In current arbitration practice, a panel's issuance of a final award does not necessarily mean the end of proceedings between the parties. One or both parties may choose to go to court to exercise rights under the Federal Arbitration Act, sometimes in an attempt to vacate the award but, more often, simply to have it confirmed so that it has the force of a court judgment. The rationale for invoking court assistance at the end of a private, confidential arbitration differs from case to case, the most straightforward being to facilitate collection of the award or to have the ability to enforce compliance. Other considerations may also come into play, but they should always be informed by the fact that it is increasingly difficult to ensure that an award will remain confidential once the court's jurisdiction is invoked.
For at least the past decade (if not longer), practitioners representing clients who elect to seek judicial confirmation have been keenly aware that filing a petition in court brings with it the risk that the award may become public knowledge, an outcome that is arguably at odds with the reinsurance industry's tradition of confidential and commercial dispute resolution. More often than not, courts across the country will deny requests to seal an award, unseal awards sua sponte and even grant motions to unseal by third-party intervenors (usually another company with exposure to the same claim or reinsurance contract). This last scenario may be of particular concern to a cedent who has "lost" an arbitration with one reinsurer but still seeks to collect from other reinsurers on the same claim.
With the unfavorable award made public, those other reinsurers now can attempt to introduce the decision into the record in their own arbitration with the cedent and argue that it should be given preclusive effect by the arbitrators.
It is a debate unto itself whether this new reality is a positive development— for example, by ensuring the same "fairness" inherent in the judicial process by preventing a party from taking multiple bites at the apple under the same treaties for the same claim—or just another example of how reinsurance arbitration has strayed from its original aim of ensuring efficient, businesslike, and (importantly) confidential dispute resolution. Whatever one's view, parties and their counsel should keep in mind all possible ramifications of simply filing a petition to confirm an award (even if no action is further taken in the proceeding), as recently seen in the Third Circuit.
The Penn National Award and Unsealing
Earlier this year, a long-running dispute between Pennsylvania National Mutual Casualty Insurance Company and one of its reinsurers, Everest Reinsurance Company, ended with the unsealing of an award from an arbitration to which Everest had not even been a party. Everest was able to obtain this result even though (1) Penn National had withdrawn its petition to confirm the award mere days after filing and (2) the district court had made no substantive decision based on the award or relied on it in any way.
This article was published in the ARIAS-U.S. Quarterly on September 1, 2021.
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