STAY DENIED PENDING ARBITRATION BECAUSE AGREEMENT DOES NOT CONTAIN AN ARBITRATION PROVISION

EASTERN DISTRICT OF ILLINOIS CONTINENTAL CAS. CO. V. COMMERCIAL RISK RE-INSURANCE CO. (CIVIL ACTION NO.: 07-C-6912, April 15, 2009)

Defendants filed an application for a pre-trial stay pending arbitration and application to appoint a referee regarding several reinsurance agreements and a separate "commutation agreement." Pursuant to the "commutation agreement," certain reinsurance agreements between the parties were terminated by consent. Under that agreement, it contained the provision that the parties would submit to the exclusive jurisdiction of the State of Illinois. The "commutation agreement" did not contain an arbitration provision. The parties disputed the scope of the "commutation agreement" as to whether it was applicable to certain reinsurance agreements issued by Allstate, which defendants succeed to their rights and obligations. Plaintiff moved for arbitration with respect to those reinsurance agreements, but not the "commutation agreement."

Defendants argued that given that it succeeded to the liabilities under the reinsurance agreements, it assumed the arbitration rights under those contracts, and thus was entitled to arbitrate the issues of whether the "commutation" terminated these contracts. Therefore, given that the issues were primarily the same as in the arbitration, defendants argued that an arbitrator, not the court, should decide whether the contracts were terminated. Judge Leinenweber disagreed, stating that a declaratory judgment request under the "commutation agreement" does not fall within the arbitration provision contained in the reinsurance agreements. Finally Judge Leinenweber stated the arbitration focused on "narrow issues regarding interpretation of two specific contracts, not the scope of the ‘commutation agreement.’" As such, the stay was denied. By Daniel W. Gerber and Jeffrey L. Kingsleyhttp://www.goldbergsegalla.com/attorneys/Gerber.htmlhttp://www.goldbergsegalla.com/attorneys/Kingsley.html