Munich Reinsurance America was reinsured under a treaty in which National Casualty Corporation and Employers Insurance Company of Wausau, among others, participated as reinsurers.  The treaty contained an arbitration clause that provided as follows:

If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party for purposes of this clause and communications shall be made by [Munich Re] to each of the reinsurers constituting the one party, provided, however, that nothing herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims … (hereinafter the “act as one” provision)

Munich Re submitted a claim under the treaty, which both National Casualty and Wausau denied.  Munich then commenced arbitration against these two reinsurers, which jointly appointed an arbitrator.  Wausau, however, subsequently moved to disqualify Munich Re’s counsel and refused to participate any further in the arbitration until that issue was resolved, or have its (and National Casualty’s) arbitrator select an umpire candidate with Munich Re’s party-appointed arbitrator.  National Casualty refused to proceed separately in the arbitration without Wausau, citing the treaty’s “act as one” clause.Munich Re filed a petition under the Federal Arbitration Act (“FAA”) to compel National Casualty to arbitrate.  The court granted the motion, finding that interpretation of the treaty’s “act as one” provision was a procedural issue for the arbitrators to decide.  The court noted that its holding was supported by federal case law, both within and outside the Second Circuit, which holds that the determination of whether an arbitration should proceed on an individual or consolidated basis is a procedural issue to be resolved by arbitrators, and not the courts.  The court added that its holding was supported by the broad language of the treaty’s arbitration clause, which covered “any dispute arising out of” the treaty.

However, the court rejected the portion of Munich Re’s motion requesting that the court to appoint an umpire.  The court held that, under the FAA,  the parties were required to proceed with umpire selection in the manner set forth in the treaty’s arbitration clause.

Click here to review the court’s decision, captioned Munich Reinsurance America, Inc. v. National Cas. Co., No. 10-cv-5782 (S.D.N.Y. 2011).