On June 7, the U.S. Court of Appeals for the Second Circuit, in the case of Certain Underwriting Members of Lloyds of London v. Insurance Company of the Americas, No. 17-1137-cv (2d Cir. June 7, 2018), overturned the lower court’s decision to vacate an arbitrator’s award and remanded the case for further proceedings. While this case arose in the unique context of a reinsurance arbitration using nonneutral party-appointed arbitrators, the opinion contains broad language that could have lasting negative ramifications on the arbitration community, as it risks causing confusion over the role of party-appointed arbitrators.

The appellant, Insurance Company of the Americas (ICA), insures workers’ compensation claims in the construction industry. The appellee, Certain Underwriting Members of Lloyds of London (the underwriters), provided ICA with second and third layer reinsurance under a series of treaties, each of which contained an arbitration clause requiring disputes to be resolved through arbitration using a three-arbitrator panel. The panel was composed of two party-appointed arbitrators and a third arbitrator, selected by the two party-appointed arbitrators, who served as the panel’s chair. However, in this case, the party-appointed arbitrators were not intended to be “neutral” arbitrators. Instead, as the court noted, the parties’ arbitration agreement permitted the parties to engage in ex parte communications with their party-appointed arbitrator during discovery.