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Symposium 2016

Adjudicating Uncertainty: An Inside Look at Panel Deliberations

by ~ Alexander Henlin (Email) (Web Site)

The final presentation at the 2013 MReBA Symposium focused on what happens “behind the curtain,” when the arbitration panel receives a dispute and is called upon to resolve it. Experienced reinsurance arbitrators commented in the wide-ranging discussion. Facilitators included Susan Grondine-Dauwer of SEG-D Consulting, Andrew Maneval of Chesham Consulting, and Anthony Vidovich of The Hartford.

The facilitators began the program by emphasizing practical considerations that go into selecting arbitrators and umpires in the American system. The facilitators and numerous members of the audience agreed that party-appointed arbitrators tend to view their role in the process as one of subtle persuasion. That is, they help to ensure that their respective appointer’s positions are presented and well understood by the entire panel. The role is not one of an advocate. Indeed, ethics codes promulgated by organizations like ARIAS make clear that each arbitrator should decide disputes that come before them on the merits. But party-appointed arbitrators do play a valuable role in the reinsurance dispute-resolution process.

Umpires, it was agreed, need to control the panel and the proceedings. Accordingly, it was remarked that the personalities involved in the arbitration should be borne in mind as an umpire is selected. Subject-matter experience is also a consideration. Whether an umpire has legal training or has been thoroughly immersed in the business is relevant both to the arbitrators with whom the umpire will be deciding the dispute, and to the ceding companies and reinsurers that will appear before the panel.

The discussion then turned to what happens when the panel, having received a case, retires to deliberate. Whether a panel adjourns for a few days to think about the case or whether it plunges right into the merits, discussion ultimately happens. There was a comment to the effect that draft awards prepared by the parties can help focus the panel on the key questions in dispute.

Two points emerged from discussion in response to audience questions. First, there may be a perception that panels engage in horse-trading when they issue an award. There was a unanimous agreement that an arbitration award is not akin to a settlement agreement that has been hammered out by the panel. The award, rather, is guided in good measure by industry custom and practice, typically because most disputes arise from claims that reinsurance contract language is ambiguous. Panels tend to be reluctant to opine about “pure” questions of coverage for the underlying loss, and instead focus on the reinsurance aspects of the dispute.

Second, while arbitrators under the American system should help the panel understand the position of the party for whom they have been appointed, the facilitators reached consensus that a panel should not consider arguments developed by an arbitrator that were neither raised nor briefed by the parties. Arbitration, more than one said, is a creature of consent: the parties picked their forum and framed their case as they saw fit. Accordingly, it follows that the parties alone must put their well considered and best arguments to the panel. Several members of the audience commented that it would be unfair to burden a party-opponent’s arbitrator with responsibility for fashioning and responding to an original argument from another’s arbitrator in the moment, without having had any benefit of briefing or argument on the point from the parties to the dispute.

In conclusion, the facilitators remarked that reinsurers have traditionally tended to view their relationship with cedents as one of partners, rather than as mere business counterparties. Arbitration is a device that helps to preserve that traditional view. All hoped that reinsurance would remain a true partnership with cedents.

Mr. Henlin is an associate in the Boston office of Edwards Wildman Palmer LLP. He may be reached at ahenlin@edwardswildman.com

© 2013 Edwards Wildman Palmer LLP. All rights reserved.

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