by ~ Alexander Henlin (Email) (Web Site) ~ and ~ Jessica Park (Email) (Web Site)
The Massachusetts Reinsurance Bar Association hosted its third annual Arbitrator Roundtable at the offices of Day Pitney LLP on March 12, 2014. ARIAS-certified arbitrators Sylvia Kaminsky and Barbara Murray facilitated a thought-provoking discussion among members and guests that frankly examined the positive and negative aspects of reinsurance arbitrations. The conversation ultimately turned to ways in which the process itself could be made more effective and the costs of arbitration better controlled.
One of the early points raised was that, over the years, reinsurance arbitrations have taken on more and more of the formalities of proceedings in court. Participants commented generally that arbitrations today typically have heavier lawyer involvement than was common thirty years ago. Modern proceedings also feature extensive legal briefing, discovery, and formal hearings that are all but indistinguishable from a trial. One participant remarked that it did not seem possible to return to the "good old days," to the extent they ever existed; but there was general consensus that, at a minimum, there are ways to increase the efficiency of arbitrations.
One suggestion that the participants discussed was that arbitrators themselves might expedite the process, perhaps by imposing shorter schedules or enforcing reinsurance clauses as written when they call for a hearing within a certain time frame. Tension, however, can arise from the fact that both parties often seek additional time to take discovery and schedule depositions, with the result that arbitrators may feel it prudent to acquiesce in the requests for more time. It was suggested that arbitration panels not shy away from sharing their thoughts about the discovery process, even if the parties do not agree. In the same vein, another suggestion was that panels might try to craft an early mediation process, perhaps with the umpire serving as the neutral, to start settlement discussions early in the process.
Another idea for making the process more efficient was to involve companies in the process more heavily. Highly experienced in-house counsel who are actively involved in the arbitration, for example, could have a more effective dialogue and might forge a stronger partnership with counsel. Engaging claims staff to assist with matters such as document review, too, might help to streamline the process by focusing attention on the most relevant points of dispute. While claims staff have many demands on their time, their expertise could be leveraged to make the process more efficient. Particularly in larger cases, the use of claims staff could be advantageous in that it might help counsel to frame the issues in dispute.
The organizational meeting was also discussed as an opportunity to increase efficiency. Some participants suggested that the organizational meeting sets the tone for everything that follows in the arbitration. If parties were to meet and confer before that meeting about how best to streamline the process, it could help to make the organizational meeting itself more productive. Another idea was to require counsel to identify, at the organizational meeting, what depositions and document discovery their side requires in order to prepare their case; this could lead to the prioritization of discovery and the phasing of issues in dispute.
The idea of putting limits on discovery generated significant discussion. Limiting discovery to a set number of depositions and document demands, and by extension limiting the volume of submissions to the panel, could significantly streamline arbitrations. At the same time, panels are mindful of their obligations to consider all of the evidence; so making proscriptive pronouncements in formal rules or arbitration guidelines could be unhelpful.
The discussion then turned to the topic of party-appointed arbitrators. Some questioned whether arbitration outcomes could be improved by moving away from the party-appointed arbitrator model in favor of a single neutral. The consensus seemed to be that such an approach would not be adopted in the near future, both because current reinsurance contracts require party-appointed arbitrators and because parties tend to want their appointed arbitrators to be a part of the process. For their part, it was suggested that companies take care not to appoint the same arbitrator time and again, if only to avoid negative perceptions.
Finally, the discussion turned to reasoned awards. In theory, a reasoned award might increase the efficiency of subsequent arbitrations and could promote early resolution if similar disputes between the same parties later arise. The utility of a reasoned award, however, could be diminished if it is subject to harsh confidentiality provisions.
The discussion revealed that there are ways in which the arbitration process can be tailored to produce a faster and more cost-effective outcome, but there are practical obstacles to implementing many of them. If the parties to a proceeding press hard enough, though, and if the companies involved show increased concern and engagement on the issue, it could go a long way toward reining in costs and changing the perceived inefficiencies of reinsurance arbitrations.
Mr. Henlin is an associate in the Boston office of Edwards Wildman Palmer LLP. He may be reached atahenlin@edwardswildman.com.
Ms. Park is an associate at Sugarman, Rogers, Barshak & Cohen, P.C. She may be reached atpark@srbc.com.
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