Employers Ins. Co. of Wausau v. The Hartford

Issue Discussed: Consolidation of Arbitrations

Submitted by Robert DiUbaldo, Carlton Fields

Date Promulgated: December 3, 2018

CaseEmployers Ins. Co. of Wausau v. The Hartford, No. 2:18-cv-07240, 2018 U.S. Dist. LEXIS 205345 (C.D. Cal. Dec. 3, 2018)

Issue Discussed: Consolidation of Arbitrations

Court: U.S. District Court for the Central District of California

Date Decided: December 3, 2018

Issues Decided:  Where parties to reinsurance contracts disagree on whether several disputes between them should be consolidated in a single arbitration proceeding, and the relevant contracts are silent on the issue, does a court have the authority to compel a consolidated arbitration?

Submitted by: Robert W. DiUbaldo, Shareholder, Carlton Fields, P.A.

Employers Insurance Company of Wausau (“Wausau”) entered into various reinsurance treaties with The Hartford and its affiliates (collectively, “Hartford”).  A dispute arose between the parties when Wausau denied payment of amounts billed by Hartford under 19 of those treaties.  Although none of the treaties contained specific language addressing the consolidation of disputes arising thereunder, Hartford demanded arbitration against Wausau and requested that it name one arbitrator to form a single panel to preside over their dispute in one consolidated arbitration.  Wausau responded to the demand by proposing that the parties agree to three arbitrations – one for each of the Hartford affiliates – and appointed a party arbitrator for each such proceeding.  Hartford refused to proceed in this fashion and appointed a party arbitrator for a single consolidated arbitration or, alternatively, multiple arbitrations if the disputes proceeded in that manner.  After continued disagreement between the parties on this score, several lawsuits were filed by Wausau seeking to compel arbitration of the disputes.  At the time the various lawsuits were brought, there were no fully constituted arbitration panels in place for any of disputes between Wausau and Hartford involving the 19 treaties.

One the lawsuits was filed in California pursuant to the forum selection clause in the operative treaty.  That treaty’s arbitration clause also required that any dispute be resolved by a three-arbitrator panel and proscribed a method for umpire selection.  Wausau sought an order from the Court directing Hartford to proceed with the umpire selection process pursuant to the express language of the treaty.  Hartford cross-moved to compel arbitration, requesting that the Court order Wausau to participate in a single arbitration before a fully constituted panel in order to adjudicate the parties’ dispute regarding whether arbitration should proceed in a consolidated fashion with respect to all 19 treaties.

The Court began its analysis by noting that the consolidation issue was a question for the arbitrators, and not the Court, to decide, relying on several federal circuit court decisions that reached this conclusion.  However, because there was no panel in place, as required by the subject treaty’s arbitration clause, the Court found that there was “no one to whom the Court [could] refer the consolidation dispute for arbitration.”  Next, the Court noted that the terms of the 19 treaties differed with respect to the reinsured parties, the required venue for any arbitration, umpire selection and other issues.  Because the Federal Arbitration Act requires courts to enforce the terms of a written agreement to arbitrate, the Court held it could not compel a single consolidated arbitration in contravention to the express terms of the treaties, including the contract before it (which was silent on the issue of consolidation).  This was so, the Court noted, even if it found that a single arbitration proceeding would be more efficient.  Last, the Court held that the subject treaty’s arbitration clause provided an unambiguous process for panel selection to resolve disputes, including any dispute about consolidation.  Therefore, the Court ruled that the two party arbitrators already in place should choose an umpire, or that an umpire should be chosen based on the treaty’s procedure if they cannot agree, and that the complete panel can consider Hartford’s request for consolidation .  Accordingly, the Court granted Wausau’s petition to compel and denied Hartford’s cross-motion.