Century Indemnity Co. v. Certain Underwriters at Underwriters London, No. 19-11056

Issue Discussed: Arbitrability

Submitted by Martha Conlin

Date Promulgated: March 6, 2020

Case:                           Century Indemnity Co. v. Certain Underwriters at Underwriters London, No. 19-11056 (D. Mass. March 6, 2020)

Issue Discussed:         Arbitrability

Court:                         U.S. District Court for the District of Massachusetts

Dates Decided:           March 6, 2020 (request to reconsider denied October 26, 2020)

Submitted by:            Martha E. Conlin, Troutman Pepper LLP

Certain Underwriters at Lloyd’s, London (“Underwriters”) sought to enjoin an arbitration demand by Century Indemnity Company (“Century”).  Underwriters argued that the arbitration demand seeks to re-arbitrate claims resolved in a prior confirmed arbitration. The Court denied Underwriters’ motion to dismiss the petition to compel arbitration.  A motion to reconsider the dismissal was also denied in October 2020, maintaining the ruling that Underwriters must proceed to arbitration to resolve the dispute.

The matter involves the settlement of the sexual abuse claims against Boy Scouts of America (“BSA”).  BSA began submitting insurance claims to Century in the 1990s relating to lawsuits alleging that its troop leaders sexually molested minors.  Century settled the claims and sought reinsurance from Underwriters, which Underwriters denied.  Arbitration regarding these claims resulted in a confidential award, confirmed in late 2018.  Century subsequently demanded arbitration for additional billings.  Underwriters argued that arbitration award precluded Century’s request for future reimbursements.  In response, Century maintained that the previous arbitration did not preclude Underwriters’ obligation to arbitrate.  The Court agreed with Century and ruled that it could seek reinsurance recovery from Underwriters through an additional arbitration.  The Court reasoned that, “[t]he preclusive effect of an arbitration award is an arbitrable issue that is not for the court to resolve” and must be decided by an arbitrator, in accordance with the agreement between the parties.

Underwriters sought reconsideration of the order on the grounds that the Court applied the wrong legal standard to the dispute when ordering the claims to arbitration.  Underwriters argued that, per the choice of law provision, the case was governed by New York arbitration law, rather than the Federal Arbitration Act.  Specifically, Underwriters argued that “New York law requires this Court (not an arbitrator) to determine the applicability of the doctrine of res judicata.”  The Court denied the petition for reconsideration without further comment, again ordering the parties to resolve the dispute in arbitration.