SECOND QUARTER 2013

VOLUME 20 NUMBER 2

INSIDE…

Interim Security: A PowerfulTool for Protecting theIntegrity of ReinsuranceArbitrations

A Primer on Technology inArbitrations

REPORT: ARIAS•U.S. 2013Spring Conference

OFF THE CUFF: Rules of Engagement

Follow the Settlementsand Allocation afterUSF&G v. American Re…The “ObjectivelyReasonable” Standard

At last! I have been agitating for some time to elicit Letters to the Editor from ourreadership, and now we finally have one. Dick White’s note is, I hope, just thebeginning.

Mea Culpa Department: in our last issue there was a typo that I failed to catch. Ishare the blame with many others, however, who also proofread (or were supposedto proofread) the semi-final version. In my article discussing the unfortunateubiquity of phrases like, “He gave copies of the exhibits to George and I,” I made thepoint that, contrary to what many folks seem to believe, “me” is not always ornecessarily a dirty word. The problem is that “dirty” came out “duty.” That’s badenough. What’s even worse, however, is that of all the readers who should or couldhave caught it – ARIAS Editorial Board, CINN staff, innumerable ARIAS members —the only individual who caught it, or at least pointed it out, was my wife. This ofcourse led me inevitably to the speculation that she may be the only person in theworld who actually reads my stuff! Is that spousal privilege or marital devotion?

Our lead article in this issue, by Charles Scibetta, is a comprehensive and invaluableanalysis of a very recent New York Court of Appeals decision on the super-hot subjectof the extent to which a reinsurer is required to accept its cedent’s allocation of theunderlying settlement. It would behoove us all to be up to date on this subject.

Another topic that seems to be assuming increasing significance is the awarding ofinterim security. Walter Andrews and Sergio Ochninger have provided a valuable andvery readable analysis.

Larry Schiffer, who as we all know could probably moonlight successfully as acomputer geek if he weren’t busy being a reinsurance lawyer, offers a “Primer” ontechnology in reinsurance arbitrations. Even though I think of myself astechnologically challenged, a good deal of his discussion actually hit home with me.

This issue is so loaded with good, meaty material that we don’t actually have roomfor the usual Law Committee case notes that appear in alternate issues. The notescan, of course, be found on the ARIAS website, and in any event the deviation is onlytemporary.

By the time you read this, the 2013 Spring Conference will have receded into memory.We hope the memories are pleasant ones for those who attended, and sources ofenvy for those who didn’t!

EDITORIAL BOARDEditorEugene Wollanewollan@moundcotton.com

Associate EditorsPeter R. Chaffetzpeter.chaffetz@chaffetzlindsey.com

Susan E. Grondine-Dauwersegboston@comcast.net

Mark S. Gurevitzgurevitz@aol.com

Daniel E. Schmidt, IVdesfourth@aol.com

Teresa Snidertsnider@butlerrubin.com

Managing EditorWilliam H. Yankuswyankus@cinn.com

International EditorsChristian H. Bouckaertchristian.bouckaert@bopslaw.com

Jonathan Sacherjonathan.sacher@blplaw.com

Ex-OfficioMary Kay VyskocilJeffrey M. RubinEric S. Kobrick____________________Production/Art Director Gina Marie Balog

VOL. 20 NO. 2SECOND QTR. 2013

editor’scomments

The ARIAS•U.S. Quarterly (ISSN 7132-698X) is published Quarterly, 4 times a year byARIAS•U.S., 131 Alta Avenue, Yonkers, NY 10705.Periodicals postage pending at Yonkers, NY andadditional mailing offices.

POSTMASTER: Send address changes toARIAS•U.S., P.O. Box 9001, Mt. Vernon, NY 10552

ARIAS•U.S.P.O. Box 9001Mt. Vernon, NY 10552914.966.3180, x112914.966.3264 faxinfo@arias-us.orgwww.arias-us.org

Eugene Wollan

Editor’s Comments Inside Front Cover

Table of Contents Page 1

FEATURE: Follow the Settlements and Allocation after USF&G v.American Re… The “Objectively Reasonable” StandardBY CHARLES J. SCIBETTA Page 2

News and Notices Page 6

FEATURE: Interim Security: A Powerful Tool for Protecting theIntegrity of Reinsurance ArbitrationsBY WALTER J. ANDREWS AND SERGIO F. OEHNINGER Page 7

Members on the Move Page 11

Letter to the Editor Page 11

FEATURE: A Primer on Technology in ArbitrationsBY LARRY P. SCHIFFER Page 12

REPORT: ARIAS•U.S. 2013 Spring ConferenceBY BILL YANKUS Page 16

OFF THE CUFF: Rules of EngagementBY EUGENE WOLLAN Page 24

IN FOCUS: Recently Certified Arbitrators Page 26

Invitation to Join ARIAS•U.S. Page 28

Membership Application Inside Back Cover

ARIAS•U.S. Board of Directors Back Cover

contentsVO L U M E 2 0 N U M B E R 2

1 P A G E

Editorial PolicyARIAS•U.S. welcomes manuscripts of original articles, book reviews, comments, and case notes from our membersdealing with current and emerging issues in the field of insurance and reinsurance arbitration and dispute resolution.All contributions must be double-spaced electronic files in Microsoft Word or rich text format, with all references andfootnotes numbered consecutively. The text supplied must contain all editorial revisions. Please include also a briefbiographical statement and a portrait-style photograph in electronic form. Manuscripts should be submitted as email attachments to ewollan@moundcotton.com .Manuscripts are submitted at the sender's risk, and no responsibility is assumed for the return of the material. Materialaccepted for publication becomes the property of ARIAS•U.S. No compensation is paid for published articles.Opinions and views expressed by the authors are not those of ARIAS•U.S., its Board of Directors, or its Editorial Board, norshould publication be deemed an endorsement of any views or positions contained therein.

Copyright NoticeCopyright 2013 ARIAS•U.S. The contents of this publication may not be reproduced, in whole or in part, without writtenpermission of ARIAS•U.S. Requests for permission to reproduce or republish material from the ARIAS•U.S. Quarterlyshould be addressed to William Yankus, Executive Director, ARIAS•U.S., P.O. Box 9001, Mount Vernon, NY 10552 ordirector@arias-us.org .

P A G E 2

In particular, some courts struggled with thequestion of whether and to what extent acedent may consider its reinsurance coveragewhile making its allocation decisions. Mostcourts recognized that it was not bad faithfor a ceding company to be aware of how anallocation would affect its reinsurancerecoveries when it made that allocation. Yet some courts have suggested that it is badfaith for a cedent to use its awareness ofreinsurance implications to choose anallocation that maximized reinsurance.iv

Arguably, that view is paradoxical. Whilecourts generally have agreed on the need fordeference to ceding company decisions andon the importance of streamliningreinsurance collection disputes, the focus bysome courts on the ceding companies’subjective state of mind was having theopposite effect. Even in cases where cedingcompanies’ decisions were objectivelyreasonable, some reinsurers were beingallowed to delay payments while they tookdiscovery into – and even sometimes held atrial on – the cedent’s subjective motivations.Their objective: To invalidate an objectivelyreasonable allocation by proving that theceding company chose that allocation tomaximize reinsurance.

In USF&G, the Court rejected the subjectivebad faith exception to follow thesettlements. The Court clarified that thestandard of review under follow thesettlements is “objective reasonableness” andthat the “cedent’s motive should generally beunimportant.”v In fact, the Court expresslyheld that a cedent can intentionallymaximize its reinsurance recovery throughits choice of allocation, so long as the cedentcould also reasonably have made the chosenallocation in the absence of reinsuranceconsiderations. The Court stated:

Cedents are not the fiduciaries ofreinsurers, and [they] are notrequired to put the interests ofreinsurers ahead of their own. …

feature

Charles J.Scibetta

Charles Scibetta is a founding partnerof the law firm Chaffetz Lindsey LLP.Chaffetz Lindsey was involved in theappellate proceedings in USF&G ascounsel for certain amici curiae.

Charles J. Scibetta

On February 7, 2013, the New York Court ofAppeals ruled in United States Fidelity &Guaranty Co. v. American Re-Insurance Co. ii

(“USF&G”), a closely watched case on followthe settlements. Although the Courtnarrowed in two respects a summaryjudgment upholding a ceding company’sallocation of a complex asbestos settlement,it nevertheless confirmed – and arguablyraised – the high bar that reinsurers facewhen challenging their cedents’ allocation ofsettlement payments among potentiallyresponsive policies.

New York follows the majority rule: Followthe settlements applies to allocation.

Like “almost all courts to consider thequestion,” the Court first confirmed that thefollow the settlements doctrine applies notjust to a cedent’s decision to settle a claim,but also to its allocation of the resulting lossamong policies.iii Given the weight andclarity of prior case law that had alreadyapplied the doctrine to allocation, the Court’sruling on this point broke little new ground.Still, the ruling is important confirmationthat New York follows the majority rule.

The standard of review under follow thesettlements is objective, not subjective.

In a more significant development, the Courtclarified the standard of review in a followthe settlements analysis. Prior casesrecognized that follow the settlementsrequires broad deference to cedents’ claimshandling, and courts generally have held thata reinsurer must follow its cedents’ “goodfaith” decisions. Before USF&G, however, nocourt had articulated a clear definition ofgood faith in the allocation context.

Follow the Settlements andAllocation after USF&G v. AmericanRe… The “Objectively Reasonable”Standard

Like “almost allcourts to considerthe question,” theCourt first confirmedthat the follow thesettlements doctrineapplies not just to acedent’s decision tosettle a claim, butalso to its allocationof the resulting lossamong policies.

inference that the bad faith claims hadsome settlement value. The cedent hadtaken a “very aggressive position” indenying that its policies ever existed,only to “abandon[] [that defense] at alate stage of the coverage litigation, inthe face of strong proof that coverageexisted.”xii While the cedent had aplausible legal defense to the bad faithclaims – i.e. that the insured lackedstanding under the particular policies inissue – the court presiding over thoseclaims denied the cedent’s motion forsummary judgment. Thus, the cedentfaced “the possibility of a jury verdict –possibly a very large one – … with theuncertain comfort of having a logicallypersuasive argument it could assert onappeal.”xiii Just prior to settlement, theinsured demanded $167 million for badfaith liability. Then, following agreementon settlement terms, the cedent andinsured sought approval of a plan ofreorganization, “partly on the groundthat the bad faith claims had significantvalue” in the settlement.xiv The courtthat supervised and approved thebankruptcy plan observed that the badfaith claims had value to the estate.xv

In addition to this evidence suggestingthat the bad faith claims had somevalue, the Court held that the recordcontained a piece of evidence that couldcall into question the reasonableness ofthe settlement amount for lung cancerclaims. The Court noted that, “[A]nexpert retained by the asbestosclaimants estimated [the insured’s]liability for each lung cancer claim at$91,174.” If the cedent had valued thelung cancer claims at $100,000 or less,there would have been no reinsurancefor those claims. Instead, the cedentvalued the lung cancer claims at$200,000. The Court observed that “[i]tis unusual for claims to be settled formore than twice what the claimant’sexpert has asserted they are worth.”xviIt said, “A fact finder could conclude thatthe lung cancer claims were priced at anunreasonably high level, and includedvalue that should have been attributedto the bad faith claims.”xvii

In light of these record facts – and citingno evidence to contradict them otherthan the fact that the cedent andinsured agreed on the valuations – theCourt held that it was “impossible to

3 P A G EWhen several reasonableallocations are possible, the law… permits a cedent to choosethe one most favorable to itself.… We think it unrealistic toexpect that the cedent will notbe guided by its own interests….[vi]

The Court held that “reasonable” in theallocation context means: “Thereinsured’s allocation must be one thatthe parties to the settlement of theunderlying insurance claims mightreasonably have arrived at in arm’slength negotiations if the reinsurancedid not exist.”vii

The Court’s application of the objectivestandard to the cedent’s summary

judgment motion.After clarifying that an objectivestandard applies under follow thesettlements, the Court applied thatstandard to the facts before it todetermine whether the trial courtproperly granted summary judgmentupholding the cedent’s allocation. TheCourt focused on three “significant,disputed assumptions underlying [thecedent’s] settlement allocation” todetermine whether, if reinsurance didnot exist, those assumptions “mightreasonably have been the basis for anarm’s length settlement among theasbestos claimants, [the insured], and[the cedent].”viii The disputedassumptions were:

(1) that all of the settlementamount was attributable to[reinsured] claims within thelimits of the [cedent’s] policies,and none of it to the[unreinsured] claims that [thecedent] acted in bad faithwhen it refused to defend [theinsured] in asbestos litigation;

(2) that claims by claimantssuffering from lung cancer hada value of $200,000 each [anamount that reinsurers claimedmaximized reinsurance], whilecertain other [claims fell wellbelow the reinsuranceattachment point]; and

(3) that the [cedent’s] entire

payment should be attributedto [one policy, when multiplepolicies were settled].[ix]

As a preliminary matter, the Court madeclear that the settlement terms agreedbetween the cedent and policyholder donot, standing alone, control under theobjective reasonableness standard. TheCourt observed that the “recordshow[ed] that the allocation [thecedent] used in billing the reinsurerswas one that [the cedent] discussed andagreed on in negotiations with [theinsured] and the asbestos claimants.”x

The Court further noted the cedent’scontention that “this in itselfestablishe[d] the validity of theallocation.” However, the Court rejectedthe cedent’s argument:

We are reluctant to adopt a rulewhereby an insurer couldinsulate its allocation fromchallenge by its reinsurer simplyby getting its, essentiallyindifferent, insured to agree toit. … [I]n many cases claimantsand insureds …, far from beingindifferent, will enthusiasticallysupport insurers’ efforts to funda settlement at reinsurers’expense. They will do this forthe simple reason that insurers,like everyone else, are apt to bemore generous with otherpeople’s money than their own.… [A] cedent’s allocation of asettlement for reinsurancepurposes will be binding on areinsurer if, but only if, it is areasonable allocation, andconsistency with the allocationused in settling the underlyingclaim does not by itselfestablish reasonableness.xi

Because it could not rely solely on theterms of the settlement, the Courtexamined the other facts in the recordwith respect to the three disputedelements of the allocation.

Concerning the question of whether thefull settlement amount was attributableto claims within the policy limits andnone to the bad faith claims, the Courtcatalogued a series of record facts thatcould support inferences adverse to thecedent.

Several pieces of evidence supported the

conclude, as a matter of law, thatparties bargaining at arm’s length, in asituation where reinsurance was absent,could reasonably have given no value tothe bad faith claims. This issue must bedecided at trial.”xviii The Court did notrank the importance of the variouspieces of evidence that supported itsdecision. Nor did it say whether any ofthese pieces of evidence would havebeen sufficient by itself to defeat thecedent’s summary judgment motion.

It seems at least arguable, however, thatthe expert evidence valuing lung cancerclaims at less than $100,000 wascritical, and that a zero-allocation to badfaith claims with apparent settlementvalue might not, by itself, precludesummary judgment for a cedent. Forexample, regardless of whether it hasreinsurance, a cedent may well resistattributing settlement payments to badfaith claims because crediting thelitigation risk of those claims couldincrease their strike value to futureplaintiffs and their counsel. If a cedenthas an objective basis to makepayments within policy limits, therefore,it may be justified in paying the claimswithin the limits in consideration of arelease on both the covered claims andon any bad faith exposure. Requiringcedents to expressly credit bad faithexposure in these circumstances wouldarguably be requiring them to putreinsurers’ interests before their own,which the Court expressly held thatcedents need not do.

It is a different case, however, if thecedent has no objective explanation forthe payments it makes within its policylimits. The Court in USF&G appeared tofind no evidence in the appellate recordthat it deemed to be an objectiveexplanation for why the cedent andinsured might have agreed to valuelung cancer claims at more than theamount reflected in the expertestimate. Clearly, the Court looked forthat evidence. Judge Smith, whoauthored the decision, asked the cedentat oral argument:

[Y]ou valued the lung cancer …claims at … 200,000 .… Whatabout the fact that theplaintiffs’ experts’ valuationswere lower than that? … Couldyou address specifically those

P A G E 4into the Court’s decision to remand thebad faith and lung cancer valuationissues for trial. Some industry observershave suggested that the Court’s remandmight reflect a material broadening ofthe grounds for reinsurer challenges toallocation decisions. And, clearly, theCourt rejected the argument that anallocation’s consistency with theunderlying settlement is, by itself,sufficient to uphold the allocation as amatter of law. However, by rejectingreinsurer challenges to cedents’subjective motives, the USF&G decisionseems to close more avenues forreinsurer challenge than it opens.

The view that USF&G materially widensthe range of disputes that should go totrial arguably confuses the tort conceptof “reasonableness” as used innegligence cases with the contractprinciple of “objective reasonableness”applied in USF&G. “[N]egligence actionsdo not ordinarily lend themselves tosummary disposition because, even ifthe parties agree on the facts, thereasonableness of a defendant’sconduct is a question for the jury.”xxii

In a follow the settlements context,however, cedents can argue that the“objective reasonableness” of theirexercise of contractual discretion shouldrarely raise a jury question.

Even before USF&G, the Court ofAppeals had already ruled thatreinsurers have “little room” to challengea cedent’s claims handling decisionsxxiii

and that follow the settlements“streamlines the reimbursementprocess and reduces litigation bypreventing a reinsurer from continuallychallenging the propriety of areinsured’s settlement decisions.”xxiv

Those rulings are inconsistent with thenegligence concept of reasonableness,where a trial is ordinarily required.

In USF&G, the Court went even furtherto suggest that trials in allocationdisputes should be rare. In discussing itsrationale for holding that follow thesettlements applies to allocationdecisions, the Court made clear that itdid so because a contrary rule would“invite long litigation over complexissues that courts may not be wellequipped to resolve, creating cost anduncertainty and making the reinsurancemarket less efficient. . . . Deference to a

expert valuations … how did thevaluations come to be higherthan the plaintiffs’ experts’numbers? … Is there … adocument before the actualsettlement … that puts a highervalue on lung cancer …? [C]anyou cite me to one?[xix]

Apparently, the Court found no suchdocument – at least it cited none in itswritten decision. It is at least arguablethat the lack of that evidence led theCourt to conclude that it could not rulefor the cedent as a matter of law on thedisputed assumption that all of thesettlement amount was attributable toclaims within the policy limits and noneto the bad faith claims. The Courtremanded this issue for trial, wherepresumably the cedent would havefurther opportunity to explain itsvaluation.

The Court next assessed the relativevaluation of lung cancer claims to theother disease claims that were valuedbelow the reinsurance attachment pointof $100,000. The Court observed thatany over-valuation of lung cancer claimscould reflect an undervaluation of otherdisease claims below the reinsuranceattachment point. The Court cited noevidence to impugn the valuation ofthose other claims on their own. Underexamination was the “relative valuation”of lung cancer and other claims.xx Again,the Court’s failure to find evidenceexplaining the lung cancer valuationappeared to be key. The court sent thisissue back for trial as well.

Finally, the Court upheld summaryjudgment on the cedent’s decisionconcerning the last disputedassumption – the allocation of all lossto just one policy year. On that issue,the cedent did not simply rely on itsagreement with its insured to supportits decision. The Court upheld theallocation to a single policy yearbecause case law at the time of theallocation provided viable argumentsfor doing so.xxi

Applying the objective standard in future cases.

Parties to future allocation disputesshould be careful not to read too much

5 P A G Ecedent’s decisions makes for a moreorderly and predictable resolution ofclaims.”xxv Given the Court’s view thatlengthy reinsurance disputes damagethe market, and that courts are ill-equipped to resolve them, it seemsunlikely that the Court’s adoption ofthe objectively reasonable standardsignals support for the fact-drivennegligence concept of reasonableness.

The better reading of USF&G seems tobe that in adopting the objectivereasonableness standard, the Court wassimply making clear its rejection of thesubjective bad faith test that someprior courts had approved. Thequestion whether to judge the exerciseof contractual discretion by objective orsubjective standards is not unique tofollow the settlements disputes. As onecommentator has explained concerningthe judging of contractual discretionunder the U.C.C., some published courtdecisions “consider only whether the[discretion-exercising party’s] actionwas reasonable, commerciallyreasonable, or justified by a reasonwithin the justifiable expectations ofthe parties. Some consider whether thediscretion-exercising party wasmotivated by the right kind ofreasons.”xxvi The objective approach is“the better view” because it avoids “thewell-known difficulties in provingsubjective motivation” and “bestaccommodates the discretion-exercising party’s interest in deferenceby judge and jury with the other party’sinterest in nonarbitrary and expectablereasons for exercising discretion.”xxvii

New York law follows this “better rule”as a general contract rule.xxviii Byadopting the objective reasonablenessstandard in USF&G, the Court simplyconfirmed that New York law alsofollows this rule in the follow thesettlements context.

Under the objective approach, wherethe record reflects multiple objectiveexplanations for a party’s exercise of itsdiscretion, “the discretion-exercisingparty, not a judge or jury, is entitled toweigh the competing reasons,” and aparty acts within its contractualdiscretion “whenever significantcontractually permitted reasons for itsactions were available.”xxix In the followthe settlements context, since a judge

or jury is not supposed to weigh thecompeting explanations for the cedent’sclaims-handling decisions under theobjective test, the cedent should win asa matter of law – i.e., the questionshould never reach a judge or jury as atrier of fact – whenever the cedent canestablish that some objective,contractually permissible explanationfor the allocation outcome exists. Inother words, if a reasonable judge orjury could reach the conclusion thatobjective evidence in the record canjustify a reasonable cedent’s decisions,then a reasonable cedent could also relyon that evidence. The judge or juryneed not and should not step in toweigh that evidence against potentiallyconflicting facts.

The Court’s specific definition of an“objectively reasonable” allocation isconsistent with this view. When theCourt held that an objectivelyreasonable allocation is one that acedent and its insured “mightreasonably have arrived at … in arm’slength negotiations” if there were noreinsurance, the Court put the focus noton what the cedent and insuredactually agreed to, but on whethercontractually permissible reasons forarriving at the challenged allocationexisted. If contractually permissiblereasons existed – regardless of whetheror not the cedent considered them –then the allocation decision should beupheld. If the only possible objectiveexplanation for the allocation isconsideration of reinsurance, thenreinsurers need not follow theallocation.

Future court decisions may furtherrefine the rule stated in USF&G, but theCourt’s express adoption of theobjective standard of review underfollow the settlements stands as animportant clarification of prior law.

i Charles Scibetta is a founding partner of the lawfirm Chaffetz Lindsey LLP. Chaffetz Lindsey wasinvolved in the appellate proceedings in USF&G ascounsel for certain amici curiae. ii 20 N.Y.3d 407 (2013).iii Id. at 419. iv See, e.g., Travelers Cas. and Sur. Co. v. Ins. Co. of N.America, 609 F.3d 143, 159 (suggesting that an allo-cation is in bad faith if the cedent “was motivatedprimarily by reinsurance considerations”).v Id. at 421.vi Id.

vii Id. at 420. viii Id. at 422.ix Id. x Id. at 421. xi Id. at 421-22 (internal quotation marks and cita-tion omitted).xii Id. at 422-23.xiii Id. at 423.xiv Id. at 424-25. xv Id. xvi Id. at 424.xvii Id. xviii Id. at 425. xix Transcript of Oral Argument, pp. 51 – 53(www.nycourts.gov/ctapps/arguments/2013/Jan13/Transcripts/010213-1-Transcript.pdf). xx USF&G, 20 N.Y.3d at 425-26. xxi In addition to assessing these disputedassumptions, the Court also commented on oneother assumption underlying the allocation. TheCourt stated that “[it] seem[ed] to be undisputed(and in any event, it is clear from the record) thatthe claims for the most serious disease, mesothe-lioma, were reasonably valued.” Id. at 424. TheCourt did not discuss the evidence that made thereasonableness of this valuation “clear from therecord.”xxii Merkley v. Palmyra-Macedon Cent. School Dist.,515 N.Y.S.2d 932, 937-38 (4th Dept. 1987).xxiii Unigard Sec. Ins. v. N. River Ins. Co., 79 N.Y.2d576, 583 (1992).xxiv Travelers Cas. and Sur. Co. v. CertainUnderwriters at Lloyd’s of London, 96 N.Y.2d 583,596 (2001).xxv USF&G, 20 N.Y.3d at 419 (citations omitted). xxvi Steven J. Burton, Good Faith in Articles 1 and 2of the U.C.C.: The Practice View, 3 Wm. & Mary L.Rev. 1533, 1561 (1994).xxvii Id. at 1562-63.xxviii See, e.g., Moran v. Erk, 11 N.Y.3d 452 (2008)(examining the dangers posed by intrusive factualinquiries into subjective motives); Kerns, Inc. v.Wella Corp., 114 F.3d 566, 570 (6th Cir. 1997) (“NewYork follows the rule that, if a party has a contrac-

If the only possibleobjective explanation for

the allocation isconsideration of

reinsurance, then reinsurers need not

follow the allocation.

P A G E 6

Susan Grondine-DauwerRecertified as ARIAS•U.S. Arbitrator At its meeting on May 8, the ARIAS•U.S. Boardof Directors approved certification of Susan E.Grondine-Dauwer, a long-time ARIAS mem-ber and previously certified arbitrator. Ms.Grondine had not re-applied in 2010 whenthe requirements changed. She recently com-pleted a full application, including sponsors,which is now required of former arbitrators.▼

Neff and Pratt Certified asARIAS•U.S. Umpires Also, at its meeting at the 2013 Spring Con-ference, the Board approved Raymond M.Neff and George C. Pratt as ARIAS•U.S. Certi-fied Umpires, bringing the total number to58. The full list of Certified Umpires can befound under the “Arbitrators/Umpires” menuof the website.▼

ARIAS•U.S. Announces TwoNew Simultaneous TrainingEvents on September 18 inWhite Plains, New York

1. A Newly Recreated Intensive Arbitrator Train-ing Workshop

The Education Committee is reorganizing theprevious workshop to provide a more intensearbitration experience for attendees. This all-day training program is for anyone planningto apply for initial certification and for all arbi-trators who would like to hone their skills. It isnot considered an “educational seminar” forcertification renewal purposes.

2. The First Ever Umpire Master Class!

This class is the first in a series of new semi-

nars designed to provide additional educa-tion programs geared to the more experi-enced certified arbitrators who would like toimprove their umpire skills. This will be a fullmorning of instruction, with “educationalseminar” credit toward certification renewal.

Reception and dinner on the evening beforethe classes!

A unique networking experience…faculty andstudent participants from both courses willattend the reception and dinner on theevening of September 17.

The location will be the recently renovatedCrowne Plaza Hotel in White Plains, N.Y.

Complete details of both programs will beannounced in June. Registration will openin July.▼

Scrimgeour Is Approved as Certified Arbitrator At its meeting on March 12, the ARIAS•U.S.Board of Directors approved James D. Scrim-geour as a Certified Arbitrator, bringing thenumber of arbitrators to 238. His profile willbe on the website shortly.▼

Edmund F. Rondepierre, Found-ing Director Edmund Rondepierre, one of the foundingdirectors of ARIAS•U.S. died on Wednesday,May 15 at his home in Darien, Connecticut. A memorial service was held on Wednesday,May 22 at St. Thomas Moore Church inDarien.

After a long career in insurance at InsuranceCompany of North America and GeneralReinsurance Company, Mr. Rondepierreretired in 1995, helped found ARIAS•U.S., andbecame an active arbitrator in reinsurancearbitrations, mostly as an umpire. He servedas President of ARIAS•U.S. for several years.▼

newsand

notices

DID YOU KNOW…?DID YOU KNOW?...THAT ARIAS•U.S. HAS A MENTORING PROGRAM FOR NEW ARBITRA-TORS WHO HAVE NOT YET SERVED ON AN ARBITRATION PANEL THROUGH TO ANAWARD? IT GIVES NEW ARBITRATORS THE ABILITY TO SEEK ADVICE AND ASSISTANCEDIRECTLY FROM EXPERIENCED ARIAS ARBITRATORS ON ISSUES RELATING TO ARBITRA-TION PROCEDURE, CASE MANAGEMENT, ETHICS, AND PRACTICE MANAGEMENT. FULLDETAILS ARE UNDER THE PROGRAMS MENU OF THE WEBSITE.

This class is the firstin a series of newseminars designedto provide additionaleducation programsgeared to the moreexperienced certified arbitratorswho would like toimprove their umpire skills. Thiswill be a fullmorning ofinstruction, with“educationalseminar” credit towardcertification renewal.

7 P A G E

Walter J. AndrewsSergio F. Oehninger

As reinsurance practitioners know, parties toreinsurance arbitrations are with increasingfrequency requesting panels to issue interimawards requiring adverse parties to postprehearing security. The purpose ofprehearing security is to maintain thefinancial status quo in order to ensure thatany eventual award does not becomemeaningless because the assets of theadverse party have been dissipatedelsewhere. Courts have consistentlyrecognized arbitrators’ authority to issueinterim orders of security in the absence of acontractual provision expressly precluding it,and have routinely upheld such orderswhere a colorable justification for the awardexists. Despite the clear recognition of apanel’s broad authority to require security,some arbitrators have on occasion beenreluctant to require security unless themovant demonstrates that its adversaryalready suffers from a deteriorated financialposition or has through its past conductraised questions about its compliance witha panel’s ultimate award. The problem withsuch an approach is that it might be too late— ordering security only after compliancewith a final award is in question frustratesthe purpose of security. To better preservethe meaning of any ultimate award, thisarticle suggests that arbitrators shouldexercise their clear authority to orderinterim security before the collectability ofthe ultimate award has already become anissue. Ordering security where thepossibility exists that any final award couldbe rendered meaningless serves to betterprotect the integrity of the arbitrationprocess by preventing the dissipation ofassets. This approach can be particularlyvaluable in these uncertain economic times.

Arbitrators’ broad authority torequire interim security There is no question that arbitrators havebroad power to order interim security, asrecently reaffirmed by the Southern Districtof New York in CE International ResourcesHoldings LLC v. S.A. Minerals Ltd. Partnership,No. 12 Civ. 8087 (S.D.N.Y. Dec. 10, 2012)(upholding interim security award whereparties’ agreement indirectly grantedarbitrator such authority). In CEInternational, a sole arbitrator issued aninterim award ordering respondents to post$10 million in security. The petitionersought to confirm and enforce the award incourt, arguing that the parties’ agreementauthorized arbitrators to award interimsecurity under the agreed-upon rules, whichprovided that “the tribunal may takewhatever interim measures it deemsnecessary, including injunctive relief andmeasures for the protection or conservationof property…[including]…an interim award,and…may require security….”

Respondents argued that the parties’adoption of those rules did not support afinding that the arbitrator acted within hispowers in ordering security because theagreement was to be construed andenforced in accordance with New York law,under which prejudgment security is notallowed. The Southern District rejectedrespondents’ argument, stating:

It lay with the parties to confer onthe arbitrator whatever powers theywished. Having adopted rules thatallowed the arbitrator to awardinterim security, Respondents arebound by their bargain. Nothingabout enforcing an order renderedin accordance with the proceduresto which the parties agreed offendseither New York law or New Yorkpublic policy.

CE International at 6. The court held that by

feature

Walter J.Andrews

Walter J. Andrews is the head ofHunton & Williams LLP’s insuranceand reinsurance practice group. SergioF. Oehninger holds the position ofCounsel in that group.

The purpose ofprehearing securityis to maintain thefinancial status quoin order to ensurethat any eventualaward does notbecomemeaningless…

Interim Security: A Powerful Toolfor Protecting the Integrity ofReinsurance Arbitrations

Sergio F.Oehninger

P A G E 8consenting to rules authorizing arbitratorsto order interim security the parties hadconsented to such authority even in theabsence of an explicit grant of that specificauthority in their contract. Id. at 7. The courtfocused on the broad authority of thearbitrator, and — significantly — did notconsider whether the arbitrator had requireda showing that respondents already sufferedfrom a dire financial position or had alreadyendangered compliance with any eventualaward. The arbitrator’s authority to ordersecurity was sufficient reason for the courtto confirm the interim arbitral award,because “the public policy favoring theenforcement of arbitration agreements andthe confirmation of arbitral awards trumpsany other.” Id. at 9.1

In reaching its conclusion, the court in CEInternational relied on the often citedopinion in Banco de Seguros del Estado v.Mutual Marine Office, Inc., 344 F.3d 255 (2dCir. 2003). There, the Second Circuit heldthat arbitrators had the authority to requirethat the reinsurer post prehearing security.Id. at 262. The reinsurer argued that thepanel had exceeded its authority, manifestlydisregarded the law, and violated publicpolicy and principles of fundamentalfairness. The court rejected each of thereinsurer’s arguments and enforced theterms of the parties’ contract, which grantedarbitrators broad authority and required theposting of a letter of credit. In determiningwhether the security award should beupheld, the court in Banco de Seguros did notconsider whether the panel had required ashowing that the reinsurer already sufferedserious financial troubles or already hadengaged in conduct placing the eventualaward in danger. Rather, the court focusedon whether the arbitrators had the power toreach the issue of security under thearbitration agreement, “not whether thearbitrators correctly decided that issue.” Id.In affirming the confirmation of the panel’sinterim award, the Second Circuit explainedthat it was “not the role of the courts toundermine the comprehensive grant ofauthority to arbitrators by prohibiting anarbitral security measure that ensures ameaningful final award.” Id. (internalcitations omitted). The court held that thepanel had the power to order securitybecause the arbitration agreement did notpreclude such a remedy. Id. at 262-263.2

Interim security has beenordered as long as there is a“specter” that any final awardcould be rendered “meaningless”Courts have recognized that the purpose ofinterim security is to ensure that anyeventual award does not become“meaningless.” See, e.g., Banco de Seguros, 344F.3d at 262; British Ins. Co. of Cayman v. WaterStreet Ins. Co., 93 F. Supp. 2d 506, 516 (S.D.N.Y.2000) (confirming panel’s interim awardrequiring security where “specter” was raisedthat any final award could be rendered“meaningless”); Nw. Nat’l Ins. Co. v. GeneraliMexico Compania de Seguros, S.A., No. 00 Civ.1135, 2000 WL 520638, at *11 at n.13 (S.D.N.Y.May 1, 2000) (holding that arbitrators haveauthority to order interim relief in order toprevent final award from becomingmeaningless); Rakower v. Aker, No. 98 Cir. 2652,1998 WL 432092, at *3-4 (E.D.N.Y. May 27, 1998)(confirming arbitrator’s award of temporaryequitable relief to prevent final award frombeing meaningless); Yasuda Fire & Marine Ins.Co. of Eur., Ltd v. Cont’l Cas. Co., 37 F.3d 345 (7thCir. 1994) (affirming interim security order toprevent final award from becomingmeaningless); Pac. Reins. Mgmt. Corp. v. OhioReins. Corp., 935 F.2d 1019 (9th Cir. 1991)(same).3

Interim security’s primary goal is therefore toprevent a Pyrrhic victory that leaves theprevailing party unable to collect on theresulting award. See, e.g., id. This purpose islikely to be frustrated if the panel requires amovant to demonstrate that the award hasalready been placed in doubt or renderedmeaningless before security is ordered.Requiring a showing that the adverse partyalready is insolvent or in run-off or hasalready diverted or expended fundselsewhere does not ensure a meaningful finalaward, because it may well mean that theassets are not going to be available to satisfythe award; it will be too late to order securityif the assets have already been dissipated ordiverted.

Ordering security where a specter is raisedthat the final award could be renderedmeaningless serves to better protect theintegrity of the arbitration process bypreventing the dissipation of assets before itis too late. In British Ins. Co. of Cayman v.Water Street, supra, a dispute arising under afacultative reinsurance contract, British

The arbitrator’sauthority to ordersecurity wassufficient reason forthe court to confirmthe interim arbitralaward, because “thepublic policyfavoring theenforcement ofarbitrationagreements and theconfirmation ofarbitral awardstrumps any other.”

9 P A G EInsurance requested that Water Streetprovide prehearing security to ensurethat any recovery awarded to BritishInsurance would be available. BritishInsurance proffered evidence of WaterStreet’s financial instability, regulatorytroubles, and possible futureliquidation proceedings. Id. at 511.Water Street maintained that “noexigent circumstance or equitablebasis” justified an order of security.The panel rejected Water Street’sarguments and ordered it to provide$1.7 million in security. Water Streetchallenged the security award in courton grounds of manifest disregard ofthe law, arbitrator misconduct, evidentpartiality, and certain underlyingdefenses. The court rejected WaterStreet’s arguments, saying that theyoverlooked the “essence ofarbitration…to provide a speedy andinexpensive determination.” Id. at 514(citations omitted). Recognizing thepurpose of interim relief to ensure ameaningful award, the court foundthat evidence of Water Street’s“maneuvers” raised the “specter” thatany final award could be rendered“meaningless” and that a “colorablejustification” for the interim awardexisted. Id. at 516. The courtaccordingly confirmed the interimaward and directed that security beprovided as directed by the panel. Hadthe panel waited until Water Streetunderwent liquidation or insolvencyproceedings, any final award wouldlikely have been renderedmeaningless. As British Ins. Co. ofCayman v. Water Street recognizes,ordering security when a threat tocompliance with a final award ispresent better protects the integrity ofthe arbitration process and is wellwithin a panel’s authority. Id.4

Courts have consistentlyupheld arbitrators’ interimawards of security Courts are “reluctant to vacate interimarbitration orders aimed at preservingthe ability of the parties to pay finalawards that result from arbitrationproceedings” and have afforded greatdeference to arbitration panels on

these issues. Great E. Secs., Inc. v.Goldendale Invs., Ltd., 2006 WL 3851159,at * 2 (S.D.N.Y. Dec. 20, 2006) (denyingpetitioner’s request to vacate interimorder requiring petitioner to placedisputed amount into escrow accountpending conclusion of arbitration). Seealso Hynix Semiconductor, Inc. v. Rambus,Inc., 2010 WL 3719086 (N.D. Cal. Sept. 17,2010) (denying motion to reconsiderorder requiring $250 million bond); Knoxv. Palestinian Liberation Org., 2009 WL1591404 (S.D.N.Y. Mar. 26, 2009)(requiring posting of $120 million insecurity); Everest Nat’l Ins. Co. v. Sutton,321 Fed. App. 192 (3d Cir. 2009) (requiring$70 million in security); Int’l Ins. Co. v.Caja Nacional de Ahorro y Seguro, 293F.3d 392 (7th Cir. June 7, 2002) (affirmingprejudgment security order againstreinsurer); Konkar Mar. Enter., S.A. v.Compagnie Belge D’Affertement, 668 F.Supp. 267 (S.D.N.Y. 1987) (affirmingpanel’s authority to require sums beplaced into interest-bearing escrowaccount for benefit of prevailing partyas determined in final award); E. AsiaticCo., Ltd. v. Transamerican SteamshipCorp., 1988 A.M.C. 1086, 1089 (S.D.N.Y.1987) (confirming interim orderdirecting party to deposit money intointerest-bearing escrow accountpending arbitrator’s finaldetermination); Southern SeasNavigation Ltd. v. Petroleos Mexicanos,606 F. Supp. 692, 694 (S.D.N.Y. 1985)(confirming interim arbitration award);Sperry Int’l Trade, Inc. v. Israel, 689 F.2d301, (2d Cir. 1982) (affirming arbitrators’order requiring proceeds of disputed $15million letter of credit be placed inescrow).5

This trend in favor of interim securityreflects the strong public policy favoringthe enforcement of arbitrationagreements and the confirmation ofarbitral awards. Arbitrators can takeguidance from recent court opinionsreaffirming their power to order interimsecurity and increase their willingnessto order interim security to protect themeaning and effect of any ultimatearbitration award when there is apossibility that the final award could berendered meaningless.6 This approachwill strengthen the integrity of thearbitration process.7

Practical ConsiderationsThe facts of each particular case will ofcourse play a critical role in anarbitration panel’s decision as towhether there is a sufficient prospect ofnoncompliance with the final award towarrant an order of interim security.Parties to reinsurance disputes shouldbe vigilant in identifying any indicationthat an adversary’s compliance with afinal award may be at risk from the timea dispute is anticipated and, undercertain circumstances, may need to beprepared to request security along withthe demand for arbitration or inconnection with the organizationalmeeting. These are among some of thefactors that may weigh in favor ofrequiring security:

• financial instability or distress

• threats of insolvency

• bankruptcy discussions

• contemplated winding down ofoperations

• regulatory problems potentiallyaffecting ability to conduct business

• questionable financial or geographicmaneuvers

• diversion of significant funds to relatedor offshore entities

• reluctance or failure to provideassurances of financial viability

• ongoing breach of obligations underreinsurance agreements

• repeated failure to make payments due

• failure to respond to demand forarbitration

• unexpected corporate changesoccurring privately during or just priorto dispute or proceedings

• failure to comply with prior orders inarbitration

• other conduct or conditions raisingdoubts about compliance with anyultimate award

Whether any of these factors constitutesa ground for security will depend on theparticulars of each dispute. Arbitratorsshould not, however, require a showingthat the award has already been placedin doubt before ordering security.

Instead, they can require security wherea “specter” is raised that any final awardcould be rendered “meaningless.”8

Conclusion With the recent downturn in the worldeconomy, requests for prehearingsecurity in reinsurance arbitrations haveincreased. Requiring a showing that theadverse party already suffers from adilapidated financial condition or hasalready engaged in conduct thatendangers collectability likely meansthat any eventual award has alreadybecome meaningless. The betterapproach is for an arbitration panel torequire security when the possibility israised that the panel’s eventual awardwill be rendered meaningless. Thesteadfast recognition by courts ofarbitrators’ authority to order interimsecurity – which reflects the strongpublic policy favoring the enforcementof arbitration agreements andconfirmation of arbitral awards – meansthat an arbitration panel’s order ofinterim security is likely to be upheld ifchallenged in court. Arbitrators’ clearauthority to require security thereforerepresents a powerful tool forprotecting the integrity of reinsurancearbitrations in these uncertaineconomic times, and panels need nothesitate to exercise that authority whenthere exists a doubt concerning aparty’s compliance with a final award.▼

Endnotes1 CE International reaffirmed that the standards

for security that may be required in court are notrequired in arbitration, confirming the interimaward “even though, had the underlying actionbeen brought in this court or in the New YorkState Supreme Court, no such interim securitycould have been ordered.” CE International, No. 12Civ. 8087 at 7. The court recognized that arbitra-tors may be “presumptively free from principlesof substantive law” and “in the arbitral context,there is a strong countervailing policy of enforc-ing arbitral awards in accordance with theirterms, as long as the arbitrators have not exceed-ed their powers.” Id. at 8 (citing cases).

2 Other courts have also consistently held thatarbitrators are authorized to order interim secu-rity. See, e.g., Certain Underwriters at Lloyd’sLondon v. Argonaut Ins. Co., No. C-03-1100 EMC,2003 U.S. Dist. LEXIS 8796 (N.D. Cal. May 13, 2003)(holding that contract “implicitly empowered”panel to “formulate appropriate relief” includinginterim payments); Meadows Indem. Co. Ltd. v.Arkwright Mut. Ins. Co., 1996 WL 557513 (E.D. Pa.Sept. 30, 1996) (ordering prehearing security

P A G E 1 0where contract granted arbitrators broad powerswithout precluding remedies but did not specifysecurity as authorized remedy); Yasuda Fire &Marine Ins. Co. of Eur., Ltd v. Cont’l Cas. Co., 37 F.3d345 (7th Cir. 1994) (affirming interim order requir-ing security where arbitration clause did notexplicitly authorize it but did contain broadgrant of authority and did not preclude security);Pac. Reins. Mgmt. Corp. v. Ohio Reins. Corp., 935F.2d 1019 (9th Cir. 1991) (upholding panel’s pre-hearing security order where arbitration clauserelieved arbitrators of following judicial formali-ties and strict rules of law).

3 See also Atlas Assurance Co. of Am. v. Am.Centennial Ins. Co., 1991 WL 4741 (S.D.N.Y. Jan. 16,1991) (confirming arbitrators’ interim order plac-ing disputed amounts in interest-bearing escrowaccount); Compania Chilena de NavegacionInteroceanica, S.A. v. Norton Lilly & Co., 652 F.Supp. 1512 (S.D.N.Y. 1987) (confirming interimorder directing party to post bond); DavidMartowski, Ordering Security From An Arbitrator’sPerspective, The Arbitrator, Vol. 42, No. 1, at 6, April2011.

4 In a different context, a New York state courtrecently recognized that CPLR 7502(c) permitsprovisional relief in aid of arbitration, such aspre-award attachments, where a later awardwould be “rendered ineffectual” without provi-sional relief. See Sojitz Corp. v. Prithvi Info.Solutions, Ltd., 26 Misc. 3d 670, 891 N.Y.S.2d 622(N.Y. Sup. Ct. N.Y. C. 2009) (confirming creditor’sattachment of debtor’s assets as security forpotential award of panel). Courts also have heldthat in situations where there is a risk thatassets will be dissipated or diverted before judg-ment, a party can be required to furnish security.See, e.g., H.I.G. Capital Mgmt. Inc. v. Ligator, 233A.D.2d 270, 650 N.Y.S.2d 124 (N.Y. App. Div. 1996)(the “uncontrolled disposal of respondents’assets, which may have rendered arbitrationaward ineffectual, presented risk of irreparableharm”); Palm Beach Realty Co. v. Harry J.Kangieser, Inc., 36 Misc. 2d 1058, 233 N.Y.S.2d 641(N.Y. Sup. Ct. 1962) (requiring party to post securi-ty to avoid dissipation of assets).

5 Courts have consistently held interim securityawards reviewable and enforceable prior to theentry of a final award. See, e.g, Banco de Seguros,supra; CE International, supra; British Ins. Co. ofCayman v. Water Street Ins. Co., supra.;Metallgesellschaft A.G. v. M/V Capitan Constante,790 F.2d 280, 283 (2d Cir. 1986); Southern SeasNavigation, supra.

6 Requiring security as a matter of course alreadyoccurs in disputes involving foreign or unautho-rized reinsurers. See, e.g, N.Y. Ins. L. §1213(c)(1)(A)(McKinney) (requiring unauthorized insurersand reinsurers to post pre-answer security);Conn. Gen. Stat. § 38a-27(a) (requiring unautho-rized insurer to post security “to secure the pay-ment of any final judgment which may be ren-dered in the action or proceeding”); TravelersIndem. Co., v. Excalibur Reins. Corp., Case 3:12-cv-1793-RNC (D. Conn. December 24, 2012) (motionfor order requiring reinsurer post pre-answersecurity); British Int’l Ins. Co. Ltd. v. Seguros laRepublica, S.A., 212 F.3d 138 (2nd Cir. 2000) (hold-ing that New York’s pre-answer security statuteapplied to reinsurance and required reinsurer topost security); Skandia Am. Reins. Corp. v. CajaNacional de Ahorro y Seguros, 1997 WL 278054(S.D.N.Y. May 23, 1997) (applying pre-answersecurity statute to unlicensed reinsurer seekingto avoid compliance with the panel’s order); Am.Centennial Ins. Co. v. Seguros la Republica, S.A.,1992 WL 162770 (S.D.N.Y. June 22, 1992) (applyingNew York’s pre-answer security statute to rein-

surance); Nw. Nat’l Ins. Co. v. Kansa Gen. Ins. Co.,No 92 Civ. 7422 (LJF), 1992 WL 367085 (S.D.N.Y.Nov. 25, 1992). See also Robert M. Hall, Pre-Answer Security and Reinsurance Arbitrations, 12-18 Mealey’s Litig. Rep. Reinsurance 10 (2002)(analyzing pre-answer security statutes andcase law).

7 Commentators have noted that arbitrators’powers to enforce interim awards may be limit-ed. See, e.g., Ronald S. Gass, Panel ExceededPowers by Imposing $10,000/Day Sanction forParty’s Noncompliance with Interim SecurityOrder, ARIAS•U.S. Q., 3Q 2003 at 28. The generalwillingness of courts to confirm interim securityawards, however, may be sufficiently coercive tosupport the practice. Moreover, parties may vol-untarily comply to avoid the costs of unsuccess-ful motions to vacate or to avoid alienating thepanel or risking an adverse inference on themerits. See, e.g., Peter Skoufalos, HavingArbitrators Order the Posting Of Security AndOther Interim Measures, The Arbitrator, Vol. 42,No. 1, at 2, April 2011.

8 Another benefit of interim orders of securitymay be that they are likely to foster early dis-pute resolution in certain cases. For instance,faced with an order requiring security as well asthe willingness of courts to confirm such anorder, a party facing significant exposure may becompelled to perform a full and frank evaluationof the claim’s merit sooner than it might other-wise. This is likely to encourage early settlementtalks and may lead to more swift and less costlyresolution of certain disputes, thereby advanc-ing one of the traditional advantages and goalsof arbitration.

Arbitrators’ clearauthority to require

security thereforerepresents a powerful

tool for protecting the integrity

of reinsurancearbitrations in

these uncertain economic times…

1 1 P A G EIn each issue of the Quarterly, this columnlists employment changes, re-locations, andaddress changes, both postal and email thathave come in during the last quarter, so thatmembers can adjust their addressdirectories.

Recent Moves andAnnouncementsSusan Claflin’s address is now ClaflinConsulting Services LLC, c/o Alea Group, 55Capital Boulevard, Rocky Hill, CT 06067,phone 860-258-6550, cell 203-907-9141,emails susan.claflin@aleagroup.com andclaflin.arbs@gmail.com.

After several years of commuting to northSan Diego, Mitchell L. Lathrop is returning todowntown San Diego.  His new contactinformation is as follows: Law Office ofMitchell L. Lathrop, 401 B Street, Suite 1200,San Diego, CA 92101-4295, phone 619-955-5951, fax 619-866-4034, emailmllathrop@lathropadr.com, websitewww.LathropADR.com.

Andrew Rothseid can now be reached atRunOff Re.Solve LLC, Two Bala Plaza, Suite300, Bala Cynwyd, PA 19004, phone 610-660-7738, email andrew.rothseid@runoff

resolve.com. Cell phone and facsimilenumbers remain the same.

Susan E. Grondine-Dauwer can be found at16 Northey Farm Road, Scituate, MA 02066,cell 617-642-3113, emailsegboston@comcast.net

Freeborn & Peters LLP has made emailingthem a little easier. The shortened tail of allemail addresses is now “@freeborn.com” andits new website has a new domainname: “www.freeborn.com.” You shouldupdate the email addresses of JosephMcCullough Robin Dusek, Edward Diffin,Kathleen Ehrhart, and John O’Bryan.

Andrew Pinkes has arrived at XL Group,Insurance Operations to be Executive VicePresident, Global Head of Claims. He can bereached at 100 Constitution Plaza, 12th Floor,Hartford, CT 06103, phone 860-293-7762,mobile: 860-830-3485, emailandrew.pinkes@xlgroup.com.

John Cashin is returning to the U.S. He is along-time member of ARIAS•U.S., but hasbeen out of the U.S. for nearly ten years,functioning from Dubai as Zurich’s GeneralCounsel and Head of Compliance for MiddleEast and Africa. He has now also taken onthe role of General Counsel for General

memberson themove

Insurance and, in the middle ofthis year, will relocate to NewYork to focus entirely on GeneralInsurance. His contactinformation remains the samefor now.

Frank DeMento has joined theInsurance/Reinsurance Group inCrowell & Moring's New Yorkoffice. His contact informationis Crowell & Moring LLP, 590Madison Avenue, 20th Floor,New York, NY 10022, phone 212-895-4272, emailfdemento@crowell.com.

Kevin Thompson’s new emailaddress is pkt812@yahoo.com.▼

ARIAS•U.S. Quarterly readers are indebtedto Professor Moxley not only for the sub-stance of his recent piece, Some Tips for Con-ducting Muscular Arbitration Hearings, but also for con-densing his paper on this subject to a bulletized formateasily accessible to busy ARIAS members.

His article is organized generally as tips for lawyersand good practices for arbitrators and undoubtedly willassist those readers. There is one section, however,where Professor Moxley also introduces a normative poli-cy judgment that is anything but normative. I refer tothe section Form of Award, and specifically what I wouldcharacterize as a slant against reasoned awards.

A letter to the editor is not the forum for a broad con-sideration of reasoned awards. More importantly, itwould require one more knowledgeable than I, to offerthat consideration. Suffice it to say, for this forum, thatreasoned awards conveying to the parties the essence of

why one party prevailed on one or more issues, maybe more satisfying and even-handed than the cur-rent practice, albeit Panel sanctioned, of informal

limited feedback from party arbitrators.

Of course as Professor Moxley states, there is a risk ofcomplexity, cost and delay. That said, presiding Judge Pol-lock observed some one hundred and fifty years ago in asuccinct judgment illustrative of a model reasonedaward, “...there are certain cases of which it may be saidres ipsa loquitur, and this seems one of them.” 1

Sincerely,

Richard L. WhiteDeputy LiquidatorIntegrity Insurance Company 625 From RoadParamus, NJ 07652

1 Chief Baron Jonathan Frederick Pollock in Byrne v. Boodle 159 Eng. Rep. 299,300-01 (Ex 1863)

Letters to the Editor may be sent to Eugene Wollan at ewollan@moundcotton.com

To the Editor…

P A G E 1 2

some sort of electronic format. Nevertheless,there are some companies that still usepaper and some older contracts or claimsthat remain in paper as well.

How documents are produced between theparties is not a big concern for arbitrators,but because it has ramifications for howexhibits will be created for the hearing (orany pre-hearing applications), it is useful tounderstand the parties’ protocols early on inthe dispute. Some arbitrators are moreinvolved than others in how documents areproduced, and it is an issue worthconsidering.

When the parties decide to producedocuments in electronic format, client filesmay be scanned into various formatsdepending on the expected use of theelectronic data. Simple electronic productionof documents may only require production inPDF (portable document) format. A PDF isessentially a picture of the document, but ina format that allows some searching andannotating depending on the grade of thesoftware used to create the PDF. The moresophisticated software allows for full searchcapability and the ability to add productionnumbers electronically along withannotations and linking of attachments.

Another format is TIFF (tagged image fileformat), which is merely an image of thedocument. This format is often used to loaddocuments into more complex documentmanagement software programs. Theseprograms, of which there are many, generallyrequire the TIFF image to run through opticalcharacter recognition (OCR) so that thedocument can be word searched.Documents can also be provided in “native”format, but that comes with its own set ofissues, including the concern about theability to edit or manipulate the document.

Before an arbitration panel considersmandating a particular document

feature

Larry P.Schiffer

Larry P. Schiffer is a partner in the NewYork office of Patton Boggs LLP, wherehe concentrates his practice on com-mercial litigation, including insuranceand reinsurance disputes, mediation,and arbitration. He is Co-Chair of theARIAS-U.S. Technology Committee.

…we will review thevarious types oftechnology availablefor use in areinsurancearbitration from theorganizationalmeeting through thehearing phase, anddiscuss the dreadedissue of whether andhow to use andmanage e-discovery.

Larry P. Schiffer

INTRODUCTIONTechnology is ubiquitous in our personal andprofessional lives. We live in a technologicalworld where new advances quickly renderwhat was the latest and greatest softwareand hardware obsolete. In disputeresolution, whether in arbitration orlitigation, technology plays a significant role.Technology has been used in reinsurancearbitrations for years. Nearly all arbitratorsare familiar with real time transcription of awitness’s testimony (one such product isLiveNote) and the use of PowerPoint foropenings and closings. In this part of theseminar, we will review the various types oftechnology available for use in a reinsurancearbitration from the organizational meetingthrough the hearing phase, and discuss thedreaded issue of whether and how to useand manage e-discovery.

TECHNOLOGY DURING THEARBITRATIONDiscoveryThe available technology for use during anarbitration, including at the arbitrationhearing, is myriad. But the question of whattechnology will be used, particularly indiscovery, and how will information beprovided to the panel are important issuesto consider at the outset of the arbitration.

Document discovery is the first area toconsider. Insurance and reinsurancecompanies today are typically paperless.This means that underwriting, contract, andclaims records are typically keptelectronically and e-mail is used morefrequently then writing letters. Manycompanies routinely scan all paperdocuments into their systems and discardthe paper. Many legacy files are also often in

A Primer on Technologyin ArbitrationsThis article is based on a paper presented at the ARIAS-U.S. Educational Seminar, “Difficult Issues in Arbitration – Even for Experienced Arbitrators,” on March 14, 2013

1 3 P A G Eproduction protocol, it is useful to hear theparties out, consider the cost associatedwith the document production, and addresswhether e-discovery is relevant to thesituation. More importantly, an arbitrationpanel needs to consider how it will wantdocuments presented to the panel for thehearing, as that will dictate the mostefficient way of exchanging documents indiscovery.

DepositionsIt is nearly universal today that everydeposition transcript is produced inelectronic format by nearly every courtreporting service alongside the traditionalpaper transcript and short form min-u-script. For arbitrators, electronic transcriptsallow for ease of storage and manipulationin advance of the hearing on thoseoccasions where the arbitrators haverequested all depositions in advance.

While an electronic transcript can be read inany standard word processing program,typically practitioners use specializedsoftware packages meant for the storageand manipulation of transcripts. LiveNoteand TextMap are two products familiar tomost arbitrators. LiveNote, TextMap, andsimilar software packages allow forsearching that is based on key words. Moresophisticated uses include the creation ofissues and annotations, as well as synchingup with exhibits and even video.

Technology in the Briefing PhaseVarious techniques can be used to presentthe hearing briefs and exhibits to the panel.This is a matter that the arbitration panelneeds to discuss with the parties at theorganizational meeting and in advance ofthe date to submit briefs, to make sure thatthe submissions are in a format that isusable and useful to the panel. A simple CDor DVD with an electronic version of thebrief and PDFs of the exhibits may besufficient for those arbitrators who wish tohave everything in electronic format. Amore sophisticated electronic brief, wherethe exhibits, case law, and the depositiontestimony all appear as hypertext links tothe actual transcripts, cases, and documentsin electronic format, may also be producedfor those arbitrators who wish that level oftechnology. When an electronic brief isproduced in conjunction with a trialtechnology consultant, the softwarenecessary to read and manipulate the

LiveNote andTextMap are two

products familiar tomost arbitrators.LiveNote, TextMap,

and similar softwarepackages allow for

searching that isbased on key words.More sophisticated

uses include thecreation of issues

and annotations, aswell as synching up

with exhibits andeven video.

information on the brief is embedded in theCD or DVD. Arbitrators need to advisecounsel of their technology interests andrequirements so that counsel are aware ofwhat needs to be provided to the panel wellin advance of the submission date.

A simple electronic brief in a word processingformat with PDF copies of the exhibits isrelatively easy to accomplish in a shortamount of time. A true electronic brief withintegrated hypertext links to cases,testimony, and documents takes some timefor a technology consultant to put together.Often, the parties will submit a simpleelectronic copy of the brief on the exchangedate and then agree to provide the panelwith the full-blown integrated electronicbrief a week or so before the hearing. Thisgives the panel a chance to read the parties’arguments in advance if the arbitratorschose to do so, but then have the fullyfunctional electronic brief before the hearingwhen the panel is more likely in a position tostudy the materials.

Not all arbitrators need or want a fullyfunctional hypertext electronic brief andthere is a significant cost associated withproducing such a document. It is importantfor the panel to discuss the scope of anyelectronic hearing submissions with theparties early on so that both the parties andthe panel understand the cost and timing ofpreparing a more sophisticated electronicpresentation in advance of the hearing.

Additionally, it may be necessary for theparties to coordinate and cooperate on theelectronic version of the exhibit sets beingprovided to the panel. Duplicate electronicversions of the same document do not assistanyone and can lead to confusion.Coordination among counsel to eliminateredundant exhibits so that the panel onlyhas one set of exhibits submitted jointly byboth sides is something to consider whenusing a sophisticated electronic brief withhyperlinks to the exhibits.

If electronic briefs with hyperlinks are notgoing to be used, but the panel wantsexhibits electronically, it will be necessary todetermine in what manner the exhibits areto be produced. If the panel wishes toannotate the exhibits in digital format, thenthe exhibits must be saved to the CD or DVDin the proper format to allow for annotation.This may be PDF format if the arbitrators

CONTINUED ON PAGE 22

2013Spring ConExplores EmergingRisks

nference With the scenario of a messy hospitaldilemma providing the context forseveral sessions and videosdramatizing three emerging riskareas, the 2013 ARIAS•U.S. Spring

Conference delved into new territories that areexpected to become much more important in thedispute resolution landscape of the future. Theconference sessions focused on “Emerging Risks andProducts” that will impact the reinsurance andinsurance industry in potential arbitrations over thehorizon.

To bring about this focus, the Co-Chairs produced aninteresting and entertaining fact pattern designed toenlighten attendees about various risks that areemerging such as cyber liability, climate change,complications of medical claims, and businessinterruption of supply chains.

The faculty alsointroduced several cuttingedge products that havebeen developed and thatare designed to protectcompanies from thesesame emerging risks.Additionally, sessionsexplored how captiveinsurance companies andbrand protection play arole in addressing currentrisks. The overarching goalof the conference was toalert arbitrators, industryrepresentatives, andattorneys to issues and disputes that they maygrapple with as these new risks and products emerge.

Complementing the conference theme,from Zurich Switzerland, was KeynoteSpeaker, Michael G. Kerner, Zurich’s CEO ofGeneral Insurance. Using the recent WorldEconomic Forum as a point of departure, hepresented an extensive analysis of risks,both evolving and emerging, that theindustry is evaluating as it prepares for thepossibilities of major impacts from societal,environmental, economic, geopolitical, andtechnological changes and events. Theaddress was the most theme-relevantpresentation ever at an ARIAS conference.

In addition, as part of its mission tomaintain ARIAS member attention on the

proper handling of ethics issues, the Ethics DiscussionCommittee led breakout sessions that focused onhow umpires should deal with potential conflicts of

Ann L. Field introducesKeynote Speaker

Keynote Speaker Michael G. Kerner

P A G E 1 6

interest stemming from appointments orexpert witness testimony in other disputes.The results of the breakouts were thenreported in general session.

For the first time in recent years, a report fromARIAS•U.S. committees was included in theconference. The purpose was to ensure thatthe ARIAS•U.S. membership is aware of theextensive activities thatare in progress within theorganization and toencourage joining by thosewho have skills they wishto offer.

The conference attracted302 paid attendees, plus sixnon-member facultyguests. In addition, 31spouses and guestsattended the food eventsand recreational activities.

At the break on Thursdayafternoon, 46 golfers took to theOcean Course and 16 tennis playerscompeted on the Breakers courts in theirrespective tournaments, under clear skies.Jennifer Devery and Eric Kobrick, chaired thegolf and tennis tournaments.

While praise for the quality of the trainingsessions was often heard, the positivecomments about The Breakers continued fromlast year. This was the second year in a row forARIAS•U.S. To avoid Breakers boredom, therewill be a change of pace next year, as the SpringConference travels down the road to the Ritz-Carlton on Key Biscayne. The 2014 SpringConference will take place on May 7-9. Save the Dates!▼

Keynote address graphics showed abroad range of potential risks.

Ann L. Field summarizes the Conference Fact Pattern… …and shows first video about a

medical center dilemma

1 7 P A G E

Captive Insurance Companies Session…(from left) Eric A. Haab, Michael G. Furgueson,

Paul E. Dassenko, and Samantha B. Miller

Aggregating/Batching Medical Claims Session –W. Neil Rambin, Joy L. Langford

P A G E 1 8

…with news of thestorm leading the way

Lunchtime on opening daywas cool inside. The Women’sNetworking Luncheon is inthe foreground.

Exploring the Interruption of Supply Chainsafter an ARkStorm …(from left) Anthony

Clark, Linda Conrad, Lloyd A. Gura

Cyber Liability Session – (from left) Laurie A. Kamaiko, Robert A. Parisi, Jr., Stewart Baker, and John L. Baker

Bad Faith, Attorneys Fees, and Interest –Oral Arguments – Adam H. Fleischer makes a reasonable point…

…Scott M. Seaman begs to differ

Bad Faith, Attorneys Fees, and Interest – Panel Deliberations – (from left)Cynthia Koehler, Daniel E. Schmidt, IV, Clive Becker-Jones

…with a dramatic example of cyber theft to start

P A G E 2 0

ARIAS•U.S. Committees Report on RecentActivities – (from left) Elizabeth Kniffen

(Technology), Mary Ellen Burns(Education), Ann Field (Forms ansd

Procedures), Jeffrey Rubin (Arbitration TaskForce), Mary Kay Vyskocil (Strategic

Planning and International)

Ethics Wrap Up – (from left) Peter J. H.Rogan, Mark L. Abrams, Mina Matin,Edward P. Krugman, Eric S. Kobrick

Two receptions gave plenty of time for discussion of the days training sessions.

2 1 P A G E

AROUNDCONFERENCEthe

Breaks provided time to catch up.

P A G E 2 2these factors to make the most use ofthe technology.

Presentation software, like PowerPoint,is another common technology productused in reinsurance arbitrations.PowerPoint can be used for openingstatements and is also very useful inclosing statements to pull the evidencetogether. Many practitioners are alsousing much more sophisticated trialsoftware packages to meld togethertestimony, video, exhibits, and chartsinto a seamless presentation. What thismore sophisticated software can do islink testimony with specific exhibits andhighlight the relevant testimony andportion of an exhibit to demonstrateadmissions, conflicts in testimony, orother points counsel wishes to make.

Trial presentation software, often inconjunction with a technologist, can beused during direct and cross-examination to lead a witness anddirect the panel to specific portions ofdocuments or testimony. While thereare different techniques andmethodologies, trial presentationsoftware allows counsel to bring up anexhibit on a screen and then highlightor “call-out” a specific portion of theexhibit for emphasis. Trial consultantswill work with counsel on direct andcross-examinations and closingarguments to put documents into aproper order and allow for swift displayand manipulation of exhibits formaximum effect and impact.

When all exhibits are available in thisfashion, the arbitrators can also ask fordocuments to be displayed duringquestioning of witnesses or counsel toanswer any open questions or clarifycertain issues.

E-DISCOVERYE-Discovery is about the biggest issue inlitigation in the past several years.There are seminars and books on E-Discovery and every bar association, lawfirm, and court system has E-Discoveryexperts, committees, rules, andprocedures. So what is E-Discovery?

E-Discovery is the manner in whichelectronically stored information (ESI) iscollected and produced as part of aparty’s discovery obligation. Becausecompanies and individuals are storing

records in electronic media and movingaway from paper files, nearly every caseinvolves ESI. In 2006 and 2007, theFederal Rules of Civil Procedure wereamended to address E-Discovery. Moststates now have similar rules. Do theserules apply to reinsurance arbitration?Not unless the arbitration clause and/orcontract wording specifically require theapplication of federal or state procedurallaw to the arbitration proceeding.

Regardless of whether federal or staterules on the collection and discovery ofESI apply to reinsurance arbitration, theunderlying issue needs to be consideredbecause of the proliferation of electroniccommunications and electronic storageof business information. So we look towhat the federal and state courts havedone to see what may be applicable in aparticular dispute.

One of the biggest issues in E-Discoveryis the failure of a party to preserve ESI.The failure of a party to keep evidenceand what to do about the missingevidence is not a new issue. Proceduralrules and court cases have existed formany years dealing with spoliation ofevidence and the use of an adverseinference against the party that fails topreserve important evidence. With theadvent of ESI, preserving electronicallystored records and communications inthe face of corporate records retentionand destruction policies has become abig issue.

Because the failure to maintain ESI hasresulted in significant spoliation ofevidence sanctions in many courts, thefirst thing that counsel must do is makesure their clients put a hold on thedestruction of any ESI and notifying allrelevant company personnel to preserveall relevant records. The issue of whenand how a litigation hold was issuedand when and how relevant companypersonnel were notified to preserve andcollect documents may arise in areinsurance arbitration if relevantdocuments were not preserved after thetime it became reasonably known that adispute as arisen. In those instances,arbitrators may need to consider howthe courts approach this issue whenfaced with a request to sanction a partyfor destroying ESI.

Under Federal Rules of Civil Procedure

have the appropriate software versionthat allows for annotations or in someother format as long as the annotationcapability is imbedded in the disk sentto the panel. If the panel only wants tohave the electronic version of theexhibits as a resource and does notplan on annotating the documents ondisk, then a simple PDF or TIFF file foreach exhibit should suffice.

TECHNOLOGY AT THE HEARINGTechnology at the hearing can beextremely sophisticated or quite simpledepending on the needs and wants ofthe parties and the arbitrators. The keyis that the technology used shouldmatch the needs of the case andshould not be used just for the sake ofthe technology itself. Not every caserequires everything to be shown on abig screen or a monitor. The moresophisticated the technology the morelikely the cost will rise. Having atechnologist from a trial consultant sitat the hearing and run the presentationis expensive.

Nearly all reinsurance arbitrations havesome version of real time testimonytranscription available to the arbitratorsand the parties. This allows the panelto read the testimony on a laptop orshared monitors while the witness istestifying. If each arbitrator has apersonal laptop hooked up to the realtime transmission, each arbitrator canmark the transcript on the fly if there istestimony the arbitrator wishes toreview more carefully later. Obviously,using shared monitors precludes theability of each arbitrator to tagtestimony on an individual basis.

Real time transcription is very helpfulwhere witnesses speak softly or in apattern that is difficult to hear. It alsomakes it easier for the arbitrators tofollow up with a witness to confirm orquestion testimony after the direct andcross-examination has concluded. Onthe other hand, staring at a screen andreading the testimony instead ofwatching the witness can bedistracting and can cause arbitrators tomiss important aspects of thetestimony. Arbitrators that use realtime transcription need to balance

CONTINUED FROM PAGE 13

2 3 P A G Eafter document requests are served.Coordination of the production and search ofESI is complex and time-consuming, not tomention expensive, and resolving issues upfront is the best way to avoid unnecessarydelay and motion practice. The Federal Rulesrequire the parties to engage in a discoveryconference before the initial schedulingconference to address E-Discovery issues.FRCP 26(f).

Sometimes ESI is not readily available from aparty’s computer systems. In thesecircumstances, many jurisdictions allow forcost-shifting to address requests for ESI thatcannot be easily obtained. Additionally, costsharing agreements may make sense forboth parties where there is a significantamount of ESI in one party’s systems thatboth parties need to assess and search.Under the Federal Rules, parties are todiscuss these issues and try to work themout at the discovery conference. In areinsurance arbitration, this can beaccomplished before the organizationalmeeting at an initial meet and confer or atthe organizational meeting. The arbitratorsshould inquire about whether any E-Discovery issues are anticipated and shouldencourage the parties to meet and resolvethose issues in advance of the organizationalmeeting if possible.

While E-Discovery is daunting, it needs to bekept in perspective. Very few reinsurancedisputes require the kind of E-Discoverydescribed above. Most parties have nodifficulty exchanging e-mails, the relevantclaim or contract files, and other ESI relevantto the dispute. Managing E-Discovery isrequired only in the most complex casewhere it is necessary to delve into largeamounts of ESI contained in extensivedatabases and numerous computers.Arbitrators need not impose unnecessaryprocedural requirements if the parties do nothave any real issues concerning E-Discoveryto address.▼

37(f), a “safe harbor” exists where a partydestroys or alters documents “as a result ofthe routine, good-faith operation of anelectronic information system.” In practicalterms, the “safe harbor” is intended toprotect parties from sanctions if spoliationof discoverable ESI occurs as a result of theroutine operation of the party’s informationtechnology systems.  This assumes, however,that the party with the duty to preserveacted in “good faith,” and therefore couldnot have anticipated and prevented thespoliation through reasonable preservationmeasures.  Thus, the “safe harbor” is by nomeans a green light to allow the“automatic” destruction of discoverableinformation by recurrent documentmanagement practices. In fact, the “safeharbor” is very limited and will not protectagainst other actions a court might takebecause of spoliation of evidence, includingan adverse inference or the requirementthat additional witnesses be made available.While FRCP 37(f) does not apply toarbitrations, it does give arbitrators someguidance on how to address requests forsanctions where ESI has been altered ordestroyed.

FRCP 34 governs the production of ESI.Under the revised Rule 34, parties now canseek the production of ESI in a particularformat (e.g., in native format (Excel, Word,Outlook), hard copy, or PDF, TIFF or otherimage format). How ESI is collected andproduced depends on the capabilities andcost of the software used to store, search,view and use ESI, and which format is bestfor the software being used. If an arbitrationrequires the production of complex ESI,arbitrators need to be cognizant of the costof collecting, storing, and searching ESIbefore granting ESI discovery requests.

If E-Discovery is going to be an issue in anarbitration, the best time and place toresolve questions concerning production ofESI is at the organizational meeting and not

While E-Discovery isdaunting, it needs to

be kept inperspective. Veryfew reinsurance

disputes require thekind of E-Discovery

described above.Most parties have

no difficultyexchanging e-mails,

the relevant claimor contract files,

and other ESIrelevant to the

dispute. ManagingE-Discovery is

required only in themost complex case

where it isnecessary to delveinto large amountsof ESI contained in

extensive databasesand numerous

computers.

DID YOU KNOW…?DID YOU KNOW?...THAT THERE ARE 14 DIFFERENT FORMS AND LISTS RELATING TO ARBITRATION AND MEDIATION AVAILABLE ON THE WEBSITE. THEY CAN BE ACCESSEDTHROUGH THE RESOURCES MENU.

One of my pet complaints, as my faithfulreaders are by now undoubtedly tired ofhearing, is the pretentious assumption bythe drafters of insurance policies and othercontracts that their modest work productoccupies a literary status second only toBiblical writings. This is most often reflectedin the abandon with which they throwaround the word “shall,” apparently underthe impression that it sounds particularlystately or elegant or imperative, when asingle “will” or “must” would begrammatically more accurate andsemantically more appropriate. I was taughtthat in ordinary parlance “shall” is used forthe first person and “will” is used for thesecond and third persons; this is reversedonly when extraordinary emphasis isdesired. One more rule of grammar that’shonored more nowadays in the breach thanin the observation!

Thus, we frequently encounter items like:“The insured shall submit …” Entirely apartfrom strictly grammatical considerations, thequestion of ambiguity rears its ubiquitoushead. Is this statement a prediction or amandate? If it’s a requirement, why notmake this clear by using “must”? If it’s aprediction, what effect does it have? (Whenwill the insured “submit” whatever it is?Next Tuesday?)

I have been known in the past to fall victimto exactly the same behavior that I criticizein others, and I fear that I am about to repeatthat here. In the process of trying to instillgood writing habits into the (sometimesimpenetrable) minds of many generations ofyoung lawyers. I have distilled much of myaccumulated “wisdom,” which is really just aeuphemism for pontification, into a few setsof rules that are deliberately phrased inquasi-Biblical terms. Why? you ask. Perhapsin the hope of making a more lastingimpression than the proverbial footprint inthe snow. Perhaps because of myadmiration for the elegant poetic languageof Genesis, Exodus, etc, etc. Or maybe justbecause I’m showing off.

P A G E 2 4

Whatever the reasons, though, here is myown personal list of LiteraryCommandments.

The Ten Commandments1. Thou shalt write English, not jargon.

2. Thou shalt write thoughtfully, notmechanically.

3. Thou shalt honor precision over vagueness.

4. Thou shalt honor correctness over fad.

5. Less is more.

6. Thou shalt honor the basic principles ofgrammatical form and structure.

7. Thou shalt honor the integrity of thesentence.

8. Write unto others as you would have themwrite unto you.

9. Thou shalt proofread diligently.

10. Strunk & White are thy twin Deities, andthou shalt consult them frequently.

All of these are — or at least should be … self-explanatory. Some of them overlap (#s1 and2, for example), and at least one (#10) has adistinctly sacrilegious sound to it. But theyall make sense, they are all irrefutable, and ifthey were all scrupulously followed the worldof lawyer writing would undoubtedly be “ afar, far better place.”

If I were asked to identify the mostimportant theme that underlies all mygrumblings and rumblings about the waylawyers write, it would probably be thisadmonition: think about what you’re writing;don’t fall into the trap of taking the path ofleast resistance simply because that pathcontains the words that spring most readilyto mind. It may take an iota of extra thoughtto say what you want to say without goingstraight via automatic pilot to the handiestcliché, but it’s worth the effort. Clichés are

off thecuff

Eugene Wollan

Rules of Engagement

This column appears periodically in the Quarterly. It offers thoughts and observations aboutreinsurance and arbitration that are outside the normal run of professional articles, often lookingat the unconventional side of the business.

Thus, we frequentlyencounter items like:“The insured shallsubmit …” Entirelyapart from strictlygrammaticalconsiderations, thequestion ofambiguity rears itsubiquitous head. Isthis statement aprediction or amandate? If it’s arequirement, whynot make this clearby using “must”?

Eugene Wollan, Editor of the Quarterly,is a former senior partner, now Senior Counsel to Mound CottonWollan & Greengrass. He is residentin the New York Office.

2 5 P A G Ethe booby traps that ambush the lazywriter.

Here’s a typical booby trap. I wouldguess that 99% of the lawyers outthere (rough estimate!), in describingan action taken under a statute, beginwith the phrase “pursuant to.” OK in itsplace, even though it sounds a bitpretentious to begin with. But why notvary it from time to time with, say, “inaccordance with,” or “by virtue of,” oreven “under”? Because, I suppose,“pursuant to” beckons with thefamiliarity of an old friend.

Sometimes a thought process can bejust as much of a cliché as a particularword or phrase. What percentage ofthe briefs or memos of law that youhave seen end with something verymuch like this: “Conclusion

For the foregoing reasons, thismotion should be granted/denied inits entirety.”

(My rough guess: 96.3%)

Just another example of lazy thinking.Or, more accurately, failure to think. Put

aside the unnecessarily legalistic word“foregoing.” Does this sentence containa single syllable that advances thewriter’s cause? Does it do anything tocapture the reader’s interest? Clearlynot. The conclusion section offers theskillful advocate a final opportunity topersuade. It should be pithy andoriginal, perhaps even dramatic. But theone thing it should certainly not be ishumdrum.

As a related part of my personalcrusade, I have also devised a list ofcorollaries to the Ten Commandments,which I have chosen, in keeping with myquasi-Biblical approach, to designateThe Seven Deadly Sins. Some are justrestatements of one or moreCommandments, to flesh out the ideasor even just reiterate them. The majordifference is that the Commandmentsare positive – they tell you what to do –whereas the Sins are negative – they tellyou what not to do.

Anyhow, here they are.

SavetheDate SavetheDate SavetheDate SavetheDate

2013 Fall Conference

October 31 - November 1HILTON NEW YORK HOTEL

SavetheDate SavetheDate SavetheDate SavetheDate

The Seven Deadly Sins 1. Committing basic grammaticalsolecisms.

2. Writing with less than total clarity andprecision.

3. Overwriting.

4. Trying too hard to sound elegant orliterary or, especially, “lawyerly.”

5. Writing in a dull, mechanistic,unthinking way.

6. Not organizing properly.

7. Failing to proofread carefully.

I hope no one will take it amiss that mycommandments use languageformulations that might have beenlifted from The Dead Sea Scrolls. Icertainly have no quasi-deisticpretentions or aspirations. Nor am I inthe same league as Daniel Dravot (in TheMan Who Would Be King), whoencouraged the natives to regard him inthose terms. I’m just a slightlyobsessive-compulsive lawyer whospends too much time focusing on themistakes of others, perhaps in order toavoid confronting his own!▼

P A G E 2 6

Counsel in the Company’s Special Liability Group(responsible for managing asbestos andenvironmental liabilities).

Prior to joining Travelers in 2003, he clerked forthe Hon. Richard N. Palmer of the ConnecticutSupreme Court and specialized in reinsuranceand insurance coverage litigation as well asgeneral corporate law for several years at theHartford-based law firm of Day Pitney, LLP wherehe also was a member of the Oliver Ellsworth Innof Court.

Mr. Scrimgeour has presented or facilitated atnumerous industry conferences and seminars,including Mealey's. AIRROC, and ARIAS-U.S. Heis also founding member of the Mediation TaskForce of the Re/Insurance Mediation Institute.

Throughout his career, Mr. Scrimgeour hasmanaged or participated in approximately 100arbitrations resulting in nearly 60 hearing daysinvolving live testimony. Mr. Scrimgeour receivedhis degrees from Amherst College and TheUniversity of Connecticut School of Law.

Susan E. Grondine-DauwerSusan Grondine-Dauwer has recently left herposition as Senior Vice President and GeneralCounsel of R&Q Solutions. After a short hiatusfrom taking on arbitration assignments, she hasnow been re-certified by ARIAS•U.S.

After 25 years in the industry working for overa dozen ceding companies and reinsurers, Ms.Grondine-Dauwer is an independent consultantproviding technical and peer review services inconjunction with her arbitration practice.

James D. Scrimgeour James (Jamie) Scrimgeour is Senior Counsel inthe Reinsurance Legal Group of The TravelersCompanies, Inc., where he manages insuranceand reinsurance disputes and analyzes variouscomplex legal matters directly affecting theinsurance operations of the Company and itssubsidiaries. He also specializes in generalbusiness counseling to the group's placement,captive and runoff client base and is co-chair ofthe Company’s Internal Resolution Committee,which facilitates resolution of internal disputesthrough mediation and, in certain cases,streamlined arbitration. Mr. Scrimgeour movedinto his current role from a position as Senior

in focus

Profiles of all certified arbitratorsare on the website at www.arias-us.org

Susan E.Grondine-

Dauwer

Recently Certified Arbitrators

James D.Scrimgeour

DID YOU KNOW…?THAT ARIAS•U.S. OFFERS TWO METHODS FOR SELECTING AN UMPIRE. THE BASIC PRO-CEDURE RANDOMLY SELECTS FROM THE FULL LIST OF CERTIFIED ARBITRATORS ORUMPIRES, WHILE THE ENHANCED SELECTION PROGRAM RANDOMLY SELECTS FROM ALIST THAT IS FILTERED BY EXPERIENCE PARAMETERS. COMPLETE DETAILS CAN BEFOUND UNDER “SELECTING AN UMPIRE” IN THE ARBITRATORS/UMPIRES MENU OF THEWEBSITE.

Intensive Workshopand

Umpire Master ClassSeptember 18, 2013

Two New Simultaneous ARIAS•U.S. Training Events:

1. A newly recreated Intensive Arbitrator Training WorkshopThe Education Committee is reorganizing the workshop to provide a more intense arbitration experiencefor attendees. This workshop is for anyone planning to apply for initial certification and for all arbitratorswho would like to hone their skills. It is an all-day training program. It is not considered an "educationalseminar" for renewal purposes.

2. Announcing the first Umpire Master Class!The first in a series of new seminars designed to provide additional education programs geared to the moreexperienced certified arbitrators who would like to improve their umpire skills. A full morning of instruc-tion, with "educational seminar" credit toward certification renewal.

Reception and dinner on the evening before the classes!A unique networking experience…faculty and student participants from both courses will attend a recep-tion and dinner on the evening of September 17.

SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | S

The location will be the recently renovated Crowne Plaza Hotel in White Plains, New York.

Complete details of both programs will be announced in June. Registration will begin in Mid-July.

Location and Schedule

SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | SAVE THE DATE | S

Do you know someone who is interested inlearning more about ARIAS•U.S.? If so, pass on this letter of invitation and membership application.

An Invitation…The rapid growth of ARIAS•U.S. (AIDAReinsurance & Insurance Arbitration Society) sinceits incorporation in May of 1994 testifies to theincreasing importance of the Society in the field ofreinsurance arbitration. Training and certification ofarbitrators through educational seminars,conferences, and publications has assistedARIAS•U.S. in achieving its goals of increasing thepool of qualified arbitrators and improving thearbitration process. As of May 2013, ARIAS•U.S.was comprised of 335 individual members and 929corporate memberships, totaling 940 individualmembers and designated corporate representatives,of which 225 are certified as arbitrators and 58 arecertified as umpires.

The Society offers its Umpire AppointmentProcedure, based on a unique software programcreated specifically for ARIAS, that randomlygenerates the names of umpire candidates from thelist of ARIAS•U.S. Certified Umpires. Theprocedure is free to members and non-members. It is described in detail in the Selecting an Umpiresection of the website.

Similarly, a random, neutral selection of all threepanel members from a list of ARIAS CertifiedArbitrators is offered at no cost. Details of theprocedure are available on the website underNeutral Selection Procedure.

The website offers the "Arbitrator, Umpire, andMediator Search" feature that searches the extensivebackground data of our Certified Arbitrators whohave completed their enhanced biographicalprofiles. The search results list is linked to thoseprofiles, containing details about their workexperience and current contact information.

Over the years, ARIAS•U.S. has held conferencesand workshops in Chicago, Marco Island, SanFrancisco, San Diego, Philadelphia, Baltimore,Washington, Boston, Miami, New York, PuertoRico, Palm Beach, Boca Raton, Las Vegas, Marinadel Rey, Amelia Island, and Bermuda. The Societyhas brought together many of the leadingprofessionals in the field to support its educationaland training objectives.

For many years, the Society published theARIAS•U.S. Membership Directory, which wasprovided to members. In 2009, it was broughtonline, where it is available for members only.ARIAS also publishes the ARIAS•U.S. PracticalGuide to Reinsurance Arbitration Procedure andGuidelines for Arbitrator Conduct. Thesepublications, as well as the ARIAS•U.S. Quarterlyjournal, special member rates for conferences, andaccess to educational seminars and intensivearbitrator training workshops, are among thebenefits of membership in ARIAS.

If you are not already a member, we invite you toenjoy all ARIAS•U.S. benefits by joining. Complete information is in the Membership area ofthe website; an application form and an onlineapplication system are also available there. If youhave any questions regarding membership, pleasecontact Bill Yankus, Executive Director, atdirector@arias-us.org or 914-966-3180, ext. 116.

Join us and become an active part of ARIAS•U.S.,the leading trade association for the insurance andreinsurance arbitration industry.

Sincerely,

Mary Kay Vyskocil Jeffrey M. Rubin

Chairman President

P A G E 2 8

MembershipApplication

AIDA Reinsurance & Insurance Arbitration SocietyPO BOX 9001MOUNT VERNON, NY 10552

Online membership application is available

with a credit card through “Membership”

at www.arias-us.org.

Complete information about

ARIAS•U.S. is available at

www.arias-us.org.

Included are current

biographies of all

certified arbitrators,

a current calendar of

upcoming events,

online membership

application, and

online registration

for meetings.

914-966-3180, ext. 116

Fax: 914-966-3264

Email: info@arias-us.org

NAME & POSITION

COMPANY or FIRM

STREET ADDRESS

CITY/STATE/ZIP

PHONE CELL

FAX E-MAIL

Fees and Annual Dues: Effective 10/1/12

INDIVIDUAL CORPORATION & LAW FIRM

INITIATION FEE $500 $1,500

ANNUAL DUES (CALENDAR YEAR)• $415 $1,200

FIRST-YEAR DUES AS OF APRIL 1 $277 $800 (JOINING APRIL 1 - JUNE 30)

FIRST-YEAR DUES AS OF JULY 1 $138 $400 (JOINING JULY 1 - SEPT. 30)

TOTAL (ADD APPROPRIATE DUES TO INITIATION FEE) $ $

* Member joining and paying the full annual dues after October 1 is considered paid through the following calendar year.

** As a benefit of membership, you will receive the ARIAS•U.S. Quarterly, published 4 times a year. Approximately $40 of your dues payment will be allocated to this benefit.

Payment by check: Enclosed is my check in the amount of $____________Please make checks payable to ARIAS•U.S. (Fed. I.D. No. 13-3804860) and mail with registration form to: ARIAS•U.S.

Dept. CH 16808, Palatine, Il. 60055-6808

Payment by credit card: Fax to 914-966-3264 or mail to ARIAS•U.S., P.O. Box 9001, Mt. Vernon, NY 10552.Please charge my credit card: (NOTE: Credit card charges will have 3% added to cover the processing fee.)

■■ AmEx ■■ Visa ■■ MasterCard in the amount of $_________________

Account no. ______________________________________

Exp. _______/_______/_______ Security Code ____________________________

Cardholder’s name (please print) ____________________________________________

Cardholder’s address __________________________________________________

Signature ____________________________________________________________

NOTE: Corporate memberships include up to five designated representatives. Additional representatives may be designated for an additional $415 per individual, per year.Names of designated corporate representatives must be submitted on corporation/organiza-tion letterhead or by email from the corporate key contact and include the following informa-tion for each: name, address, phone, cell, fax and e-mail.

By signing below, I agree that I have read the By-Laws of ARIAS•U.S., and agree toabide and be bound by the By-Laws of ARIAS•U.S. The By-Laws are available atwww.arias-us.org in the About ARIAS section.

________________________________________________Signature of Individual or Corporate Member Applicant

P.O. Box 9001Mt. Vernon, NY 10552

Board of DirectorsChairman

Mary Kay VyskocilSimpson Thacher & Bartlett LLP425 Lexington AvenueNew York, NY 10017212-455-3093mvyskocil@stblaw.com

President Jeffrey M. Rubin

Odyssey America Reinsurance Corp.300 First Stamford PlaceStamford, CT 0690203-977-0137jrubin@odysseyre.com

Vice President (President Elect)Eric S. Kobrick

American International Group, Inc.180 Maiden LaneNew York, NY 10038212-458-8270eric.kobrick@aig.com

Vice PresidentElizabeth A. Mullins

Swiss Re America Holding Corporation175 King StreetArmonk, NY 10504914-828-8760elizabeth_mullins@swissre.com

Ann L. FieldZurich Insurance Group1400 American LaneSchaumburg, IL 60196847-605-3372ann.field@zurichna.com

Michael A. FrantzMunich Re America 555 College Road EastPrinceton, NJ 08543609-243-4443mfrantz@munichreamerica.com

Mark T. Megaw ACE Group Holdings436 Walnut StreetPhiladelphia, PA 19106215-640-4020mark.megaw@acegroup.com

John M. Nonna Patton Boggs LLP1185 Avenue of the AmericasNew York, NY 10036Phone: 646-557-5172Email: jnonna@pattonboggs.com

James I. RubinButler Rubin Saltarelli & Boyd LLPThree First National Plaza70 West Madison StreetChicago, IL 60602312-696-4443jrubin@butlerrubin.com

Chairman EmeritusT. Richard Kennedy

Directors EmeritiCharles M. FossMark S. GurevitzCharles W. Havens IIIRonald A. Jacks*Susan E. MackRobert M. ManginoEdmond F. Rondepierre*Daniel E. Schmidt, IV

*deceased

AdministrationTreasurer

Peter A. Gentile7976 Cranes Pointe WayWest Palm Beach, FL. 33412203-246-6091pagentile@optonline.net

Executive Director/ CorporateSecretary

William H. YankusSenior Vice PresidentCINN Worldwide, Inc.P.O. Box 9001Mt. Vernon, NY 10552914-966-3180 ext. 116wyankus@cinn.com

Carole Haarmann AcuntoExecutive Vice President & CFOCINN Worldwide, Inc.P.O. Box 9001Mt. Vernon, NY 10552914-966-3180 ext. 120cha@cinn.com