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Pine Top Ins. Co. v. Continental Reins. Corp., No. 88‐5402, (N.D. Ill. Oct. 5,
1988). The court denied defendant reinsured's motion to compel arbitration
where a dispute between a reinsurer's liquidator and reinsured concerned an
alleged voidable preference. The court ruled that although the agreement
between the parties stated that any dispute between the parties with respect
to interpretation of the agreement would be submitted to arbitration, a
dispute as to whether a transfer is a voidable preference is not a dispute
relating to the interpretation of the agreement and thus is not subject to the
arbitration clause.
Schacht v. Hartford Fire Ins. Co., 1991 U.S. Dist. LEXIS 12145 (N.D. Ill. Aug. 30,
1991). The Rehabilitator of an insolvent insurer, Centaur, sued several
companies, including the defendant, alleging fraudulent conspiracy,
concealment, and breach of duty in the formation and maintenance of a
reinsurance pool. Because the reinsurance contracts provided that "any
dispute arising out of" the contracts must be arbitrated, several defendants
moved to stay litigation pending arbitration. The Director argued that he
should be able to proceed with the non‐arbitrable claims against the
defendants who were not signatories on the reinsurance contracts.
Although the court agreed that several of plaintiff's claims against nonsignatory
defendants did not implicate the arbitration clause, the court
nonetheless ordered a stay of litigation on all claims, pending the completion
of arbitration, because most of the non‐arbitrable claims involved the same
general facts as the claims which were subject to arbitration. The court
ruled that to hold otherwise would lead to potentially inconsistent outcomes
and inefficient use of judicial resources.
Schacht v. Hartford Fire Ins. Co., 1991 U.S. Dist. LEXIS 16430 (N.D. Ill. Nov. 6,
1993). The court held that a parent insurance company was entitled to
arbitrate claims against it where its subsidiary was a signatory to an
arbitration clause in a reinsurance contract with the plaintiff despite the fact
that the parent had no agreement to arbitrate. Arbitration is appropriate
where claims against the subsidiary and its nonsignatory parent are identical,
where the results of the arbitration would impact conclusively on the parent
and where the claims stem from the relationships created by the reinsurance
contract. Moreover, the court held that all discovery should be stayed
where arbitrable and nonarbitrable claims are intertwined to avoid
unnecessary confusion and potential inconsistent outcomes.
Selcke v. New England Ins. Co., No. 92‐C‐5599 (N.D. Ill. Oct. 27, 1992).
Rehabilitator sued insurance company for breach of contract arising out of
amounts allegedly due under three reinsurance contracts. Defendant reinsurer
moved for stay pending arbitration, based on contractual provision for
arbitration "should an irreconcilable difference of opinion arise as to the
interpretation of" the agreement. Court denied stay, despite federal policy
favoring arbitration, on the ground that reinsurer, which attached letter to
motion apparently conceding liability and asserting set‐off as an affirmative
defense, failed to show that dispute involved a contractual interpretation
issue.
Missouri Ainsworth v. Allstate Insurance Company, 634 F. Supp. 52 (W.D. Mo. 1985).
The receiver of two insolvent insurance carriers sought to set aside the
mandatory arbitration provisions contained in reinsurance contracts between
the companies and the reinsurer. In upholding the enforceability of the
arbitration clauses, the United States District Court for the Western District of
Missouri held: (i) the Federal Arbitration Act (the "FAA") favors the arbitration