Case 2:11-cv-01055-LDD Document 1 Filed 02/11/11 Page 1 of 22

IN UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CERTAIN UNDERWRITERS AT LLOYD'S, )

LONDON )
)
Petitioner, )
v. ) Civil Action No.
)
CENTURY INDEMNITY COMPANY, )
successor to INSURANCE COMPANY )
of NORTH AMERICA )
)
Respondents. )
)

PETITION FOR AN ORDER COMPELLING

ARBITRATION AND APPOINTING AN UMPIRE

Petitioner Certain Underwriters at Lloyd's, London ("Underwriters") as and for its

Petition for an order compelling arbitration and appointing an arbitrator pursuant to the

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention

Act"), 9 U.S.C. §206, alleges as follows:

NATURE OF THE PETITION

1. This action arises from a dispute between Underwriters and Respondents Century

Indemnity Company, successor to Insurance Company of NOlih America (hereinafter "Century

Indemnity" 01' "Century") over Centuris claim for reimbursement pursuant to reinsurance

treaties issued to Century by Underwriters. Petitioner and Respondents are engaged in an

arbitration proceeding with respect to this dispute, and have been unable to select a third

arbitrator (an "umpire"), as required by the governing arbitration clauses in the reinsurance

treaties. Without the selection of an umpire, the arbitration cannot proceed.

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JURISDICTION AND VENUE

2. Petitioner Certain Underwriters at Lloyd's, London, consisting of United Kingdom

syndicates of individual Names who underwrite the reinsurance, is the palty against whom

Century commenced arbitration proceedings under the Treaties by an Arbitration Demand dated

November 22,2010.

3. Upon information and belief, Respondent Century is a corporation organized

under the laws of Pennsylvania, with its principal place of business located in Philadelphia,

Pem1sylvania.

4. This Court has original subject matter jurisdiction over this action pursuant to the

Convention Act, 9 U.S.C, §§202 and 203, because the subject matter of this Petition is an

arbitration clause contained in a commercial contract which is not entirely between citizens of the

United States.

5. In addition, this COlUi has subject matter jurisdiction over this action pursuant to

28 U.S.C. § 1332(a)(2) because the amount in controversy exceeds $75,000, exclusive of interest

and costs, and is between citizens of a State and citizens of a foreign state.

6.' Venue in this district is propel' because the goveming arbitration clauses provide

that the arbitration shall take place in this district.

THE REINSURANCE CLAIMS

7. On February 4, 2008 and October 23, 2009, Century submitted billings to

Underwriters with regard to American Cyanamid asbestos products claims and asbestos non~

products claims. These billings were presented on the basis that all of the asbestos products

claims, and all of the asbestos non~products claims, constituted an "accident" under the treaty

language.

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8. Underwriters disputed Century's position that all of the asbestos products claims,

and all of the asbestos non~products claims, constituted "accidents" under the treaty language.

9. The primary issue to be considered by the arbitration panel in this matter will be

whether, and to what extent, CentUlY can accumulate the product and non-products asbestos

claims as "accidents" under the reinsunince contracts at issue (the "Accumulation Issue").

THE REINSURANCE CONTRACTS PROVIDE FOR ARBITRATION

10. Century demanded arbitration against Underwriters pursuant to Explosives,

Chemical and Pharmaceutical Treaty 103 ("Treaty" 01' "Treaties") issued by Underwriters from

1960~1964. A copy of a representative Treaty is attached hereto as Exhibit A and made a part of

this Petition.

11. Treaty 103 contains an arbitration clause, which states:

If any dispute shall arise between the Company and the Reinsurers with reference
to the interpretation of this agreement, 01' the rights with respect of any transaction
involved; the dispute shall be refened to two Arbitrators, one to be chosen by each
party, and such Arbitrators shall choose an Umpire, and in the event of said
Arbitrators not agreeing, the decision of said Umpire shall be final and binding
upon all patties. The Arbitrators and the Umpire shall interpret the Agreement as
an honourable engagement, and they shall make their award with a view to
effecting the general purpose of this Agreement in a reasonable malmer, rather than
in accordance with a literal interpretation of the language.. Said Arbitration to take
place in Philadelphia.

12. The Treaties are silent as to how to proceed in the event that the two party~

appointed Arbitrators do not agree on selection of the Umpire.

13. The Treaties contain no qualification requirements for the Arbitrators or Umpire.

THE ARBITRATION PROCEEDINGS

14. Century commenced arbitration proceedings against Underwriters under the

Treaties by an Arbitration Demand dated November 22,2010.

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15. The parties simultaneously exchanged designations of their party-appointed

arbitrators by letters dated January 14, 2011. Underwriters designated Mr. Thomas S. Orr as its

party-appointed arbitrator, and Century designated Mr. Martin Habel' as its party-appointed

arbitrator.

EFFORTS TO SELECT AN UMPIRE

16. Century suggested that the parties select an umpire by a cross-strikes method,

whereby each patiy would propose three candidates, the opposing party would then be permitted

to strike two of these candidates, and the umpire would be randomly selected from the two

remaining candidates based upon the last digit of Dow Jones industrial average on an agreed

upon date ("the cross-strikes method").

17. Underwriters objected to this process firstly because it is not the prescribed

method in the Treaties and secondly because Underwriters feared that it could lead to selection of

a non-neutral Umpire candidate.

18. Ultimately, Century agreed to proceed with the selection of atl Umpire in the

mamlel' specified in the Treaties, pursuant to which the two party-appointed arbitrators are to

choose an umpire. The parties agreed to allow until February 4,2011 for this process to continue.

By mutual agreement, this date was subsequently extended until February 11,2011.

19. Century further proposed that should this method for Umpire selection fail, that

the parties should'then adopt the cross-strikes method.

20. Underwriters again refused to adopt Century's proposal and insisted that the

umpire either be agreed upon by the arbitrators, 01' that the parties agree a methodology to select a

truly neutral umpire. Spe~ifically, Underwriters proposed that-the pmiies select from panels of

retired judges.

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21. Century indicated that they had no interest in selecting a neutral Umpire and

rejected Underwriters proposal.

22. On February 3, 2011, Mr. Haber and Mr. Orr spoke substantively for the first time

by telephone to discuss umpire candidates. Mr.' Habel', Centuris party-appointed arbitrator,

proposed Mr. Richard White and Mr. Clive Becker-Jones as potential umpires. Mr. 01'1',

Underwriters' party-appointed arbitrator, proposed Mr. James Phair, and Mr. David Brodnan as

umpire candidates.

23. Neither Mr. Habel' nor Mr. 011' agreed to the appointment of either of the umpire

candidates suggested by the other side.

24. Mr. Phair and Mr. Brodnan, Underwriters' umpire candidates each have in excess

of 40 years relevilllt industry experience and have collectively participated in over 400

arbitrations. Neither has ever been a member of an arbitration panel between the Parties involving

the issue and treaty language in this arbitration.

25. Both Mr. White and Mr. Becker-Jones, Century's arbitrators, have previously

participated in arbitrations between the Parties involving issues and accumulation language

materially the same as those at issue in this arbitration. Further, both Mr. White and Ml'. Becker-

Jones were nominated to those arbitration panels by Century, and issued rulings in those

arbitrations.

26. Following the naming of Mr. White and Mr. Becker-Jones, Underwriters asked

Mr. Orr to relay to Ml'. Haber their vehement objections to the nomination of such clearly non-

neutral Umpire candidates.

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27. In response to Underwiiters' objections, Mr. Habel' proposed two new umpire

candidates to replace Mr. White and Mr. Becker-Jones, Ms. Susan Mack and Mr. Ray Prosser.

Mr. Orr did not agree to either of these two new candidates.

28. In light of the candidates initially proposed by Century, Underwriters also

proposed an alternate Umpire selection methodology in line with their consistent position that the

Umpire should be neutral. Underwriters' proposed randomly selecting a pool of candidates from

the Insurance Neutrals list of the well-known and well-respected arbitration and mediation

services firm, Judicial Arbitration and Mediation Services, Inc. ("JAMS"). This methodology

included several provisions to further ensure the selection of a truly neutral Umpire, including

allowing each side an agreed number of strikes, and eliminating any candidates which had

previously considered the Accumulation Issue. We attach a copy of the proposed UJ.?1pire

Selection Methodology as Exhibit B.

29. This alternative Umpire Selection Methodology was shared with Century on

February 8, 2011. Within hours, Century advised that the proposed methodology was a "non-

starter," because they did not wish to use a new pool of candidates and that the JAMS Insurance

neutrals were primarily retired judges and not insurance industry persOlmel.

30. At the same time, Century proposed its own alternative selection methodology.

Under its proposal, the two parties would rank the four remaining umpire candidates, with the

candidate with the best combined score becoming the umpire. In the event of a tie, Century

proposed a Dow Jones coin flip between the two tied candidates.

31. Underwriters have rejected Century's alternative selection methodology.

FIRST CAUSE OF ACTION

32. Underwriters repeat and reallege each and every allegation set forth in

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paragraphs 1 tlU'ough 31 above as if fully set forth herein.

33. Messrs. 01'1' and Haber are unable to agree upon the selection of an umpire, and

the parties have been unable to agree upon an alternative method of umpire selection.

34. There is no prospect that an umpire can be agreed upon by the pal'tywappointcd

arbitrators, 01' that an umpire selection methodology can be agreed upon by the parties.

35. Without an umpire, the arbitration cmmot proceed.

WHEREFORE, Underwriters respectfully requests that the Court:

1. Assume jurisdiction of this matter pursuant to Title 9, United States Code;

2. Enter an order and judgment ordering:

A. The parties use Underwriters' Umpire Selection Methodology, or in the

alternative;

B. That either James Phair or David Brodnml be selected as the Umpire,

or in the alternative;

C. Naming a neutral umpire of the Court's own choosing; and

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3. Grant such other and further relief as to the COUlt may deem just and

propel'.

Dated: February 11,2011

BUCHANAN INGERSOLL & ROONEY PC

By: 1UJ-V,· St..lu~\,;{ ~ .

Ho al'd D. Scher, Attorney LD. No. 03673
Samantha L. Southall, Attorney I.D. No. 80709
Two Liberty Place
50 S. 16th Street, Suite 3200
Philadelphia, Pennsylvania 19102
Telephone Number: (215) 665-8700
Facsimile Number: (215) 665-8760

KISSEL HIRSCH & WILMER LLP

By: Joseph G. Hynes, Esquire
580 White Plains Road
Tarrytown, NY 10591
Telephone Number: (914) 750-5933
Facsimile Number: (914) 750-5922

Attorneys for Certain Underwriters at

Lloyd's, London