Cont’l Cas. Co. v. Certain Underwriters at Lloyds of London
Issue Discussed: Motion to vacate supplemental arbitration orders
Submitted by JP Jaillet
Date Promulgated: August 23, 2021
Case: Cont’l Cas. Co. v. Certain Underwriters at Lloyds of London, No. 20-2892, 2021 U.S. App. LEXIS 25184 (7th Cir. Aug. 23, 2021)
Issue Discussed: Motion to vacate supplemental arbitration orders
Court: United States Court of Appeals for the Seventh Circuit
Date Decided: August 23, 2021
Issue Decided The Seventh Circuit affirmed a District Court decision confirming supplemental arbitration orders, which clarified an earlier arbitration award
Submitted by J.P. Jaillet*
Continental Casualty Company and Continental Insurance Company (“Continental”), the cedents, and Certain Underwriters and Lloyd’s of London (“Lloyd’s), the reinsurer, were parties to reinsurance treaties that contained arbitration and honorable engagement clauses.
Continental and Lloyd’s arbitrated a dispute concerning how reinsurance limits and retentions should be calculated under the treaties with respect to multi-year losses. The arbitration Panel issued an award (the “Award”) finding in Lloyd’s favor.
Continental submitted a motion to the Panel requesting that it clarify whether the award applied with respect to: (i) past billings only; or (ii) past and future billings. The Panel issued supplemental orders (the “Supplemental Orders”) specifying that Lloyd’s had fully discharged “their past, present and future obligations” for asbestos losses for three specified accounts.
Continental filed a petition in the U.S. District Court for the Northern District of Illinois seeking to confirm the Award, but to also vacate the Supplemental Orders. The District Court confirmed the Award and the Supplemental Orders.
On appeal, the Seventh Circuit affirmed. The Court rejected Continental’s argument that the Supplemental Orders exceeded the Panel’s authority. The Court reasoned that the treaties’ honorable engagement clauses empowered the arbitrators with wide discretion to fashion appropriate remedies, including rulings with respect to future billings.
The Court also rejected the argument that there was no “possible interpretive route” to reach the Supplement Orders. The Court reasoned: “The arbitrators may have thought that the only way to implement the purpose of the agreement was to preclude all of the asbestos bills for the three named companies. The [treaties] gave them the power to resolve the case on general principles, not just legal entitlements, and that seems to be what they did.”
* J.P. Jaillet is a Partner at Choate, Hall & Stewart, LLP
