John Hancock Life and Trustmark arbitrated to a panel consisting of two party-appointed arbitrators and a neutral umpire. The panel found in favor of Hancock, and the award was confirmed in court. When Trustmark refused to pay the award on the basis that it should be subject to offsets for other items that were in dispute, Hancock initiated a new arbitration over this refusal, naming the same arbitrator it had appointed in the first arbitration.
Addressing a threshold issue, the new panel held 2-1 that a confidentiality agreement executed in the first arbitration, which prohibited disclosure of the evidence, proceedings, and award therein, did not preclude Hancock’s arbitrator from revealing information from the first proceeding to the new panel. Trustmark then filed in Federal District Court to enjoin Hancock’s arbitrator from participating in the second arbitration, contending that the arbitrator was not “disinterested” because he knew what happened in the first arbitration. The District Court agreed with Trustmark and issued the injunction, which Hancock appealed.
The Seventh Circuit Court of Appeals reversed, holding that the nature of tripartite panels entails that partyappointed arbitrators will typically be partial to the parties who selected them. The court explained, however, that this does not mean such arbitrators are not “disinterested,” unless they have some financial or other personal stake in the outcome. The court rejected the district court’s conclusion that the arbitrator’s purported violation of the confidentiality agreement demonstrated partiality, pointing out that the arbitrator would be just as “disinterested” as the district court judge himself, who had also participated in adjudicating both sets of proceedings. In-depth discussion of this decision, captioned Trustmark Insurance Company v. John Hancock Life Insurance Company (U.S.A.), appears in a Special Focus feature on Jorden Burt’s reinsurance blog at www.ReinsuranceFocus.com.