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NORTH RIVER INS. CO. v. ALLSTATE INS. CO.

October 7, 1994

THE NORTH RIVER INSURANCE COMPANY and UNITED STATES FIRE INSURANCE COMPANY, Plaintiffs,
v.
ALLSTATE INSURANCE COMPANY, Defendants.


SOTOMAYOR


The opinion of the court was delivered by: SONIA SOTOMAYOR

SONIA SOTOMAYOR, U.S.D.J.

 OPINION AND ORDER

 Defendant Allstate Insurance Company seeks a stay of this action pursuant to the Federal Arbitration Act, 9 U.S.C. ยง 3, so that arbitration may be had of a dispute arising out of a series of treaty reinsurance agreements between the parties. Plaintiffs North River Insurance Company and the United States Fire Insurance Company contend that the doctrine of collateral estoppel bars defendant from seeking further arbitration of the liability issues in the parties' dispute. For the reasons set forth below, defendant's motion to stay this action pending arbitration is granted, and the complaint will be dismissed.

 Background

 The facts involved in this case are largely undisputed. North River Insurance Company ("North River"), United States Fire Insurance Company ("US Fire"), and their affiliates the International Insurance Company ("IIC") and Westchester Fire Insurance Company ("Westchester Fire") (collectively the "plaintiffs"), provided insurance coverage to manufacturers who produced goods containing asbestos. To reduce their exposure, plaintiffs entered into a series of reinsurance treaties with defendant Allstate Insurance Company ("Allstate"). *fn1"

 The reinsurance treaties at issue covered intermittent periods dating back to 1968. The treaties provided that for each "occurrence," Allstate would provide coverage above a certain retention, or deductible. The various treaties had retentions ranging from $ 250,000 to $ 1,000,000. The treaties all contain substantially similar arbitration clauses, which provide in pertinent part:

 
If any dispute shall arise between the reinsured and the reinsurer with reference to the interpretation of this contract or their rights with respect to any transaction involved, the dispute shall be referred to three arbitrators . . . the arbitrators shall consider this contract an honorable engagement rather than merely a legal obligation; they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of a majority of the arbitrators shall be final and binding on both the reinsured and the reinsurer.

 Affidavit of Andrew S. Amer, Sworn to March 7, 1994 at Ex. A, Article XV ("Amer Aff.").

 In the wake of extensive asbestos litigations in the 1980's, plaintiffs submitted claims to Allstate. A dispute arose, however, over the meaning of the word "occurrence" in the treaties. Allstate contended that because each asbestos claim arose out of multiple occurrences, plaintiffs and their affiliates had to pay multiple retentions. Plaintiffs argued that all of the asbestos claims arose out of a single occurrence, and therefore only a single retention payment was required. To resolve this dispute, in 1989-90 plaintiffs initiated a number of arbitration proceedings.

 By consent of all parties, the arbitrations were consolidated (hereinafter the "Consolidated Arbitration"). The Consolidated Arbitration was held before a panel of three arbitrators in October 1992. On November 11, 1992, a majority of the arbitrators found in favor of plaintiffs. See Amer Aff. at Ex. B. The two page arbitration award does not indicate the grounds upon which the majority based its decision, nor did the dissenting member of the panel provide any reasons for his disagreement. The award was confirmed by an order of the Supreme Court of New York, New York County, on December 1, 1993.

 Currently, there are seven pending arbitrations between Allstate and North River, and one between Allstate and US Fire. Although no demand has been made, another dispute (hereinafter the "MacArthur Claim") will be submitted to arbitration if a stay pending arbitration is granted in this action. *fn2"

 Defendant herein seeks an order pursuant to the Federal Arbitration Act *fn3" staying this action so that arbitration may proceed in accordance with the arbitration clause contained in each treaty. Plaintiffs maintain that the doctrine of collateral estoppel bars Allstate from seeking further arbitration of the liability issue between the parties because the central issue in each of the pending disputes is the meaning of the term "occurrence." *fn4" Plaintiffs contend that once the award in the Consolidated Arbitration was confirmed by the Supreme Court of New York, the Full Faith and Credit Act *fn5" requires this Court to permanently enjoin Allstate from proceeding with the ...


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