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Arbitration award favoring Hartford subsidiary upheld

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A U.S. appeals court has refused to overturn an arbitration award granted to Hartford Financial Services Group Inc. units in a dispute with a Scottsdale Insurance Co. unit.

Hartford units First State Insurance Co. and New England Reinsurance Corp. had entered into a number of reinsurance and retrocessional agreements with reinsurer National Casualty Co., a unit of Scottsdale, Arizona-based Scottsdale Insurance, according to Friday’s ruling by the 1st U.S. District Court of Appeals in Boston in First State Insurance Co. and New England Reinsurance Corp. v. National Casualty Co.

In August 2011, First State demanded arbitration under eight of these agreements to resolve differences of opinion about billing disputes and the interpretation of certain contract provisions relating to claims payments, according to the ruling.

The arbitrators ruled in December 2012 that payment obligations were to be triggered by billing that was “in a form and content generally” proposed by First State. National sought to vacate the arbitration award, claiming the arbitrators had “exceeded the scope of their authority.”

The U.S. District Court in Boston ruled in First State’s favor, and a three-judge panel unanimously upheld the ruling. “A federal court’s authority to defenestrate an arbitration award is extremely limited,” said the appeals court ruling. “A legal error (even a serious one) in contract interpretation is, in and of itself, not a sufficient reason for a federal court to undo an arbitration award.”

“The payment protocol limned in the award tracks the plain language of the relevant provisions in the parties’ reinsurance agreements,” said the panel. The “arbitrators were doing nothing beyond construing the underlying agreements,” the panel court said in affirming the lower court’s refusal to vacate the award.