Risk Management

Lloyd's arbitration award affirmed

Judy Greenwald

August 24, 2021 Reprints

Berkshire Hathaway Lloyd's of London Coverage Disputes P/C Insurers CNA Reinsurance More + Less -

A federal appeals court Monday affirmed an arbitration award in favor of Lloyd's of London in a reinsurance dispute with CNA Financial Corp. units, stating it might have ruled otherwise, but is constrained by federal arbitration law.

Between 1966 and 1978, CNA units Continental Casualty Co. and Continental Insurance Co. entered into 15 treaty reinsurance contracts with Lloyd’s, according to Monday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Continental Casualty Co. and Continental Insurance Co. v. Certain Underwriters at Lloyd's of London.

Lloyd's and Continental agreed on the methodology for calculating reinsurance obligations for more than 40 years, the ruling said.

Then in 2010, Continental outsourced its claims handling to Berkshire Hathaway Group unit Resolution Management Inc., based in Boston, which changed the methodology, resulting in Lloyd’s paying more.

The dispute over this led to an arbitration award in Lloyd’s favor. CNA unsuccessfully filed suit over the issue in U.S. District Court in Chicago. Its ruling was affirmed by a unanimous three-judge appeals court panel.

“It would be difficult to overstate the strength of the Supreme Court’s support for arbitration when the parties have elected to solve their dispute using that mechanism,” the ruling said.

The Federal Arbitration Act “spells out a narrow set of reasons that may support a court’s confirmation, vacatur, or modification of an award,” it said.

“If our job were to assess the merits of Continental’s position in the same way that we approach ordinary appeals, it is possible that we might come to a different conclusion.

“But we are constrained by the FAA, as interpreted by the Supreme Court,” the ruling said, in affirming the lower court’s order.