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First State Insurance Co. v. Nationwide Mutual Insurance Co.

United States District Court, D. Massachusetts

October 21, 2014

FIRST STATE INSURANCE COMPANY and NEW ENGLAND REINSURANCE CORPORATION, Petitioners,
v.
NATIONWIDE MUTUAL INSURANCE COMPANY, Respondent.

MEMORANDUM & ORDER

INDIRA TALWANI, District Judge.

I. Introduction

Petitioners First State Insurance Company and New England Reinsurance Corporation ("First State") bring this petition against Respondent Nationwide Mutual Insurance Company ("Nationwide") to confirm an arbitration award. Presently before this court are First State's Petition for an Order Confirming Final Arbitration Award and Entry of Judgment [#4] and Nationwide's Motion to Dismiss Petition for Order Confirming Final Arbitration Award and Entry of Judgment [#15]. For the following reasons, First State's petition [#4] is DENIED and Nationwide's motion to dismiss [#15] is ALLOWED.

II. Background

The Parties are parties to various reinsurance agreements (collectively, the "Reinsurance Agreements"). Irreconcilable disputes arose between the Parties under these agreements. On August 23, 2011, First State sought arbitration against Nationwide under the Reinsurance Agreements. See Arbitration Demand [#35-5]. The Parties then negotiated the Agreement for Consolidation of Arbitration, which was executed by counsel for Nationwide on March 7, 2012 and by counsel for First State on March 19, 2012. See Agreement Consolidation Arbitration [#35-6].

On August 30, 2012, the appointed three-member arbitration panel held an organizational meeting regarding the arbitration. See Pet'r's Pet. Order Confirming Final Arbitration Award & Entry J., ¶ 9 [#4] [hereinafter Pet.]; Resp't's Mem. Supp. Its Mot. Dismiss Pet. Order Confirming Final Arbitration Award & Entry J., 1 [#16] [hereinafter Resp't's 1st Mem.]. At that meeting, First State defined the purpose of the arbitration as follows:

What's important to begin with here is that First State filed the arbitration to fix a broken relationship.... And the problem is [Nationwide will] say, well, we don't have to pay you until we audit, or we don't have to pay you until our questions are answered, or we don't have to pay you until we get this document or that document.... This arbitration isn't about claims. We eventually work through all of the claims with them. We're not suggesting that we don't.... We worked through over $9 million in balances and have $10, 000 in disputed claims. We don't need the panel to decide the claims.... It's not about the individual claims... because we'll eventually work through them. We don't need the panel to help us work through these claims. We need the panel to interpret the contract... [and] to order that the parties are to brief three issues: [1] what information triggers the payment obligation under the contracts...; [2] is an audit or information request a pre-condition to payment...; [and 3 the issue of] privilege.

Tr. Organizational Meeting, available at Resp't's 1st Mem., Ex. A.

Nationwide objected to this approach and argued that the arbitration
has to be about claims [because] the arbitrations clause [of each of the Reinsurance Agreements] does not provide for resolution of... differences in a vacuum, but only in conjunction with specific claims.... [First State] wants some kind of an abstract interpretation of the contract... and that's not what the panel is empowered to do under the arbitration clause. It can touch on the question of the interpretation of contracts... but not in the abstract, but with respect to the particular transaction, the facts of that transaction, the circumstances of the transaction. All the details [First State] apparently does not want to deal with.

Tr. Organizational Meeting, available at Resp't's 1st Mem., Ex. A. Nationwide further argued that as a practical matter, because First State predicated its demand for contract interpretation on allegations charging Nationwide with a pattern of conduct amounting to abuse of its claims examination rights, an evidentiary hearing was required. Resp't's 1st Mem. at 3.

After that hearing, the panel ordered the Parties to submit briefing on the "Contract Interpretation and Application" issue and stated that after a February 2013 hearing "and the Panel's Decision, the Panel will develop with the Parties a schedule (including hearing dates) to address outstanding issues." Letter from Lawrence O. Monin (On Behalf of the Panel) to Counsel for First State and Counsel for Nationwide (Sept. 4, 2012), at 4, available at Resp't's 1st Mem. at Ex. B. The Parties then submitted their briefs and documentary evidence to the panel. Pet. ¶ 10; see Resp't's 1st Mem. at 3. On February 12, 2013, in Boston, the panel conducted a hearing, Pet. ¶ 11, and Nationwide "reiterate[ed its] objection" to the manner in which the issues were being dealt with, Tr. Hearing, available at Resp't's 1st Mem., Ex. C.

On February 20, 2013, the panel sent to the parties an order entitled"Final Award on First State's Motion on Contract Interpretation" (the "February 2013 Award"). See Final Award First State's Mot. Contract Interpretation [#4-4] [hereinafter February 2013 Award]. The panel sent emails to the Parties concerning the February 2013 Award on March 4, April 17, and April 18, 2013. See Pet. at Ex. 3.

On May 31, 2013, First State initiated this action, petitioning this court for an order confirming the award ...


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