Case of the Day: Century Indemnity Co. v. Certain Underwriters at Lloyd’s

The case of the day is Century Indemnity Co. v. Certain Underwriters at Lloyd’s of London (S.D.N.Y. 2012). Century, a Pennsylvania insurer, had a reinsurance agreement with certain reinsurers in the London Market in 1968. The reinsurance agreement covered certain asbestos claims. In 2001, the reinsurers imposed new documentation requirements for claims made under the reinsurance agreement, and from 2001 to 2005, they withheld payments from Century on the grounds that it had not complied with the new requirements. The agreement had an arbitration agreement, and Century initiated an arbitration, asserting that the new documentation requirements were improper. In 2006, the tribunal issued an order denying Century’s motion for pre-hearing security but requiring one of the reinsurers, Harper Insurance, to post letters of credit with respect to certain reserves and claims. In 2007, after an evidentiary hearing, the tribunal issued a final interim order, which established documentation requirements that Century would have to meet and guidelines for reconciliation of the parties’ accounts. Later in 2007, the tribunal issued another interim order that modified the prior order and indicated that the tribunal would meet fifteen months later to consider whether it needed to exercise continued jurisdiction. In 2008, a dispute arose about Harper’s obligation to provide letters of credit for “incurred but not reported” accounts, and the tribunal issued an order reaffirming the 2006 order and stating that Harper was not required to post letters of credit for those accounts. In January 2009, the tribunal met and determined that it did not need to continue to exercise jurisdiction, and it issued a final award on February 5, 2009.

In 2011, Century sought confirmation of the final award and the interim awards that the tribunal had made in 2007, which, according to Century, were “necessarily incorporated” in the final award. Harper cross-moved for confirmation, but in its view, the final award also “necessarily incorporated” the interim orders relating to the letters of credit.

The judge confirmed the final award and the two interim awards that the parties agreed were necessarily incorporated. On the award concerning the letter of credit, the court noted that an interim order mandating a letter of credit “is sufficiently final for federal court review and confirmation,” citing Banco de Seguros del Estado v. Mutual Marine Offices, Inc., 230 F. Supp.2d 362, 368 (S.D.N.Y. 2002). It therefore confirmed that order as well.

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