Third Circuit Upholds Order for New Arbitration Panel to Decide Consolidation Issue
Pa. Nat’l Mut. Cas. Ins. Co. v. New Eng. Reins. Corp., No. 19- 1805, 2019 U.S. App. LEXIS 36388 (3rd Cir. Dec. 6, 2019) (Not Precedential).
The cedent had arbitrated a dispute with two other reinsurers and then this arbitration arose with this reinsurer. The parties filed cross-petitions to compel arbitration, with the reinsurer seeking to compel arbitration before the prior arbitration panel. The cedent wanted the consolidation issue heard by a new panel of arbitrators and the reinsurer wanted the previous panel to hear the consolidation issue.
The fundamental question was whether the new dispute was the same as the previously arbitrated dispute. As the court noted, if the two disputes were the same, then under the reinsurance agreement the disputes would be consolidated and heard by the same panel of arbitrators that decided the first arbitration. The district court sent the consolidation question to a new panel of arbitrators and the reinsurer appealed.
The circuit court affirmed the district court’s order. The court held that the reinsurance agreement provided for a specific method of choosing arbitrators. Although the treaty provided that “if more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party,” the court stated that sending the consolidation question to the prior arbitration panel would invite the court to prejudge the consolidation question and ignore the express language of the reinsurance agreement. The court held that it could only compel arbitration of the consolidation issue before a new panel chosen according to the express terms of the agreement. Thus, the two disputes will be consolidated, according to the court, “if and only if” a new panel determines that the current dispute is the same as the prior dispute and that the new panel finds that the prior panel is still available to handle the new dispute.
In a footnote, the court stated that, in this case, the first panel had already issued a final award in a non-consolidated arbitration before the cedent sought to arbitrate with this reinsurer. Here, said the court, the consolidation issue was not before the first panel and, therefore, a new panel was necessary to resolve the consolidation issue.