United States Life v. Superior National

BACKGROUND

U.S. Life contractually agreed to reinsure the workers’ compensation risks insured by five California insurers between May 1, 1998, and January 1, 2003. This reinsurance contract contained an arbitration provision. These California insurers later declared bankruptcy and will be referred to as UNITED STATES LIFE v. SUPERIOR NAT’L INS. SNICIL. The California Insurance Commissioner became SNICIL’s statutory liquidator.

Ten years ago, on November 29, 1999, U.S. Life requested arbitration, seeking: 1) rescission or reformation of the rein- surance contract because SNICIL misrepresented the reserves during the underwriting process and 2) damages for SNICIL’s bad-faith performance. SNICIL agreed to arbitrate, seeking a declaration that the reinsurance contract was valid, a ruling that U.S. Life was to perform its contractual obligations, and damages. The panel, which consisted of an arbitrator appointed by each party and a neutral arbitrator selected by the parties’ arbitrators, bifurcated the arbitration proceeding into two phases.

Phase I addressed rescission and reformation claims. After holding extensive hearings, the panel entered a Final Interim Award…