Michigan Mutual Insurance v. Unigard Security Insurance

Opinion by Judge BOOCHEVER.

Dissent by Judge REINHARDT.

Unigard Security Insurance Company (“Unigard”) appeals the district court order confirming an arbitration award entered in proceedings between it and appellees, Michigan Mutual Insurance Company, et al. (“Re-trocessionaires”). Unigard claims that the part of the award setting forth conditions precedent to the Retrocessionaires’ obligation to reimburse Unigard should be vacated because the arbitration panel exceeded its authority and imposed conditions that do not draw their essence from the parties’ contract. Unigard also asks us to vacate as irrational and in “manifest disregard of the law” the panel’s decision to remove any obligation of Retrocessionaires to pay on certain future claims. We affirm.

*828 BACKGROUND

Unigard was a reinsurer of primary insurance companies. Reinsurance occurs “when one insurer (the ‘ceding insurer’ or ‘rein-sured’) ‘cedes’ all or part of the risk it underwrites, pursuant to a policy or group of policies, to another insurer” (the “reinsurer”). Unigard Sec. Ins. Co. v. North River Ins. Co., 4 F.3d 1049, 1053 (2d Cir.1993). The reinsurer indemnifies the ceding insurer on the risk transferred,…

dissenting.

I dissent from the majority opinion because I believe that the panel incorrectly interpreted the arbitrator’s award. While the language is concededly unclear, I believe that there is a logical interpretation that may be given to the arbitrator’s award that effectively obviates any need to examine its rationality under the standards articulated by this court. See Todd Shipyards Corp. v. Cunard Line Ltd., 943 F.2d 1056, 1060 (9th Cir.1991).

I disagree with the majority’s decision to interpret the award to relieve the Retroces-sionaires of all future obligations. Even if the majority correctly found that the award, as the majority construes it, is not in manifest disregard of the law, such a construction at the very least renders the award an absurd, even a bewildering decision. I cannot accept that the arbitrators were so lacking in common sense and legal knowledge that they would have intended the award to be so construed.

Instead, I believe that we should find that the award merely denied Unigard’s request for payments under the INSLIC contract— that is, the arbitrators rejected Unigard’s request for an order declaring the continuing obligation of the…