation A.C.I.I. and “Chartered Insurer,” as well seeing regulatory matters, drafting reinsurance agree- as an Associate of The Chartered Institute of Arbitrators, ments and corporate contracts, and commutations. London, where he hold the designation of A.C.I.Arb. Ms. Kaminsky served on the Board of Directors of CRC. His current and past board directorships include Gothaer PAGE 24

U.S.A. Inc., New York (President); Seaboard North Mr. Thornton began his legal career in Miami over thirty- American Holdings, Vancouver; Seaboard Life Insurance five years ago. He has practiced a wide variety of in focus Company (USA); VASA Insurance Group of Companies, defense litigation, including personal injury, environmen- Indianapolis; The German-American Round Table, New tal torts, governmental liability, commercial liability, pro- York; United Americas Insurance Co., New York; GAN fessional liability, including medical and dental malprac- Anglo Insurance Co., New York; Lombard Continental tice, hospital, ER, nursing home, and ALF defense, and Insurance PLC, London (Chairman); Groupe Barthelemy coverage disputes for insurers and insureds. In 1968, he Peter A. Insurance, Paris; InterContinental Insurance, Sao Paulo, formed the partnership of Stephens, Demos, Magill & Scarpato Brazil; Continental Insurance U.K. Ltd; Continental Thornton. In 1976, he formed his own firm John W. Insurance (Europe) Ltd; The Corinthian Group, New Thornton, P.A., which now operates in conjunction with Jersey; The Americas Group Inc, New Jersey. the law firm of Thornton & Mastrucci. Peter Reid holds insurance intermediary licenses in major Over the years, Mr. Thornton, in addition to successfully states, as well as Reinsurance and Surplus Lines interme- trying hundreds of lawsuits, has also served the legal diary licenses. He is British born and a naturalized US profession through chairmanships of and membership in citizen since1982. He is not a lawyer, but rather a sen- numerous professional organizations, including the ior level industry executive with strong operating experi- American Bar Association, International Association of ence in the insurance/reinsurance business both domes- Defense Counsel, Federation of Insurance and Corporate tically and internationally. He believes strongly in ADR Counsel, and Defense Research Institute. He has pre- and the special value that seasoned professionals with sented and prepared over seventy speeches and articles John W. strong industry background can bring to the arbitration for lawyers, insurance claims personnel, and other pro- Thornton, Sr. process. fessionals. Mr. Thornton has also produced expert analy- ses and expert testimony concerning insurance coverage Peter A. Scarpato and bad faith litigation, as well as providing state and federal legislative support in tort and insurance matters. Peter Scarpato is the Chief Operating Officer of AIG’s Global Surety Division and Vice President - Counsel of Michael J. Toman its Run Off Divisions. Mr. Scarpato’s 18-year career as an in-house legal officer Michael Toman’s reinsurance career began in 1973 with and management executive for both active and run off, General Reinsurance Corporation in their pricing/actuari- domestic and international insurance and reinsurance al department where he worked closely with their actu- companies makes him uniquely qualified to fully consid- aries developing year-end IBNR studies. Subsequently he Michael J. er the business, legal and strategic aspects of every drafted reinsurance agreements for two years, develop- Toman case. During that time, he has participated as sole and ing their first standard contract library. Finally he panel arbitrator, counsel, mediator, negotiator, and party worked as an account assistant in their treaty marketing in hundreds of arbitrated and litigated disputes and department. negotiated settlements. His combination of active and Mr. Toman then spent the next fifteen years at National run off experience has required him to understand and Reinsurance Corporation, starting in 1981 as an resolve virtually all of the most common, and many less Assistant Secretary in the treaty underwriting depart- common, issues from all sides of the business, including ment and was promoted into areas of increasing respon- assumed and ceded reinsurance, primary and excess sibility, which led to his appointment as Senior Vice insurance, bankruptcy and liquidation, and other less President, Manager of treaty underwriting and a mem- traditional matters (e.g., surety, warranty). ber of National Re’s internal Board of Directors. In addition to his ARIAS•U.S. certification, he partici- Significant accomplishments included the formulation of pates in several arbitration and mediation organizations, corporate positions and new products in response to including the Reinsurance Association of America, as changing accounting regulations including finite risk Certified Arbitrator for the NASD and New York Stock products, the introduction of actuarial techniques to the Exchange, and as mediator for the Federal District Court treaty rating process, the institution of comprehensive for the Eastern District of NY and MediateArt program underwriting reviews as a service to clients and sponsored by Volunteer Lawyer for the Arts in New prospects, and the production and negotiation of com- York. plex reinsurance transactions. Mr. Scarpato is a licensed attorney in and for the State Subsequent to the purchase of National Re by General and Federal Courts of New Jersey and New York, and Re, he was recruited by PXRE Reinsurance Corporation in the United States Supreme Court. He is a member of 1998 as Executive Vice President and a member of its the American Bar Association, New Jersey and New internal Board of Directors to establish and manage the York State Bar Associations and Association of the Bar start-up of its direct writing treaty division. In 2001, he for the City of New York. was hired by CNA Re as Executive Vice President to manage their standard lines, surplus lines and catastro- John W. Thornton, Sr. phe divisions. In 2002, Mr. Toman established MJT, LLC an independ- John Thornton grew up in northwestern Ohio and ent consulting firm specializing in the following areas: received his undergraduate degree from Notre Dame. Arbitration, Underwriting Reviews, Forensic He served three years as an officer in the U.S. Navy, Investigations, Strategic and Operational Planning, before returning to Notre Dame Law School, where he Runoff and Records Analysis. graduated second in his class in 1956. Mr. Toman holds both BA and MBA degrees from the 25 PAGE University of Connecticut. Andrew S. Walsh James Veach Andrew Walsh is Senior Vice President and General in focus Counsel of Legion Insurance Company (In James Veach grew up near Carbondale, Illinois. He Rehabilitation), joining the company upon its acquisition attended Vanderbilt University and then NYU Law by Mutual Risk Management Ltd. in 1987. At Legion, School, a fateful decision that turned him, at least in he has been involved in developing many innovative the eyes of his boyhood friends, into a New Yorker. captive, rent-a-captive and alternative risk transfer prod- James After several years with the Manhattan District ucts. In his capacity as head of the legal department, Veach Attorney’s Office, Mr. Veach joined what was then Rein, he has been responsible for managing the dispute reso- Mound & Cotton. He never left. A veteran of many lution function, involving matters with reinsurers, years of insurance litigation and reinsurance arbitration, agents, brokers, and insureds. His duties also include he now concentrates his practice on reinsurance arbitra- providing legal counsel on regulatory, employment law, tion and litigation, insurance (and reinsurance) regulato- corporate, and contract issues. ry matters, and insurer (and reinsurer) insolvency. In May 2002, he established an independent arbitration Over the years, he has arbitrated and litigated questions and consulting practice, specializing in property and concerning a variety of property, liability, and life/health casualty, workers’ compensation, accident and health treaties. These disputes involved issues ranging from treaty and facultative reinsurance, and agent, broker, the allocation of Agent Orange losses, to the applica- TPA and MGA dispute resolution. Andrew tion of sunset clauses, to the determination of per risk From 1982 to 1987, Mr. Walsh served in various capaci- S. Walsh and per occurrence limits, to fact-specific late notice ties in the legal department of Colonial Penn Group, and misrepresentation problems. providing regulatory counsel and litigation management Mr. Veach has tried a reinsurance case to a jury, and services, with emphasis on reinsurance and managing argued the scope of the Federal Arbitration Act before general agency disputes. From 1980 to 1982, he was the Second Circuit. He is particularly interested in how in private practice, where his practice concentrated on motion practice, the fine points of the hearsay rule, and union labor law issues. other litigation devices have gradually migrated from Mr. Walsh is a member of ARIAS•U.S., the American, the courtroom to the arbitration panel. See, e.g., Pennsylvania and Philadelphia Bar Associations, the Confirming Confidential Arbitration Awards in “Open Delvacca Chapter of the American Corporate Counsel Court,” Mealey’s Report: Reinsurance (December 30, Association, and is former chair of the Philadelphia 1999). Association of Corporate Insurance Counsel. He gradu- Mr. Veach is a frequent speaker at insurance and rein- ated from the New York University School of Law in Ronald L. surance seminars and gatherings sponsored by 1979 and Union College in 1976. He obtained his Wobbeking Mealey’s, PLI, American Conference Institute, and the Chartered Life Underwriter designation in 1985. He is Reinsurance Contract Wording Discussion Group, and admitted to practice in Pennsylvania. has participated in ARIAS•U.S.-sponsored seminars, as well. He has written for Best’s Review, Mealey’s, Global Ronald L. Wobbeking Reinsurance, the Environmental Claims Journal, and other publications. Ronald Wobbeking is an actuary by training. His entire He has argued (not always successfully) for arbitration working career was at Allianz Life Insurance Company with the receivers of insolvent insurance or reinsurance of North America (formerly North American Life & companies. Stephens v. American International, 66 F. Casualty). He retired as President in 1999 and was 3d 41 (2d Cir. 1995); Corcoran v. Ardra Insurance Co., responsible for all Accident, Health and Group Life 566 N.Y.S.2d 575 (N.Y. Ct. App. 1990). He has seen insurance and reinsurance, as well as Individual Life the rehabilitation, liquidation, and winding-up process reinsurance. He was also responsible for all Variable from at least three angles – acting on behalf of cedants, Life and Annuity operations for three years. reinsurers, and receivers – and been involved in many He served as Chair and CEO of Preferred Life Insurance U.S., U.K., and Bermuda insolvency proceedings. He is Company of New York, a wholly owned subsidiary mar- looking forward to arbitrating for or against cedants, keting variable and group insurance programs, Chair of reinsurers, retrocessionaires, and receivers immersed in North American London Underwriters that provided next wave of insurance and reinsurance failures. See, $75 million of corporate capital to Lloyds, and Chair of “Buffet Letter Raises Concerns on Reinsurer Not Paying Ultralink that provided nationwide network services for Claims,” WSJ, p. C11, March 11, 2003. health programs offered to multi-state employers. Mr. Veach resides in Teaneck, New Jersey with his wife, Mr. Wobbeking served on the Board of Directors for Deborah, also an attorney, and Zachary, an accom- Health Insurance Association of America (HIAA) for sev- plished middle-school trumpet player who recently dis- eral years, as a member of its Executive Committee, and covered the electric guitar. as Secretary and Chair of the Membership and Ethical Standards Committee. He was Chairman of the Nontraditional Marketing section of the Society of Actuaries and Chair of the Twin Cities Actuarial Club. Mr. Wobbeking has served on committees of various Biographies of all certified industry organizations – Group Insurance Company arbitrators are online at Committee, the PIMA Advisory Committee and Group www.arias-us.org Officers Round Table Committee for HIAA. PAGE 26 case notes Panel’s Monetary Award corner Upheld as Not “Indefinite” or the Product of a “Rough Case Notes Corner is a regular feature Justice” Compromise in which Ron Gass reports on a by RONALD S. GASS*, The Gass Company, Inc. on which to vacate an award, the district court held that the monetary award was significantcourt Reinsurance arbitration panels frequently “clear, final and definite” on the issues sub- order monetary awards that are not derived decision related mitted to the panel regarding the managing in a strict arithmetic fashion but rather agent’s alleged maladministration of the war- to arbitration. reflect a balancing of the relative equities ranty program. Thus, it rejected the cedent’s involved in the dispute based on the evi- argumentthatthe award was “indefinite” dence. The question of whether such awards because it did not take into account the rein- may be vacated on the grounds that they are surers’ ongoing contractual payment obliga- too “indefinite” or the product of a “rough tions and that it should be treated as an off- justice” compromise in violation of the setting credit against monies the reinsurers Federal Arbitration Act was the subject of a allegedly owed itand notas a lump sum recentIllinois federal districtcourtruling con- payable to them outright. The award could firming a panel’s contract damages award. only be vacated, according to the court, if it In this dispute, the cedent wrote certain war- was notsufficiently clear and specific enough ranty contracts administered by a managing to be enforced, which was not the case here. agent in the context of a 100% fronting With regard to the cedent’s “rough justice” arrangement. In the wake of huge losses, the compromise argument, the court was not reinsurers soughtrescission of the reinsur- persuaded that the panel had ignored the ance agreement or, alternatively, breach of rule of law in fashioning its award in light of contract damages due to the managing the court’s review of the hearing record and agent’s alleged maladministration of the post-hearing briefing. Even if the panel had program. Following an eight-day hearing, made an “equitable” decision, the court con- the panel denied the reinsurers’ rescission cluded that the cedent had waived applica- claim butawarded $4.82 million arising from tion of a “strict rule of law” standard given the agent’s payment of uncovered claims, both parties’ reliance on, inter alia, general unreported claims, and late reported claims; legal principles regarding agency, industry unreported premiums; and lost investment custom, and “business fairness” rather than income, stating that its decision reflected strict adherence to the governing state law. “the panel’s evaluation of the relative respon- sibilities of the parties for the problems Commenting on this case, several U.K. corre- resulting from the Reinsurance Agreements.” spondents of mine indicated that English courts would probably reach a similar result In its motion to vacate, the cedent argued in under § 46(1) of the Arbitration Act of 1996, *Mr. Gass is an ARIAS-U.S. Certified federal districtcourtthatthe panel’s mone- Arbitrator providing reinsurance and which applies to all arbitrations commenced tary award violated § 10(a)(4) of the Federal insurance dispute resolution services after January 31, 1997. This provision reported- to the industry as an umpire and Arbitration Act, which provides that an ly departs from the old rule that English arbi- party-appointed arbitrator. award may be vacated by the court “[w]here trators were bound to apply the law strictly He may be reached via E-mail at the arbitrators exceeded their powers, or so [email protected] or through his and now authorizes them to reach equitable imperfectly executed them that a mutual, Web site at www.gassco.com. If you or compromise resolutions that may not be would like to receive his occasional final, and definite award upon the subject strictly aligned with the applicable law. reinsurance case notes by E-mail, matter submitted was not made.” Observing please send him a request, and he will be delighted to add you to his mailing that the scope of its review of the panel’s Certain Underwriters at Lloyds’ v. BCS list. Copyright © 2002 by The Gass decision was “grudgingly narrow” and that Insurance Co., No. 01 C 1374, 2003 U.S. Dist. Company, Inc. All rights reserved. “mere ambiguity” was an insufficient basis LEXIS 83 (N.D. Ill. Jan. 3, 2003). 27 PAGE George F. Adams Robert B. Green Dr. Herbert Palmberger John P. Allare Thomas A. Greene David R. Robb arias•u.s. Howard N. Anderson Alfred Edward Gschwind James P. Powers David Appel Mark S. Gurevitz Peter F. Reid Richard S. Bakka Martin Haber John H. Reimer certified Nasri H. Barakat Franklin D. Haftl Robert Reinarz Linda Martin Barber Robert F. Hall Debra J. Roberts arbitrators Frank J. Barrett Robert M. Hall Robert L. Robinson Peter H. Bickford Lawrence F. Harr Edmond F. Rondepierre (As of February 28, 2003) John W. Bing James S. Hazard Angus Ross John H. Binning Charles W. Havens, III Peter A. Scarpato

Paul D. Brink Paul D. Hawksworth Daniel E. Schmidt, IV Although ARIAS•U.S. believes George A. Budd John Harlan Howard James A. Shanman certification is a significant Janet J. Burak Robert M. Huggins Richard M. Shusterman and reliable indication of an Mary Ellen Burns Ian Hunter QC Richard D. Smith individual’s background and experience, it should not be John R. Cashin Wendell Ingraham Walter Squire taken as a guarantee that Marvin J. Cashion Ronald A. Jacks J. Gilbert Stallings every certified member is an Robert Michael Cass I. Davis Jessup Jack M. Stoke appropriate arbitrator for Dewey P. Clark Bonnie B. Jones C. David Sullivan every dispute. That determi- Peter C. Clemente Leo J. Jordan Paul C. Thomson nation should be preceded by William Condon Sylvia Kaminsky Bert M. Thompson a review of several factors, James Corcoran James I. Keenan N. David Thompson including but not limited to, the applicable arbitration pro- Carol K. Correia T. Richard Kennedy Kevin J. Tierney vision, potential conflicts or Dale C. Crawford William M. Kinney Michael J. Toman bias and the type of business John J. Cuff Floyd H. Knowlton John J. Tickner involved in the dispute. In Patrick Cummings Eric S. Kobrick John W. Thornton addition, ARIAS•U.S. wishes Paul E. Dassenko Anthony M. Lanzone Thomas M. Tobin to acknowledge that its certi- Donald T. DeCarlo Mitchell L. Lathrop James Veach fied arbitrators are not the John B. Deiner Jim Leatzow Theodore A. Verspyck only qualified arbitrators. As noted above, the Society is Theodor Dielmann Lydia B. Kam Lyew Jeremy R. Wallis gratified that many of the Anthony L. Di Pardo Peter F. Malloy William J. Wall most respected practicing James F. Dowd Andrew Maneval Andrew S. Walsh arbitrators sought and Charles Ernst Robert M. Mangino Paul Walther obtained certification from Peter J. Flanagan Merton E. Marks Richard G. Waterman ARIAS•U.S. Others who are Charles M. Foss Richard E. Marrs Norman M. Wayne similarly qualified and experi- Caleb L. Fowler Walter R. Milbourne Emory L. White enced, have not yet sought certification. William W. Fox, Jr. Robert B. Miller Richard L. White James H. Frank Edwin Millette W. Mark Wigmore Peter Frey Lawrence Monin Michael S. Wilder

Ronald S. Gass Jeffrey L. Morris P. Jay Wilker Searchable biographies Dennis C. Gentry Gerald F. Murray Ronald L. Wobbeking of all certified arbitrators Ernest G. Georgi Thomas Newman Eugene Wolllan are online at William J. Gilmartin Charles L. Niles, Jr. www.arias-us.org George A. Gottheimer, Jr. Robert J. O’Hare, Jr. PAGE 28 • David Appel Dennis C. Gentry Daniel E. Schmidt, IV arias u.s. Richard S. Bakka William J. Gilmartin Richard D. Smith Frank J. Barrett George A. Gottheimer, Jr. Jack Stoke Peter H. Bickford Thomas A. Greene Thomas M. Tobin umpires John W. Bing Martin D. Haber Bert M. Thompson John H. Binning Franklin D. Haftl N. David Thompson (As of February 28, 2003) Mary Ellen Burns Robert F. Hall Paul C. Thomson III R. Michael Cass Robert M. Hall Richard G. Waterman Dale Crawford Paul D. Hawksworth W. Mark Wigmore The ARIAS•U.S. Umpire List is Peter C. Clemente Robert F. Huggins Ronald L. Wobbeking comprised of ARIAS•U.S. Certified Arbitrators who Paul Dassenko Ronald A. Jacks Eugene Wollan have provided ARIAS•U.S. Donald T. DeCarlo Peter F. Malloy with satisfactory evidence of John B. Deiner Robert M. Mangino having served on at least Anthony L. DiPardo Charles L. Niles, Jr. three (3) completed (i.e. a final award was issued) Caleb L. Fowler Herbert Palmberger insurance or reinsurance James H. Frank James J. Powers arbitrations. Peter Frey Edmond F. Rondepierre

BOARD OF DIRECTORS Thomas L. Forsyth ADMINISTRATION AIDA REINSURANCE & Swiss Reinsurance America Corp. INSURANCE ARBITRATION SOCIETY Chairman Treasurer www.arias-us.org 175 King Street, Armonk, NY 10504 Daniel E. Schmidt, IV Phone: 914-828-8660 Richard L. White Dispute Resolution Services Int’l Email: [email protected] Integrity Insurance Company 628 Little Silver Point, 49 EastMidland Avenue Little Silver, NJ 07739 Mark S. Gurevitz Paramus, NJ 07652 Phone: 732-741-3646 The Hartford Financial Phone: 201-634-7222 Email: [email protected] Services Group, Inc. Email: [email protected] Hartford Plaza, Hartford, CT 06115 President Vice President Charles M. Foss Phone: 860-547-5498 Email: [email protected] Stephen H. Acunto Travelers Property Casualty Corp. President, CINN Worldwide, Inc. One Tower Square – 1FG, Christian M. Milton 35 Beechwood Ave, Mt. Vernon, NY 10553 Hartford, CT 06183-6016 AIG Reinsurance Services Phone: 914-699-2020, ext. 110 Phone: 860-277-7878 110 Williams Street - 15th Fl., Email: [email protected] Email: [email protected] New York, NY 10038 Executive Director President Elect Phone: 212-266-5800 Email: [email protected] Corporate Secretary Thomas S. Orr William H. Yankus GeneralCologne Re Eugene Wollan Vice President, CINN Worldwide, Inc. 695 East Main Street, Stamford, CT 06901 Mound Cotton Wollan & Greengrass 35 Beechwood Ave., Mt. Vernon, NY 10553 Phone: 203-328-5454 One Battery Park Plaza, Phone: 914-699-2020, ext. 116 Email: [email protected] New York, NY 10004 Email: [email protected] Vice President Phone: 212-804-4222 Email: [email protected] Thomas A. Allen White and Williams LLP 1800 One Liberty Place, Philadelphia, PA 19103-7395 Chairman Phone: 215-864-7001 Emeritus T. Richard Kennedy Email: [email protected] Directors Vice President Emeritus Charles W. Havens, III Mary A. Lopatto Ronald A. Jacks LeBoeuf, Lamb, Greene & MacRae LLP Susan Mack 1875 Connecticut Ave. N.W., Ste. 1200 Robert M. Mangino Washington, D.C. 20009-5728 Charles L. Niles, Jr. Phone: 202-986-8029 Edmond F. Rondepierre Email: [email protected] 29 PAGE Members . . . News About You and Your Activity

A new feature of the ARIAS•U.S. Quarterly, starting with this issue, is a section reporting on news of ARIAS members. “ARIAS Members on the Move” (on page 13) For this section to be valuable, we need you to tell us what has happened recently in your life thatyou feel fellow members mightwantto know about. Fill out the form below and send it in or just type the information into an email message to Bill Yankus with the subject “Quarterly News.” Tell us abouta job or company change, recenthonors or promotions, major events in your business, community, or personal life. Or just let us know about changes in your contact information. We’ll use it to update our database and list it for other members to bring their Palm Pilots up to date.

Name Type of change (please indicate with a check): ❏News ❏Address ❏Phone ❏Fax ❏E-mail

Fax or mail this sheet, or just send an email with the information to [email protected]. If you mail itin, send to ARIAS•U.S., 35 Beechwood Ave., MountVernon, NY 10553 If you fax it, send to 914-699-2025. PAGE 30

Do you know someone who is interested in learning more about ARIAS•U.S.? If so, pass on this letter of invitation and membership application. AN INVITATION…

The rapid growth of ARIAS·U.S. (AIDA Reinsurance & Insurance Arbitration Society) gives testimony to the accept- ance of the Society since its incorporation. Through numerous conferences, seminars, and literature, and through the establishment of an ambitious certification process, ARIAS·U.S. is realizing its goals. Today, ARIAS·U.S. is com- prised of 261 individual members and 41 corporate memberships totaling 425 members, of which 119 have been cer- tified as arbitrators. In addition, ARIAS·U.S. in recent years has added to its list of accomplishments the launching of the ARIAS·U.S. Umpire Appointment Procedure and the approval of CLE "Accredited Provider Status" by the New York State Continuing Legal Education Board. The Umpire Appointment Procedure includes a unique software program, created specifically for ARIAS·U.S., that randomly generates the names of umpire candidates from a list of ARIAS·U.S. arbitrators who have served on at least three completed arbitrations. The procedure is free to members and available at a nominal cost to non-members. The CLE Accredited Provider Status allows those who attend ARIAS·U.S. conferences and seminars to earn CLE credits in the areas of professional practice, practice management, skills and ethics. ARIAS·U.S. is proud to be on the list among other prestigious Accredited Provider organizations. ARIAS·U.S. also produces a Member Directory with Certified Arbitrator and Umpire Listings, the Practical Guide to Reinsurance Arbitration Procedure, and Guidelines for Arbitrator Conduct. These publications, as well as a Quarterly review, special member rates for seminars and workshops, and access to certified arbitrator training are among the benefits of membership in ARIAS-U.S. In recent years, ARIAS·U.S. has held seminars across the county, including Chicago, Marco Island, San Francisco, San Diego, Philadelphia, Baltimore, Boston, Miami, New York City, Puerto Rico, and Bermuda. The Society brings together many of the leading professionals in the field and serves as an educational and training forum. We invite you to enjoy all its benefits by becoming a member of this prestigious Society. If you are interested in learning more about the organization or membership, examine the many information areas of this web site. If you have questions, contact Bill Yankus, Executive Director, at [email protected] or 914-699- 2020, ext. 116. Join us, and become active in ARIAS·U.S. – the industry's best forum for insurance and reinsurance arbitration pro- fessionals.

Sincerely,

Daniel E. Schmidt, IV Charles M. Foss Chairman President 31 PAGE

AIDA Reinsurance & Insurance Arbitration Society Membership 35 BEECHWOOD AVENUE MT. VERNON, NY 10552 PHONE: 914.699.2020 Application FAX: 914.699.2025 WWW.ARIAS-US.ORG

ARIAS•U.S. is a not-for-profit corporation that promotes the improvement of the insur- NAME & POSITION: ance and reinsurance arbitration process for the international and domestic markets. The Society provides continuing in-depth seminars in the skills necessary to serve effectively on COMPANY or FIRM: an insurance/reinsurance panel. The Society, through seminars and publications, seeks to make the arbitration process meet the needs of today’s insurance/reinsurance market place by: STREET ADDRESS: Training and certifying individuals qualified to serve as arbitrators and/or umpires by virtue of their experience, good char- acter and participation in ARIAS•U.S.- sponsored training sessions; CITY/STATE/ZIP Empowering its members to access certified arbitrators/umpires and to provide input in developing efficient economical and just methods of arbitra- PHONE: FAX: tion; and Providing model arbitration clauses and rules of arbitration. E-MAIL ADDRESS: Membership is open to law firms, corpora- tions and individuals interested in helping to achieve the goals of the Society. MEMBERSHIP BENEFITS Benefits of membership include the Fees and Annual Dues: Effective 2/28/2003 newsletters, special rates for INDIVIDUAL CORPORATION & LAW FIRM seminars/workshops, membership directory, access to certified arbitrator INITIATION FEE: $500 $1,500 training, model arbitration classes and practical guidance with respect ANNUAL DUES (CALENDAR YEAR)*: $250 $750 to procedure. FIRST-YEAR DUES AS OF APRIL 1: $167 $500 (JOINING APRIL 1 - JUNE 30)

Complete information about ARIAS•U.S. is FIRST-YEAR DUES AS OF JULY 1: $83 $250 (JOINING JULY 1 - SEPT. 30) available at www.arias-us.org. Included are current biographies of all certified arbitra- TOTAL (ADD APPROPRIATE DUES TO INITIATION FEE) $ $ tors, a calendar of upcoming events, and online registration for larger meetings. * Member joining after October 1 is considered paid through following calendar year. FAX: (914) 699-2025 NOTE: Corporate memberships include up to five designated representatives. Additional designated representatives are available for an additional $150 per individual, per year. (914) 699-2020, ext. 116 Names of designated corporate representatives must be submitted on corporation/organiza- EMAIL: [email protected] tion letterhead or by email from the corporate key contact and include the following infor- mation for each: name, address, phone, fax and e-mail. PAYMENT BY CHECK: ENCLOSED IS MY CHECK IN THE AMOUNT OF $______PLEASE MAKE CHECKS PAYABLE TO ARIAS•U.S. (FED. I.D. NO. 13-3804860) AND MAIL WITH REGISTRATION FORM TO: ARIAS•U.S. P.O. BOX 9001, MT. VERNON, NY 10552

PAYMENT BY CREDIT CARD (FAX OR MAIL): PLEASE CHARGE MY CREDIT CARD: AMEX VISA MASTERCARD FOR $______ACCOUNT NO.: ______EXP. ____/____/____

CARDHOLDER’S NAME (PLEASE PRINT): ______CARDHOLDER’S ADDRESS: ______SIGNATURE: ______FIRST CLASS U.S. POSTAGE PAID PO Box 9001 WHITE PLAINS, NY Mount Vernon, New York PERMIT NO. 5007 10552