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District Court Concluded that Confidentiality Agreement Executed as Part Of Arbitration is Not Subject to Arbitration

TRUSTMARK INSURANCE CO. V. JOHN HANCOCK LIFE INSURANCE CO.  (CIVIL ACTION NO. 09-3959. JANUARY 21, 2010

The parties to a reinsurance contract disagreed regarding whether certain businesses were part of the reinsurance contracts. As a result, they agreed to arbitration. As part of the arbitration, the parties entered into a Confidentiality Agreement under which the documents and the ultimate findings were subject to confidentiality. The arbitrators also signed the Confidentiality Agreement.

After that arbitration, another dispute arose and the parties again turned to arbitration. One of the parties selected an arbitrator from the first arbitration. The arbitrator was subject to the Confidentiality Agreement. While the second party was concerned with the arbitrator's ability to honor the agreement and the arbitrator himself expressed concern that it might be difficult to segregate the information, he was ultimately appointed.

At arbitration, the party prevailing in the first arbitration sought to "authorize use of all materials from the First Arbitration," and prohibit the matters resolved by the first panel from being relitigated. The arbitrator-in-common did not recuse himself from those deliberations, and the second panel determined that the Confidentiality Agreement extended to the second arbitration. The party aggrieved by the first arbitration (and breach of the Confidentiality Agreement) sought to enjoin the second arbitration on the basis that the Confidentiality Agreement was not subject to arbitration, and that the arbitrator-in-common breached the Confidentiality Agreement by ruling on extending the Confidentiality Agreement.

The court held that because the Confidentiality Agreement contained no arbitration clause, the parties could not be forced to arbitrate issues that they did not agree to arbitrate and granted the injunction.

The arbitration panel’s authority originates from the terms and conditions of the contract in question. If the arbitration provision does not include the necessary language to incorporate agreements which arise out of the dispute, courts may not extend the scope of the arbitration agreement to related agreements. Here, the parties could have included a provision to ensure the intent of the parties.

 For a copy of this decision, click here: http://tinyurl.com/rr-February-2010-Edition

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Jeffrey L. Kingsley, Goldberg Segalla, Insurance attorney
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Jeffrey Kingsley maintains an international practice that focuses on matters involving insurance and reinsurance coverage, commercial and regulatory issues, and extra-contractual liability arbitration and litigation. As a leader in Goldberg Segalla’s reinsurance practice he has extensive experience handling and consulting clients on complex reinsurance allocation issues, regulatory issues, arbitrations, transactional issues, and disputes involving the follow-the-fortunes doctrine.

Jeff provides comprehensive legal representation for Fortune 500 companies, insurers,...

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Thomas F. Segalla, Insurance Attorney, Goldberg Segalla Law Firm

Thomas F. Segalla, is the co-author of the renowned insurance law treatise Couch on Insurance 3d and is one of the founding partners of the firm.  Mr. Segalla is a nationally recognized reinsurance and insurance expert who has been retained by numerous insurance carriers and policyholders.  His active practice focuses on the defense and insurance coverage aspects of matters involving bad faith; construction site personal injury accidents (Labor Law §§ 200, 240(1) and 241(6)); and toxic tort and environmental issues. As a member of the Defense Research Institute (DRI), he is the Past Chair of the Insurance Law Committee and served on the Board of Directors and is the past Chair of the Law Institute. In addition, as a member of the Federation of Defense and Corporate Counsel, he is integrally involved in the relationship between the Insurance Industry and defense counsel. He has published and lectured extensively for many professional organizations.  Mr. Segalla possesses an AV rating from Martindale-Hubbell and has been named to the Top 50 of the New York Super Lawyers.

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