In Trenwick American Reinsurance Corp. v. Unionamerica Insurance Co., No. 3:13cv94 (JBA), 2013 US Dist. LEXIS 97518 (D. Conn. July 12, 2013), the US District Court for the District of Connecticut permitted a non-signatory to a reinsurance agreement to compel arbitration under the agreement. In addition, the court concluded that the arbitration panel, not the court, should decide whether the claims at issue were time-barred.
The case arose when Unionamerica Insurance Company (“Unionamerica”) demanded that Trenwick American Reinsurance Corporation (“Trenwick”) participate in an arbitration concerning amounts due under a reinsurance agreement. Id. at *4. The agreement was between Trenwick, as the reinsurer, and Commercial Casualty Insurance Company of Georgia (“CCIG”), as the cedent. Id. at *2. Unionamerica was not a party to the agreement. A schedule to the agreement, however, provided that, if CCIG were to become insolvent or financially impaired, Trenwick “agree[d] to pay Unionamerica the excess liability amount due under the Reinsurance Agreement subject to all terms and conditions of said Agreement.” Id. at *3-4. The agreement also contained a dispute resolution provision requiring CCIG and Trenwick to arbitrate “any dispute” between them “arising out of or in connection with” the agreement. Id. at *3.
Trenwick refused to participate in arbitration. Instead, Trenwick filed a complaint in federal court seeking permanently to enjoin Unionamerica from commencing arbitration, because Unionamerica was not a party to the reinsurance agreement. Id. at *1, *4. Unionamerica moved to dismiss and asserted that Trenwick should be compelled to arbitrate. Id. at *1.
The court first addressed whether it had jurisdiction to determine the arbitrability of the parties’ dispute. Id. at *8. Unionamerica asserted the court lacked jurisdiction because the breadth of the arbitration clause required the arbitration panel to determine arbitrability. Id. at *8. The court rejected this argument. The court concluded it should determine arbitrability because the agreement lacked “‘clear and unmistakable’ evidence that the parties intended the issue of arbitrability to be determined by the arbitrators.” Id. at *12.
Next, the court addressed whether the parties entered into a contractually valid arbitration agreement. Id. at *12. Trenwick asserted there was no agreement to arbitrate because Unionamerica was not a party to the reinsurance agreement. Id. at *8, *14. Unionamerica disagreed. It argued that the schedule granting Unionamerica rights in the event of insolvency explicitly provided that Unionamerica was entitled to amounts due “subject to all terms and conditions” of the reinsurance agreement, including the arbitration terms. Id. at *12-14 (emphasis added). The court agreed with Unionamerica. Id. at *15-16. The court reasoned that its conclusion was supported both by the insolvency schedule and by a contract provision precluding the creation of rights in favor of third parties, except as provided in the insolvency schedule (among other schedules). Id. at *15. The court’s willingness to enforce the arbitration provision also may have been influenced by the fact that it was the non-signatory seeking arbitration – i.e., the court was not in a position of forcing a non-signatory to arbitrate; it was requiring a signatory to uphold its obligations. Id. at *15-16.
Finally, the court addressed which adjudicative body – the court or arbitration panel – should evaluate a timeliness defense. Id. at *17-18. Trenwick argued that the court should address the limitations defense because Georgia law governed, and the Georgia Arbitration Code provided that a party could request that a court stay arbitration if a claim were time barred. Id. at *18. The court rejected Trenwick’s argument because “a choice of law provision contained in an arbitration agreement, without more, cannot impute a specific intent to exclude certain disputes from arbitration.” Id. at *19. “Further, without express language to the contrary, it is well established in the Second Circuit that ‘any limitations defense – whether stemming from the arbitration agreement, arbitration associate rule, or state statute – is an issue to be addressed by the arbitrator.’” Id. at *19 (citations omitted).