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CERTAIN UNDERWRITERS AT LLOYD'S LONDON v. CENTURY INDEMNITY COMPANY Complaint

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

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Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 1 of 22
IN UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON Petitioner,
)
) ) ) ) ) ) ) ) ) )
)
v.
CENTURY INDEMNITY COMPANY, successor to INSURANCE COMPANY of NORTH AMERICA Respondents.
Civil Action No.
PETITION FOR AN ORDER COMPELLING ARBITRATION AND APPOINTING AN UMPIRE
Petitioner Certain Underwriters at Lloyd's, London ("Underwriters") as and for its Petition for an order compelling arbitration and appointing an arbitrator pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention Act"), 9 U.S.C. §206, alleges as follows:
NATURE OF THE PETITION
1.
This action arises from a dispute between Underwriters and Respondents Century
Indemnity Company, successor to Insurance Company of NOlih America (hereinafter "Century Indemnity"
01'
"Century") over Centuris claim for reimbursement pursuant to reinsurance Petitioner and Respondents are engaged in an
treaties issued to Century by Underwriters.
arbitration proceeding with respect to this dispute, and have been unable to select a third arbitrator (an "umpire"), as required by the governing arbitration clauses in the reinsurance treaties. Without the selection of an umpire, the arbitration cannot proceed.
Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 2 of 22
JURISDICTION AND VENUE
2.
Petitioner Certain Underwriters at Lloyd's, London, consisting of United Kingdom
syndicates of individual Names who underwrite the reinsurance, is the palty against whom Century commenced arbitration proceedings under the Treaties by an Arbitration Demand dated November 22,2010. 3. Upon information and belief, Respondent Century is a corporation organized
under the laws of Pennsylvania, with its principal place of business located in Philadelphia, Pem1sylvania. 4. This Court has original subject matter jurisdiction over this action pursuant to the
Convention Act, 9 U.S.C, §§202 and 203, because the subject matter of this Petition is an arbitration clause contained in a commercial contract which is not entirely between citizens of the United States. 5. In addition, this COlUi has subject matter jurisdiction over this action pursuant to
28 U.S.C. § 1332(a)(2) because the amount in controversy exceeds $75,000, exclusive of interest and costs, and is between citizens of a State and citizens of a foreign state.
6.'
Venue in this district is propel' because the goveming arbitration clauses provide
that the arbitration shall take place in this district.
THE REINSURANCE CLAIMS
7.
On February 4, 2008 and October 23, 2009, Century submitted billings to
non~
Underwriters with regard to American Cyanamid asbestos products claims and asbestos
products claims. These billings were presented on the basis that all of the asbestos products claims, and all of the asbestos language.
non~products
claims, constituted an "accident" under the treaty
2
Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 3 of 22
8.
Underwriters disputed Century's position that all of the asbestos products claims,
and all of the asbestos non~products claims, constituted "accidents" under the treaty language. 9. The primary issue to be considered by the arbitration panel in this matter will be
whether, and to what extent, CentUlY can accumulate the product and non-products asbestos claims as "accidents" under the reinsunince contracts at issue (the "Accumulation Issue").
THE REINSURANCE CONTRACTS PROVIDE FOR ARBITRATION
10.
Century demanded arbitration against Underwriters pursuant to Explosives,
01'
Chemical and Pharmaceutical Treaty 103 ("Treaty"
1960~1964.
"Treaties") issued by Underwriters from
A copy of a representative Treaty is attached hereto as Exhibit A and made a part of
this Petition. 11. Treaty 103 contains an arbitration clause, which states: If any dispute shall arise between the Company and the Reinsurers with reference to the interpretation of this agreement, 01' the rights with respect of any transaction involved; the dispute shall be refened to two Arbitrators, one to be chosen by each party, and such Arbitrators shall choose an Umpire, and in the event of said Arbitrators not agreeing, the decision of said Umpire shall be final and binding upon all patties. The Arbitrators and the Umpire shall interpret the Agreement as an honourable engagement, and they shall make their award with a view to effecting the general purpose of this Agreement in a reasonable malmer, rather than in accordance with a literal interpretation of the language.. Said Arbitration to take place in Philadelphia. 12. The Treaties are silent as to how to proceed in the event that the two
party~
appointed Arbitrators do not agree on selection of the Umpire. 13. The Treaties contain no qualification requirements for the Arbitrators or Umpire.
THE ARBITRATION PROCEEDINGS
14.
Century commenced arbitration proceedings against Underwriters under the
Treaties by an Arbitration Demand dated November 22,2010.
3
Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 4 of 22
15.
The parties simultaneously exchanged designations of their party-appointed
arbitrators by letters dated January 14, 2011. Underwriters designated Mr. Thomas S. Orr as its party-appointed arbitrator, and Century designated Mr. Martin Habel' as its party-appointed arbitrator.
EFFORTS TO SELECT AN UMPIRE
16.
Century suggested that the parties select an umpire by a cross-strikes method,
whereby each patiy would propose three candidates, the opposing party would then be permitted to strike two of these candidates, and the umpire would be randomly selected from the two remaining candidates based upon the last digit of Dow Jones industrial average on an agreed upon date ("the cross-strikes method"). 17. Underwriters objected to this process firstly because it is not the prescribed
method in the Treaties and secondly because Underwriters feared that it could lead to selection of a non-neutral Umpire candidate. 18. Ultimately, Century agreed to proceed with the selection of atl Umpire in the
mamlel' specified in the Treaties, pursuant to which the two party-appointed arbitrators are to choose an umpire. The parties agreed to allow until February 4,2011 for this process to continue. By mutual agreement, this date was subsequently extended until February 11,2011. 19. Century further proposed that should this method for Umpire selection fail, that
the parties should'then adopt the cross-strikes method. 20. Underwriters again refused to adopt Century's proposal and insisted that the
01' that the
umpire either be agreed upon by the arbitrators, truly neutral umpire. retired judges.
Spe~ifically,
parties agree a methodology to select a
Underwriters proposed that-the pmiies select from panels of
4
Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 5 of 22
21.
Century indicated that they had no interest in selecting a neutral Umpire and
rejected Underwriters proposal. 22. On February 3, 2011, Mr. Haber and Mr. Orr spoke substantively for the first time Mr.' Habel', Centuris party-appointed arbitrator,
by telephone to discuss umpire candidates.
proposed Mr. Richard White and Mr. Clive Becker-Jones as potential umpires.
Mr. 01'1',
Underwriters' party-appointed arbitrator, proposed Mr. James Phair, and Mr. David Brodnan as umpire candidates. 23. Neither Mr. Habel' nor Mr. 011' agreed to the appointment of either of the umpire
candidates suggested by the other side. 24. Mr. Phair and Mr. Brodnan, Underwriters' umpire candidates each have in excess
of 40 years relevilllt industry experience and have collectively participated in over 400 arbitrations. Neither has ever been a member of an arbitration panel between the Parties involving the issue and treaty language in this arbitration. 25. Both Mr. White and Mr. Becker-Jones, Century's arbitrators, have previously
participated in arbitrations between the Parties involving issues and accumulation language materially the same as those at issue in this arbitration. Further, both Mr. White and Ml'. BeckerJones were nominated to those arbitration panels by Century, and issued rulings in those arbitrations. 26. Following the naming of Mr. White and Mr. Becker-Jones, Underwriters asked
Mr. Orr to relay to Ml'. Haber their vehement objections to the nomination of such clearly nonneutral Umpire candidates.
5
Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 6 of 22
27.
In response to Underwiiters' objections, Mr. Habel' proposed two new umpire
candidates to replace Mr. White and Mr. Becker-Jones, Ms. Susan Mack and Mr. Ray Prosser. Mr. Orr did not agree to either of these two new candidates. 28. In light of the candidates initially proposed by Century, Underwriters also
proposed an alternate Umpire selection methodology in line with their consistent position that the Umpire should be neutral. Underwriters' proposed randomly selecting a pool of candidates from the Insurance Neutrals list of the well-known and well-respected arbitration and mediation services firm, Judicial Arbitration and Mediation Services, Inc. ("JAMS"). This methodology included several provisions to further ensure the selection of a truly neutral Umpire, including allowing each side an agreed number of strikes, and eliminating any candidates which had previously considered the Accumulation Issue. Selection Methodology as Exhibit B. 29. This alternative Umpire Selection Methodology was shared with Century on We attach a copy of the proposed UJ.?1pire
February 8, 2011. Within hours, Century advised that the proposed methodology was a "nonstarter," because they did not wish to use a new pool of candidates and that the JAMS Insurance neutrals were primarily retired judges and not insurance industry persOlmel. 30. At the same time, Century proposed its own alternative selection methodology.
Under its proposal, the two parties would rank the four remaining umpire candidates, with the candidate with the best combined score becoming the umpire. In the event of a tie, Century proposed a Dow Jones coin flip between the two tied candidates. 31. Underwriters have rejected Century's alternative selection methodology.
FIRST CAUSE OF ACTION
32.
Underwriters repeat and reallege each and every allegation set forth in
6
Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 7 of 22
paragraphs 1 tlU'ough 31 above as if fully set forth herein. 33. Messrs. 01'1' and Haber are unable to agree upon the selection of an umpire, and
the parties have been unable to agree upon an alternative method of umpire selection. 34. arbitrators, 35. There is no prospect that an umpire can be agreed upon by the pal'tywappointcd
01' that
an umpire selection methodology can be agreed upon by the parties.
Without an umpire, the arbitration cmmot proceed.
WHEREFORE, Underwriters respectfully requests that the Court: 1. 2. Assume jurisdiction of this matter pursuant to Title 9, United States Code; Enter an order and judgment ordering: A. The parties use Underwriters' Umpire Selection Methodology, or in the alternative; B. That either James Phair or David Brodnml be selected as the Umpire, or in the alternative; C. Naming a neutral umpire of the Court's own choosing; and
7
Case 2:11-cv-01055-LDD Document 1
Filed 02/11/11 Page 8 of 22
3.
Grant such other and further relief as to the COUlt may deem just and propel'.
Dated: February 11,2011 BUCHANAN INGERSOLL & ROONEY PC By:
1UJ-V,· St..lu~\,;{ ~ . Ho al'd D. Scher, Attorney LD. No. 03673 Samantha L. Southall, Attorney I.D. No. 80709 Two Liberty Place 50 S. 16th Street, Suite 3200 Philadelphia, Pennsylvania 19102 Telephone Number: (215) 665-8700 Facsimile Number: (215) 665-8760
KISSEL HIRSCH & WILMER LLP By: Joseph G. Hynes, Esquire 580 White Plains Road Tarrytown, NY 10591 Telephone Number: (914) 750-5933 Facsimile Number: (914) 750-5922
Attorneys for Certain Underwriters at Lloyd's, London
8

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