New York Federal Court Compels Arbitration Over Asbestos Losses From Affiliate’s Policies

Certain members of an insurance group demanded arbitration against a reinsurer (successor in interest) for the reinsurer’s alleged failure to pay its share of asbestos losses arising out of underlying insurance policies issued by another member of the insurance group, one that did not demand arbitration and was not a signatory to the reinsurance treaties. The arbitration demands resulted in the reinsurer suing the demanding cedents and the affiliated policy issuing company in federal court challenging the arbitrability of the losses arising from the policies issued by the non-demanding affiliate. In response, the ceding companies moved to compel arbitration, and the affiliate moved to dismiss the claim against it because it had not demanded arbitration.

The treaties had broad arbitration provisions. They also included in the definition of the “Company” the named ceding companies and all subsidiary corporations of the named companies. Also, one of the ceding companies that demanded arbitration had reinsured its non-demanding subsidiary on a 100% basis. Thus, the ceding companies argued that the reinsurer agreed in the treaties to indemnify covered losses of the signatory ceding companies and their subsidiary companies.

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