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completion of the plan of arbitration. The issue is now before the Fourth
Circuit.
Vesta Fire Ins. Corp. v. New Cap Reins. Corp., 244 B.R. 209 (Bankr. S.D.N.Y.
2000). Before insolvency of a reinsurer, the reinsured demanded arbitration as
provided in the reinsurance agreement to recover reinsurance proceeds.
Subsequently, an administrator was appointed and a stay was entered under
Australian law. The creditor filed a petition in bankruptcy court. The contractual
right to arbitrate did not preclude the bankruptcy court from deferring to the
Australian insolvency proceeding. The Bankruptcy Code, rather than the
Federal Arbitration Act governed, and the fact that arbitration was already
underway did not require an exception to the foreign injunction.
Washburn v. Corcoran, 643 F. Supp. 554 (S.D. N.Y. 1986). The court held that
the McCarran‐Ferguson Act barred application of the Federal Arbitration Act.
Consequently, the New York liquidator is not required to arbitrate the
reinsurance contract dispute between it and the Illinois rehabilitator, pursuant
to a reinsurance agreement containing an arbitration clause.
Ohio Benjamin v. Pipoly, 800 N.E.2d 50, 155 Ohio App. 3d 171 (Ohio Ct. App. 2003),
Compelling arbitration against the will of the liquidator interferes with the
liquidator’s powers. To compel arbitration would adversely affect the
insolvent insurer’s assets. The importance of the liquidation process trumps
any presumption in favor of arbitration. The Court held that absent express
statutory authorization for private arbitration to proceed despite the lack of
assent to the same on the part of the liquidator, the public policy of Ohio law
(expressed throughout Ohio Revised Code Chapter 3903) defeats the
attitude that courts should favor arbitration.
Covington v. American Chambers Life Ins. Co., 150 Ohio App. 3d 119 (Ohio Ct.
App. 2002). The Court reversed a trial court order which enforced an arbitration
clause against the liquidator of an insolvent insurance company. The Court
interpreted Fabe v. Columbus Ins. Co., 68 Ohio App. 3d 226 (1990) overruled by
Benjamin v. Pipoly, 155 Ohio App.3d 171 (Ohio Ct. App. 2003), to stand for the
proposition that enforcement of an arbitration provision is not mandatory if it
would affect the priority of claims or adversely affect a party to the liquidation
proceeding.
Fabe v. Columbus Ins. Co., 68 Ohio App. 3d 226 (1990), overruled by Benjamin
v. Pipoly, 800 N.E.2d 50, 155 Ohio App. 3d 171 (Ohio Ct. App. 2003). The court
held that the Superintendent of Insurance, as liquidator of insolvent insurance
company, was bound by binding arbitration provision in agreement between
insolvent insurer and reinsurers from whom Superintendent was attempting to
recover amounts allegedly owed; enforcement of arbitration provision did not
usurp trial court's exclusive jurisdiction over liquidation proceedings or
interfere with liquidator's statutory powers.
Hudson v. John Hancock Fin. Services, 2007 Ohio 6997 (Ohio Ct. App. 2007). The
Court affirmed the Pipoly decision stating that liquidators cannot be forced to
arbitrate. The Court also expanded the Pipoly decision, holding that the
liquidation of insurance companies under state law does not fall under the
Federal Arbitration Act due to “reverse preemption” by the Ohio Liquidation
Act. The Court also noted that Pipoly should be applied in instances where the
liquidator is attempting to obtain benefits under a reinsurance agreement while
repudiating an arbitration clause that conflicts with the purposes and policies of
the Legislation Act.