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Arrowood Indemnity Co. v. Equitas Insurance Limited

United States District Court, S.D. New York

July 30, 2015

EQUITAS INSURANCE LIMITED, CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, (and Syndicates set forth on Schedule A), Respondents.

Robert Lewin, Michele L. Jacobson, Beth K. Clark, STROOCK & STROOCK & LAVAN LLP, New York, NY, For petitioner Arrowood Indemnity Company, formerly known as Royal Indemnity Company.

Lloyd A. Gura, Amy J. Kallal, Andrea Fort, MOUND COTTON WOLLAN & GREENGRASS, New York, NY, For respondents Equitas Insurance Limited, Certain Underwriters at Lloyd's of London, et al.


DENISE COTE, District Judge.

This is the second dispute between petitioner Arrowood Indemnity Company ("Arrowood") and respondents Equitas Insurance Limited and Certain Underwriters at Lloyd's of London ("Underwriters") over an arbitration award entered in Arrowood's favor in 2013 ("Award"). Earlier this year, Underwriters moved under Federal Rule of Civil Procedure 60(b)(3) to set aside this Court's January 2014 Order and Judgment ("Award Judgment") confirming the 2013 Award. That motion was denied as an impermissible collateral attack on the Award. Arrowood Indem. Co. v. Equitas Ins. Ltd., No. 13cv7680 (DLC), 2015 WL 2258260, at *5 (S.D.N.Y. May 14, 2015) ("Rule 60 Opinion"). While that motion was pending, Underwriters initiated a second arbitration proceeding regarding the Award and underlying contract ("Second Arbitration"). Arrowood now seeks to enjoin the Second Arbitration, to enforce the Award Judgment, and to hold respondents in contempt of that Judgment. Underwriters crossmove for an order compelling arbitration. For the following reasons, the Second Arbitration is enjoined.


The facts of this case are explained in detail in the Rule 60 Opinion, and only those necessary to resolve the instant dispute are provided here. See Rule 60 Opinion, 2015 WL 2258260. In the 1960s, Arrowood entered into a reinsurance agreement with Underwriters. The parties' agreement was embodied in a complex contractual reinsurance program called the "Global Slip."

The Global Slip involved three types of coverage. Of particular relevance here is "Common Cause Coverage, " which provides for losses arising from "occurrences" during the term of the contract that are the "probable common cause or causes" of more than one claim. The Common Cause Coverage provision includes a clause stating, in pertinent part, that "this Contract does not cover any claim or claims arising from a common cause, which are not first advised during the period of this Contract" (the "First Advised Clause").

The Global Slip contains two other provisions important to this litigation. First, it contains a broad arbitration clause, which states that

if any dispute shall arise between [Arrowood] and [Underwriters] 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.

Second, Article 16 of the Global Slip provides that Underwriters "or their duly accredited representatives shall have free access to the books and records of [Arrowood] at all reasonable times for the purpose of obtaining information concerning this Contract or the subject matter thereof."

In the 1980s, Arrowood began presenting asbestos claims to Underwriters under their interpretation of the First Advised Clause. It sought reinsurance contributions for payments that Arrowood made to its insureds on liability policies for products that the insureds had placed into the market that contained asbestos. Underwriters denied Arrowood's claims on the ground that its interpretation was wrong, and the parties commenced arbitration in October 2010, presided over by a three-arbitrator panel (the "Panel"). Arbitration proceedings took place in New York City in March and April of 2013 (the "First Arbitration").

During the First Arbitration, the parties agreed that Common Cause Coverage applied to claims like asbestos claims, where there is a delay in the manifestation of injury. They disagreed, however, as to the interpretation and effect of the First Advised Clause. As the Panel observed, the meaning of the First Advised Clause was ambiguous and at the "heart of the dispute." Underwriters took the position that the clause required that any insurance claims involving latent causes - such as asbestos claims - had to be noticed to the insurer during the contract period. Arrowood, by contrast, argued that the clause only barred Common Cause Coverage for claims that had first been noticed to the insurer prior to the date of the policy, which was January 1, 1967.

The Panel accepted Arrowood's interpretation, holding that the time of making a liability claim is irrelevant if the liability is alleged to have resulted from a common cause such as an injury caused by exposure to asbestos, except that the First Advised Clause "excludes coverage for insurance liability claims that were already made against [the insurer] prior to the effective date of the" Global Slip, January 1, 1967. As such, the clause had "no application to any of the [asbestos] claims asserted in this arbitration." The Panel further noted that Underwriters "presented no evidence from which the [Panel] could reasonably conclude that any of Arrowood's claims for reinsurance in this Arbitration are not covered due to the" First Advised Clause.

On the basis of their interpretation of the First Advised Clause, on April 4, 2013, the Panel issued an award requiring Underwriters to pay Arrowood $44, 808, 973 in principal and interest (the "Award"). This sum represented outstanding bills for five reinsurance accounts - four accounts with Common Cause claims and one with a claim under a different Global Slip provision.

The Award further directs Underwriters to pay "any reinsurance bills submitted by Arrowood after the date of this Final Award... under the probable common cause or causes' provision of the 1967 Global Slip Reinsurance Contacts" on the four ...

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