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einsurance agreement between Continental and Kansa Re, the other
insolvent company involved in this proceeding, had been commenced prior
to the issuance of an injunction in the ancillary proceeding prohibiting
actions, proceedings and arbitrations against the insolvent foreign
companies. Continental withdrew its objection to the injunction upon the
court’s order that the arbitration could continue. Kansa General agreed that
the arbitration could continue. Although the arbitration was between
Continental and Kansa Re, Kansa General had posted the letter of credit that
the arbitrators had directed Kansa Re to post as security for a possible
award in favor of Continental. Shortly after the injunction was issued, the
arbitrators awarded Continental an amount in excess of the letter of credit
that Kansa General had posted. Kansa General opposed Continental’s
motion to compel Kansa General to participate in the arbitration on the
ground that Kansa Re, and not Kansa General was the party to the
arbitration.
After a detailed examination of the relationship between Kansa Re and
Kansa General, including the fact that they filed for bankruptcy at the same
hour of the same day, the court decided that Kansa General could be
compelled to participate in the arbitration, even though it was not a
signatory to the arbitration agreement. The court observed that the posting
of the letter of credit by Kansa General manifested its intent to arbitrate
disputes under the reinsurance agreement with Continental, and ruled that it
would be unjust for a party to arbitrate a dispute and to then avoid the
arbitration agreement after losing the arbitration proceeding. In granting
Continental’s motion to compel Kansa General to participate in the
arbitration, the court stressed that Kansa General had originally agreed to
permit the arbitration to go forward and that Continental had withdrawn its
opposition to an injunction in exchange for being permitted to proceed with
the arbitration.
Knickerbocker Agency, Inc. v. Holz, 4 A.D.2d 71, 162 N.Y.S.2d 822 (1957),
affirmed, 4 N.Y.2d 245, 173 N.Y.S.2d 602, 149 N.E.2d 885. The insurance code
vests exclusive jurisdiction over all claims against an insolvent insurer in one
count. This prevails over a claimant's contractual right to arbitration. The
court was not moved by the fact that arbitration was sought as a defense and
not to establish a claim. The court also found unpersuasive the fact that the
claimant instituted arbitration proceedings after the insurance commissioner
and commenced an action against the claimant, which was separate from the
liquidation proceedings.
Reliance Ins. Co. v. First Class Coverage, Inc., No. 15 CIV. 2269 (NRB), 2005 WL
2276877 (S.D.N.Y. Sept. 14, 2005). The court granted the liquidator’s petition to
compel arbitration in an action by the insolvent insurer for alleged breach of a
program manager agreement. The agreement contained an arbitration clause
encompassing the dispute, and the court rejected the defendant program
manager’s argument that the insolvent insurer failed to comply with notice
requirements in the arbitration clause.
Universal Marine Ins. Co. Ltd. v. Beacon Ins. Co. and Cherokee Ins. Co., 592 F.
Supp. 948 (1984) on appeal from the W.D. North Carolina, District Ct. No. St‐C‐
83‐328. The parties, including a primary insurer, reinsurer and retrocessionaire,
began plans to develop a consolidated arbitration agreement, but the
reinsurer was placed in receivership, and the court stayed all actions against
the insolvent reinsurer. The primary insurer obtained a temporary restraining
order restricting the reinsurer and its receiver from interfering with the